Dental Tax Trends: Are You Fully Using Your Retirement Plan?
Do you know the maximum amount you can put into your retirement plan this year? Most dentists and team members are not fully funding their retirement plan each year—leaving tax deductions and asset growth on the table.
The ideal plan varies depending upon length of time you or your Doctor have had employees, how many employees you have, and how much money you can afford to put into the Plan. We always recommend you contribute the highest amount possible because you receive a tax deduction for it and you create a nest egg for yourself at the same time.
Some options may include:
- Simple IRA: the maximum contribution is $12,500 + $3,000 if over age This type retirement vehicle is intended for very small businesses because the Doctor cannot afford to save more money each year. You want to quickly outgrow this type plan.
- 401K plan: this is the most popular retirement plan in dentistry and is probably the type plan you have in your office. Note that most dentists are not using it correctly because they do not know they can contribute MORE than just the 401k Deferral amount which is $18,000! The maximum contribution for 2016 is $53,000 + $6,000 if over age The most profitable dentists use both aspects of the plan and maximize their entire contribution each year. Note that the plan may be set up with or without a ROTH component—making it possible for you to contribute to a ROTH even if your income would have otherwise been too high to contribute to a ROTH IRA outside of the 401k plan.
- Combination Profit Sharing / Defined Benefit Plan: because of the significant growth we are seeing in dentistry, this type plan is becoming more widely used. In essence, you are adding a Defined Benefit Plan onto your 401k plan so that you can contribute even more money to a retirement plan each year, thus saving even more for retirement. The maximum contribution is $265,000 for 2016. Dentists use this plan when they desire a large tax deduction, need to catch up for saving for retirement, and can part with this cash until retirement.
Do you know how much you are paying for your retirement plan administration and asset management? Beware of hidden fees! Nearly every time my team and I review retirement plans we uncover unnecessary fees dentists are paying that are cutting into the expected growth for them and their team.
Not sure if you have the best retirement plan for your office? Or, maybe you are not sure if you are paying too high of a fee for the service you are receiving? We would be happy to do a complimentary review for you! Give me a call at 770-552-8500 or www.thewillefordgroup.com
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