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28 August, 2023

Preparing For Retirement: Essential Tips for Dentists


As a dental practice owner, you’ve worked hard to build a successful, thriving business. That’s why it’s important to take care of your financial health, especially when it comes to preparing for retirement.

In this blog post, we’ll provide essential tips and strategies to help you achieve a financially abundant retirement. We’ll explore saving and investment strategies for dentists, risk management, insurance options, dental practice transitions, and lifestyle considerations in retirement.

Retirement Income Planning For Dentists

If you’re a dentist, retirement planning comes with a unique set of challenges and considerations. There are several key factors that can impact your retirement funds:

  • Income Variations Throughout a Dentist’s Career

As a dentist, you often experience income variations over your career, especially if you own a dental practice. Early-career dentists may face student loan repayments, while mid-career dentists may have mortgage or business loan repayments. Income can also fluctuate depending on health insurance plans, market trends, and economic recessions. Understanding and managing fluctuations is vital for effective retirement income planning.

  • Unique Considerations for Practice Owners vs. Employed Dentists

Dentists who own their practices have additional responsibilities when planning for retirement. The value of your practice is considered to be a retirement asset and it’s important to create a comprehensive exit strategy that minimizes risk and tax. Alternatively, employed dentists might focus on maximizing retirement contributions and minimizing personal tax liabilities. Whether you’re a practice owner or an employed dentist, it’s also essential to build a diversified investment portfolio.

  • Impact of Mortgage or Business Loan Repayments on Retirement Savings

For dentists who have mortgages or business loans, it’s important to strike a balance between debt repayment and retirement savings. There are interest tax deductions available for certain loan repayments, which can help reduce your tax burden while saving for retirement. Proper financial planning can help you manage retirement savings and loan repayments effectively.


Saving and Investment Strategies for Dentists


The Importance of Savings and Business Budgets

Before diving into investment planning, it’s worth building a robust savings habit and maintaining well-structured personal and business budgets. Understanding and monitoring key performance indicators (KPIs) can help you optimize your dental practice’s financial health, leaving more room for retirement savings.

Tax-Advantaged Retirement Accounts for Dentists

Tax-advantaged retirement accounts are powerful ways to boost retirement savings. Some of the common retirement accounts for dentists include:

  • 401(k) Plans – Wage Deferrals and Employer Contributions

Employed dentists should take full advantage of wage deferrals and profit-sharing contributions in employer-sponsored 401(k) plans. These plans allow for pre-tax contributions, and some employers offer matching contributions, which can significantly increase your retirement savings. Contribution limits for 2023 are $22,500 for wage deferrals, and increase to $73,500 when supplemented with employer contributions.

  • Individual Retirement Accounts (IRAs) and Roth IRAs

Both traditional IRAs and Roth IRAs offer tax advantages, but they differ in how contributions and withdrawals are taxed. You should consider your current tax bracket and future tax expectations when choosing between the two. A Dental CPA can help identify the most tax-effective retirement accounts for dentists.


Exploring Additional Investment Options

In addition to retirement accounts, you can explore other investment options to diversify your portfolio:

  • Stocks, Bonds, and Mutual Funds

Investing in stocks, bonds, and mutual funds can provide potential growth opportunities for long-term financial goals when preparing for retirement. However, it’s essential to balance your level of risk and return based on your risk tolerance and investment goals.

  • Real Estate Investment Considerations for Dentists

Real estate can be an attractive investment for dentists. Owning property can provide passive income to you during retirement, but it requires careful research and management. It’s important to consider factors such as location, property type, and rental market conditions before venturing into real estate investments.

Risk Management and Insurance Coverage


Risk Management Options

Running a dental practice comes with various risks. To protect your personal assets from potential business-related liabilities, you might consider using an LLC or separate corporate structure. These entities can shield your personal assets from business debts and liabilities. Assets of employer-sponsored qualified retirement plans are protected from claims of creditors both in and out of bankruptcy actions under the Employee Retirement Income Security Act of 1974.

Importance of Insurance in Retirement Planning

Insurance plays a crucial role in securing a stable retirement. It’s worth finding appropriate business insurance that covers malpractice to protect yourself from potential liability and risk.

Insurance Coverage for Potential Health Issues and Long-Term Care

It’s also important to have adequate health insurance, especially as you approach retirement. By reviewing your insurance coverage regularly, you can ensure it adequately addresses your long-term health needs during retirement. It also means you’ll have additional support in case of medical assistance later in life.

Professional Liability Insurance Considerations for Retired Dentists

Even after retirement, dentists may need to maintain professional liability insurance that includes tail coverage. This helps to protect you against potential claims related to your past practice. It’s also important to consider if you intend to do dental-related consulting work while retired.


Having a Dental Practice Transition Plan in Place

As you approach retirement, it’s critical to have a practice transition plan in place, if you own your dental practice. Having a well-structured dental practice transition plan helps ensure the continuity of patient care and the future success of your dental practice.

  • Creating a Dental Transition Plan for Continuity of Patient Care

A practice transition plan should outline the steps for a smooth handover of patient care. This includes identifying potential successor dentists or associates within the practice and involving them in leadership roles gradually. The goal is to ensure that your patients feel comfortable with the new provider and that the quality of care remains consistent.

  • Identifying Potential Successor Dentists and Associates

Identifying and training potential successors is vital for a successful dental transition. You should assess the skills, experience, and compatibility of potential successors to find the right fit for your practice’s future. It can take time to find the right successor, so it’s worth starting this process as soon as you’ve decided to sell. 

  • Legal and Financial Aspects of Dental Transitions

It’s worth engaging a Dental CPA and legal consultant who both specialize in dental practice transitions. They can help with practice valuation, negotiate terms with potential buyers or associates, handle the legal paperwork involved in the ownership transfer, while also minimizing your tax liability.


Evaluating Retirement Readiness

As retirement approaches, it’s important to regularly assess your retirement savings progress to ensure you’re on track to meet your financial goals. This helps you identify any shortfalls and make necessary adjustments to stay on course.

Seeking guidance from a financial advisor who specializes in the dental industry can provide valuable insights and personalized retirement planning strategies.

Life is dynamic, and your financial circumstances may change over time. As a dentist, you need to be prepared to make adjustments to your retirement plan based on changing circumstances.


Lifestyle Considerations in Preparing for Retirement

Beyond financial planning, lifestyle considerations play a crucial role in preparing for retirement. Retirement is an opportunity to focus on overall well-being, including physical and mental health. Engaging in activities that bring you joy, spending time with loved ones, and pursuing hobbies can enhance your retirement experience.

Many dentists find fulfillment in post-retirement work, such as with charities, dental consulting, or part-time dental practice work. Exploring such options can provide a sense of purpose and keep you engaged in your local community.



Retirement planning is an essential aspect of any dentist’s financial journey. By considering income variations, leveraging tax-advantaged retirement accounts, exploring investment options, and managing risks through insurance and legal structures, you can achieve a secure retirement. 

As you embark on the journey of preparing for retirement, consider seeking guidance from experienced financial professionals, like Dental CPAs and financial advisors who specialize in assisting dental professionals. With careful preparation and strategic decisions, you can look forward to a rewarding and fulfilling retirement.

To start your retirement income planning journey with confidence, book a call with our team of expert Dental CPAs.

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Note: The material and contents provided in this article are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Ed Gabriel, CPA is President of DrillDown Solution and a graduate of Brigham Young University. His clients benefit from over 40 years of experience in maximizing profits, minimizing taxes and putting them in the best financial position possible.