The Journey to Retirement

By John W. Portwood Jr., DDS, MS, MSF, CFP, ChFC, CLU, MAGD

Part 1: Beginning the Journey

Preparing for retirement is one of the most daunting tasks that young dentists face when they first start practicing. In contrast to the immediate challenges of paying off school debt and the normal expenses of day-to-day living, retirement seems like a vague, misty mirage that needs to be worried about later. Add to that the transition to private practice and the funds required to eventually purchase a practice, and now it seems like retirement can never be accomplished. It is true that approximately half of all Americans have no retirement savings(1) and about two-thirds are woefully underprepared,(2) but, as dentists, you have the opportunity to achieve a comfortable retirement with proper planning and some work.

Fears about being able to retire are valid and should not be discounted, for they are very real and must be addressed. Without formulating a plan of action in the beginning of your career, you may face a financial disaster in your later years. Without planning for your retirement, you will get exactly what you planned for — nothing.

The key to success is starting early and staying consistent.

First, you need a number. That number is how much money you need to retire.

Assistance will probably be needed from a retirement specialist to not only find that number, but also to find a plan that can deliver it to you. However, I will go through some of the math to give you an idea of the process. You want a comfortable retirement, so let us say for this example that you want $135,000 a year to retire on (remember, you will hopefully have some income resources, such as rental properties, investment income and part-time jobs, other than your retirement plan). If you discount the Social Security payments you will receive (let’s estimate them at $55,000 for you and your spouse), then you need the retirement plan to deliver $80,000 a year in today’s dollars. Next, you have to realize that with 3% inflation per year (a good long-term rate to hang your hat on), your money is halved in buying power every 24 years. If you are about 28 years old and plan on retiring when you are 65 years old, then your $80,000 will need to be approximately $240,000 annually to be able to have the same lifestyle that $80,000 today provides. Now, calculate what pile of money is needed to take out $240,000 a year without depleting the pile before you die. Numerous researchers have calculated the amount that can safely be withdrawn each year, and that percentage varies between 3%–5% annually, allowing the recipient to adjust each year for inflation.(3) Some of that percentage depends on how old you are when you retire, some on prevailing markets. In our example, we will assume that you are 65 years old. I have found 3.8% to be my favorite number, but, for illustration purposes, we will use financial adviser William Bengen’s 4% number. Multiply your $240,000 by 25 (to account for the 4% withdrawal), and you will need $6 million total to have your goal of $240,000 ($80,000 in today’s dollars) to withdraw per year.

Yes, that daunting number may seem unachievable, but the key to success is starting early and staying consistent. Compounding interest is your friend, and every year that you delay contributing makes the goal that much harder to achieve. Remember, you don’t have to maximize contributions during the early struggles in your career. In fact, most older dentists started by contributing to an individual retirement account (IRA) and still have those same IRAs once they retire. Again, the key is to start early and consistently contribute. You can contribute more as time goes on and your finances improve. It is extremely hard to not contribute and then catch up later. Every year is precious and critical to success.

Now, let’s look at the average retirement age. The average American retires at 62 years old.(4) For the average dentist, it is 69 years old.(5) The fact that most dentists retiring work for themselves and have great incomes contributes to this later retirement. Factors that lead to early retirement include declining health, longing to enjoy family and travel, and the desire to do something else.

I recommend that you pick a retirement date as your target date. It doesn’t mean you have to quit on that day, but what it does mean is that you are now secure and can retire if you choose. It is an amazing feeling to know that you are financially secure. It changes your whole practice outlook. You are now working because you choose to and not because you have to. Remember that we used 65 years old in our example above. However, the age you are using as your target is important from the standpoint that it helps determine how much annually you have to invest to achieve your overall financial goal.

There are many plans available, from the lowliest IRA to complex defined benefit and defined contribution plans. Each of them serves a goal and a purpose, with concomitant obligations in some of these plans to include staff. The annual amount needed to fund the plan goes a long way in deciding which plan to pick. I can’t emphasize enough that you should get help from a retirement specialist to figure out how to achieve the goal. You don’t need any help to open an IRA, but understand it will not ultimately get you to your goal. It is a great place to start when you are beginning, but you will need something stronger to reach the finish line.

(As an aside, if you are going to use an IRA, then go with the Roth option. If your timeframe is greater than 18 years, you will be better served with paying taxes up front and letting the balance grow tax-free. Even if you have less than 18 years to invest, I still recommend a Roth IRA for its estate-planning advantages.)

Be sure your retirement specialist sets benchmarks to help ensure you are on pace to achieve your goals. Investments grow logarithmically because of the effects of compounding, and it can be difficult to know whether or not you are on pace to achieve your goal. Usually, you feel as if you are constantly behind, yet you are still on track. I would recommend benchmarks at intervals of five years. That usually lets you weather both rising and declining markets and gives a more precise estimation of your trajectory.

Your retirement plan is only one part of the income picture. You also have Social Security and investments, as well as any work you might do in retirement. I know that many are concerned that Social Security will not be available in the future for fear the program will run out of money. However, it would be politically damaging for any party to do that, so I see a “fix” coming at some point soon. There are many options to fix the problem, and we will have to let the politicians find the right answer. I would still include Social Security in the planning equation.

It is often tempting to spend your retirement contribution on something other than the goal you set forth.

Part 2: Navigating the Journey

Continuing your journey toward retirement, it is important to make sure that you are hitting all of your benchmarks. Remember that these are guideposts, not absolutes, but they let you know if you are staying the course or falling behind in reaching your goal by the date you have chosen. Sometimes life throws curveballs and creates conflicts that pull you away from contributing to your retirement.

It is often tempting to spend your retirement contribution on something other than the goal you set forth. It can be on equipment for the practice, such as a new dental suite, or something for your personal and family life, such as a long-deserved family vacation or a new car. Remember, there is always somewhere else to spend the money that is more fun than putting it aside for something in the future. But you also need to realize that the future is coming, and you must be prepared.

Unanticipated crises may arise that demand your finances and waylay you from your retirement-saving. This is another reason for the benchmarks. You may actually have to contribute more to play catch-up for a previous diminution in payments. Working with your adviser to make adjustments to the plan may be necessary. It is critical that you communicate with your retirement specialist to stay on course. They understand that things happen, and adjustments must be made on the journey, and they have the expertise to help you right your ship’s course.

As you get older and acquire more disposable income, you may now have money to invest outside of your retirement plan. You always want to achieve your retirement plan goal, but you don’t necessarily want all of your money inside the retirement vehicle if it can be helped. While a pension plan does receive tax-deferred or tax-exempt status on the earnings of the plan (depending on the plan chosen), these plans are subject to the vagaries of the tax laws and rules of distribution, which can be adjusted by the administration in charge. This can materially affect the outcome you desire. By having other investments outside of the plan, you pay your taxes on the growth, and then the money is outside of government control. I recommend that your goal should try to be a 50/50 mix of retirement plan assets to personal investments by the time you retire. This may not be attainable, but it should at least be a goal. These investments can be in stocks, bonds or real estate.

As you begin to approach retirement, you need to evaluate the risk on your portfolios.

Another event that can occur during this time is an inheritance — received by either yourself or your spouse. This is money that can go a long way toward creating a great retirement. Many times, I see this money used for personal things that may be necessary for the individual or the family, but I also find that in many cases it is used on somewhat frivolous items. I think the important lesson here is to separate needs versus wants. This money can be used to fund your investments outside of the retirement plan, creating a tidy nest egg.

Another issue requiring discussion is your estate plan and how you wish to manage your funds after you have left the world behind. Minimally, you should have a will in place to fulfill your final wishes. This is especially important when minor children are involved.

Your financial assets are generally governed by contract law and not probate, meaning you can get past probate by designating beneficiaries in your investment and IRA accounts, allowing the money to go directly to those you choose to have it.

As you begin to approach retirement, you need to evaluate the risk on your portfolios. While it is usually necessary to keep stocks in your portfolio in order to make retirement funds last throughout your life, sometimes it is prudent to pare back on the speculative securities and to place money in more secure investments. This is where an adviser can be of great help in deciding which securities to replace and which to lessen in position.

There will be an initial sense of loss when you retire, and you must figure out how to fill this void.”

You should also be planning out what you will be doing in retirement with your time and money. This can be very challenging for dentists, as they have been married to their practices as professionals for the last 25–40 years. The big question becomes, “What am I going to do now, and am I prepared for this?” These are very important questions as you are going into a period of your life that lasts 10–25 years. It is a time to explore outside activities and hobbies, but you can only fish and play golf so much. There needs to be something to do that is meaningful. It could be challenging yourself to a new hobby or field that you have always wanted to try. It could be volunteering with groups or agencies that need help. It could be traveling or spending time with family and grandchildren. The important thing is that there will be an initial sense of loss when you retire, and you must figure out how to fill this void. The important lesson — and I can’t stress this enough — is to not retire until you figure this out. It is hard to bring the ship back out of mothballs once it is in dry dock. If your one great enjoyment is to do dentistry and see your patients, then it is perfectly fine to continue doing that. We must also acknowledge that dentistry as a profession takes a physical toll on our bodies over the course of our careers, and there may come a time when that toll is too great and we are no longer able to practice at the high level to which we aim. It is important to prepare for retirement both financially and emotionally, so that if this time comes, you are prepared to face it.

The only problem with retiring later is that your practice will probably lose value the longer you delay retirement. Transitioning out of practice is important financially. For most dentists, their practices begin to decline after the age of 55 for many reasons — they begin cutting back hours, don’t invest in technology or marketing, etc. While the income is great and to be able to see your patients and staff every day is fulfilling, you will need to recognize that you will lose much of your practice value as you age in place. A successful transition takes several years to plan and enact and should not be waited upon until the last minute to implement.

It is difficult as a dentist to walk away from your practice for a month, but, if you can make it work, I would recommend you take a test drive to see what retirement is like. Take a month off work and spend the time focusing on the kinds of things you intend to do during retirement: travel, take a new hobby class, spend time with friends and family, etc.

After this experience, you will be able to make a more informed decision. The worst-case scenario? You had a great vacation and realize you are not ready for retirement.

As you reach your desired retirement age, you must make decisions about how to enjoy what is yet to come.

Part 3: The Moment Has Arrived

As you wind down your journey to retirement, hopefully all of your planning and hard work has come to fruition and you successfully attained your goals. I am sure there has been turbulence during the journey, as that is the norm and not the exception. Emotionally, it is very difficult to retire. Your relationships with your staff and patients wind down and, in many cases, completely disappear. As professionals, dentistry is more than a job — it is your passion. It is important that you recognize there will be a feeling of loss, and that is normal. Hopefully, you will replace it with new joys and excitement.

As you reach your desired retirement age, you must make decisions about how to enjoy what is yet to come. Each of you has chosen a retirement age that is ideal for you. For example, I will pick the age of 64. Your first decision is what you will do for healthcare. This is an important decision, as you will not qualify for Medicare until the age of 65. If you are fully retired, then you will have to find a private insurance policy that will cover you until the age of 65. This can be not only problematic, but also expensive, as you are no longer in a group policy. For some, it may be difficult to afford a new policy if you have preexisting conditions, and this may affect your decision to wait until 65 to retire.

One should eliminate as many loans and debts as possible before entering retirement.

The next decision is what to do if you did not accomplish the retirement number that you have been working toward. Perhaps you delayed saving later than you should have, or perhaps you didn’t maximize your plan contribution each year. Maybe the market was unkind or your adviser didn’t perform well. Whatever the reason, there is a likelihood — and I speak from experience in working with dentists — that you are short of your desired goal. You are now faced with a dilemma. Do you accept a lower retirement plan amount, which is acceptable if all of your other retirement income goals are good, or do you work longer to save more? Working longer is definitely acceptable, as your desired retirement age was a benchmark and not an absolute. If working a few more years will help you reach the goal you desire, it is not the end of the world. It is only difficult if your health is poor.

One should eliminate as many loans and debts as possible before entering retirement. Your goal is to try and reduce as much drag on resources as possible. In the personal world as well as the business world, debt is a large anvil weighing down performance and preventing one from reaching goals. Interest payments reduce income needed to live on and the ability to reach your savings goals. Social Security is another issue. If your normal retirement age is 67 (as defined by the Social Security Administration), and you take your Social Security at 64, then you will receive a reduced amount from your normal retirement amount. This reduced amount will last for the rest of your life. This is not a problem if it is accounted for and the reduction in income is acceptable. I am often asked at what age someone should take Social Security. My answer is that you take it when you need it — not before. The longer you wait before taking it provides you with a higher monthly income. The only absolute reason to take it early is that it is a necessity to exist or your health is poor. The great thing about Social Security is that it is your only income source in retirement that is indexed for inflation. All of your other sources have to be adjusted manually.

Look at the sale of your practice as another piece of the pie that will ultimately get you to your goal.

If you own your practice, you have hopefully chosen a transition path and are now homing in on the final transition into retirement: selling your practice. While this will provide extra funds from which to live on in retirement, it is never as much as you think it will be or as much as you think it should be. It is hard to quantify — and accept — an amount for a lifetime of hard work. After taxes, it may be several hundred thousand dollars, which will help toward retirement, but it will not set you up for a life of luxury. Again, look at the sale of your practice as another piece of the pie that will ultimately get you to your goal.

Housing may be an issue in that you no longer need that large house. Securing a smaller home may or may not be financially helpful to your retirement plan. This of course depends on how old your house is and the cost of the new house you are looking at. While you might not make a large profit, it may be more beneficial from a maintenance perspective to sell an old house and incur fewer repair costs in the future, when your income will be fixed. Healthcare costs rise as you get older, and, even though Medicare will help cover most of these costs, there are some costs that will have to be accounted for outside of Medicare. Insurance to cover long-term care is practically a requirement, given the likelihood of its necessity and cost. As you wind down practice-related insurances and eliminate disability insurance once you have achieved financial independence, I would recommend purchasing a good long-term care policy for both you and your spouse. This policy covers many of the costs that Medicare doesn’t cover or has limits on, such as nursing homes or skilled nursing care. These costs can be substantial and deplete retirement resources quickly at a time when they are needed most. The ideal time to purchase these policies is around the age of 55 but can adequately be purchased up until about the age of 64–65. Happiness in retirement is a rather vague target. What makes us happy differs between individuals, making it difficult to quantify. I do know that having adequate resources to do the things you have planned is extremely important and the reason I wrote this article. I hope each of you finds joy and happiness in life and that retirement is all you expected.

John W. Portwood, Jr., DDS, MS, MSF, CFP, ChFC, CLU, MAGD, is a retired family dentist, certified financial planner and nationally recognized financial lecturer. He has furthered his financial background by receiving a master’s degree in personal financial planning and finance specializing in wealth management. To comment on this article, email impact@agd.org.

References

1. USAFacts Team. “Nearly Half of American Households Have No Retirement Savings.” USAFacts, 9 Nov. 2023, usafacts.org/data-projects/retirement-savings. Accessed 5 May 2025.

2. Dhue, Stephanie. “55-Year-Old Americans Are ‘Critically Underprepared’ for Retirement, Survey Finds.” CNBC, 26 June 2024, cnbc.com/2024/06/26/55-year-old-americans-critically-underprepared-for-retirement-survey-.html.

3. Bengen, William P. “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning, Oct. 1994, pp. 171-180.

4. Hartman, Rachel. “What Is the Average Retirement Age in the U.S.?” U.S. News and World Report, 19 March 2025, money.usnews.com/money/retirement/aging/articles/what-is-the-average-retirement-age.

5. “U.S. Dentist Retirement and Career Span Trends.” Health Policy Institute, ADA, ada.org/resources/research/health-policy-institute/ dentist-workforce/dentist-retirement-trends. Accessed 5 June 2025.