What do you visualize when you say retirement? Some visualize Caribbean cruises, others see fly fishing in a mountain stream, while others see nothing at all. I visualize flying an open cockpit biplane. For all who hope to retire in some level of comfort and confidence, here’s what you need to consider before you lock the office door and throw away the key.
Most dentists look forward to the freedom to pursue other facets of life beyond running a business and performing dentistry. Whether your goal is to just be done with work, or you still wish you were at the office, most retirees notice they suddenly have more time on their hands. You have the same 1,440 minutes per day, but how you manage it is the difference. You are now in control and your choices will determine how you feel about your life.
During the years I’ve met several folks who are glad to be done with work but who are not happy about retirement. They complain about all sorts of things, including boredom. This is because they missed a key element of retiring—preparation.
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If work is your life, then you have a lot of preparation to happily retire. Before you pull the plug on work, figure out some things you like to do or want to try when you have more time. My unhappy retired friends generally have no avocations to take the place of their vocations.
Are you financially ready to retire?
This question is important but not the only concern. A recent American Dental Association (ADA) survey found that dentists need funds from four different sources to retire.1 These expected sources of income include private savings such as an IRA, simplified employee pension, or 401(k) (62.4%); social security (13.4%); sale of practice (12.7%); and other (12.5%).1
Take the time to sit down with your spouse or significant other and do the math. Realistically look at your goals, your health, and your life expectancy. Do you want to leave a financial legacy to your kids or a community charity? That will impact your spending patterns in retirement. Financial planners use “the 4% rule” as a rough estimate for spending if you don’t want to deplete your savings over your lifetime.2
No matter where you are on your path to retirement, consider using the services of a fee-only financial planner. Financial consultants say that only 50% of dentists have determined the retirement savings needed to maintain their lifestyle.3 Until the pandemic, data showed that dentists were saving only about 3% for retirement while the ideal rate is closer to 10%. Dentists, and professionals in general, have good cash flow. However, we tend to earn and spend, not earn, save, and spend. This is a matter of choice and habit that is within our control.4
Unfortunately, only 26% of dentists use a certified financial planner (CFP).2,5 Seeking assistance from a certified and trusted financial professional can help you better understand your options, including saving in ways that offer tax advantages, remaining invested after taking required minimum distributions, and evaluating your practice in preparation for your transition. Although you may find a professional transition service that meets all your needs, these services often call upon a specialist for nonstandard cases, and this is something that you can do.
Most important is that you pay for an outside opinion of your situation in an area of the financial world that is constantly changing. A resource that has a wealth of information online is Dentist Advisors.6 A financial planner should ask very personal questions because they cannot help you if you don’t disclose all your information. Ultimately, you need to determine when it’s right for you to enter the ranks of the retired.
Money is not the critical barrier
You don't need a lot of money to be happy in retirement. Rather, if you are happy you will find a lifestyle that fits your budget. This is why it’s so important before retirement to set goals, both personal and financial, and to include your spouse or significant other in the discussion.
A good financial planner or consultant will help in this area. One significant issue is selling your practice. No longer can you count on a big boost in your retirement savings from the sale of your practice. Young doctors are leaving school with such high debt that getting financing for a practice purchase is often not possible or rational. In the current market there are more sellers than buyers. Thus, what you might have been counting on to boost your net worth from the sale is not likely to be what you hoped for.
In fact, many practices are not selling at all. This is one reason the average retirement age for dentists has gone up. In 2005 the average dentist retired at about 66 years old. In 2018 that number jumped to 69 years old!7 Dentists are working a few years longer and accepting that their practices will not sell.
Consider working longer
One of the key points I’ve discussed with dentists is whether you should retire at all. I’ve seen dentists who had all the proper planning and strong finances become unhappy and angry in retirement. If you’re enjoying your practice and your health allows you to continue to practice, maybe retirement is not for you.
If you don’t have hobbies, don’t have a social circle outside of your peers, and your life revolves around your practice, you may be happier never retiring.
There are several options. If you can deliver excellent care and your office arrangement allows you to be profitable, consider working just two days a week. Your practice will become smaller, and you can ease into retirement. If you have an associate or partner, consider working just one week per month. These arrangements require a skilled staff and mutual discussion with all involved—doctor, staff, and patients—to be successful.
Soft skills have value
When you do retire, your behavioral skills and emotional intelligence are the keys to enjoying life. I suggest you build on things you already like to do, including personal time and together time. Look for a new challenge—learn a new language, take a class at the local college, or try gardening. If you’re not already in a service club or similar group, now is the time to give that a try. This may seem like a Pollyanna approach, but it has psychological merit.
The happy retirees I’ve met talk more about the new friends they’ve met than about themselves. They are outward focused, not self-focused. It seems my less happy retiree friends assumed that the world would revolve around them in retirement, and maybe that’s how it was at their work. In the real world, the world revolves around the active listener.
Create a schedule, and volunteer
If you used to get up at 5:30 a.m. and liked it, don’t change. But now get up and do something you didn't have time to do in the past. Take a walk or go for a swim. Set aside time alone and with your spouse. Go to church at the same time on Sunday.
If you’re missing dentistry and want to give back, consider applying for an adjunct position at a dental school. If you enjoyed the business side of your practice, consider volunteering at SCORE, a volunteer organization to help small business owners.8
Those who prepare for retirement have full and busy days. Those who let retirement sneak up on them are bored. Keep in mind that your funeral should be a celebration of a life well lived. People will generally not remember how much money you had. They will remember the time you helped someone or the fund you created for a local foundation. Don’t retire—start over and make something good happen for others and yourself.
Editor's note: This article appeared in the September 2022 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
References
1. Levin RP. The 10th anniversary of the Dental Economics-Levin Group Annual Practice Research Report. Dental Economics. September 22, 2016. Accessed September 19, 2018. https://www.dentaleconomics.com/macro-op-ed/article/16387996/the-10th-anniversary-of-the-dental-economicslevin-group-annual-practice-research-report
2. Kawashima C, Williams R. Beyond the 4% rule: how much can you spend in retirement? Schwab. March 7, 2022. https://www.schwab.com/resource-center/insights/content/beyond-4-rule-how-much-can-you-safely-spend-retirement
3. Pride JR, Hufford BC. Ready, set, retire! Dental Economics. June 1, 2001. https://www.dentaleconomics.com/money/article/16389876/ready-set-retire
4. Isaac R, Mulcock M. 7 mistakes dentists make that ruin retirement. The Dentist Money Show Podcast. #298. https://dentistadvisors.com/education-library/podcast/7-mistakes-dentists-make-that-ruin-retirement/
5. Levin RP. A profession in transition: Findings from the 2018 Dental Economics–Levin Group Annual Practice Survey. Dental Economics. October 1, 2018. https://www.dentaleconomics.com/practice/overhead-and-profitability/article/16385046/a-profession-in-transition-findings-from-the-2018-dental-economicslevin-group-annual-practice-survey
6. Financial planning and investment management for dentists. Dental Advisors. www.dentistadvisors.com
7. Dentist retirement increase. American Dental Association. https://www.ada.org/-/media/project/ada-organization/ada/ada-org/files/resources/research/hpi/hpigraphic_dentist_retirements_increase.pdf
8. SCORE. https://www.score.org
