Investing in Your Practice: Why a 30-year-old Orthodontist Started Planning for Retirement
By Dr. Beth Troy
After completing residency two years ago, I thought my first years as an orthodontist would consist of perfecting bracket placement, adjusting retainers and solving the occasional staff scheduling conflict. Never did I suspect that I would be preparing for retirement!
In dental school and residency, I had a few lectures on “practice management,” none of which addressed retirement planning, much less the variety of 401(k) plans and pensions available. But after discussing this void with my fiancé, Jerry (an attorney and financial planner), I quickly understood the importance of planning now for my future and the futures of my office personnel.
Jerry convinced me that as a young professional I need to take full advantage of the many benefits offered in our office’s retirement plan. As a future owner of a practice, I have a moral obligation and legal duty as a fiduciary to make sure employees understand our retirement plan and have full access to participation. I learned that not all investments or 401(k) plans are the same. Just as each patient’s mouth reveals a unique malocclusion, many practices are faced with special circumstances that benefit from a qualified financial professional who ensures that the practice provides a retirement plan tailored to specific employee needs.
The Department of Labor regulates retirement plans so that not just the higher-paid participants (i.e., the dentists) benefit. There is a limit on the amount of money that dentists can contribute to their own account if the other lower-paid employees are not adequately contributing. The lower-paid employees must also have their contributions matched by the practice at an acceptable level. This encourages dentists to take an active interest in their staff’s retirement planning. When the lower-paid employees have the opportunity to maximize investing, the higher-paid employees do as well.
I also learned that investing early and often is critically important. Jerry gave me a chart showing someone who invested $500 per month for 30 years at an assumed annual rate of return of 9 percent ending up with an account worth more than $850,000. This convinced me to make retirement investing a priority now. Like many of you, I have student loans and other financial obligations that require immediate attention. But as a young dentist faced with the uncertainty of Social Security and a dependable economy, I invest some amount—no matter how small—every month.
As dentists, we spend countless hours fixing problems that are often avoidable through proper prevention. We also educate our patients to help them achieve maximum oral health. If we take similar preventive measures to make sure that our practice’s retirement plan is “healthy” and we take the initiative to invest for our own future, we can foster a happier workplace and accelerate our path to a successful retirement.