Drilling Down: Financial Considerations for Dentists

Published: May 11, 2024

As financial advisors to many medical professionals, Modera has found that, when it comes to their finances, dentists have very specific needs. Here we address the three typical financial stages of a dental career and explain how a relationship with a Modera advisor can help to secure your financial wellbeing.

Stage One – Just Out of School

Training to become a dentist is time consuming. A general dentistry education starts with an undergraduate degree and continues with four years of dental school. Specializing requires even more training. However, the payoff can be exceptional, with average annual salaries around $225K and up for general dentists, and more than $335K for specialists. It’s a nice way to start a career.

But you also want to start your life, especially after spending so many years as a student. Perhaps at this point you’re in a relationship and may even have children. You own a home or would like to, are ready for a nice car, and want to invest in a practice. You’re deciding on your future. Improving your hand speed. And getting a sense of the business side of your profession. And, like many starting-out dentists, you may also have a large amount of student loan debt, which after the first couple years in practice becomes non-deductible as your income goes up.

Seeing a large paycheck can make it tempting to take out a large mortgage, buy an upscale car, and enjoy the other fruits of your labor. But we urge you to be cautious, especially if your career is still in its infancy and you have significant student debt. Committing to living more modestly at this stage in your career will allow you to focus on using your salary to build your practice and wipe out your loans.

Areas to focus on in stage one:

Managing your spending
Avoiding non-productive debt
Optimizing your practice and learning the ropes
Saving and investing aggressively

Stage Two – Close to a Decade In

By now you are in what we call the stage of professional maturity. Your practice may be well established. Perhaps you’ve moved into your dream home and have the car you’ve always wanted. You may have paid off your practice loans, reduced some student debt, and are actively building your wealth.

This stage will most likely make up about 20 to 25 years of your career. You should be working on continuing to build on the financial foundation created in stage one.

Areas to focus on in stage two:

Harnessing business cash flow to complete debt payoff of practice, equipment, buildings, and eventually student loans
Continuing to build your personal wealth
Setting annual investment and capital goals to harness cash to fund preset targets
Reviewing, analyzing and monitoring areas of tax, insurance, estate planning, retirement projections and investments regularly

Stage Three – Financial Freedom

The goals of this phase are wealth harvesting and preservation. While you’re continuing to work actively, you may also be preparing your business for sale one day and need guidance on maximizing the net after-tax amount. With retirement on your radar, you may be ready to downsize your home and pay off any residual debt.

Areas to focus on in stage three:

Review and monitor specific retirement goals
Examining your monthly cash-flow needs
Getting your practice ready to sell
Determining if you will continue to work (perhaps part-time) or retire fully

How Modera’s financial advice can help:

Even if you’re an expert at running your dental practice you may not know how to optimize it to ensure it continues to serve you financially throughout your life. Modera is well versed with the unique financial planning considerations that dentists face due to our experience with those in the profession. Modera has financial advisors with specific experience in guiding dental professionals.

We can help you through every stage of your career, from getting established, to growing your wealth, to selling your practice and retiring successfully. If you don’t have a collaborative financial team – usually a CPA, attorney, and an insurance advisor – we can help you assemble one. And we’ll work closely with them and you to help keep you on track from whatever stage you’re currently in and through your retirement.

It’s also important to note that we operate as fiduciaries, always putting your interests first, and work on a fee-only basis, much of which may be tax-deductible. To learn more about how Modera can support your unique needs, please contact us.

Learn more on how we work with doctors and dentists: moderawealth.com/specialties/doctors-dentists

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