Rehearsing retirement

May 1, 2009
If you read my articles about retirement, you know that I don't believe in the Industrial Age concept of retirement, which is defined in the dictionary as being “put out of use.

by Brian Hufford, CPA, CFP

For more on this topic, go to and search using the following key words: retirement, clinical dentistry, four risks of retirement investors, Brian Hufford.

If you read my articles about retirement, you know that I don't believe in the Industrial Age concept of retirement, which is defined in the dictionary as being “put out of use.” To me, retirement is doing more and more of what I love doing, and less and less of what I hate doing with more time away from work. What is your definition?

As our firm thinks about how to assist clients to think about retirement, we have found that the preparation activity that seems to resonate with them and with us is the concept of rehearsing retirement — a different phase of life.

Practicing clinical dentistry involves a great deal of rehearsal in order to deliver excellent clinical outcomes. What about thinking of a rehearsal for retirement as a three-act play? Act 1 could be “It's Just Sleep: The RV or The Four Seasons?” Act 2 could be “The Dental Practice: Folsom Prison or Dancing with the Stars?” Act 3 could be “The Bigger Future: Walking the Malls or A Walk in the Clouds?” Note that this is a serious play, and calls for considerable rehearsal to get it right.

Act 1: It's Just Sleep: The RV or The Four Seasons?

This act's rehearsal involves imagining where your current commitment to savings and your current investment approach will lead at retirement age. We believe that every dentist should save at least 20% of income annually throughout a career. Ultimately, you will need at least 20 times your pretax retirement income in savings to exit dentistry. If you need $150,000 of retirement income per year, you need $3 million in savings to avoid having to withdraw more than 5% of retirement capital each year. Rehearsing for this outcome involves starting with your end savings goal in mind and establishing an annual savings and investment strategy that leads to a higher probability of achieving your goal.

Our firm believes that the economy has entered a once-in-a-generation secular bear market that could require investors to more actively protect against secular market declines. Secular market trends can last from 16 to 20 years.

During secular uptrends, a passive strategy works well. But during secular down trends, a more active strategy is needed to protect investment capital. There are rallies and declines in secular bull and bear markets. The difference is the dominant trend during the longer secular period. We believe this started in the year 2000. Your investment approach must navigate the four risks of retirement investors: market risk, goal risk, inflation risk, and longevity risk.

Act 2: The Dental Practice: Folsom Prison or Dancing with the Stars?

Dentists across the country are rehearsing new transition strategies that play to the needs of dentists in the 21st century. This has been to stay connected to a dental practice with more time off and excellent economic outcomes. The concept of a “retire-and-walk-away” practice sale is becoming more rare. Practice mergers and deferred sale arrangements are newer concepts that are designed to be more in line with the current dental practice demographics with a limited number of buyers and sellers who wish to practice longer, but at a reduced pace.

Smaller and more rural communities may present no qualified buyers for a dental practice. Practice mergers present an excellent outcome for buyer and seller to realize the asset value of the practice, as well as a continuing connection with a dental practice. Rehearsal of exit strategies has never been more important.

Act 3: The Bigger Future: Walking the Malls or A Walk in the Clouds?

This year I will be 60 years old, and my wife and I will have been married for 40 years. We fell in love at age 13 but waited until age 20 to marry. I love what I do. I couldn't imagine a better group of professionals to work with than dentists.

I have forced myself this year to develop other areas of my life about which I am passionate. I have asked myself which areas of my practice add the most value to the dental clients I want to focus on for the rest of my life.

I have also tried to find passion in activities that will draw me away from work life more frequently so I can obtain a better balance between work and leisure. This is hard for me to do. I believe it is important to live by the adage “Your future always needs to be bigger than your past.” I am rehearsing daily.

In summary, don't enter the critical final act of your life without ample rehearsal. Rehearsal is natural to your practice of high-quality clinical dentistry. So also take the time for rehearsal for a high-quality retirement life.

Brian Hufford, CPA, CFP®, is CEO of Hufford Financial Advisors, LLC, an independent, fee-only planning firm that helps dentists achieve financial peace of mind. Contact Hufford at (888) 470-3064, or at [email protected].

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