3 Things Every Dentist Should Know Before RetiringSubmitted by Creative Wealth Strategies on August 12th, 2015
This year I’m seeing more dental practice sales than I have seen in many years. A trend I think will continue because the current workforce of dentists is aging. The American Dental Association says 37 percent of dentists are nearing retirement, but less than 4 percent will be in a financial position to retire by 65.
Given this information, it’s never too soon to start thinking about retirement. To help you plan for the years beyond your practice, here are three things every dentist should know before retiring:
Have an exit strategy in place
Do you plan to sell your practice for one lump sum, or do a transitional buy-in over time? Whatever your plan, you need an exit strategy in place long before you plan to pull the retirement trigger.
If you plan to sell your practice, you may need to work with a dental practice sales consultant to come up with a valuation and a plan to market and sell your practice. You’ll get one lump sum of money, which will help with retirement, but you may also have to pay broker fees and hefty taxes.
If you have an associate buy into your practice over time, that money can be directed into a retirement plan. This could potentially allow you to defer taxes and provide a long-term plan to build your pre-retirement nest egg. However, you’ll have to work with another dentist, which could be a deal breaker for some solo practitioners.
Whatever your strategy, it’s something to think about and implement years before you want to leave your practice.
When you reach age 65, you’ll be required to apply for Medicare, unless you qualify for a special enrollment period. This government program can be tricky to navigate, so it’s important you understand your coverage options and requirements.
Medicare doesn’t cover all of your medical expenses, so most dentists will need to budget additional money each month to pay for supplemental insurance and other out-of-pocket medical expenses.
Medicare Part A is free and covers hospital visits, while Medicare Part B pays for medical services like doctor visits. Dentists reaching age 65, who don’t qualify for a special enrollment will be required to pay Medicare Part B premiums which are typically taken out of your social security check. You may decide to purchase a supplemental policy to help with these costs. To get prescription drug coverage you must enroll in Medicare Part D and choose a private insurer or have prescription coverage that is at least as good as Medicare, coverage that is considered “creditable”.
Before retiring, talk with a Medicare representative to understand what’s covered and what isn’t. Using this information, you can make an educated financial decision about future health care costs.
To learn more about Medicare, how it works and who to talk to about the program, check out this guide from the Department of Health and Human Services.
Have a financial advisor in your corner
How much money will you need to retire? What should you invest in to provide income after you’re done working? These are just two of the dozens of questions that you’ll have as you approach retirement.
To help you navigate this transition, you need a financial advisor to help you make educated decisions. There isn’t a one-size-fits-all retirement plan. Every dentist has unique retirement goals and objectives that require a tailored strategy.
You need to figure out a monthly budget to live on while retired, investment options and how to properly withdraw income from your retirement accounts, just to name a few.
Are you ready to retire? What concerns do you have? Share your thoughts in the comment section below.