Can I Afford to Retire?

December 12, 2018 Retirement Plans and IRAs

When to retire: it’s a difficult decision that asks you to weigh your life goals, family obligations, and, of course, finances. Perhaps you want to devote several more years to your practice regardless of your financial situation. Maybe you’re more than ready to close out the last chapter of a career well done–but don’t know if the numbers will line up. As you’re considering entering into this important transition, keep the following points in mind.

Do I Have an Exit Plan?

A secure, stress-free retirement does not come from a spur-of-the-moment decision. Putting a plan in place 3-5 years before your transition will help you not only financially, but mentally and emotionally, as you prepare for change.

Namely, you will need to make plans for your practice. Since the process of selling a practice can take a period of a few years, phasing out while a future new owner phases in can help you, your employees, and the new owner adjust to the change. Knowing that the business can survive without you will give you peace of mind about retirement as you stabilize your schedule and finances. If you have yet to design your exit plan, you may need to reassess whether you’re ready to retire.

Have I Been Investing throughout My Career?

Of course, dentists and physicians who have managed their money well since the beginning of their career will be in the best shape for retirement. However, even mid-career doctors can make a significant impact on their retirement readiness with how they handle their finances today:

  • Don’t sacrifice all of your retirement savings to pay off debts. While debt reduction is important, you must balance it with a long-term saving plan for tomorrow. Take advantage of the Tax Cuts and Jobs Act of 2017, a plan that has changed federal tax withholding tables, to set those extra savings aside.
  • Keep your practice well maintained and up to date. Even if you have a loyal customer base, would-be buyers may balk at making an offer on an office with dated equipment and interiors. Keep the costs of these improvements in mind and make sure you can afford to make them before retirement.
  • Make wise investments when it comes to equipment that will incur a substantial cost, such as a Cerec machine or a 3D cone beam. Is your current income enough to support the investment and offset the expense? 

Have I Sought Advice from the Right Professionals?

While you have most likely worked with a number of financial planners and insurance agents over the years, retirement calls upon the expertise of professionals who specialize in transitions. A good business valuation can provide you with your practice’s worth along with recommendations for how to improve management to increase the bottom line. An accountant can help you maximize tax benefits and prepare a clean tax return to make your practice more appealing to potential buyers. A transition consultant, more specifically, can assess your practice’s marketability for future owners and determine what steps you need to take to insure a healthy retirement.

At Collier & Associates, our advisors can guide you through the the process of appraisal, succession plans, and phase-out plans. With over half a century in business, we have the experience to help you make your transition to retirement with confidence and success. Contact us today to get started.

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