On average, dentists retire later than the general population. According to the American Dental Association (ADA), the average retirement age for dentists is 69, compared to 64 for the general population. Despite earning higher-than-average incomes, many dentists still retire later than most professionals, raising the question: If dentists have higher incomes, why don’t they retire earlier?
The answer isn’t just about making more money—it’s about structuring financial outcomes in a way that ensures long-term security.
The good news? A secure retirement is within reach if you take the right steps today. By knowing your retirement number, avoiding lifestyle inflation, and building wealth beyond your income, you can set yourself up for retirement on your terms.
1. Know Your Retirement Number (Hint: It’s Not Just Your Net Worth)
One of the biggest financial mistakes dentists make is underestimating how much they need to retire and when they can retire. It’s common to hear dentists say, “If I can just get my investments to $5 million, then I’ll be ready to retire.” The problem with this approach is that it doesn’t account for lifestyle spending and other critical variables.
To address this, we created a simple benchmark called the 30x Rule: Multiply your current annual spending by 30. If you spend about $150,000 per year, you’ll need about $4.5 million in total assets (including practice equity, investments, and real estate) to retire comfortably. That’s your magic number!
Of course, this is a simplified estimate that doesn’t account for factors like future healthcare costs, inflation, lifestyle changes, and asset allocation. However, it shifts the focus from a static dollar amount to a more dynamic, spending-based approach to retirement planning.
When you know your retirement spending number, you can calculate your current Total Term (Tt) score by dividing your current net worth by your annual spending. This will show you how close you are to the 30x mark and give you insight into how far you are from making work optional.
2. Avoid Lifestyle Inflation
Many dentists make the mistake of increasing lifestyle costs as income grows rather than prioritizing savings. Given that spending is a major factor in retirement preparation, the best way to safeguard your future is to track your spending.
Let me be clear—I’m not advocating for detailed budgeting. That often leads to restrictive spending habits that aren’t sustainable. Instead, simply track where your money is going and prioritize a healthy savings rate—typically around 20% of your gross income.
Bringing awareness to your spending is a helpful way to avoid lifestyle creep. This enables dentists to free up cash and allocate more toward retirement savings.
A study by the Employee Benefit Research Institute (EBRI) found that high-income earners who save 20-25% of their income are 80% more likely to retire on time than those who save less than 15%. Even high-income earners struggle financially when spending outpaces savings. The key is balancing living well today while preparing for tomorrow.
3. Build Wealth Beyond Your Income
While income is a powerful tool for wealth-building, it’s not enough on its own. Dentists need to build assets outside their primary earnings to ensure long-term financial security.
Simple Strategies to Build Lasting Wealth:
- Understand Your Total Term Score (Tt): As explained above, this measures how many years your net worth can sustain your lifestyle. The higher your score, the longer you can live on your net worth.
- Diversify Investments: Avoid putting all your wealth into a single asset class. A mix of practice equity, retirement accounts, brokerage accounts, and real estate can provide stability and growth.
- Prioritize Tax-Efficient Savings: Maximize tax-advantaged accounts like 401(k)s, IRAs, and HSAs to reduce your lifetime tax burden and boost long-term growth.
Start Now, Stay Flexible
Retirement planning isn’t just about hitting a financial target—it’s about creating the flexibility to make work optional on your terms. Whether you’re early in your career or approaching retirement, the best thing you can do is start now.
Next Steps:
âś… Track your 30x retirement number and your current Total Term Score (Tt)
âś… Save at least 20% of your income and avoid lifestyle creep
âś… Build a diversified investment portfolio that supports long-term security
Don’t wait until you’re burned out to start planning. The earlier you take control, the more options you’ll have for the future.
And if you’re overwhelmed about where to start, schedule a free consultation with our team, and we’ll help you understand where you can begin. Or if you’re a client of Dentist Advisors, reach out to your financial advisor and they’ll help you understand if you’re on the right track.