Spring into Savings | Tim Streid & Dr. Mart McClellan

Spring into Savings

No matter how much income you earn, you’ll never build wealth without saving. This seems painfully obvious, yet we see many people who don’t save enough, and more still who miss opportunities to save.

That’s because most people think about saving only in terms of setting aside money during their working years. They completely ignore the opportunities to save during their post-working years. This is when a holistic view of your financial plan and smart tax prep strategies come into play.

Let’s look at savings opportunities during both phases.

Saving in the wealth accumulation phase

During your working years, we recommend saving a minimum of 15% of your gross yearly income (more is better!) to combat wealth eroders like taxes and inflation.

Where should this money go? Well, for most of our dentist clients, their 401(k) is the cornerstone of their retirement plan. However, we recommend putting no more than half of the money you’re saving into your 401(k). With a 401(k) as your main retirement vehicle, there’s too much pressure on it to perform well, and too much to lose if the market goes down right as you’re approaching retirement (as we saw recently during the Great Recession).

Instead, diversify. In addition to contributing to a 401(k), a diversified retirement plan can include things like after-tax investments, municipal bonds, income-producing real estate, and more.

Saving in the wealth distribution phase

It’s during the wealth distribution phase of your retirement years you’ll find “hidden” opportunities for saving. That’s because every dollar you don’t have to pay out in taxes and fees is a dollar saved. Plan ahead and you can avoid a lot of these expenses that eat away at retirement income.

It starts with taking a longer-term view of tax prep rather than simply looking to maximize deductions year by year. When you do this, you may realize that some elements of your retirement plan aren’t as robust as they first appear.

For instance, going back to the 401(k): When our dentist clients first come to see us, they invariable list the value of their 401(k) under their assets, but rarely (never) list the corresponding taxes they’ll pay upon distribution under liabilities. This leads to a false sense of security. But it also illuminates other opportunities; maybe there’s a better place to put your savings to maximize wealth and reduce taxes instead of automatically investing the maximum in your 401(k). It just takes the right approach to your financial plan.

Think holistically

Smart wealth-building saving is more than setting aside some money every month and relying on a 401(k). For the best results, you need a holistic view of your financial plan to understand how each and every decision you make affects your retirement savings and your financial future.

Learn more about our approach to creating a holistic Financial Treatment Plan and our goal to help our dentist clients retire with 100% of their pre-income retirement by visiting our website and checking out our book, Your Retirement Smile.