Retirement Planning for Dentists

The Price of Time vs. The Time Value of Money

With all of the economic news and year-end approaching, I am seeing more inquiries about retirement planning for dentists and escaping the daily office grind. For most, there comes a point in our career where we want to utilize the wealth we have accumulated to begin to buy back our time. 

What Is the Time Value of Money?

Back in 2010, I spent almost two years running the pricing desk for a large note buying operation.  During that time, I reviewed up to 8-10 real estate note deals per day. It wasn’t long before I could evaluate a real estate note in my sleep.  I learned a lot about the time value of money. 

The Time Value of Money (TVM) is essentially that a sum of money in the hand has greater value than the same sum to be paid in the future. This is the basis of all lending and borrowing. This is why people are willing to pay more dollars in the future (interest) to have money in hand today.

If I invest my savings, that is, I “loan” or give it to someone else as an investment, I give up the use of that money today for the reasonable expectation of receiving my original investment back plus a return on that money. 

The reason that money today is worth more than money in the future is that money today can be reinvested, earning returns in the interim, or used for immediate consumption. It is also a more certain reality than a future sum due to risks of losing principal, inflation decreasing purchasing power, etc. 

What about TIME? Is your time worth more today or in the future?

Time is also a currency. A value exchange system. It can be spent, saved, invested and squandered. 

What is the price of time, especially when it comes to retirement planning for dentists? Do we sacrifice it today in the hope that time in the future is worth more than today? Do we value our current relationships less than those of the future because the future is more important than today?

Three main reasons for the time value of money:

• Reinvestment opportunities
• Uncertainty and risk
• Preference for current consumption

In other words, there is a “price” that we believe must be paid by the borrower of our capital to compensate us for the three considerations listed above. Don’t these same considerations apply to our own TIME? Isn’t our most valuable currency TIME? We can’t accumulate it, we can’t grow it, and we can’t buy it back after we lose it.

What is the price of time in regards to retirement planning for dentists, doctors and other practitioners?

What is the “price” we are paying when we give up or are careless of our time, always assuming that there will be a “future time” when our current sacrifice of time will far outweigh what we are giving up – sacrificing time with our friends, family, community or church. Time making memories – memories that cannot be recreated later for any amount of money.

I often talk about the 5 Freedoms. For most people, there is never enough certainty to climb beyond the base level of financial freedom. This is why there are high-income professionals still working in their 60s or 70s. Uncertainty is a beast with no master. It creates feelings of guilt and keeps us from giving ourselves permission to live the life we really want to live. 

A clear game plan with defined measurables can provide the certainty to start creating more Freedom of time now. Today. In many cases even before total financial freedom has been fully reached. 

I suffered (as did my family) through the same provocation as to “never having enough.” I was mistakenly worried that if I didn’t work or put in all the hours humanly possible in my business and real estate investments, that I would never get ahead. 

The problem is that I had no real plan other than the willingness to work.  Work hard, but not always so smart. I was captivated by the journey at the expense of the present, seemingly focused on the future and not on the moment.  I know now that one can have both – it requires a different mindset, a different way of thinking and a non-traditional model. 

The Value of Today.

This principle has been life changing for many of my members at Freedom Founders. 

Gertrude and Bob Dubanski told me just last week with big smiles on their faces… “Since we have sold the practice, we can spend time with family. It’s been over three decades since we’ve been able to be free enough to live our lives without constraints. We are moving across the country to be close to our family. We're buying back our time, giving ourselves permission to take our foot off the pedal and enjoy life.”

Bob and Gertrude worked hard for 35 years. The physical and mental toll created compression and stress. Before Freedom Founders, there was much uncertainty about how much was “enough.” How valuable is it to them to have this time now (today) vs being stuck behind the chair for more long years? No amount of money in the world could buy back this time for them once it’s gone. 

Retirement Planning for Dentists…
The Phases of Life – How quickly can you get to Freedom?

1. Development and Education

Early in life, we are taught through formal education that the path to success is to trade time for dollars. We enter our formal education in the hopes of acquiring the skill set and licensure to trade time for dollars at a relatively high level. At this phase of life, it is important to think critically, evaluate what you are being taught and develop the right mindset. Seek out the right model and don’t be afraid to question everything. 

2. Startup (family and business) 

This is often a season of marriage, young children, startup practices/businesses. Time is traded for income to sustain basic lifestyle needs. Energy and enthusiasm are your greatest assets. Often, the greatest ROI at this stage comes from investing in yourself. Growing a toolbox of transferable skill sets (communication, leadership, collaboration, sales) that will shape the trajectory of the coming decades. 

3. The Sacrifice Period

Production. Efficiency. Growth. Your practice has become a strong economic engine. You have your nose to the grindstone. This stage requires dedication, especially as the breadwinner or financial head of the household, to try to balance competing priorities. Time becomes an increasingly valuable asset. It is critical to consider the “net present value” of time now vs in the future. As my friend Jim Sheils says, “You have 18 summers with each child.” Even that is not guaranteed. Many of our members allude to the fact that those 18 summers go by so fast. 

In this phase, you will either experience an inflection point, or plateau for decades without ever graduating to the next level. Most practitioners stay stuck in this phase until their 60s or 70s. It does not have to be this way! 

4. The Expansion Phase

You may still be far from “retirement.” You have much to give. Time begins to expand again. One day you wake up to realize that your kids are adults. The 18 summers are gone. It is bittersweet to see young adults step into their own. You are now the parent of adults, filling the role of mentor/influencer. 

With kids out of the house, there is less tying you down. This can be a fun part of life, exploring your “next”, changing the business model. It is a season of exploration, leadership and higher levels of contribution.

By now, you should have enough asset-based income to be financially independent of the practice. When it comes to retirement planning for dentists, this allows for ultimate Freedom of choice. These can become your most productive years. You might actually like your business model for the first time in years because you don't have the pressure to keep driving or feel like you have to hit bigger numbers. 

Unfortunately, many in this stage don’t have a model for making their wealth work for them. They may have significant net worth, but it is tied up in dead equity or 401ks that cannot be accessed for years. Others have been focused on their practice for so long that they barely have a life beyond it. 

Some get sucked into thinking that the path to Freedom and “success” requires increasing the size of your business… opening multiple practices and “scale”. Unless you truly love that game with a passion, it’s the wrong game for most. It usually eats up more time and creates less Freedom. Regrettably, we often don’t give ourselves permission to go in a direction contrary to what everyone else is thinking/doing. Don’t let the herd decide what success looks like for you. Give yourself permission to live life on your terms. 

5. The Legacy Season

Then come the Grandkids (still waiting for mine!). After decades of hard work and juggling family responsibilities, many forget hobbies or interests, or are unsure how to evolve in life and business at this stage. This is your opportunity. You are no longer constrained by the compression of practice and family. It’s time to explore, have fun, travel. If you are still in practice it should be with a business model that you love. It should not feel like a grind. 

It is also a season of pouring into the next generation, sharing and archiving the library of your mind and developing others whether in your family (kids, grandkids) or beyond (mentoring). 

How soon can you transition to asset-based income? 

The faster you can transition to asset based income, the earlier you can start buying back time and evolving as an individual. 

There is a model that gives us the ability to sustain your lifestyle with asset based income – a more predictable, sustainable cash flow that is not produced by us, and that is hedged against inflation. This is not what we were trained to do. We’re trained to be good producers, trading time for dollars. We must graduate from being dependent on earned income to income producing assets as fast as possible. 

This process starts slowly. But there is a compound effect. I call this the “Freedom Curve”. Progress accelerates as you progress up the exponential curve. There comes an “inflection point” where things start to really take off.  With discipline and the right plan, It is possible to hit that inflection point very early in life. 

But regardless of age/stage of life, many are closer than they think. Typically those who are later in life and career have more assets and resources which can be converted and re-deployed. The key is clarity, focus and the right plan and execution. 

Identify the assets that will buy back time.

When it comes to retirement planning for dentists and other medical practitioners, many high-income professionals have the majority of their net worth lying dormant in assets that are not producing income or creating more Freedom. 

Assets including: 

• 401(k)s, defined contribution or cash balance plans, etc
• Primary residence
• Secondary homes, vacation properties
• Lifestyle assets (boats, RVs, cars)
• Whole life insurance and annuities
• Commercial buildings
• Under-performing and volatile financial investments

It is amazing to see the revelation that comes from realizing that you have enough, but that it is simply not working hard enough for you (either “dead equity” or else deployed in disparate investment products that have been acquired from various financial advisors over the years). Disorganization leads to confusion and lack of certainty about how much you really need. Many do not even fully understand the financial products they have purchased or what role they play in the overall plan. 

With the right model, it is possible to make that net worth work for you, creating enough asset based income to create Freedom. 

Value today more than tomorrow.

What a tragedy it would be to spend a lifetime saving for a future date but never be given the opportunity to enjoy it. Or perhaps not being able to enjoy it with the ones you love – while you still have the health, energy and vitality to truly make the most of it.

Today is worth more than tomorrow. Your financial plan should take that into account and be creating a clear path with defined measurables to  create “return on TIME” now – not at some distant someday date. 

Why opt for retirement planning for dentists that requires you to postpone Freedom until your children are grown and gone. Until your body is worn down and the years have passed? The reality is that you can (and should) be creating more and more Freedom in each of the 5 Freedoms. You don’t have to wait. You can’t afford to wait.