It's never too late

With great gusto, I've regaled dental students, conference attendees, and anyone else who will listen about the miracles of compound interest.

Rick Willeford, MBA, CPA, CFP

With great gusto, I've regaled dental students, conference attendees, and anyone else who will listen about the miracles of compound interest. I've joyfully introduced financial neophytes to the ideas of "break even" and "critical mass" points on the growth curve of investing and how $2,000 invested at 10 percent for 30 years would grow to a zillion dollars, etc. But I received a reality check one day when an attendee asked meekly, "But what if I am 55 years old and don't have 30 years to let compounding do its magic. Is it too late?"

On the same theory-reality theme, a number of dentists politely remind me that they did not have $2,000 to invest 30 years ago. They were still eating beans and making a box of macaroni and cheese last for a week. I realized that the majority of folks share the same dilemma: they really didn't get started saving while they were young, and they often didn't get started saving while they were "old" either! Now, they are beginning to get lined up for the "final approach," and they and they are concerned with their predicament.

So, what to do? There is some good news in most cases. Those who are in their 40's and 50's typically are in their peak earning years, and they should have more income to turbo-charge their savings. Your clinical skills and speed are finely tuned, and you've likely picked up some post-graduate training in automated endo, cosmetics, etc. Your communication skills should be well honed by now. You have built up a lot of trust and good will with your patients, so they may be willing to proceed with more optimal care. A lot of seeds you have planted in the past are coming to fruition. By the way, if the preceding statements are not true about you, they might serve as good set of guidelines for you to start working on!

As your profits grow in your 50's, you should have the double benefit of seeing your personal expenses get smaller. Perhaps your house is about paid for, and your kids are out of school. On the other hand, your parents may be aging and in need of care. Your children may be out of college, but have moved back home for a variety of reasons. Welcome to the "sandwich" generation — caring for family at both ends of the spectrum. As you age, you can probably take advantage of some of the more sophisticated retirement plans I touched on in my February column. In 2004 you can contribute $41,000 to a defined contribution plan (up from $40,000) plus a catch-up of $3,000 if you are age 50 or older. In many cases, with a 401k you also may contribute about $16,000 for a spouse on the payroll who is 50 or over. That's $60,000, without needing to go to a more complex Defined Benefit plan, which could raise the contribution limit up to over $100,000. Of course, such contributions have to be compared with the cost of operating the plan and providing fair benefits for the staff. This is a complex area, but benefits of 85 to 90 percent are not uncommon with a properly designed plan. Have your retirement advisors evaluate your options. Shoot me an email if you need me to interpret what they said!

The next step is to ensure that your funds are invested effectively. I will address the particulars in future articles, but one item is paramount, yet often overlooked. I am continually surprised by the number of dentists who do not get quarterly or even annual performance reports on their investment portfolios. I am not referring to the monthly statements you get from your broker. That is just a regurgitation of the month's activity and ending balance, similar to your bank statement. Quarterly and annual statements tell you what your portfolio's performance has been over the last one. three , five, and 10 years. They give investors a clear understanding of where they started and how are their funds growing over time.

The cynical side of me says that many brokers are not anxious for you to see such a report card on their performance. You owe it to your future to insist on such a report. I can send you a sample to show you what you should be looking for-and how to interpret it.

Raymond "Rick" Willeford, MBA, CPA, CFP, is president of Willeford & Associates, CPA, PC, and Willeford CPA Wealth Advisors, LLC. As a fee-only advisor, he has specialized in providing financial, tax, and transition strategies for dentists since 1975. Mr. Willeford is the president of the Academy of Dental CPAs, an associate member of AADPA, and a member of Linda Miles' Speaker and Consultants Network. Contact him by phone at (770) 552-8500 or by email at

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