This is a question we hear quite a bit, and the answer is easy to give. You first need to ask yourself one important question – what am I currently spending?
The fist step in calculating what your retirement savings should be is to know exactly how much money you currently spend and what it’s going towards. Because of this, the answer to the question “how much money will I need to retire” will be different for every single dentist. Avoiding calculating the actual numbers is one of the biggest mistakes a dentist can make.
Many dentists assume that they can just make rough estimation of a retirement budget, but this is ill advised. This method doesn’t take into account any large, out-of-the-ordinary expenses such as vehicle purchases, vacation spending, or any emergencies that may come up. It’s been recommended that you track your spending over a three-year period to get the most accurate measure of how much money you’re actually spending.
Once you realize that your future spending should be mostly the same as your current spending, you’ll be able to calculate how much money you’ll need to save in order to retire comfortably. The simplest way to find this number is to times your annual spending by 20 or 30, depending on your age. If you’re retiring earlier, you’ll need to add more years, if you’re retiring later in life, you can subtract a few years.
It will be a challenge, but dentistry is a profession in which you can feasibly accumulate up to 30 times your annual spending. The trick is to start early, plan careful and watch your personal spending. For more tips on retirement, selling your dental practice or any other dental transitions, please contact CTC Associates.