Determining when to retire is harder than ever today! Inflation and sequence of returns must be considered before hanging up the handpiece. Do you have a level of savings that will see you through or will you run out of money? What is your level of wealth? More importantly, what is your level of health? Dentistry is demanding physically and mentally. Dentists are working longer with the average retirement age approaching 70. Practicing dentistry takes its toll . I know many dentists who suffer from a myriad of health problems. Let’s consider some options to lighten the load and move you in the direction of a much deserved retirement!
Retire In Practice
This is a great option for the 50 year old dentist who is tired and ready to downshift. I did this successfully for 8 years prior to walking away. What I mean when I say retire in practice is that you reduce your days worked to between 3 – 3 ½ days per week and or knock off an hour early at 4:00pm . You will find that you can still produce at the same level of production. Believe me when I tell you my staff loved the schedule and were motivated to get the work done and get out to enjoy their lives. It’s all about work life balance. Since covid, many dentists are working this schedule . Many patients are still working from home and can come whenever you are open. Be sure you don’t lose significant production as this will affect your practice sale price.
Savings Required to Retire
The savings equation is a personal one depending on your lifestyle, debt level, desired level of income and whether you want to leave a financial legacy for your family. Consult your financial advisor. A good rule of thumb is to be debt free . No mortgage. No auto debt. Savings should total 10 -12 times your income at age 60 – 65. This savings should be liquid in retirement and taxable savings accounts. This level of savings will provide 70 – 80 % income replacement. Remember, you will no longer be saving . You should no longer need to pay life, disability or office overhead insurance. Your spending requirements are typically less. Social security will make up the difference. Consult with a financial advisor to arrive at an appropriate withdrawal strategy to minimize your taxes. You need to consider your sequence of returns. Should market returns be lower your first several years of retirement ;you may be faced with altering your withdrawal percentage.
Net Worth
American Dental Association 2022 reports dentists retiring with an average net worth of $1.5 million.
According to the Fed Survey of Consumer Finances 2022 : In the U.S. to be in the top 5 % net worth you will need $3,795,000 . [Motley Fool May 5 ,2024 article by Adam Levy. ]
Keep in mind that all of these are surveys and are somewhat suspect as they are dependent on respondents’ accurate reporting.
Average Income Needs for Retired Dentists
I have seen figures range from $10,000 – $20,000 per month. This depends on lifestyle and location of course!
Practice Sale
Don’t rely on your practice sale to fund your retirement. The average practice sells for $450,000 and after broker fees and taxes there will be $300,000 net left to the doctor. This is after a lifetime of work. Dentists earn a high income and often require that income to support a high lifestyle. That is the brutal truth of the matter. Dentists begin saving late in their career after losing 8 primary earning years and paying off a large debt load. If you are smart you have to save regularly beginning early in your career. I recommend saving 15-20% per year.
Selling or Leasing their Building
When selling your practice you will have the option of selling your building. This may very well be the best option . I know a dentist who decided to lease his building to the new owner who purchased his practice. The new owner really wanted to buy the building and renovate it. The selling doctor chose to go it alone and did not get a long term lease.The dentist bought the practice and proceeded to build a new clinic in town . The selling doctor cannot secure a buyer for his building as it is only designed as a dental building and no dentist wants to compete with the new clinic down the street. It sits empty and is losing value as I write this post! Get professional advice. A $300 phone consult would have advised the doctor to sell the building to the new owner or to consult an attorney on drafting a lease. Don’t step over the dollars to pick up the pennies . I’ve seen it my entire career!
Enjoy the Youth of Your Retirement Years
I want you to think about your mortality for a minute. The average male who reaches age 60 in good health , will have 1000 weeks on average that they can get around good enough to enjoy life . For females it’s more like 1300 weeks. If you wait until your late 60’s or early 70’s to retire you lose the youthful years of your retirement.The prolonged chronic stress of dentistry exacts a toll on your body. Hang up the handpiece and enjoy your life. Begin the next chapter. That is what I’m doing now. I absolutely love helping dentists find success in private practice and help them sell and transition to retirement when they are ready. Find your purpose and go for it!
I know it is hard for you hard charging achievers to retire but you owe it to yourself and your family . Life is short! YOLO!