Retirement in Flux

Flux (verb) definition: continuous change, passage, or movement

Flux (verb) definition: continuous change, passage, or movement

BY Brian Hufford, CPA, CFP®

I have been an unwitting formal spectator to dentists' changing retirement aspirations during the past eight years. It began with my professional interest in qualified retirement plans as an ingenious tax-saving tool for small businesses. I could not imagine early in my tax career that a business owner could be allowed to save large amounts of money and deduct the amount saved under retirement plan rules.

This was before I was seriously engaged with the dental profession. My interest at that time was limited to the annual tax deductions for small businesses. In my 30s, I had no larger view of a retirement goal than saving taxes while saving.

Early in the 2000s, I was privileged to participate with an ADA Committee that explored the effects of baby boomer (those born between 1946 and 1964) demographics for dentistry. The committee believed that serious retirement challenges to the dental profession would exist beginning, ironically, in the year 2008 as the leading edge of baby boomer dentists reached the retirement age of 62.

The committee believed for the subsequent 15 years that retiring boomers would potentially cause a 5,000 dentist-per-year shortage that would need to keep up with U.S. population growth. The committee was concerned that values of dental practices would plummet with such a shortage (thus it would be a buyer's market).

The results of the committee's work was presented at an ADA annual meeting and published in JADA. In 2007, in partnership with the Academy of General Dentistry, our firm completed the inaugural scientific survey of the dental profession and dentists' preparedness for retirement.

We surveyed approximately 24,000 dentists via email, and based on a large response from member-dentists, we concluded that about three out of 10 dentists would be in a position to retire at their desired retirement age if practice values were included. This was one year before the 2008 market debacle.

This brings me to the present time and the disorienting current economics of retirement. According to Tom Streiff at PIMCO (Delayed Entitlement: The Changing Economics of Retirement), a recent Gallup survey indicates that the expected retirement age among those still working has increased by seven years since 1996. This might suggest that dentists who had planned to retire at age 62 might be wrestling with expected retirement closer to 69 or 70.

The challenging economic factors contributing to this change in retirement perception among dentists are interest rates on savings at near 0% (not so long ago dentists could count on achieving yields of 4% to 6% with low-risk, fixed-income investments) and the unknown future of Social Security. Streiff stated in his article that Social Security could run out of money 10 years earlier than originally forecast. Likewise, the uncertainty of health insurance coverage and Medicare is a contributing confidence deflator for a normal retirement.

All of this uncertainty is frustrating to dentists in their late 50s and 60s. But I prefer to look at current circumstances as a healthy boost toward self-reliance among dentists intentionally pursuing a preferred future.

I have never believed that full retirement at age 62 is a good goal. I have never had a dentist tell me, "What I really want to do is quit working completely in my early 60s in order to become irrelevant." What I am seeing are some healthy attitudes among dentists that are brought about by the challenging economy toward more saving, less debt, and adopting practice transition models that allow more time off while allowing the dentist to stay connected with the profession. This is a positive development.

Ironically, the current high level of uncertainty about the future seems to be reinforcing bad as well as good financial habits. Dentists who are not saving for the future have a ready rationalization available with the difficult investment and practice environments. Rather than bearing down and embracing the challenges, they retreat and complain. Those who already have good financial habits are saving more and planning to adapt successfully to the current environment.

I have never considered getting a tattoo. But perhaps if I had one, it would be the Chinese symbol for crisis. I am told this is the symbol for danger and the symbol for opportunity.

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 bhufford@huffordfinancial.com.

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