One of the most important things our clients want is as we go through the financial planning process is guaranteed retirement income. This is a big goal but it’s also an achievable one. We develop a Financial Treatment Plan for the dentists we work with that do just that, built on a solid foundation of three key elements.
Read: insurance. This includes having full auto, homeowners, liability, disability, health, and life insurance in amounts that fully cover you in case something unexpected were to occur. Some dentists we work with balk at this step because they don’t want to spend the money on the insurance premium. However, a single terrible accident or event could wipe out all your financial resources if you’re not insured. That’s why we consider it the first key foundational piece in your strategy for guaranteed retirement income.
This second cornerstone requires discipline. We tell our clients that they must be disciplined and put aside 15% or more of their gross annual income. So if you bring in $300,000 per year gross, you should be saving $45,000. Is that a lot? Yes! But that’s what it takes to create the foundation for guaranteed retirement income. It’s the minimum to offset inflation, taxes, standard of living increases, and other wealth-eroding factors. Ideally, the savings rate would be even higher than 15%.
Finally, we come to liquid cash in the form of CDs or checking, savings, or money market accounts. It’s important to establish this cash reserve even before putting money into retirement accounts. We advise our clients to have 50% of their yearly gross household income liquid. A dentist who makes $250,000 per year gross, for example, should have $125,000 easily accessible.
This is just a brief overview of foundational pieces of the Financial Treatment Plans we develop for the dentists we work with. If you’re interested in learning more about planning for guaranteed retirement income, look out for our upcoming book, Your Retirement Smile or visit our website. We help dentists plan for their future and we’d love to help you.