Research published yesterday by financial consultants Wesleyan shows dentists are hopelessly unprepared for retirement — three quarters don’t know how much they should be saving each month and one in eight have no intention of finding out.
Dentists don’t like buying shares and they only really like flexible pensions that let them buy their practice freehold, a dangerous strategy because most practices today are in completely the wrong places and as dentistry increases the pace of its journey towards retail lots of practices won’t be fit for purpose and at best will have to be sold with change of use and conversion costs. This means they are unlikely to provide you with the nice comforting passive income stream you had planned for when you finally sell your practice — really think about this one.
It’s a bad time for pensions anyway because, as we are being constantly told, we’re living too long and interest rates are too low. The Pension Protection Fund expects 600 funds to collapse by 2026. If you’re reading this, what are your plans? Are they something like keep going for now and sell up at some point in the distant future, because that’s how I acquired the practice from Bob the previous owner and it worked for him?
That works to a point, however you’ll need to sell at a certain price. Practice values continue to climb with geography, creating some strange anomalies. An established mixed practice in Croydon can achieve 185 per cent of turnover while one in Plymouth of equal size and profile will achieve 100 per cent. And, as we all know, dentistry is changing and in 10 years’ time when you are getting ready to exit, where will the values be for your kind of practice? There is always a best time to go — the challenge is determining when that best time is.
The good news is that the dental market is still growing at 7%+ per annum, and this growth is concentrated in the private sector. A simple rational conclusion therefore is that dentistry is a great business to be involved with now and for the foreseeable future. You need to use this big wave of growth to plan properly for retirement — my advice to all my clients is to make sure you have the option to retire comfortably at 55.
The survey of 100 dentists by financial consultants Wesleyan also revealed that the amount dentists think they’ll need each year in retirement has fallen by nearly £10,000 since 2014. So clearly a lot of people are heading for a rude awakening, and needlessly, because anyone in a position to own a practice right now has the opportunity to gear it to their lifestyle — and that means how they live while they’re working and afterwards.
If you would like to discuss the above then please feel free to give me a call.