Here’s Why It Happens and What You Can Do About It
If all your peers have moved to Florida and you’re still years away from retirement, it’s not necessarily a matter of poor financial planning. Studies show that yes, dentists really do retire later than everybody else. The average retirement age for dentists is 69, but it’s 62 for the rest of the country.
On the surface, this might not make much sense. After all, dentists tend to be high earners. In fact, the average income for a dentist is more than triple that of the typical American. That should translate to an earlier retirement and a far bigger nest egg. But not necessarily. Modern dentistry presents a unique set of benefits and challenges that can make early retirement tricky.
The Current State of Retirement for Dentists
Most people don’t really want to downsize their lifestyles. They want to live a long time after retirement, too. Factor in relentless inflation and cost of living increases and you’ll see that this means retirement savings funds will have to be pretty healthy – no matter what industry you’re in.
There are a few roadblocks that make early retirement harder for dentists, specifically. But with proper planning and a good hard look in the mirror, they can definitely be overcome.
Seeing big numbers in your bank account can lead to a luxurious lifestyle. This isn’t necessarily a bad thing, but if you plan on maintaining your standard of living, your retirement plan will need to be equally generous.
Debt and Loans
According to a recent study by SoFi, oral surgeons, orthodontists, endodontists, and dentists are the top four careers with the highest amount of student debt. Practice loans, personal debt, car payments, mortgages, and the costs of daily living can eat away at your retirement fund, too.
Dentists often own, manage, and work at their private practices. Juggling these finances is a lot more challenging than comparing your living expenses to your paycheck, like most Americans do. Worse, this well-funded industry tends to attract predatory lenders, salespeople, and financial advisors that can make managing your money that much harder.
Unpredictable Practice Sales
In the past, a dentist could sell off their practice and retire comfortably. This may still be the case for some, but selling your dental practice could be a gamble and shouldn’t be Plan A. Build the necessary nest egg first, then if you decide to sell your practice, you can use the proceeds to supplement your savings.
Blame It on the Economy
Retirement? In this economy? The American economy hasn’t been doing anybody any favors – least of all dentists. Building a decent nest egg isn’t easy in the best of times, and inflation erodes the value of your hard-earned dollars. Requiring seven or eight figures worth of savings isn’t unheard-of anymore.
Difficulty Transitioning to Retirement
For some, leaving a career is just plain hard. After decades of dedicating yourself to your craft and building a business you love, taking a step back can be a challenge. This isn’t unique to dentistry, but the emotional toll of hanging up your white coat certainly factors into the average age of retirement.
Five Ways Dentists Can Retire Younger
We’re not suggesting that giving up your morning latte will allow you to retire seven years earlier. Nobody drinks that much coffee. Besides, eliminating all quality of life isn’t the path to a happy retirement. That said, there are a few steps you can take today that will make life easier for your future self.
1. Rein in your lifestyle
Keep an eye on your spending, your savings, and look for places where you can streamline. If you’re able to cut back and still feel comfortable, you may discover that your retirement goals are more attainable than you thought.
2. Boost your savings
Squirreling away the oft-recommended 15% of your income is a good place to start. But if you’re used to a more lavish lifestyle, that probably isn’t going to cut it. In that case, 20% may be more realistic for you. It might not be easy, but the more you can save today, the sooner you’ll be able to retire.
3. Get debt under control
You likely have practice loans, business loans, personal loans, student loans that never seem to go away… the list goes on. Before you get overwhelmed, get organized. Understanding where your money goes will definitely help you keep more of it.
4. Do the math
Once you’ve organized your finances, figure out now how much you have, how much you need, and how much you plan on spending. Be honest with yourself so you can create a realistic retirement timeline.
5. Work with a financial expert
For a lot of people – especially dentists – working with a financial advisor can make this whole process a lot more doable. If you do decide to hire a financial expert, look for those who have experience and expertise in the dental industry. Be sure to choose a fiduciary who is obligated to put your needs first.
HR for Health Can Help
The age at which you retire is up to you – and if your practice is running smoothly, planning for an earlier exit is a lot easier.
If you need to plan for your employees’ retirement as well as your own, HR for Health is a licensed fiduciary with a 401(k) option that meets all compliance requirements, including state-specific laws. We can help you secure the necessary documents, prepare for changes, and navigate policies and procedures so you stay compliant. We’ll help you keep up with the state of HR in dentistry and help you choose the right retirement plan for your practice. Our specialized HR software solutions cater specifically to the needs of savvy healthcare professionals like you.