When it comes to planning for retirement, the premise is simple. All you have to do is plan in advance, so you’re able to do what you want with all of your free time.
However, according to the 2016 Retirement Confidence Survey, 26% of people have less than $1,000 saved for their retirement, and as many as 64% had saved less than $50,000!
So, in light of these shocking statistics, we thought we’d write the ultimate dentists guide to retirement. That way, you can feel a little more secure about your future.
So, without further ado, let’s dive on in!
How Do I Get Started?
The best thing to do is to begin saving as early as possible and put aside as much as you’re able to.
Retirees have way more responsibility for their plans than ever before. Historically people had traditional pensions. However, these days more people have 401(k)s and IRAs that need managing to last the entirety of your retirement.
When Should I Start Saving?
Well, first things first, you need to think about the age you want to retire and work backward from there. Having a plan is essential. Ideally, you should start saving for your retirement when you start working.
However, before you start investing, you should have a few retirement goals in mind. Are you thinking of traveling? Moving? Taking up a new hobby? There are a ton of things you can do when you hit retirement; you just have to plan ahead.
If your goal is to move or to travel the world, you’ll need to save more. However, this isn’t as hard as it seems, which is one of the reasons why it’s become increasingly popular for retirees to up sticks and move to the beach.
If that sounds like something you’d like to do, start researching and see what your options are. There are loads of properties out there; you just need to find something that suits your situation.
Once you’ve got a better idea of what you want to do during your retirement, you’re able to work out how much you need to save.
There are plenty of retirement calculators online that’ll tell you how much you need to save each month. Then all that’s left to do is to decide where you want to store your investment.
Typical retirement vehicles include:
- IRAs (regular and Roth versions)
If all this information is too overwhelming, you’ll need to hire the services of a financial advisor to help you plan appropriately.
We recommend doing this anyway because it never hurts to get clarity on something as crucial as this.
Chances are your employer’s 401(k) plan will include guidance on how to get started, how to build up your savings, and how to maintain the standard of living you desire.
However, if you want further information on how to make the most of your plan, we suggest researching the following fund companies and reading the literature they provide on the subject:
- Fidelity Investments, Charles Schwab (SCHW)
- T. Rowe Price(TROW)
- TD Ameritrade (AMTD)
When you couple this with savvy retirement planning you increase the likelihood of securing the future you’re envisaging.
We suggest investing regularly via automatic withdrawals into a tax-deferred retirement account like a 401(k). It’s both a practical and effortless strategy to build your retirement fund.
Things you should note:
- Employer-sponsored 401(k)s have an annual contribution limit of $18,500 if you’re under the age of 50.
- If you’re over 50 the limit’s $24,500.
Plus, plenty of employers are willing to match employee contributions, so be sure to swot up and see what you’re entitled to.
However, 401(k)s typically offer fewer investment options than IRAs. This means you might not be able to find an investment opportunity that aligns with your risk tolerance.
Plus, you could end up losing more money in investment fees in comparison to an IRA. However, this isn’t always true, because this will depend on the specific investments you opt for.
Types of 401(k) Plan
There are a few kinds of 401(k) plan. However, the two most popular are as follows:
The standard plan: this is where employers choose whether to match the employee’s contribution (up to a set percentage). Employers can change the amount they contribute each year, depending on the needs of the business.
Safe harbor plan: this plan demands that employers make some kind of annual contribution.
Benefits of 401(k) Plans for Dentists
The most significant advantage of a 401(k) is the personal tax. Dentists have the opportunity to defer taxes up to $53,000 or $59,000 on their income, saving them thousands of dollars!
What About IRA’s?
The biggest issue with saving with an IRA is that their annual contribution limits are lower than a 401(k).
For example, if you’re under 50, you can save $5,500 per year. Whereas, if you’re over 50 or older you’re entitled to save $6,500 each year.
You might already know this, but both IRAs and 401(k)s are available in either traditional and Roth varieties.
With a traditional, your investment goes in pre-tax. However, when you withdraw the funds, they become taxable during your retirement.
Whereas, with a Roth, you don’t get a tax break when you make contributions. However, when you access it the money during retirement, you won’t be taxed.
Therefore, you’ll need to weigh up both the pros and the cons on how to save for your retirement so you can make an informed decision that’ll benefit both you and your family in the long run.
Did You Find These Planning for Retirement Tips Useful?
If you have any questions about planning for retirement as a dentist, please feel free to get in contact via email. We would be more than happy to help and would love to steer you in the right direction. One of our professional team members will get back to you as soon as they can. Speak soon!
Alternatively, if you’re on the hunt for wider reading about the dental industry, please feel free to browse the books and publications we have to offer. Enjoy!