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5 Reasons Retirement Planning Is Different for Dentists

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There are many perks that come with being a dentist (e.g., owning your own practice, a high salary, the potential for a secure financial future and a stylish yet slimming white coat), but there are also challenges. Obviously the greatest of these challenges is the patient who believes flossing should only be performed in line with solar eclipses, but a close second is saving for retirement. There are several reasons why planning for retirement is different for dentists.

#1 – A late start

It’s common for dentists to start saving for retirement later than many of their non-dentist peers. After struggling through years of college and dental school, it’s only natural to want to enjoy your comfortable salary once you’re gainfully employed. However, this approach can be detrimental to your long-term retirement savings. Note that for every ten years that pass, you’ll have to save roughly twice as much to reach the same retirement goal, meaning one dollar saved today can avoid the need to save two dollars a decade from now. Thus, it’s important to find a balance between enjoying the lifestyle your income allows today and setting aside money for the future.

#2 – Student loan debt

According to the American Student Dental Association (ASDA), the average dentist graduated with approximately $304,824 of debt in 2020.1 That’s a big hole to dig out of, so it’s no wonder many dentists try to tackle this debt by prioritizing payoffs over saving for retirement. While it’s important to pay down outstanding debt as quickly as possible, you shouldn’t neglect your retirement savings while doing so. Consider leveraging low interest rate loans to pay off your student loans while still finding room in your budget to save for retirement.

#3 – The danger of slowing down

An all-too-common mistake made by many dentists is cutting back on their work hours in the years leading up to retirement. While this is a common practice in many professions, it can be devastating to a dentist’s retirement security. Beyond reducing your ability to save, the last few years of your practice’s profits are the most important when it comes to valuing your business as you prepare to sell it. Your patient load, production levels and revenue will be closely scrutinized, and any drop will reduce the amount you receive during the sale.

#4 – The importance of insurance

Your retirement can be significantly impacted should you become unable to work due to an injury or disability. That’s why it’s important to have the right insurance in place to protect yourself, your family and your practice.

You may be surprised to learn that dentists are prone to severe and debilitating back issues due to the static posturing required on the job. There have been numerous studies reporting an increased risk of neck, back, arm and wrist pain impacting those in the dental field. One study found that three out of four dentists suffer from musculoskeletal disorders that affect their ability to practice.2 These issues can even become so pronounced that they force dentists into early retirement.

What can you do to avoid cutting short your prime earning and saving years? Protect your earnings with a disability policy that takes your career into consideration. Your wealth manager can help you avoid industry pitfalls and implement a policy that makes sense given your personal financial situation and desired level of risk.

#5 – The challenge of saving

If you own your own practice, you likely put a good percentage of your profits back into your business. And while that investment has the potential to pay off significantly when you sell the practice and retire, it’s important to diversify your retirement savings along the way.

Unlike many of your peers in other professions, for you saving for retirement isn’t quite as easy as automatically contributing to an employer-sponsored 401(k) plan. You need to be a bit more strategic and intentional about your retirement savings. If you don’t currently have access to an employer-sponsored retirement plan, consider establishing one (or several) of the following retirement savings vehicles:

  • Traditional IRA – A traditional IRA allows you to make contributions with pre-tax dollars (or post-tax dollars if certain income thresholds are exceeded). This means you can defer taxes while you’re working in a higher tax bracket then pay taxes on withdrawals when you are retired and (potentially) in a lower tax bracket.
  • Roth IRA – Roth IRAs offer the benefit of tax-free growth. Because contributions to a Roth IRA are made with after-tax dollars, you don’t receive a tax deduction up front, but withdrawals at retirement are typically tax free. This can be a huge benefit for dental practice owners whose monthly income is expected to increase during retirement.

It’s important to note there are income limits imposed on Roth IRA contributions. Your wealth manager can help determine if you’re eligible to make Roth IRA contributions. Note that if you have access to a 401(k) plan that allows Roth elections to be made on plan contributions, these income restrictions don’t apply.

  • Simplified Employee Pension (SEP IRA) – You may consider setting up a SEP IRA to help yourself and your employees save for retirement. In 2022, a SEP IRA allows practice owners to defer up to $61,000, or 25% of an employee’s compensation, to retirement savings.3 Contributions can only be made to a SEP IRA by you, the employer. To be eligible, an employee must be at least 21 years old, work full time at the practice, have worked at the practice for three of the last five years and receive at least $650 in annual compensation.
  • Savings Incentive Match Plan for Employees (Simple IRA) – A SIMPLE IRA is another retirement savings vehicle that can be used by both dentists and their employees. In contrast to a SEP IRA, employees are eligible to make tax-deductible contributions to the plan. As the employer, you can match up to 3% of an employee’s salary or make nonelective contributions of 2% to every eligible participant, regardless of his or her participation. The 2022 annual employee deferral limit to a SIMPLE IRA is $14,000. Those age 50 and older can make a catch-up contribution of $3,000, raising their annual deferral limit to $17,000.4

To be eligible, you must have 100 or fewer employees. Each employee must have earned at least $5,000 in eligible compensation in any two previous calendar years and be on track to earn at least $5,000 in the current year in order to participate. As the employer, you can exclude employees who receive benefits from a union, and you can also choose less-restrictive participation parameters.

At Creative Planning Dental, we specialize in helping dentists navigate the unique financial challenges of their profession. We support dentists with a team of credentialed, educated, experienced and action-oriented advisors, including Certified Financial Planner™ practitioners, Certified Public Accountants, insurance specialists, attorneys and other professionals dedicated to helping you achieve your goals. If you’d like help planning for retirement, or with any other financial matter, please schedule a call with a member of our team.


  1. https://www.asdanet.org/index/get-involved/advocate/issues-and-legislative-priorities/Dental-Student-Debt
  2. H.S. Bedi, Ninad Joshirao Moon, et al., Evaluation of Musculoskeletal Disorders in Dentists and Application of DMAIC Technique to Improve the Ergonomics at Dental Clinics and Meta-Analysis of Literature, J. Clin. Diagn. Res., Jun 1, 2015, at 1
  3. https://www.irs.gov/retirement-plans/plan-participant-employee/sep-contribution-limits-including-grandfathered-sarseps
  4. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-simple-ira-contribution-limits

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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