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5 reasons dentists retire 7 years later than the average American (and how to fix that)

Jan. 7, 2022
The average American retires at age 62, but the average retirement age for dentists is 69. Here are five distinct reasons why dentists have a harder time retiring at an earlier age.

In a national income and retirement study of dentists throughout the country, the American Dental Association found that the average retirement age for dentists is 69.1 When Gallup did a survey of the general population, it concluded the average American is retiring at age 62.2 What’s interesting is that the typical dentist earns more than three times the average American. So, if that’s the case, why are dentists retiring seven years later? As dedicated professionals working with dentists for nearly 15 years, our team at Dentist Advisors has found that there are five distinct reasons dentists have a harder time retiring at an earlier age.

1. Dentists tend to be prime targets for product-focused, commission-based salespeople.

Because dentists are among the highest earners in the country, it’s no surprise they can attract salespeople like flies to honey. Understandably, it can be difficult for dentists to know whom to trust and where to turn when they need support with financial planning and investments. All too often, they get talked into buying insurance and investment products that serve the best interests of their “advisor,” who was motivated by the commission rather than the best interests of the dentist.

Advice: Be wary of salespeople who present themselves as financial advisors and try to sell you products instead of advice. Before hiring an advisor, ask how he or she is compensated—by fees, commissions, or both—and how you will know exactly what you’ve paid them for their services. And remember, the best advice comes from advisors who put your interests first. Make sure you ask a potential advisor whether he or she is a fiduciary, which means the advisor is legally bound to put their clients’ interests first.

Further reading: Membership plans—a coverage solution for your retiring baby boomer patients

2. Dentists can be more susceptible to a pent-up demand for lifestyle purchases—especially in the early years of a career.

By the time you get out of dental school, many of your friends might already have nice cars, new houses, or are going on exotic vacations. There can be pressure to keep up, and with a high income, it’s easy for spending to get out of control before you realize what’s happened.

Advice: Keep your spending under control by making sure you save a healthy portion of your income every month. It’s common advice that the average person should save 10%–15% of their income, but this generally won’t cut it for dentists who want to maintain the same lifestyle in retirement they enjoyed during their working years. I recommend dental professionals aim for a savings rate of 20% or higher. A great way to prioritize saving is to set up a direct deposit or schedule automatic transfers to your savings account on the same day you get paid.

3. Dentists tend to need more money to retire comfortably.

Because you’ve been used to more income (and its associated lifestyle benefits) during your career, it’s likely you’re going to need more money than the average American to support a comfortable retirement and maintain your current standard of living.

Advice: No one wants to downgrade their lifestyle once they retire. Take the necessary steps to have a solid understanding of how much you spend (what you’ll need) and save (what you’ll have) now to help ensure you’re not faced with uncomfortable changes in the future.

4. Dentists have a higher degree of financial complexity than the average American due to the fact they, more often than not, are the owner or part-owner of their own practice.

As a business owner, your financial life is much more complicated than simply a mortgage and a paycheck—instead, think practice loans, student loans, business and personal tax returns, and employee issues. And on top of that, don’t forget that you are still the clinician in your practice who must produce! These complex financial situations can be a lot for one person to juggle alone, but there are ways you can keep it all under control.

Advice: Get (and stay) organized! For your practice, this means keeping your profit and loss statement up-to-date so there’s never a question about the financial health of your business. For an overall picture of your financial well-being, link your accounts to a dashboard so you can track personal spending and calculate your net worth on a quarterly basis. Also, consider working with a financial expert, ideally one who understands the nuances of the dental industry.

5. Dentists have incomes that are often large enough to hide financial mistakes.

This is perhaps the most significant reason dentists are retiring later than the average American. With a lot of money coming in, they may feel less urgency to get organized and make a plan. Consequently, net worth never really has the chance to grow as quickly as it would if essential financial planning were prioritized.

Advice: Build your team of professionals who can guide you through important financial decisions and allow you to focus on your craft—preferably with experts who understand the ins and outs of dentistry. The foundation of what I like to call a dentist’s “advisory board” is your CPA and financial advisor. Other professionals you should consider working with are an estate planning attorney, a marketing consultant, a practice coach, and a great office manager. Having the right people around you will give you the confidence to know you’re making the right decisions for your practice and finances.

Retirement planning isn’t what most people would call a fun time, but as behavioral finance expert Morgan Housel says, “Controlling your time is the highest dividend money pays.” At the end of the day, we all want to reach the point where work is optional, whether we choose to retire at that time or continue working for the love of our profession. As a financial advisor, it’s my role to make sure my clients are confident about where they stand financially and understand the behaviors and actions needed to be successful in reaching their goals. Over the years, I’ve seen how a sudden moment of self-awareness can be the catalyst to adjustments in one’s behavior that will have life-changing results. Take what’s been presented here and implement it for yourself. These steps will get you closer to your retirement goal and lay the foundation for more steps you can take to make work optional at an earlier age.  

Editor's note: This article originally appeared in the January 2022 print edition of Dental Economics.

References

  1. Munson B, Vujicic M. Supply of full-time equivalent dentists in the U.S. expected to increase steadily. American Dental Association. Accessed October 22, 2021. http://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_0718_1.pdf
  2. Newport F. Snapshot: average American predicts retirement age of 66. Gallup. May 10, 2018. Accessed October 22, 2021. https://news.gallup.com/poll/234302/snapshot-americans-project-average-retirement-age.aspx
About the Author

Amanda Bateman, CFP

Amanda Bateman, CFP, is a certified financial planner professional and financial advisor at Dentist Advisors, an investment advisory firm providing modern financial planning and investment management services to dental professionals across the country.

Updated December 1, 2021

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