Super Charging Your Retirement Assets for Dental Practice Owners

#1 Max our your 401(k) and Optimize the Investments-

The most common advice you will hear is to max out your 401(k).  Do you wish you could ever do more?  You can, having your 401(k)-plan reviewed every 3-5 years is a good way to make sure you have the most cost effective internal expenses on your investments and the most up-to-date features to offer your employees.  Being able to reduce internal fees just .30% can make a huge impact over a time horizon of 10 years or more.

#2 Have You Ever Heard of a Cash Balance Pension Plan? –

This is the avenue of where it gets very interesting from a personal tax perspective.  (Side note, this is for the Dentist owner of a practice, with less than 20 employees, at least 3 years or more until retirement, and practice revenue greater than $1,000,000) A Cash Balance plan is a defined benefit plan with the flexibility and portability of a defined contribution plan. The defined benefit characteristics allow for larger contributions and tax deductions (Can be as high as $200,000+ per year for the owner) but still require minimum funding standards and a promise to pay benefits. Like a defined contribution plan, benefits are communicated as notional or theoretical account balances and are easier to understand.

#3 Combining a 401(k) and a Cash Balance Pension Plan-

The most common question when we implement this strategy is, “Are we allowed to have both?”  The Short Answer is Yes.  This allows you to produce larger contributions, especially for Principals and Owners, Cash Balance Plans are usually combined with 401(k) Profit Sharing Plans. The 401(k) Profit Sharing component can also provide flexibility in the combined plan.

#4 What Does the Math look like behind this strategy? –

Here are rough estimates of what you could contribute per year at the age of 49-65.

Here are the theoretical ending account balances at the beginning of your retirement at age 65.

This 16-year retirement strategy will yield account balances at retirement around $3,500,000 with modest investment gains. Remember this is only the retirement savings from age 49-65.  This does not include your retirement savings from 26-48.