Roger Levin, DDS, MBA
For the last few years, I have dedicated these columns to the subject of practice management. Most of you reading this know that I support the concept of a boutique style, high-profit, high-quality practice. After consulting over 2,500 dental practices, I have found that the low- to medium-volume practice that provides comprehensive diagnosis and care usually has a higher real profit than the high-volume
practice operating in a somewhat disorganized fashion.
Inevitably, if you follow the principles that I have laid out in these columns and in the seminars that I present, you have increased the profitability of your practice. Although I have never seen an actual research study to support it, a number of financial experts have indicated that only about 3 percent of all dentists can afford to retire at the age of 60. While the amount necessary to retire is different for each individual, it still is true that people are living longer and that we currently are in a very low inflation cycle.
If you are fortunate enough to live a long life, when the inflation rate starts to rise (and it inevitably will), you may find that you have not saved enough to enjoy your retirement years. This is uncomfortable, considering that most dentists have had excellent careers, produced sufficient income and provided tremendous help to other people.
The value of a financial plan
Most dentists - in fact, most people - do not have a great deal of training in the area of finance. That is why most of them cannot retire at the age of 60.
You may have a pension plan, 401(k), IRA, etc., but that does not mean that you will have sufficient funds to retire at a given age. It also is unlikely that the long-term performance of the stock market will continue at the rate of increase of the last few years. What should you do?
Every dentist should have a financial-plan analysis performed as soon as possible. A financial plan will guide you as to how you are handling your money, how you should be handling your money, how much money you need and how much money you need to retire, as well as provide you with a great deal of additional information. A financial plan gives you an overview of investment options without picking specific investments for you.
Be sure the financial planner you use does this exclusively and on a full-time basis. Use only a fee-for-service financial planner who is not mainly interested in what else he or she can sell you. Many CPAs are unable to perform a thorough financial plan although they have excellent accounting and tax backgrounds. A successful financial plan should enable dentists to save some segment of their income beyond that which they need or want to spend for daily living. It is that savings that inevitably becomes your retirement funding when you want to retire.
Financial planning is essential for dentists. According to Tim Chase, president of Wealth Management Services [(888) 337-7555)] and recently honored as one of the top financial planners in the United States by Worth Magazine:
"It bothers me a great deal that so many dentists have excellent careers and then are either unable to retire or have to be very careful about what they spend during retirement in order to ensure that they can pay their basic living expenses. If all dentists would have financial plans performed and updated annually or every five years, they would retire with far more money available to them than they ever imagined. They do not realize that it is never too early to start.O
The amount you save and what you do with that savings are the key factors in short- and long-term financial planning. Each year, I get calls from hundreds of dentists who want to retire in the next couple of years and want us to build their practices now because they do not have sufficient dollars saved to retire. They expect to make enough in their last one or two years of practice to put them over the proverbial hump. Unfortunately, most of these people are looking at an additional five to seven years of practice to retire comfortably. As an old saying goes: You do not get rich in dentistry. You get rich by investing what you make in dentistry.
I recently received a call from a young dentist, 31 years old, asking about having a financial plan performed for him. I asked him what motivated him at 31 to have the wisdom to pay to have a financial plan performed and he said, OAll I know is I need to start now unless I want to work the rest of my life.O
Dr. Roger Levin is founder and president of The Levin Group, a national, dental-management and marketing-consulting firm. He can be reached at (410) 654-1234.
