17 Jun A better retirement strategy

If you are like most dentists, you have done a relatively poor job, at least up until now,  of accumulating the necessary funds for retirement. You should not feel embarrassed about this, only concerned. You are just one dentist in a huge majority of dentists!

The longer you have until retirement, the easier it is to put off the need to make substantial contributions to your retirement savings. The ADA reported that less than 4% of dentists would be in a financial position to retire at age 65. The ADA further reported that dentists in the 50 to 54 age group only put aside 11.4% of their income towards retirement even though the smallest of retirement plan types allows a contribution of 15% of income.

Most 55 year old dentists are probably quite far behind in funding for their retirement. With only ten years remaining, some critical, life-changing financial decisions will have to be made. It is PARAGON’s experience that 1 of 3 things will happen over the next 10 years to these 55 year olds.

1. A very large number of these 55 year old dentists will continue to ignore the “ticking clock” and will not do anything (or at least very little). Many will reach age 65 only to discover that their practice is not worth what it was 10 years  earlier and many will have to continue to practice because they will simply not be in a financial position to retire.
2. A smaller group of these 55 year olds will really knuckle down and start pouring  as much funding as they possibly can into a pension plan. If they remain healthy and their practice income does not drop off over the next 10 years (most practices do drop off significantly once the dentist gets closer to retirement  age), many of these dentists will reach age 65 with adequate retirement  funding. However, unfortunately, it will be necessary for most of these dentists to sacrifice many personal financial needs and goals in order to fully satisfy their retirement needs. In addition, maximizing pension contributions for the doctor also means maximizing contributions for the employees as well. Not that the employees don’t deserve it, but funding the employee’s retirement will represent another significant cash flow drain on the doctor’s personal income.
3. And, finally, an extremely small percentage of these 55 year olds will make the most of their options. This group will not only adequately fund for their retirement, but will do so without suffering any reduced personal income; without changing their life style; and, without sacrificing any of their personal needs and goals.

Dr. Lucky is one of these 55-year-old dentists from our third group. Dr. Lucky sells his practice now for $500,000 utilizing the PARAGON PreSale Program and receives not only favorable tax treatment (we will discuss this more), but also a contractually guaranteed 10% interest rate. The structure of the PreSale Program allows Dr. Lucky to continue to work full-time (less if he desires) for as long as he chooses and be compensated 40% of his personal collected production. In addition, he will be able to pick and choose the procedures he wants to do and the patients he wants to continue to treat.

The majority of Dr. Lucky’s practice sales proceeds (at least 75%, possibly  80%)  are taxed at very favorable capital gains rates instead of the top tax bracket ordinary income tax rates (his accountant absolutely loves this part). Under current tax law, this represents a potential annual tax savings to Dr. Lucky of approximately 30%! This obviously creates an enormous financial advantage. If Dr. Lucky uses his “tax favored” practice sale proceeds to support his family’s annual living needs without any sacrifice to their life style, he can then use his provider compensation from continuing to  practice dentistry (the 40% seller compensation) to maximize his annual contributions into a pension plan. In fact, under current tax law, he may be able to utilize a defined benefit pension plan to shelter virtually 100% of his provider compensation income thus having very little, if any, income that is taxed each year (he has already paid the taxes on his sales proceeds they are living on each month). Another major advantage is that Dr. Lucky will have no employees of his own after he sells his practice thus he will not be obligated to make pension contributions for anyone other than for himself!

What does all this mean?

Freedom!

Dr. Lucky will easily fund a handsome retirement nest-egg by age 65 (probably even sooner); he will pay far less in income taxes each year (possibly even none at all); he will enjoy substantially more after-tax income (unless he decides to off-set the higher income with less clinical time in the office); he will be able to enjoy more frequent and longer vacations; his family will be fully protected in the event of disability or death; he will not experience any more practice overhead; and, he will not have any more practice administrative responsibilities.

The time to begin planning your retirement and your freedom is long before you actually retire. PARAGON will help you plan your final practice years to be much more enjoyable and considerably more profitable. Call PARAGON today to schedule a life- changing consultation… you will be very glad you did!