How Dental Practice Owners Begin to Save For RetirementSubmitted by Mission Financial Planning on October 27th, 2016
Sometimes dentists care so much for their patients and sacrifice so much for their employees that they short themselves and their own families. Providing for your family does not only mean in the day to day, but planning for the future as well.
In the very early stages, you may not need to set up a company Retirement Plan at all. The first step can be as simple as funding a personal IRA. It can be deductible, if you qualify and need the tax break, and a great first step. Beginning the commitment to consistent savings is very important.
A SIMPLE plan for the dental practice may be the next logical step. It's inexpensive to set up and maintain; the main "cost" of the plan is the practice’s contribution made on behalf of the employees, which doubles as an employee benefit, but is limited to 1 – 3% of the participating employees’ compensation. You can make contributions to your own account through salary deferrals up to the IRS limits.
A SIMPLE is a great stepping stone on the way to a 401k, which offers higher contribution limits when you’re ready to save more, and greater flexibility in plan design.
Business owners have a huge advantage over a typical employee in their ability to fund a retirement plan, and the tax benefits are significant. Many do not realize that "Uncle Sam" is helping them fund their retirement in the form of tax deductions. Tax credits are even available to offset the initial costs of setting up a SEP, SIMPLE, or qualified plan (including a 401k).
For contract dentists (1099 employees), the options for establishing your own plan are broad and as the only employee, every dollar benefits you. A SEP or solo 401k can create a very nice nest egg and provide tax benefits as well.