Dentistry can be a rewarding career, yet dentists often face tough challenges when it comes to their financial planning. Because so many dentists are also business owners, their situation is often complicated. Not only do they have to provide for their family, but they must also look after the livelihood of their staff and the financial success of their practice at the same time. An experienced financial advisor who takes a holistic approach is essential to help guide them through those complexities and design a plan for retirement, develop savvy tax strategies, an education plan for children, align an estate plan with financial goals, to name a few.
What are the common mistakes we see dentists make that effect their financial outcomes?
- Not having clear goals.
If you don’t know where you want to go, you won’t know how to get there. Goals may include practice ownership, a retirement date, a solid practice succession plan, paying down debt or leaving a legacy. Whether personal or professional, all goals should be factored in the plan.
- Not considering risks.
Life doesn’t always go according to plan, whether in your practice or personal life. Understanding insurance coverage is critical for protecting a practice and the families behind that practice against events of disability and also personal and professional liability.
- Not having a cash flow plan.
With appropriate planning, current income can be enjoyed without sacrificing the benefits of a long-term growth focus. Creating a cash flow plan that includes automated savings and intentional withdrawal order is an important part of an effective plan.
- Not considering the taxes.
Dentists can have a relatively high tax liability. They must be strategic with taxable investments, asset location, harvesting losses, deferring compensation, and using a Health Savings Account which gives you a triple tax advantage (tax-deductible contributions + tax-free growth + tax-free withdrawals on qualified medical expenses). Bring together your financial planner with your CPA to build a strategy that minimizes the taxes you pay.
- Not optimizing their savings.
Dentists often miss the tax benefits of maximizing contributions in certain accounts (401(k), Roth, IRA, 529, HSA, etc.). That can mean having to manage a pile of accounts, each with a different set of rules. Work with a financial advisor who will create a strategy that benefits your personal wealth management AND benefits your practice at the same time.
- Not having a debt management plan.
Dentists often start their careers with a high amount of debt. It begins with student loans, add a business loan, the mortgage on a family home, etc. and the snowball becomes more complex . A debt payment strategy can save thousands of dollars.
- Becoming a target.
Dentists are too often the target of dubious pitches from self-serving promoters. Without a trusted professional in their corner to vet ideas, dentists can get pulled into flimsy trading strategies and risky ventures. Find a financial advisor who is a fiduciary; they have committed to the highest standard of care and are legally obligated to put your interests ahead of their own.
- Not considering the value of their time.
Not using financial professionals can rob dentists of precious time that could be spent developing business and serving their patients. An experienced financial planning team will leverage dentists’ energy and productivity by monitoring asset location, investment allocation, rebalancing, cost-effective implementation, and keeping a laser focus on the plan.
- Not seeking a retirement plan design that meets their needs.
A surprising number of dental practices don’t offer a retirement plan. This not only impacts employees; it also can be detrimental to a dentist’s retirement. All retirement plans are not created equal. Selecting the best retirement offering (there are a lot more choices than you think) could provide tens of thousands of dollars of additional savings and tax benefits over time.
Hiring an advisory firm with experience serving dentists along with their practices can make a world of difference in how the above challenges are handled. Choose one that is a fiduciary, bound to put your interests first, and doesn’t charge commissions that can erode your growth efforts. Expect a lifelong consultative relationship that adds clarity to your financial plan no matter what life brings your way either personally or professionally. At SYM Financial, we work with dentists to help them effectively manage their wealth. We handle financial planning, portfolio management and manage retirement plans for practices.
To have SYM Financial Advisors work for you call 800-888-7968 or email eturley@sym.com and claim a complimentary, financial review with an advisor at no obligation.
Disclosure: The opinions expressed herein are those of SYM Financial Corporation (“SYM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. SYM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. SYM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about SYM including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request.
