You have worked diligently for decades to help improve the smiles of countless patients, perhaps treating two, three or more generations of the same family. You helped them achieve and maintain good oral health and subsequently good overall health – your job is nearly done and retirement is looming.
Now, though, you start to wonder – is your financial future in good health too? Did you start saving soon enough and have you thought far enough ahead about selling your practice to ensure a good profit?
A September 2016 study of dentists, physicians and other healthcare professionals by TD Bank indicated that while 56 percent of those surveyed expect that their partners would take over the practice when they retire, less than half – 48 percent – were confident that the sale of the practice, along with existing savings and investments, would bring enough financial security to last throughout retirement.
Dentists generally are not able to start saving for retirement as early as other professionals for many reasons. In addition to undergrad studies, they have an additional four years of dental school. Tack on a dental residency which can be another two or three years, that new dentist is nearing 30 and is just now ready to start earning. In addition, dentists have one of the highest average student loan debts after dental school – over $261,000, according to the American Student Dental Association’s 2016 numbers. Add starting a private practice to the equation – and the resulting business expenses – along with starting a family, it is easy to see the challenges for dentists in trying to save for the future.
Fast forward 30-40 years and now the dentist is looking ahead to life as a retiree. Student debt is long gone, the kids are grown and on their own, there’s been some savings, and the practice is doing well. Should be simple to sell, right? If you had a partner or two and did your homework ahead of time, as did Dr. David Rummel of Columbus, Ohio, you may have done it right.
Rummel, who practiced for 37 years, was in partnership with the same dentist for 30 years – and when he knew retirement was sooner than later, began to think about how to find the right dentist who not only would fit in well with patients and staff, but would be in a position to buy Rummel’s share of the business. “I was very concerned about the quality of the person who would take on my position – and I think that’s a concern for a lot of dentists,” he said. “We probably had four or five dentists come into the practice before finding the one we would offer the opportunity to buy me out.”
The economy is a major factor in when dentists decide to retire, stated Dr. Henry Fields, Professor and Endowed Division Chair of the Orthodontics Department at The Ohio State University College of Dentistry – and a bad or recovering economy means a later retirement for most. Fields, who is also former dean of the OSU College of Dentistry, explained that dentists today tend to wait later to retire. “There are some that have been hanging on for a while recently because of the downturn in the economy and generally speaking, the departure date has been later.” Fields said as dentists choose to delay their retirement for financial reasons, there are also those new dentists finishing dental school – and that means more dentists in practice.
There are other issues dentists face when preparing for retirement:
While these are just some of the considerations dentists should address head-on, there seems to be one constant: it’s never too early to start planning for retirement, especially if it involves the sale of a dental practice. “There needs to be planning with your business broker, CPAs and wealth manager,” Rector advises.