Author: Dr. Mart McClellan & Tim Streid

How can you make the most of your money? If you want a secure financial future – and who doesn’t – then you should ask yourself this question.

One common approach to make the most of your money is to ruthlessly cut expenses to the bone and stick to a draconian budget. Another approach is to max out your retirement account every year; yet another is to automatically reinvest interest and dividends you earn.

But when we work with our clients, many of whom are successful dentists, we don’t recommend any of these approaches. Instead, we talk about how the best way to make the most of your money is to keep your money in motion.

What is Money in Motion?

Just as blood needs to circulate in order to keep the body alive, so, too, does money need to stay in motion. Money that stagnates in one place goes stale and prevents you from reaching your full potential when it comes to building wealth.

Yet this is exactly what most people do, because it’s exactly what they’ve been taught. Financial experts almost all say the same thing: take the money you’ve earned and put it into a retirement account that can’t be touched (without incurring a penalty) for years, possibly decades, depending on your age. Or invest it and don’t touch those investments until retirement.

This “set it and forget it” approach is appealing because it requires so little effort. But it means that each dollar you’ve put into that account has now been used just once to build your wealth.

Why is this a problem? Because it’s not the best way to make the most of your money. It’s certainly not how the financial institutions, corporations, and government (which we collectively call “the rainmakers”) make theirs.

How the Rainmakers Do It

When you deposit $10,000 into a savings account, the bank does not literally put your $10,000 into the vault for safekeeping and let it sit there. Instead, it takes your money and makes more money off of it, mainly in the form of loans to other customers. It gives you a very low interest rate while making a lot of money off your one-time deposit, all because it’s keeping that money in motion.

We find it interesting that the institutions that advise individuals like us to lock away our money for our own good for long periods of time are doing the exact opposite – and making a lot of money in the process.

Making the Most of Your Financial Future

Now that you know how rainmakers make money by keeping it in motion, don’t you want to do the same? You can build the wealth and have the retirement you want without resorting to severe budgeting or locking away your money for decades.

You can read more about money in motion and how to set yourself up for retirement without a pay cut in our book, Your Retirement Smile, or visit our website to learn more.

Are you prepared to retire at age 65? If you’re like most dentists, the answer to that question is No. In fact, dentists are retiring later than ever before. According to a report from the ADA, leaving their practices at the age of 68.8 on average. That’s almost four additional years of work beyond what we’ve been told is the “normal” age for retirement. Part of this can surely be blamed on the fact that many people aren’t quite prepared financially to retire at 65.

What about you, are you on track to retire at 65? Do you know what return is needed to support your lifestyle? Here’s what to know in order to retire on your schedule.

Don’t Focus Just on Accumulation

Many dentists believe that for successful retirement, it’s necessary to accumulate a huge pile of assets by age 65. That’s why they focus on the first of the three wealth-building phases – accumulation – and ignore the second and third – distribution and conservation.

But we believe this is the wrong way to approach it. These three phases aren’t sequential, but are intertwined throughout life; every decision you make impacts two or possibly all three. That’s why it’s imperative to understand and plan for the distribution and conservation phases during the wealth accumulation years (i.e., while you’re making money in your dental practice). If not, you’ll likely maximize your retirement accounts without understanding exactly why or exactly how you’ll get the money out of those accounts decades later.

The True Difference Between 3% and 8%

To illustrate the importance of distribution, imagine these scenarios. Two dentists are saving money before retirement, both with the same goal of continuing to live on $300,000 a year once they stop working. The first dentist must accumulate $10,000,000 by retirement to draw that annual income of $300,000 at a distribution rate of 3%. The second needs only $3,750,000 in assets to draw that same $300,000, this time at a distribution rate of 8%.

Which scenario sounds better to you? You can see that these scenarios don’t depend on a high rate of return or even the nature of the financial products themselves, but are dependent on having the right distribution strategy in place to maximize the assets that have been accumulated. What’s important here is not the rate of return, but the rate of distribution.

Planning for All Three Phases

Our goal is to help dentists retire when they want to with the peace of mind that they have financial security to see them through their golden years and don’t have to downgrade their lifestyle in the meantime. For more info on our philosophy and how we make that happen, we invite you to peruse our website and check out our book, Your Retirement Smile.

People are retiring later and later in life, and missing out on the sixties…the best decade of your life! There are many reasons that cause people to delay retirement, but most are unnecessary and can be avoided with a strategic financial plan. Keep reading to find out more about utilizing your financial plan to prepare you for a happy, comfortable, on-time (or even early) retirement.

In order to avoid delaying your retirement, it’s vital to set yourself up for long-term wealth enjoyment. Just because you make a good income during your career and save money for retirement  (in the traditional sense) does not mean you will retire on time. In fact, many of our clients (particularly dentists) are doing both of these things and still retiring later—closer to age 70. If you are doing everything “right” according to the traditional method of retirement planning, why are you having to delay retirement to stay afloat?

Factors that delay retirement 

First, professionals pursuing higher education delay entering the workforce, naturally cutting down on the number of years they will have over the course of their career to accumulate wealth. Once you are finally in the workforce, it is likely that you have several large financial obligations such as student loans, purchasing a home, or starting a family. 

Additionally, many people do not understand the exponential curve of life and its impact on long-term wealth building, which can also slow down wealth creation and push out retirement. There are three phases of the curve (accumulation, distribution, and conservation), which are dynamically connected and intertwined. It is important to look beyond wealth accumulation and understand that your money decisions throughout life will affect multiple, if not all, of these phases. 

The role of your Financial Treatment Plan

In order to overcome these factors that delay retirement, you must have a dynamic Financial Treatment Plan in place. This plan should be set up long before you are ready to retire, and it is incredibly important to look at this plan holistically and at a macro-level. Nothing works in a vacuum, and your financial decisions in each area of your plan affect the others, including your retirement. A Financial Treatment Plan will help you make the right decisions with every dollar that comes into your life by positioning it to benefit your long-term wealth.

You deserve to be able to retire on time without stressing over your finances. Learn more about our philosophy and the importance of a Financial Treatment Plan in our book, Your Retirement Smile. You can also learn more about our services on our website, and give us a call to schedule a consultation to discuss your financial future!

When planning for your financial future, there are a few things that are top-of-mind: a retirement fund, money to leave behind for your family, and saving, conserving, and protecting your wealth. Charitable giving can help with all of those factors. While it may sound counter-intuitive, giving more can mean that you have more money in retirement and more to give to your family when you are gone.

We speak with many people who are hesitant to make sizeable charitable donations because they view it as a transaction, or a wealth deduction. Thinking of charitable giving in this way is a microeconomic perspective and can put you at a financial disadvantage. We challenge you to evaluate your financial situation and plan on a macro-level, where all facets of the plan are connected and you keep your wealth in motion. This approach means that your charitable giving can actually increase your wealth and be a strong part of your strategy.

With a holistic and well-balanced financial treatment plan, charitable giving can act as a “triple win” in the following ways: 

1. Have more income in retirement.
2. Not disinherit your spouse or children.
3. Make a gift to the charity of your choice and see the results of your gift during your lifetime.

When a well-positioned charitable strategy is paired with a traditional retirement plan, the tax benefits are three-fold. There is the potential to receive a tax deduction up front, a tax deferral on growth inside the plan, and tax-free access to investments at the end. Charitable giving, when carried out properly along with other diversified assets can be one of the most powerful distribution strategies.

There are a few different approaches to take, such as the TurboTithe strategy or a charitable remainder annuity trust (more on this in our book, Your Retirement Smile). Many people don’t take advantage of these opportunities in their financial plan because they are unaware of the benefits, or they did not find out about them early enough in their career. The right financial advisor who is concerned with your passions and best interest can help you work through the ideal method for your overall financial plan.

The bottom line is this: the better you are positioned financially, the more options and income streams you will have in the future. This gives you the freedom to make proactive decisions, and allocate your money how you want to—whether that means giving to charity or using it in other ways.

Let us talk to you more about charitable giving as a win-win-win strategy. Visit our website and give us a call to get on the right track with your financial future.

When thinking about retirement, there may seem like there are a lot of different paths to take. The best way to make good financial decisions for yourself and your future is to be well-versed and educated in personal finance topics, such as retirement plans. In this blog post, we are breaking down pensions vs 401k plans, two common retirement plan options, to help you better understand them.

Pensions

A pension is a retirement fund that an employer contributes to while you are working. In retirement, the funds from this provide you with guaranteed income, typically on a monthly basis.

There are several factors that determine how much income you receive in retirement, including: your age, how long you have been with the company, and your income while working. Additionally, different companies may have rules about pension eligibility.

Pensions are being phased-out across the country and it is becoming increasingly hard to find companies that still offer them. However, if you like the idea of a guaranteed income in retirement, which most people do, an annuity can be an alternative and acts as a “self-made pension.”

401k Plans

A 401k plan is a retirement fund that is offered by your employer and is funded by you. You are responsible for making all of the investment decisions, therefore you take on all of the risk associated with it. Even if your company matches your contribution, the burden of figuring out how much to contribute to save enough for your retirement falls entirely on you.

Additionally, 401k plans are controlled by the government and they make all the rules. The government dictates when you can take money out of a 401k and how it will be taxed. They can also change these rules, meaning that you may not be able to take out your money at the age you expected, or you may be taxed differently than you had planned.

What you should know

The best route to take when planning for retirement is extremely dependent on your situation, preferences, and retirement goals. We are big proponents of keeping your wealth in motion, as well as devising a retirement plan that doesn’t require you to take a pay cut in retirement. It is always best to talk through these decisions with a financial advisor so that you can set yourself up to be smiling through your retirement! In need of retirement planning or wealth management advice? Visit our website to learn about our services and give us a call to schedule an appointment.