I Predict a Financial Revolution in Dentistry
that will change how you view retirement
Americans will begin to turn back to the pragmatic values of previous generations in regard to personal finance, retirement philosophy, and savings. They will gradually value saving money versus over-leveraging debt and spending what they don’t have. Americans will take more caution in the stock market and look to reduce the expense and risk associated with these investments. In the business of dentistry, there will be a major shift in what is perceived as financial success. Productivity will not be the measuring stick of success and the concept that more is better will be challenged. Dental businesses will become more diverse as new technology and innovation paves the way for new dental services – and unique dental business models as a result. With the emerging dentist, there will be a new barometer for personal, financial well-being. How much money you save – rather than earn – will be the new standard of success.
Instead of comparing gross production and overhead percentages while chatting in the tee-box or at the local dental meeting, dentists will quietly focus on improving their savings per year and reduce their investment risk and expense as a result. Great overhead doesn’t mean you save enough money (but that is another blog altogether.) Early retirement can be a reality for today’s emerging dentist that is embracing this new philosophy and riding the wave of an American sentiment that is turning back towards a more predictable path to wealth. If you are a dentist that is 55 yrs old or older, you likely had dreams of a retirement just around the corner; however, recent statistics suggest that, for many, this dream is an apparition – not quite real and always evasive.
The American Dental Association’s 2010 Survey on Retirement and Investment was just released and reveals some compelling data that supports my theory that there will be a shift in thinking with regards to personal financial well-being in dentistry. For example, the survey reveals that dentists under 35 yrs old said they plan retire by 59.4 yrs old. (Table 1, page 3). Then, dentists between 55 and 64 yrs. old were asked the same question. They responded that they would retire at 66.7 yrs. old!
What happens in a dental career that pushes the desired retirement target date for dentists away by nearly 8 years?
The older dentist might read this and scoff that the “young dentist” that was surveyed was un-realistic and unaware of the realities of retirement demands. Maybe dentists discover how much they love dentistry and decided to work later in their career. Both would be fair to consider. They are not correct to assume, however, that today’s younger dentist can’t accomplish the dream of financial independence at a very young age. There is a revolution under-way with many dentists choosing to focus on saving more and pulling that retirement date back towards them a bit. What happened in that twenty-year span that slowly pushed a retirement date away like some looming glacier in retreat?
In the 2010 ADA survey, “dentists were asked if the economic downturn delayed their retirement.” 39% said yes. In order to make up the erosion of capital, many dentists will delay retirement 5-7 years. There is a lesson in learning to respect our history. In 2003, the ADA asked the same question after the stock market bottomed out in August of 2002. At that time, “43% of dentists said their retirement would be significantly delayed” as a result of this downturn in the first part of this 21st century. I wonder if any of the dentists surveyed in 2003 where the same in 2010? Imagine delaying your retirement 7 years only to find the same stock market downturn hits you up side the head once again. If I’m a dentist that is starting my career or just hitting my stride, I’m starting to respect the blessing of a cash-based business and embracing a smarter strategy to save more and reduce risk along the way.
Our culture reflects my theory and the American citizen is beginning to increase what they save each year. The Department of Commerce, Bureau on economic analysis data reveals that Americans were saving as little as 1.8% of disposable income in the third quarter of 2007. You can view the data graphically at http://www.bea.gov/briefrm/saving.htm. Do you remember October, 2008? I don’t blame you for wanting to forget it. The bottom dropped out of the stock market that month and, in many cases, retirement portfolios, kid’s college savings accounts, and brokerage investments across the nation lost nearly a third of their value. What most people don’t know is that the reaction was profound.
Savings rate jumped to nearly 5.5% in late 2008 and kept climbing to over 7% by mid-2009 – staying relatively high. America is beginning to value savings and a return to improving efficiency in their personal finance and their businesses.
Corporate America has been quietly hoarding cash as well and reflects much of the data we find on individual savings rates. After all, savings for retirement is predictable and pragmatic. No one can take that away from you. Strong savings insulates many from the failure to achieve market gains consistently. Strong savings allows for a more conservative and predictable financial plan. A dentist, across a variety of business models, has the realistic potential to save and invest 25% of their gross income and we see glimpses of that every day. There will be a revolution of sorts in the approach towards retirement for dentists in the next decade and I challenge you to get back to basics and re-consider your own well-worn path.
