If you’re like many dentists, you have strong discipline in how you treat your patients and manage your practice or personal career. Considering patient needs and the best course of treatment for their oral and general heath requires not only extensive training, but also communication skills, planning and good decision making. Practice and career management require these same skills in addition to sound budgeting and staff or personal goal assessment. It is often helpful to apply these same disciplines to your financial and retirement goals.
Although it’s never too late to begin planning for your financial security, getting an early start can give you a real boost toward reaching your financial goals. If you want to keep a comfortable retirement, a house or a college education within your reach, the question is, can you afford to wait?
The key to saving is to think of it as another basic expense in your budget. Don’t look for savings in what’s left over after spending; often there isn’t any. Instead, make saving a habit. Treat your savings deposits like your rent or mortgage payments and put aside a set amount each month (or even each week). Over time, even small amounts can make a big difference.
In addition, the longer you are invested, the more you can potentially benefit from the power of compounding. Compounding occurs when investment earnings on your portfolio are reinvested and potentially produce more earnings. This has a snowball effect — each year’s gains are added to principal, forming a larger base upon which future earnings may accumulate, potentially increasing the overall growth of your investment.
Invest for retirement
As a dentist, one of the best ways to provide for your financial security is to establish an employer-sponsored retirement plan such as a 401(k) for your practice. If you are an employee at a practice, university or corporate entity, you should take advantage of any 401(k), 403(b) or 457 plan that may be offered. These tax-advantaged plans allow you to make pre-tax contributions. For example, let’s assume that you make $4,000 a month and contribute $400 to your employer-sponsored retirement plan. That pre-tax contribution would reduce your taxes from $1,000 to $900. This example assumes a 25% tax bracket and is for illustrative purposes only.
Additionally, taxes aren’t owed on any 401(k) investment earnings until they’re withdrawn at retirement, when you may be in a lower tax bracket.
What’s more, Roth-style individual retirement account plans allow for after-tax contributions and tax-free withdrawals in retirement — when your tax bracket may be lower — provided certain eligibility requirements are met. Another big plus is direct contributions from each paycheck so you won’t miss the money, as well as possible employer matches on a portion of your contributions.
If a 401(k) or similar plan isn’t available to you, consider investing in an IRA. IRAs come in traditional and Roth varieties. Generally, contributions to an income earned on traditional IRAs are tax-deferred until retirement; Roth IRA contributions are made after taxes, but earnings thereon can be withdrawn tax free upon retirement. Note that certain eligibility requirements apply and nonqualified taxable withdrawals made before age 59½ are subject to a 10% penalty.
The ADA Members Retirement Program is here to help
As you review this article, keep in mind there are many points to consider. You may want to evaluate your practice’s unique needs and goals. For these reasons, it is generally advisable to speak with a retirement planning professional before making any decisions. The ADA Members Retirement Program is endorsed by the ADA to aid dentist employers and their employees regarding retirement planning.
The AXA Equitable Retirement Plan Specialists
The ADA endorses retirement savings and distribution plan products through AXA Equitable that can assist you toward achieving your retirement goals. With over 50 years of experience working with ADA members, AXA Equitable retirement program specialists are licensed to provide the expertise and resources to assist you and your dental team in evaluating the plan options best suited for your personal retirement goals. In addition, AXA Equitable provides a full range of recordkeeping and plan administration services to complement its suite of retirement product offerings for ADA members and employees. For additional information on these ADA-endorsed member benefits, call AXA Equitable at 1-800-523-1125 or visit www.axa.com/ada to learn how you can start saving today.
This article, written by Mr. Santo LoPorto, senior director and client relationship manager at AXA Equitable, originally appeared in the spring 2019 issue of Dental Practice Success. He has more than 25 years of experience in the retirement and financial services industry.
This article has been written for general information purposes only. This material does not constitute an offer or solicitation of any kind and is not intended, and should not be relied upon, as investment, tax, legal, or financial advice or services.
The ADA Members Retirement Program is funded by a group variable annuity contract issued and distributed by AXA Equitable Life Insurance Company, NY, NY. Annuities have limitations and restrictions. For costs and complete details contact a Retirement Program Specialist. AXA Equitable and its affiliates do not provide tax or legal advice. You should consult with your attorney and/or tax advisor before purchasing a contract. GE-135044(03/18) (exp.03/20)