Back to Basics: Getting Close to Retirement

Getting closer to retirement can bring an undeniable sense of anticipation. But it can also bring some uncertainty. Certainly, you’ve heard the horror stories of those who retired and then immediately regretted that decision. Perhaps someone you know lost their sense of purpose, missed practicing dentistry, or had a health scare shortly after retiring.

Thinking about retirement can bring a high level of uncertainty for anyone, but dentists face particular challenges and issues that can make this a time filled with anxiety. You’ll be thinking about a host of questions. Some are relatively mundane, such as, “How much fishing can I do before going out of my mind?” Others are much more substantial: “Will I be in good health when I retire?” or “Will I be able to sell my practice for a good price to a good person—someone I’ll feel good about recommending to my current patients?”

No question is bigger than this one: Will your retirement income last and allow you to live in something approximating your current lifestyle? As people are living longer, this is an increasingly important question, and the answer can be difficult to predict, because estimating what your daily, weekly, and annual costs will be takes some legwork and can be unpredictable. Here are some things to consider.

Selling your practice

If you own part or all of your dental practice, hopefully you haven’t eschewed saving for retirement, assuming that your practice will be worth enough to carry you through your retirement years. If you are doing that … stop. Make sure you have a more viable saving and investment strategy. Yes, you may have a very profitable practice that will bring a large sum on the market. But many factors will be at play when the time comes for that sale, including the supply of dentists in your area, the success of those practices, local demographic changes such as the departure of a previously big employer or industry in the area, overall property values, local property and business taxes, and many more. Many if not all of these factors are beyond your immediate control.

So what can you do? First and foremost, have some savings and investment alternatives that won’t change in value if your practice does. Next, keep a close eye on the overall financial health of your state and municipality, any economic or political climate changes that may change the value of your practice or your asking price, and the overall market for practices and other similar businesses in your area.

If your practice appreciates in value over time, fantastic. That will translate into a bigger nest egg when the time comes to sell. But if values are going in the wrong direction, you’ll have an opportunity to increase your other savings and investments. Even if the general trend in value is going up, don’t necessarily assume it will continue in that direction. The economy is cyclical, and movement in the markets can have significant downstream effects on property values and the selling prices of business enterprises. Don’t panic; just be prepared, and always have a Plan B.

Basic living expenses

Expenses like food, housing, taxes, utilities, insurance, and transportation won’t go anywhere when you retire. In some cases, these basic expenses might go down, such as auto maintenance you won’t need as regularly if you aren’t making that hour-a-day commute back and forth to the office. But other expenses might increase. With more free time on your hands, you may pursue expensive hobbies or dine out more often. Consider how you envision your retirement lifestyle changing when you estimate your basic expenses, and plan accordingly. Don’t forget to consider changes that may affect your lifestyle, such as the arrival of grandchildren.

Discretionary expenses

With more free time on your hands, you may get the sudden urge to take that African safari or that Caribbean cruise. Maybe the tennis membership you’ve always avoided because you were never free to play suddenly becomes more attractive. If you’re finally going to start that lucrative antiquing side business you’ve always dreamed of, that could become costly as well. Talk through with your spouse and kids what your expectations (and theirs) are for your retirement.

Healthcare should be considered in this category as well, particularly as you get later in retirement. Your expenses may shift from travel and hobbies early on, to more healthcare expenses later. Health savings accounts and other savings vehicles can help you prepare for this shift. Talk to a trusted financial advisor as you near retirement, and join a community of other retired persons to learn what challenges they faced and how to overcome them.

Figuring out how much income you will need in retirement may give you peace of mind, but it could do the opposite also—creating stress as you realize that you may need more than you think. Better to open that closet now and address it as soon as you can. Your future self is depending on you.