As a dentist, you may enjoy many perks–from high salaries and stylish white coats to the potential of financial security for yourself and your practice. One challenge often faced by self-employed individuals such as dentists is retirement planning – to ensure they can retire comfortably and live comfortably throughout their later years. Luckily there are retirement plans specifically tailored for dentists that can maximize savings while taking advantage of tax breaks.
Dentists must make smart financial moves early on in their careers, as dentistry can take its toll physically. Early retirement could require taking out Social Security benefits due to limited employment.
Saving for retirement is important for employees across all fields, but saving for dentists is especially essential. Unfortunately, unlike in many other professions, dental hygienists don’t typically have access to employer-sponsored retirement plans: only 67% of full-time and 48% of part-time dental hygienists are offered plans through their employer according to Dentistry IQ data.
Due to limited Social Security benefits available for dentists, most are responsible for saving for their own retirement and this can be challenging. On average, monthly benefits average out at just over $1,348, making life increasingly challenging as you try to live off of just that amount alone.
Self-employed individuals have unique retirement account options available to them beyond traditional IRAs, such as profit-sharing plans and Simplified Employee Pension Plans (SEP IRA). Under a profit-sharing plan, a percentage of profits contributed back into your plan as an attractive employee retention tool; this requires consulting an experienced tax advisor like Arch Financial Planning to set up and administer properly.
SEP IRAs provide another viable option for small-business owners, including dental practice owners. With a higher contribution limit than an IRA (up to $61,000 for 2022, including catch-up contributions for those 50 and over), this type of account allows owners to defer employee and employer deferral contributions together into tax deferred accounts. As well, the structure of a SEP IRA allows you to add on more sophisticated retirement structures like cash balance plans later, further expanding your retirement savings. No matter your experience or status as an associate or practice owner, reviewing and optimizing your retirement strategy on an annual basis is key to ensure success for future years. By taking an inclusive approach to saving for retirement, you can have faith that all your hard work will pay off over time.