As a dentist, you should start planning for your retirement savings while you are still building your dental practice. That can give you enough time to refine your retirement goals and find plans that best suit your dental practice. The best retirement plans for dentists include diversified and safe or minimally speculative investments that offer excellent long-term returns.
These investments can ensure you earn a passive income that can support your accustomed lifestyle even after you can no longer work as a dentist. It is a good idea to research the different available investment options and select the one that can bring you the best returns.
Retirement plans for dentists
When looking for the best retirement plans for dentists, you might want to consider these options:
SIMPLE IRA
SIMPLE IRA is the acronym for Savings Incentive Match Plan for Employees’ Individual Retirement Accounts. If you have a medium-sized dental practice with 100 or fewer employees and do not sponsor a retirement plan, you can consider this start-up plan to contribute toward your and your employees’ retirement savings. Employees are eligible for the savings plan if they have earned up to $5,000 in the current or the past two years. The employees can choose to deduct the contributions from their payrolls, and you can make matching or non-elective contributions.
As an employer, you have to match up to three percent of the employees’ salary. So, if the employees choose to contribute three percent of their salary, you have to match with a three percent contribution. If they decide to contribute one percent, you contribute one percent. However, if they choose to go with seven percent, you do not have to go higher than three percent.
The SIMPLE IRA is easy to set up, has minimal administrative costs, does not require annual IRS reporting, and can offer up to a $500 tax credit per year. While the contributions you make for employees are mandatory, they are considered business expenses and are, therefore, tax-deductible.
Health savings account
A health savings account can help you cover qualified medical expenses and high deductibles that you might incur after retirement. Check with the IRS how much you can currently contribute as an individual or as a family or if you are eligible to make additional catch-up contributions. A health savings account is tax-efficient since its contributions and distributions are tax-exempt.
Real estate direct investment
Investing in rental real estate can ensure regular and ready cash flow every month after your retirement. If you invest prudently, the rental income you get can enable you to continue living in your accustomed style as a high-earning dentist. So, it is essential to carefully consider the real estate type, condition, location, rental income trends, development possibility, and property management aspects before making your investment. It is also necessary to calculate how much it will cost you to manage the property or hire a caretaker or a property investment company to manage it for you.
Syndicated real estate investment
If you do not want to deal with the management issues that can arise with owning one or more real estate properties or your budget does not extend to purchasing the properties you like, you can invest in syndicated real estate. In syndication, several investors will get together to invest in a property or multiple properties and receive specific returns on their investments. A real estate investment manager or company will manage the properties on behalf of the investors.
Aside from the management aspect, this type of investment is more affordable and allows for more diversification. In addition to investing in multiple properties, you can also choose to invest in several real estate syndicates. Do this after carefully researching the real estate syndicates and their managers.
Real estate debt funds
The best retirement plans for dentists include real estate debt funds. In this investment option, you and other investors can team up to contribute to a debt fund managed by a competent fund manager. The fund manager will lend money from the debt fund to real estate developers at seven to 12 percent interest. The real estate that these developers are developing will serve as collateral for the loans.
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