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Round two of facing the undeniable consequences of not being engaged and consistent while starting early with a sound financial protocol. To get you in the mood again, click this link and take a listen:

Why do lottery winners go broke? Why do we hear so many stories about professional athletes and famous actors falling on hard times after earning tens of millions of dollars? And why do 95% of all dentists fail to finish anywhere close to the financial level they should? The answer to all three questions is the same: We get distracted by the assets, and virtually ignore the financial dependency created by our habits. Arguably, every dentist should earn enough to create a sustainable financial existence. What’s missing from the equation is often a sound strategy to attempt to eliminate the need for a bunch of money. Our debts are often our largest ongoing obligations. From mortgage debt to student loans, being debt free will prevent you from needing a bunch of money in your retirement. Lifestyle creep where we see debt as normal, credit cards as necessary, and instant gratification at the expense of savings is a common thing for dentists. If you want to break your dependency on your income, you must save a higher percentage of your income every year until the day you retire. Most dentists blindly assume that they can reduce their income dependency in retirement with no prior successful track record of doing so. If this describes you, you are in for a rude awakening. Now is the time to change those habits that will continue to hold you captive and ruin any chance of successfully transitioning from work to anything else.

When I speak with doctors over the phone, I not only ask them for some numbers from their practice, but I always ask these two questions. Questions that each person reading this should be able to instantly, but they never do. The first is: How long do you want to practice? The second is: How much money do you need to feel financially independent? Generally, they say they really have not thought about it but then most come up with an age at which they would like to have the choice of transitioning out of dentistry if they chose to without any financial worries or debt. The second question is always a tough one. I try to make it easier by saying: “You probably can count on being able to spend about 4%-5% of the money you’ve saved (after taxes) and not run through your saved principal. So, if you had $2,000,000 you could spend about $80K-$100K a year. Would that be enough?” Generally, they are shocked when I remind them that they will need about the same amount of money they spend now, minus debt payments if they are debt free at retirement. They are shocked because, for the first time, they realize there is no way that $2,000,000 would carry them through their retirement. So, we look at greater and greater amounts. The general consensus seems to be in the $4,000,000-$6,000,000 area for retirement to generate enough income to live on without working. Then we look at where they are, and boom, they are shocked again. It’s as if they live in some fairy tale where their fairy godmother will miraculously appear when they reach age 62 and bless them with that retirement money they have failed to save.

So here is a little advice on what to do minimally to survive your work career and transition into an early or even timely retirement. For recent graduates, I challenge them to not buy anything (no new cars, homes, use credit cards, or add any additional debt) until they can save their age in $1,000 bills every year. If you are 26, that would be $26,000, and would go up by $1,000 a year. That is a little over $500/weekly. You would not only reach your goal for retirement, but you would exceed the previous example before age 62. I have never seen a recent graduate who could not pay off their school debt in 5-7 years.

For those 35 to 50-year-old dentists that are already behind: Don’t swing for the fence.   You don’t really need any home runs. Your strategy is to sit down with a financial advisor and give them all the financial information you have and partner with them to create a plan that is a few years short of age 62 to accomplish your financial goals. Keep in mind that working forever is a pipe dream. You can’t even purchase disability insurance after age 64. Generally, structuring a financial plan will involve divesting yourself of silly purchases like second homes, boats, and revolving credit you never pay off, while saving and decreasing debt. These financial advisors will also factor in the additional costs of kids and any other factor that would affect your ability to get out of debt and accumulate savings. This is a real wake up call when you actually see your current potential without drastic changes in your life style.

For those 50 to 70-year-olds, you should be completely out of debt before your 55th birthday, with at least $3,000,000 in cash and on track to accelerate your accumulation while working to make your practice an asset that would bring a tidy sum at retirement.

For anyone else that finds themselves thinking: “Yes but, I _____________________, give me a call and allow me to help you take the first steps to financial freedom. Just a talk with a friend that has been there and helped thousands of doctors realize their dreams. Standing up and committing to a new accountability for you and your spouse when it comes to money is the first step toward a stress-free life and a predictable future. This is how you Summit.

Michael Abernathy, DDS
972-523-4660 cell
[email protected]

PS. A great resource for gaining understanding on what it takes to retire with financial security is Dr. Doug Carlsen. This is a retired (at age 53) dentist with a ton of great information delivered periodically via short videos. Check out his YouTube channel at: