The Gold Crown Podcast

How Dentists Can Retire Before 50 – A Guest Article From a Dentist Just 1 Year Away From FIRE

I always love receiving messages from dentists on the path to FIRE, so imagine my delight when a dentist, who is just 1 year away from FIRE, freely offered write an article on his insights that have led him to the end of his journey. Due to him having not yet announced his plans, he has decided to remain anonymous and we hope to have him on the podcast soon once he has made his FIRE plan public. Enjoy!

How Dentists Can Retire Before 50

Have you heard about the FIRE movement? If you have found this website I’m guessing you have, and nowadays it’s easy to find financial blogs that describe retiring before a traditionally accepted age with the ability to maintain one’s lifestyle without the need to ever actively earn another dollar. This is the definition of Financial Independence Retire Early in a nutshell. But I’m guessing you are also a dentist and many threads on Dentaltown will tell you that as a dentist you have no shot (weak pun) at retiring early. In fact, the ADA reports that the average retirement age for a dentist is approximately 69 years old while the average retirement age for an American is only 63 years old.

Why can’t dentists retire early? Because most dentists graduate with a large student loan. Then we inflate our lifestyle and live like doctors. Then we purchase practices and go into more debt. And dentistry isn’t as profitable as it used to be. The golden age of dentistry is over and dentists are losing the war to insurance companies and corporate dentistry. You can probably come up with a few more reasons why you will likely die with a handpiece in your hand.

I believe that dentists can still retire at a young age. I’m 42 years old. My wife and I are on pace to reach financial independence next year. I want to share how we are doing it because there is nothing special about what we are doing. I’m not a day trader, real estate mogul, lottery winner, and we never received an inheritance. I am a clinically average dentist who owns a dental practice (just one office). If you are a dentist that would like to retire before age 50, you can do it. Here is how. You will need to become financially literate, track your numbers, learn to hate debt (stay with me), work hard and ambitiously (the offense), live below your income (the defense), and have a strong internal locus of control.

BECOME FINANCIALLY LITERATE

First, I have a disclaimer. There isn’t an original thought in this entire article. Everything I’m about to discuss I learned from other resources as I became financially literate, and later as I studied personal finance and investing. I will attempt to give credit each time I discuss a concept I learned elsewhere. As a starter, this whole article isn’t original. In 2008, I read an article in Dental Economics by Dr. Doug Carlsen describing characteristics of dentists who retired before age fifty. Google it. The article is still applicable today.

Second, it is very unfortunate that personal finance isn’t better taught in school. For many people, even discussing money is taboo and many families don’t talk about money. But keeping and growing your savings is at least as important as making money in the first place. Today, there are great resources to help dentists learn about personal finance and investing. When I graduated from dental school, I recorded Suze Orman and got a subscription to Money Magazine. Nowadays, I would direct a new grad over to whitecoatinvestor.com. On the website, Dr. Jim Dahle covers everything a doctor needs to know about investing. It is possible to become financially independent by stuffing money under your mattress, but it is much more efficient to learn how to make your money grow. A dentist can invest in stocks, bonds, and/or real estate. Compound interest is amazing and necessary if you want to FIRE. The website also educates its readers about different types of insurance, and even tips about how to increase income and control spending. Also, as a dentist we are targets for people trying to sell us poor investments (investments that benefit the salesperson significantly more than the investor). He teaches his readers how to identify and avoid these situations. I really feel that WCI is the best financial resource available to dentists and spending an hour or so a week reading his blogs and/ or listening to his podcast and/ or taking his course and/ or reading his book is time well spent.

TRACK YOUR NUMBERS

This one is really important to me. First, you should be tracking your annual spending. My wife and I track this down to the cent. This is easy for us because we each have one credit card. We also have one checking account that we use to pay all of our bills. You don’t have to simplify to this extent, but this makes it really easy to track spending. Second, you should track your income. Subtracting spending from income lets you know how much money you have available to pay off debt, save, or invest. The most important number to track is savings rate. Your annual savings is everything that you invest, save, or use to pay off debt throughout the year. Your savings rate is everything you save throughout the year divided by your annual net income (income after taxes). If you would like to retire before age 50, I would encourage you to have at least a 50% savings rate.

If you choose to buy a dental practice, there are many more numbers that you should be tracking. A dental specific CPA or practice consultant can help if you don’t want to do this on your own, but you need to know these numbers. I track new patients per month, gross production, net production (after write offs), overhead, net collections and cash flow. Knowing these numbers allows you to gauge your financial health (and if applicable the health of your practice) and make decisions to improve these numbers.

LEARN TO HATE DEBT

I’m not Dave Ramsey. I do believe in good debt. Good debt is debt that will allow you to improve your financial situation. For example, taking on student loan debt to become a dentist allows us to have a much higher income than we would have otherwise had. I don’t know what I would have done with my BS in biology, but I know I wouldn’t be in the financial position I’m in today if I didn’t take on that debt. If you choose to buy a practice and possibly the commercial real estate in which you practice, this could be another example of good debt. Is taking on a mortgage to buy a house good debt? Real estate brokers, banks, and the government certainly wants you to believe it is, but we can leave that debate for another time. There is definitely bad debt. The classic example of bad debt is credit card debt. The interest rate is always high. Another example is pay day loans. Even financing a car is bad debt. If you find yourself with bad debt pay it off quickly. Then analyze and fix what caused you to take on that debt in the first place.

Good debt can become bad debt if the good debt is overleveraged. For example, White Coat Investor recommends trying to maintain student loan debt at a 1:1 ratio. This means that a student would project their income for the first year after they graduate and try to maintain their student loan debt to no higher than that number. According to the American Dental Education Association, the average student loan debt for dentists graduating in 2019 was $292,169. So, young dentists are frequently finding themselves with ratios much higher than 1:1. At what point would taking on this level of debt fail to make financial sense? If a young dentist feels that they aren’t able to pay off their student loan debt within five years of graduation, I would encourage them to contact Travis Hornsby at studentloanplanner.com.

I took on student loans, a practice loan, and a mortgage to purchase the commercial real estate. I would do it again, but I always hated the debt and paid it off fairly quickly. But what should you do first? Should you pay off debt, invest for retirement, or invest back into your practice. My answer is yes, you should do all three from the beginning. The key to this is maximize offense and play strong defense. Our income increased throughout our career, but I always felt that as long as we had debt we were still poor. As a dentist you should be able to become completely debt free and become FI before age 50.

THE OFFENSE

My thoughts on offense, defense, and locus of control are all derived from the book “The Millionaire Next Door.” This is a classic book (written in the 90s) that analyzes characteristics of the average millionaire in the U.S. It has since been updated and “The Next Millionaire Next Door” was released in 2018. The Cliffs Notes version is that millionaires work hard and ambitiously while spending significantly less than what they make. As an aside, the book proves that The American Dream is still alive and well. The first version of the book found that 80% of all millionaires were born to middle class or below families. The latest version found that the number is now closer to 86%. My wife and I both grew up in lower middle income families. So, don’t let anyone tell you that The American Dream is dead.

Offense means that you maximize your income with hard and ambitious work. As a dentist, the best way to maximize income is typically through practice ownership. The ADA reported that the average private practice dentist made $204,710 in 2019. I would suspect that the average practice owner make significantly more than this. But owning and running a small business is hard work. I heard the hosts of the “Shared Practices” podcast mention that the worst day as an owner is worse than the worst day as an associate, but the best day as an owner is way better than the best day as any associate. I completely agree. Even if a dentist chooses to never own, or even chooses a career in public health, the military, or academia their income will likely be over six figures. This is a high income and FIRE can be achieved from any dental career path, but practice ownership is likely the surest path to early retirement.

THE DEFENSE

Defense means your annual (personal) spending. There is no correlation between spending and income. If a dentist wants to achieve FIRE it will likely mean that they can’t have a lifestyle that others expect a dentist to live. I listen to a podcast by a popular financial advisor firm that caters to dentists. A few months ago, they mentioned that their average client spends $214,000 per year. These are clients that they are advising. I assume that their client’s average income is also higher than the ADA average, but I would guess that their clients’ average savings rate is also well below 50%. Meanwhile, according to the Bureau of Labor and Statistics the average American family spent $63,006 in 2019.

There is nothing wrong with spending $214,000 per year. In fact, I would argue that the purpose of money is to help us live our ideal life and you should strive to have great work-life balance from the beginning. My wife and I buy everything that we want, but we are intentional with our spending. We think about major purchases and whether or not that purchase will really make our lives better. If the answer is yes, we will absolutely buy it. But if the answer is no, and we impulse purchase something, we regret it. You will be surprised to learn how little you can spend and still live a great life after all debt is gone.

INTERNAL LOCUS OF CONTROL

Successful people believe that they control every aspect of their life. They don’t believe that life just happens. For example, I don’t allow myself to believe in luck. Of course, life throws obstacles at us that complicates our lives. But I know that I will overcome every obstacle and reach every goal that I set for myself. If you want to achieve FIRE, you have to know that you can do it, and then make it happen.

So, there you go. This is the dental blueprint for FIRE. What do you think? Did I leave anything out? Is there anything that you disagree with? If you would like me to dive deeper into any of the topics leave a comment or reach out to [email protected].

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You CAN Retire Sooner than Expected

Many critics of FIRE have a hard time realizing that they CAN retire much sooner than they think; they are just making the conscious decision to NOT to. The key is savings rate. I’m going to say it again to fully emphasize: THE KEY IS TO RETIRING EARLY IS TO HAVE A STRONG SAVINGS RATE. Many salespeople try to tout higher and higher returns on investment, but the reality is that ROI IS NOT NEARLY AS IMPORTANT AS SAVINGS RATE. Networthify (see link below – they did not pay me to say this) has a great calculator that will tell you how many years at what savings rate will allow you to retire:

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https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=20000&annualPct=5&withdrawalRate=4

I plugged in the average annual income of employed dentists according the Bureau of Labor and Statistics in the US ($178,260 ignoring tax) and just clicked the graph to see how many years to retire it would take at a 60% savings rate. The result is that the average dentist could retire in 12.4 years even if they started with $0 assuming a 5% ROI, and a 4% withdrawal rate (a whole other article is needed to explain why 4% withdrawal rate is generally considered a “safe” withdrawal rate. Basically, the Trinity Study in 1988 states that if you withdraw 4% from your retirement, you should never run out of money even during the worst recessions in history. To be fair, Nobel Prize economist William Sharpe says running out of money in retirement is a tough problem, and one better alternative could be having “lock-boxes” of diverse assets each year to sell rather than a fixed percent withdrawal).

Most folks focus on Return on Investment (ROI) saying higher is better. Now ROI is important, but even a spectacular 20% ROI on every investment at the US average of 6% savings rate takes 24 years to retire. On the other hand, a 2% ROI with a strong 60% savings rate would allow a retirement in 14.5 years! Side note: I do not recommend trying to get a 2% ROI because inflation is normally about 2-3%, so you wouldn’t be making any return. A healthy savings rate is like fuel in your vehicle. Without any savings to invest (fuel), it doesn’t matter if you have a high ROI (Lamborghini) or a low ROI (beater) – you’ll go nowhere fast.

*credit to the ADA

Most people tend to save 6% (US average) and aim for a 7% ROI with the stock market, which would take a whopping 49.5 years to hit retirement (dentist or not). 49.5 years!!! Sadly this is how most people do retirement, but hopefully you won’t be one of them. Life is too short to have to spend that much time working especially when a small increase of savings rate earlier in your life can exponentially accelerate your retirement timeline and provide the freedom to spend your precious time the way you want. Even if one wants to die with a drill in their hand, FIRE doesn’t prevent that, it just gives the joy of working because they want to, not because they have to. Keep in mind the average retirement age of a dentist according to the ADA is now 70 (back in 2017, it was 68.9), and it will continue to increase. Most of us get out of dental school around age 27 – that’s over 43 years of working.

*credit to the ADA Health and Policy Institute

I personally have a savings rate of about 50% right now, but hope to improve it more in the future (If you have a savings rate that is higher, please reach out to us at [email protected] – we’d love to share your wisdom & help more people on their path to FIRE!) I don’t feel deprived of anything at this savings rate, and I think most dentists would feel the same way. The Zig Zigler quote rings very true here: “you can have anything you want, but you can’t have everything you want.” While buying a boat or a corvette might not be “FIRE friendly,” your life is your own and if that’s important to you, make it happen. If it’s important you’ll find a way to work it into the budget. Just keep in mind that the longer the list of exceptions, the less successful FIRE will be. Many graduates feel “I got through dental school and I deserve to buy something nice” (I know this because I felt the same way), but it’s important to try to live like a dental student even after graduating.

25X Rule – the rough estimation of the total money needed to retire early. I spend about $6K a month, which is $72,000 per year. $72,000 x 25 = $1.8M. Most Americans need more than $1M to retire (per Charles Schwab) so this sounds believable.

A misconception most people have is that if you make a lot of money (like people think dentists do), then you are wealthy. Most dentists tend to spend up to their income (ex: if you take home $200K but spend $195K you’re actually relatively poor), so it doesn’t matter the total amount of money someone makes, it’s all about their savings rate. For those feeling they want to be very aggressive with their FIRE, there are lean FIRE communities on reddit and Mister Money Mustache that advocate this approach (and they are not dentists and did not have dentist income but they still make FIRE happen!). Other great resources for FI include Active Duty Passive Income, From Military to Millionaire, Physician on FIRE, Fire Drill Podcast, Mad FIentist etc.

Final Tips:

  1. Track everything through mint or other financial software.
  2. Pay yourself first – do NOT just “save what’s left over.” Sounds challenging, but this is doable!
  3. Raise your savings rate – try to shoot for 50% or higher. Savings rate will ALWAYS be the most important factor in FIRE.
  4. 25x Rule: Times your annual expenses by 25, and once you have hit that FIRE number, you are Financially Independent.
  5. Once retired, 4% withdrawal rate or less for safety for your eternal nest egg.
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Military Dentistry

Everyone has their own strategy to get to FI. For us dentists, the cost of education is always top-of-mind. I would have been over $400,000 in debt from dental school alone not counting my undergraduate education, not to mention my wife’s grad and undergrad education (grand total would have been well over half a million dollars of debt!). My strategy was to combat this HUGE amount of debt asap by doing HPSP (Health Professional Scholarship Program) with the Army. I will probably have to do a post on each item below just for more details. Below are some benefits to doing the program when I did it. Programs can always change so keep in mind there may be differences in the future. I am not a recruiter and these views are my own btw 😉

DENTAL SCHOOL

  • 100% of dental school costs paid for (including books and tuition) during school
  • $2000 / month stipend for living expenses during school
  • $3000 Orascoptic customized loupes and light ($1500 each) after graduation

HOUSING

  • VA Home Loan – exclusive access to 0% down home loan (possibly the BIGGEST opportunity to jump-start FIRE by getting a 2-4 unit investment property. Can be used during or after service). can be used more than once if loan is paid off or if you get assigned a new station.
  • On-post housing is free.
  • Off-post housing depends on location. I get about $2,000 a month in housing allowance, and my rent is $1725, so I pocket the difference ($275).

EDUCATION

  • GI Bill – Up to 36 months of education expenses (tuition, fees, housing, and $1,000/year supplies & books). In-state public institutions are 100% covered, while private and international schools are covered up to $25,162 per year (as of now until July 2021). GI bill benefits can be used as early as 90 days of active service, but you only get 50% of the coverage, while 3 years of active duty service start results in 100%. GI bill can be used for lots of different things including entrepreneurship training, Some dental CE’s, flight training, on the job training, vocational school, undergrad and graduate degrees, independent learning, correspondence training, etc. This could also cover the cost of a dental specialty residency. I have tried to use it to pay for a big ortho CE but it got denied (maybe other CE’s would work if at a university). The GI bill can be given to your kids or spouse, but you have to commit to 10 years of service (serve 6, sign up for another 4).
  • Residencies – The military has pretty much every residency available. Chances of admission are higher mostly because the programs are for military only so there is less competition. Some programs are very small / soon to be non-existent if they aren’t already like Peds because there are so few pediatric patients seen on-post. There is a great opportunity to get the residency you want and some amazing people involved. Doing a residency does incur additional service obligation, but some are neutral years (ie 1 year aegd does not require a 1 year pay-back).

INVESTING & RETIREMENT

  • TSP (Thrift Savings Plan) – up to 5% base pay match on contributions to your tsp (essentially like an IRA). Roth TSP and TSP available. Roth TSP maximum contribution limit is $19,500 /year NOT INCLUDING your standard Roth IRA ($6,000 /year limit), meaning you can contribute $25,500 /year to a Roth! Lots of civilian investors wish they could have such a high Roth limit. Many different funds available including the “LF” or Lifecycle Funds, which automatically re-balance themselves so you have higher risk earlier in your life and lower risk later in life (basically moves from high risk stock indices early in your life to low risk bonds later in your life). You can roll over your TSP accounts to civilian equivalents when you exit the military.
  • 20 years of service allows you to retire with 40% of your base pay (2% x #serviceyears). Stay in for 30 years, you get 60% of your base pay averaged from your highest 3 years of pay. Assuming you graduated from dental school at age 27, you could be guaranteed retired at 47 with nothing else, BUT be sure to look at base pay charts posted online. Your retirement base pay will likely be a little above $7,000 as a Lieutenant Colonel and 40% of that a month is $2,800. Investing is still a good idea to supplement income during retirement.
  • Credit Cards – Chase Sapphire Reserve and the American Express Platinum have no annual fees for active duty service members. I love the Sapphire Reserve because it allows me to save a ton of travel points as well as a $300 travel credit and other bonuses (I will have to make a post just about that. Actually I’ll probably need to do that for a lot of things on this list).

Family & Free Time

  • 2.5 days of leave per month (30 days / year with a maximum bankable amount of 60 days. Can also be saved and used at the end of service to exit early. I might exit 2 months earlier than expected).
  • Birth – 21 days of paternity leave for men (42 for mothers). All costs associated with your family’s childbirth is covered including hospital stays, additional treatments, support groups, etc.
  • Daycare – Army tax credit lowers cost of daycare down to the cost you would be paying on-post if there were any open spots (I did daycare off-post because everything was full). I would have payed $1,600 /month in daycare, but only end up spending about $800 /month
  • Family time – Posts often have a ton of trails, parks, movie theaters, bowling alleys, and groups that host events.
  • Dental – Dependents can get Tricare dental insurance for about $11 /month.

BANKING

  • Access to use USAA (can have incredibly competitive loans, but also offers pretty much everything else to service members. Bank built for active duty or veterans by veterans) I use them for home owner’s insurance, and the more products to buy from them, the better the cost.
  • Access to use Navy Federal Credit Union (can have incredibly competitive loans). I use them for my car loans at 1.75% for 5 years. Immediate family members are also allowed to use NFCU.

HEALTH

  • Access to free on-post gyms
  • Access to free on-post pools
  • RMR: Some posts offer Resting Metabolic Rate testing (I had mine done so I know exactly how many calories I expend by just existing)
  • Bod Pod: Some posts have Bod Pods that will accurately tell you your exact body fat percentage and fitness professionals can help you track and guide you. I do these every 2 months.

MISC.

  • Rank of Captain.
  • Lower total pay than average civilian dentist (roughly 25th percentile by Bureau of Labor Statistics Standards), but healthcare, dental, vision, hearing, psych, fitness, etc are all covered in addition to everything else listed here.
  • Deployment / being assigned to a field unit (and then gifted to a dental clinic for most your work) is possible. While this sounds scary, most people actually enjoy it.

POSSIBLE DRAWBACKS

  • You might not get the station you want (but the assignment officers actually try to get you the location you want if possible. You get to submit a ranking tier list like 1.) Germany 2.) Ft. Drum New York, etc).
  • You might not get to always do the dental procedures you want to do (you fit the needs of the military, and if that means do a ton of exams, or only fillings, or if people are overdue for cleanings you might need to do that. The stereotype of military as amalgam lines are not accurate because I very very rarely do amalgams. Clinics generally have more than every material you’d want. Also doing a CE to do certain procedures does not necessarily permit you to do that procedure since there is a military credentialing system you have to get approved by first).
  • You might not get to always travel when / where you want (there is a healthy amount of leave, but things can always come up, and you will have to ask for permission to go places especially if it’s outside the couple hundred mile radius of the base).
  • You might be assigned to a field unit, then gifted to the dental unit to work. This means if your unit deploys or does field training exercises, you go with them.
  • You have to maintain some level of physical fitness to pass the fitness tests. These normally occur every 6 months. There is a new test that involves 6 events: 2 mile run, 3 rep dead lift, standing power throw, sprint drag carry, push-up, and leg tuck. search online for the acft minimum scores to pass if you are concerned. I never did sports or exercise when I was younger, but even I could pass with a little practice.
  • You might not be able to work a side hustle or weekend clinic moonlighting (some places limit your ability to do dental work at civilian offices on weekends to 15 hours a week).

CONCLUSION

  • The military might not be for everyone, but for those who want to try to try a dental road less traveled and get a good chunk of debt forgiven, it could be perfect. I was willing to go through anything to pay for school, and I was pleasantly surprised to find it enjoyable, and I can see why people stay in career. I did not know what I exactly wanted to do in dentistry so it gave me the time to center myself and prioritize everything. Military is a valid way to hit FI by getting a guaranteed pension at retirement in 20 years, so it may be something to consider. I personally will leave after 4 years to pursue practice ownership.