In this second episode, Dr. Brady Frank does the math and dentists across the country aren’t making the money they should be. Due to lack of guidance, and flaws in the industry, dentists aren’t retiring with what they thought they would be and Dr. Frank talks honestly about what to do about it. By being proactive and using the cash-flow theory instead of the accumulation theory dentists can take their career to new places and regain control over their income.

 

 

All right folks, Brady Frank here, chapter one of DDSO Strategies or if you’re following along on the blog, that’s wonderful. You may not have a book. We’re going to map some of this out.

Accumulation theory vs cash-flow theory

This is a big one, this is kind of where everything starts, this really is your foundation right here, of which everything else is built off of. Stephen Covey says, “Begin with the end in mind.”

Number one purpose is finding what you love to do in dentistry and having extra income from doing that.

Number two is asking, what does that income look like and how does that affect my retirement? Not only my retirement but what I call total dental freedom. That means if you’re here, you most likely just don’t want to retire from dentistry, you just want to have a more financially secure position.

And so, let’s talk about how one can do this and still just really, really enjoy doing dentistry and maybe cut back a little, maybe retire entirely if you’ve got physical issues, or you’ve got other recreational stuff you want to do, whatever it is, let’s talk about it.

If you’re following along in the book, there’s a graph that we’re going to go over right here. Most traditional financial planners in dentistry today say that you’ve got to save up about $3 million dollars in your retirement account and then put it into fixed investments. So, $3 million, okay, bringing in about 3% in fixed investments is going to give you $90,000 a year pre-tax after-tax. That’s about $45,000 with state income tax if you have an income tax in your state.

So, saving up $3 million will give you $90,000 a year in spending money. Not very much, right?

Most dentists feel like, okay, knowing that I need to save a lot more money. Let’s talk about that. How much do you need to save in retirement assuming that you’ve got to pay taxes after it comes out of your retirement account? Oftentimes, the number ends up being around $270,000.

Hey, could you live off that if you’re debt-free? Maybe? I hope so. Once you’re debt-free and once you’re not doing dentistry anymore. So that’s where we’ve got to begin. Even though you might continue to do dentistry right, you may become disabled, you may get burned out like a lot of dentists do at a certain age.

What does $9 million in the bank look like?

You’ve saved up in your retirement account, in mutual funds, and now you have put those into fixed investments at, let’s say, 3%. $9 million at 3% interest gives you $270,000 and then you have to pay taxes. Assuming about a 50% state, federal, and then any other little taxes that are there, boom, you’ve got $135,000 a year to live off of.

Does that sound like a lot to live off of? Probably not. You’re probably used to living off of a lot more than that as a dentist. That’s pretty daunting. Who have you have saved up $9 million dollars to have your glorious 135,000 after-tax dollars for total mental freedom? That’s right, the statistics are way less than 1% of dentists have saved up $9 million in their retirement account. Yet most dentists would say they can’t retire on 135,000 and after-tax dollars.

So, what does one do with that information?

Let’s first define what total dental freedom is.

Total dental freedom is not where you just retire from dentistry – it’s where the practice of dentistry is a choi