Why Dentists Retire 6 Years Later Than the Average American – Episode 80

How is it possible that the average dentists retires later than the average American? Income can’t be the reason — dentists are among the highest earners in the country. And you can’t put all the blame on personal spending when there’s an entire web of variables to consider. In this episode of Dentist Money™, Reese & Ryan cover five main reasons dentists have a difficult time holding onto their income and building enough wealth to retire comfortably.

Podcast Transcript:

Reese Harper: Welcome to The Dentist Money Show, where we help dentists make smart financial decisions. I am your host, Reese Harper, here with my trusty old co-host, Sir Ryan Isaac.

Ryan Isaac: Good morning to be with you. Good to be in the studio.

Reese Harper: Good to be with you, Ryan. I would like to have you be prepared this morning to offer my favorite quote of the week.

Ryan Isaac: You would like me to recite it?

Reese Harper: Slowly, but with passion. This quote is the best introduction we could possibly give to today’s subject. I am hoping I get to go see this gentlemen here in the next month, in person.

Ryan Isaac: Ok?

Reese Harper: He is famous, we won’t say who it is, but it is probably one of your favorite people in the world. Plus, he plays the banjo.

Ryan Isaac: Anyway, now they know who it is. This famous, banjo playing person said, “I love money. I love everything about it. I have bought some pretty good stuff. I bought me a $300 pair of socks, got a fur sink, an electric dog polisher, a gasoline powered turtle neck sweater. Of course I have bought some dumb stuff too.” Steve Martin.

Reese Harper: That is one of my favorite quotes, “and I’ve bought some dumb stuff too.” Keep trying to imagine the fur sink. Also, the gasoline powered turtle neck sweater. I am trying to figure out how that works.

Ryan Isaac: This is an old quote, if it were today he would have been using something like LED or solar powered.

Reese Harper: What Steve is saying kind of leads us into our topic, which is dentists.

Ryan Isaac: Weird!? Money and dentists?

Reese Harper: Money and dentists on The Dentist Money Show. I am struggling to make an exact tie in because it is tough to tie in an electronic dog collar on the show. I called the ADA last week because my old statistics that I had were from 2010 from the ADA’s national survey of retirement incomes. I don’t know if you have ever read that Ryan, but it is late night reading that a lot of us enjoy. A seventy page report, ya know? They took 12,000 samples and tried to figure out how many, or at what age, were dentists retiring. In 2010 they did this study and the average retirement age basically of all dentists including GP’s and specialists was about 67. I have been using that in my presentations, and I thought I am going to call in and see if there is any updated data.

Ryan Isaac: See if it gets better?

Reese Harper: My hope was that we made a difference! People are retiring younger.

Ryan Isaac: We have effected the overall national average!

Reese; The good news is, it has gotten worse for everyone, including the non dentists since 2010. It used to be that 62 was the average retirement age for the national average from a Gallup study that we have from a few years ago. The most recent Gallup research shows that the average American is retiring at 63. The ADA’s most recent research was in 2015, and it was a survey of the average retirement age of dentists and the new average retirement age is 69 not 67.

Ryan Isaac: Two years.

Reese Harper: That is a two year jump. The average person retiring at 63, and the average dentist is retiring at 69. The average American earns $56,513.00. The average American is earning just under 60 grand, that is the median income for those of you who want to know the difference between median and mean. When people say this don’t let them trick you. A median is the middle person in a set of data. The mean is the average of all of the samples in a set of data. The average income is actually a little bit higher, the average income is up in the $70,000 range. That is the national average income. You are taking in billionaires and averaging it with people at the poverty level. The median income, meaning the middle person, is usually a better representation of what the average person earns because the numbers skew so high on the high end. People like Sir Ryan Isaac skew it when you are pulling down nine figures!

Ryan Isaac: I wanted to be humble with my seven.

Reese Harper: It just skews the data.

Ryan Isaac: It is a lucrative industry we are in!

Reese Harper: Yes, but for dentists we don’t have a median income number. We only have the average income, or the mean. The average is $229,630. That is all dentists and all specialists. That is roughly four times, or a little bit more than four times, the average person. The obvious question for a lot of people is this just happening because dentists have an uncontrollable urge to buy a gasoline powered turtle neck sweater?

Ryan Isaac: Is it that simple? They just spend too much money?

Reese Harper: An electric dog polisher? The full picture is pretty complex. We have talked about this for a decade and it is not an easy thing to figure out. I think that mosts dentists generally do have a hard time with personal finance as compared to the average person. I would say the average person I meet, the average employee, does not have quite as hard of a time with personal finance because most of their choices are being made for them.

Ryan Isaac: Yes, less complex for sure.

Reese Harper: I think that it is fair to say that dentists are not retiring 6-8 years later than the average person just because they want to, or they really love their jobs more than the rest of us.

Ryan Isaac: That is probably true for some.

Reese Harper: But it can’t be true for the average. The average dentist probably loves their job slightly more than the average American. I wouldn’t say that they would retire with that much of a gap.

Ryan Isaac: Yes, the gap is widening.

Reese Harper: There is always variability in this data, but this is one of twenty studies that show similar statistics. There is a pattern that you just can’t ignore. My question for you, Sir Ryan Isaac, is why is that happening?

Ryan Isaac: That is what we will get to today. There is a lot to unpack there. I ask this to dentists a lot, as do you. When I ask people and we talk about this statistic in conversations they say, “we spend too much money.” They will say that. They will also say things like, “we are un organized,” or “we spent so long in dental school living on student loans and sacrificing in apartment living that we just spend a lot.” I think there are a fair amount of people that like to work that long.

Reese Harper: I had an experience yesterday on the phone with a person that called in that said, “I am supposed to call you and talk to you because my friend told me that I needed to call and talk to you about my financial stuff.” I asked if he had listened to the podcast or visited our website, and no he had not, he was just supposed to call me. I am like, “ok great, we are starting from absolute ground zero.” We get talking about this and it turns out he is in his mid seventies.

Ryan Isaac: Still going?

Reese Harper: Yup, happy to work and enjoys it. Told me he just loves it, and can’t ever see himself doing anything different. I don’t want to be mean.

Ryan Isaac: You are not a mean guy.

Reese Harper: I am not a mean person, I am not trying to say anything to question him. I am just going along assuming everything he is telling me is factual. He loves his job. Has plenty of money. Then slowly details start to come out where I am like, interesting this story isn’t really matching up. Early on in the conversation he told me, “you know, I met with my retirement guys and they told me I was probably good to retire.” I was like, “do they know how much you guys spend? Have you talked about personal spending?” He is like, “no, I don’t know why they would need to know all of that? They have got my investments and they are taking care of them. We don’t get into how I spend my money.” That was kind of an interesting observation. The second thing he said was, “I can’t play golf every day, the country club won’t let me do tee times every day. It would back up. I try to spread it out. I have been a country club member for twenty five years.” He loves it, and is right in the middle of this prominent U.S. city. He was telling me about the cabin he goes to with his wife that they are trying to get all paid for. Then it starts adding up. He starts talking about where he likes to eat, and how wonderful the dinner was he had last weekend. We start talking about this bone in rib eye I was trying to grill and he starts telling me about the steak he is getting. In my head I am thinking, “this guy has got to be spending a solid twenty grand a month, burning through this.” When we get down to it after thirty or forty five minutes he is like, “Ya know, maybe I need to keep working. Maybe that is why I am working!” I am like there is a pretty big gap between the amount of assets he has and everything else. Could he quit? Ya, certainly. The problem is he hasn’t created enough financial security for himself to walk away from work confidently and know that his investments will cover his lifestyle. There is a gap there, and the gap felt too big. He watched his practice go from 1.4 million in collections down to where he was probably doing like $410,000.

Ryan Isaac: One clinical day a week and a couple hang out days?

Reese Harper: Ya! It is just interesting to see the lack of preparation early on, financially, is one of the causes of late retirement. Lifestyle does play a big part of that.

Ryan Isaac: It can’t be ignored.

Reese Harper: If we were to break this out into categories we would just say that one of the things is that dentists need more money to retire comfortably because they earn more money during their working years and they develop an above average lifestyle. After a decade of sacrificing like you said, living on student loans, it is hard to temper all the personal splurges you want to make when real income kicks in. You feel like, “I can do whatever I want now!”

Ryan Isaac: It is not unique to dentists. Everybody increases spending as their pay increases. That statistically is shown. Savings rate averages in the country is low for everybody. Everyone is doing the same thing. If you are making $60,000, you try to spend $60,000. It is just multiplied as dentists.

Reese Harper: The reason for me taking that tangential story was partially because I was surprised at how this doctor reflects something common in the market. They are retiring later not by choice, but they say a lot of times it is by choice. A lot of times I am told that someone is working because they love it.

Ryan Isaac: What else am I going to do?

Reese Harper: For some people that is true. I would just love for those people to have enough income from their investments and retirement to where working really is optional.

Ryan Isaac: And they know it, for sure.

Reese Harper: We don’t have to have a conversation about it. The conversation went from, “I am fine”, to “I don’t know.” He has had a great life. He is well traveled, has enjoyed good food and great experiences. You can’t say it hasn’t been a great career, I just think the ideal would be able to have work be optional at a slightly earlier point in your life so that he can focus on the things that he loves and wants to spend more time on during his later years and not have the stress and anxiety that comes from trying to maximize the value of a practice sale in your late seventies.

Ryan Isaac: That is what I was going to say. There is probably a fair amount of anxiety of not knowing. Having a narrative in your head every day, “I am coming because I want to.” But not really knowing? The older you get and slower you get and watching production go down, work hours go down, and then worrying. It used to be worth a million dollars and now it worth $200,000.

Reese Harper: I know! Think of all the after tax money that you used to pay down all of the debt to buy that practice that at one point was worth $600, $700, $800 thousand. You work so hard to pay it all off. You have to pay taxes to pay it off. A lot of people don’t realize that but as you pay down those practice loans the principal part of your loan payments is taxable income. You are paying taxes and then you are paying it down and the practice just deflates in value. It is like, “what is the point of growing it if you just literally gave away $500,000 of money that you could have gotten on a sale!” Right now, that is what this person needs to back away. They aren’t going to be able to get that because they have waited too long to exit. All of the hard work he put in to get it up to that collection level cannot be maintained. It requires too much.

Ryan Isaac: No, the cabin has got to be on the chopping block.

Reese Harper: I don’t want to be all drudgery. He has had the worst life in the world. I am not saying that, I am just saying that there is a better way and it might not have required a lot of adjustments. This person just neglected basic financial planning. Instead of paying down the debt at the rate he did, or instead of putting money in a savings account, he could have invested it. He could have set up the right retirement account. He could have slightly adjusted his living expenses so lifestyle wasn’t creeping in quite as much. It wouldn’t have felt any different. Life wouldn’t have been less enjoyable. It was just that by the time he was in his mid sixties he would have been fine.

Ryan Isaac: And mathematically he could have known it.

Reese Harper: Yes, then he could have had confidence and could have literally come in to work because he loves it.

Ryan Isaac: Yes, and it wouldn’t matter if the practice slowly disappears.

Reese Harper: He also wouldn’t care if he doesn’t make any money. He could bring in an associate and have them slowly take care of the patients and he would have maximized the resale value because he could have sold it at its peak evaluation. It think the real issue is if you build up enough personal wealth then it lets you walk away confidently while being able to sell your practice at its peak evaluation.

Ryan Isaac: Let’s back up to something you said earlier. In this story, when he goes to his financial guys to get a picture.

Reese Harper: Let’s do that. There are like five things that we want to talk about. The first one is that they need more money to have a better lifestyle. I think that is a fair assumption a lot of people make. The second thing is that as one of the highest income earners in the U.S., dentists are an obvious target for sales people of all kinds. They are just an obvious target. You are the person that every financial planner knows makes the most money of anyone. If you look at the income statistics, I was just writing about that this week, the average dentists if you combine GP’s and specialists, or just take GPs the average GP is probably the highest income earner in the country based on multiple studies. If you read a study that says dentists are number four or number five, take a look at what the actual income they report is because most of the incomes for what dentists are reported are not what they actually make. It is mostly coming from payroll statistics that get reported when people report their payroll data to the department of labor. Those wages, those salaries that you get paid in the practice are the only things that are reported. Some guys set their salaries at like $270 or $280 to maximize retirement contributions. Some of them keep really low salaries and take $400 grand in distributions. It just depends on the practice. You will see that the dentists average income gets reported really low in these national surveys. Other occupations that get reported on these surveys like maybe Anesthesia or medicine, a lot of times those are more accurate averages because most of the doctor’s salary gets paid from the hospital wages on a W2. It is easy to track it. People might think that doctors are the highest income earners, but in reality, after combing through the data you will see that dentists could be the highest income earners. They will be targeted for any product or service. It can be tax, financial planning, legal, insurance, equipment, real estate, you name it. I am not throwing an professional under the bus, I am just saying that everyone knows that you are the person to go sell stuff too.

Ryan Isaac: Yes, and it is not only high income, it is steady income. That is the perfect person to sell stuff too because they can afford consistent payments. They can get loans really easy and they can afford really high payments quickly.

Reese Harper: Then they go, that makes sense. A $200,000 transaction only costs $1100 bucks a month.

Ryan Isaac: With the best rates and quickly.

Reese Harper: Ultimately, we feel like it is particularly important as a dentist to not get mediocre financial advice from your financial planner. This is in most cases.

Ryan Isaac: Well like in your story, this guy is in his seventies and asks, “Can I be done?” No one is talking about the data that will actually be able to tell him if he is close to being done.

Reese Harper: What is your actual net worth? He didn’t even know how much money he had!

Ryan Isaac: Someone is looking at what the market returned last year, they know what the S&P did, so they are picking good funds.

Reese Harper: The client assumes that that is the role of the financial planner and that is the whole picture.

Ryan Isaac: The whole picture is not what return you are giving me. The financial advisor does not control that much anyway! The investments that you pick have a huge amount of control over that, but the financial advisors job is to select investments that give the client the return that they need to reach their goals with the least amount of risk that the client wants to take. Most people interpret, and in this case too, this person assumed that their financial advisor was taking care of it. His financial planner told him that he was good to go, but he said, “I don’t know, it doesn’t seem right.” I am like, “ya, it doesn’t seem right because you are not!” It was the good gut feel that he had that said, “I don’t think I can, but they are telling me that I can.” Most financial advisors will say that because they have been responsible for some time. This guy is in his mid seventies they have been responsible for trying to help you get to retirement so they shouldn’t say, “sorry, you are still decade away. It didn’t work.” His gut was telling him the right thing. There is literally a $5000 a month spread between what he needed and what he had based on the quick math I was doing. That was giving him a lot of credit. I was giving him the benefit of the doubt for not even knowing the value of his assets. He was saying, “I don’t know what this one is worth. That might be worth $110,000. My wife has something, I don’t know what it is.”

Ryan Isaac: That just seems like something you would want to know a lot earlier, or have someone tell you.

Reese Harper: Some people are listening to this saying, “that will not be me, I know everything about my situation.” I am just saying that the average person does not. All of us have a little bit of the average person in us. Don’t assume that you are perfectly organized, we know what perfectly organized really means because we can see the context of why you need to track everything the way it needs to be tracked, a lot of people assume because they have a rough idea in their head of what is going on that that means they are organized. The person that I talked to would not have thought that he was unorganized. Anyways, I think bad advice is another reason people retire late. They get poor advice, most of it is driven by sales and commissions. When you work with a financial advisor who is getting paid on commission, that is a situation where you will not get the best advice. I was at a lecture last night up at the University of Utah listening to this marketing lecture on content media and stuff like that. The faculty member is an adjunct faculty guy that owns a marketing company. Shout out to Anthony. He runs a marketing agency and he comes to this lecture and he starts out his lecture with a story about going to a party. He says he was at this party and was over by the pool. He also says he gets asked to go to a lot of parties.

Ryan Isaac: Anthony is a cool dude, I can see that everyone wants him at their parties.

Reese Harper: He says he is sitting there and this guy comes up to him in the corner of this party and he shakes his hand and asks him how he is doing. Makes some small talk. Then the guy introduces himself and says, “Hi, my name is John, I just wanted to come and meet you and find out a little bit about you.” He asks him what his name is, and then he says, “do you or your family ever wonder what it would be like if you were to prematurely pass away?”

Ryan Isaac: Wow, that works every time at the party.

Reese Harper: Anthony is sitting there going, “what?” The fact that he told it was…

Ryan Isaac: A great ice breaker.

Reese Harper: Then the guy says, “You can actually combine the benefits of insurance with a savings plan.”

Ryan Isaac: At a party, by the pool!

Reese Harper: You can combine the benefits of an insurance policy with a savings plan? Has anyone ever talked to you about the benefits? And Anthony keeps thinking, “We are at a party! I’m sitting by a pool!” He just related this to social media and how if a dentist, for example, goes on Facebook and says something random that doesn’t really belong in the party people don’t invite him back. That guy didn’t come back to the party. I thought it was funny that even a marketing person had had this experience of someone whether true or not. He chose to tell it as his example of how to behave well online and not to bring things to the party that don’t belong.

Ryan Isaac: That is really good, great story.

Reese Harper: Then he followed it up with, “If any of you want to know the benefits of permanent life insurance, come talk to me after class. I’ve got a calculator. It is the worst thing in the world.”

Ryan Isaac: The marketing guy said this?

Reese Harper: Interesting man, I thought it was so funny. It made me remember how much bad advice happens out there at parties, by the pool. I thought you would like that story.

Ryan Isaac: That is a guaranteed way to meet people at a party, “hey, how’s it going? Have you thought about dying recently? Wouldn’t you like investments when you are dead?”

Reese Harper: It is just nutty.

Ryan Isaac: On that note, I need to take a breather. Let’s take a little break, then we will hit three more quick ones on why dentists are retiring late.

Ryan Isaac: Ok, Reese, we are back.

Reese Harper: Welcome back to The Dentist Money Show.

Ryan Isaac: I am eyeing that chime, as a welcome chime.

Reese Harper: C for Chi people, it is not going away. I still haven’t seen that hashtag anywhere. No one is hash tagging C for Chi. If this goes viral today, let’s start commenting online, let’s get a conversation going.

Ryan Isaac: Join the conversation at dentistadvisors.com.

Reese Harper: That feels like something that shouldn’t be at the party. I got kicked out.

Ryan Isaac: What is the third reason that dentists retire late, you have this categorized as “more complexity”. You said earlier that the average person does not struggle with personal finance like a dentist does. I think there is more to that than what you are saying. You are not saying that the average American worker really understands personal finance. It is a hard thing to understand. What you are saying though is that the average American worker that has a W2, and a 401k already set up, is not paying the lease or mortgage on the building, hiring, managing, firing Susie and Bill, implementing the wrong marketing strategy again.

Reese Harper: It is like, “oh man, that was kind of a waste. My bad, let’s try it again.” No, the first time felt like a big waste. Why do you think the average dentists marketing budget is 1% of their collections? For one year it was 5%, and then they are like, not going through that again.

Ryan Isaac: What you are saying though is that most people just don’t have the complexity that a dentist’s does. It is interesting because we could list a dozen different categories of financial complexity, but when you separate that from what they have to deal with in a business you think about can you ever get good enough? Can you get good enough clinically? Do you finally reach a point where you are like, “I never need to learn anything else clinically.” Of course not, you can learn your whole life how to get better clinically. Can you get to a point where you don’t need to learn anything else about marketing? You are an expert marketer? You are going to these lectures at the University and tell me what you learn. How does anyone ever wrap their heads around how much detail you can get into in marketing. Just marketing alone!

Reese Harper: Between HR, finding the right talent, motivating a team, leadership, accounting, financial, expansion, real estate, second locations, associate contracts, compensation for associates that makes them actually want to be an associate, those are all really challenging things to achieve as an entrepreneurial dentist. There isn’t enough time in a lifetime! Yesterday, I am having this conversation realizing that there is a crossroads in marketing where you can’t learn it all. I feel like I know a lot, but I can’t be everything. When you are a small business, like we have been in the past, and most dentist practices start out to be, you are really small and there isn’t anyone to delegate anything to! You start out with a hygienist, an office manager, and sometimes you buy into a practice that already has an operation going which comes with different problems. The challenge is that as you grow, it does get easier because your job can be more specialized. The hardest part is when you are really small, and you are doing it all on your own, and you don’t have a team. That is the hardest point. It is demotivating because everything moves so slow and it is demotivating because you don’t feel like you can get to anything yourself that you know you need to get to. That is why the finances are so complex.

Ryan Isaac: The solution then is to find a way to get more organization. Now can someone get organized on their own without hiring people? At some point you have to do something by yourself when you are the startup guy and you are doing your own hygiene. There is just an amount of organization that you should try to develop on your own. Build some skills, ya know?

Reese Harper: A little skill building. You can’t outsource things very well if you do not understand them. That is why a lot of practices struggle that buy bigger practices. You will see associates come out and buy a large operation and they struggle to keep the collections healthy and keep profitability high because they don’t have any idea what is happening. You bought this thing and you want to execute everything. It is harder to clean up the business and get it organized if you don’t know anything about it. What we are talking about here though is the personal financial side. This gets neglected as well. Both the personal and the business financial situation make the overall dentists life very complex. If you think about just the financial complexity that a dentist has to deal with. Any time there is any extra money there is never an obvious place to put it. Almost everyone else when they have some extra money knows exactly where it should go. The dentist struggles to know where it should go.

Ryan Isaac: Do you buy a new cone beam?

Reese Harper: It could be re-invested, put into marketing, hiring another person, student loan, practice loan..

Ryan Isaac: The boat…

Reese Harper: The house. You could buy and have a lifestyle expense, you could consider paying down your mortgage, you could pay off the credit card. You have a choice all of the time between expansion and contraction.

Ryan Isaac: Then what do you end up picking? The one that feels the most anxious at the time.

Reese Harper: Yes, the one that feels like it is the right call, but there really is a strategy that would take a masters degree to understand about the order of expansion and the order of debt payoff, the order of the investing that you should do within the practice. Perhaps the human capital requirements that you are lacking? The people versus the equipment versus the location versus the capacity of your space. All of those things are really hard decisions. It is not just that it goes into the 401 k and if anything is left over, I throw it towards the mortgage. At the end of the day, it is not that because you are earning more, you get used to a slightly better lifestyle, and that just adds to the complexity.

Ryan Isaac: That is really hard especially if you are coming out of school and you finally get paid. The temptation is just to have a comfortable life, finally. Maybe you have been married for awhile with a couple kids and you have been living off student loans. It is nice to have a car where the doors open, ya know?

Reese Harper: Dude, so nice.

Ryan Isaac: It is nice to take a trip because you haven’t gone anywhere for awhile.

Reese Harper: I mean, if you just think about the complexity of the choices that a dentist has to make. Think about just the retirement plan decisions. Do I do an IRA? Do I do a Roth IRA? Do I do a simple IRA? Do I do a 401K? Do I do a profit sharing plan or do I do a pension? Which one is good for me today, next year, and in five years. Should I be changing it? That is just the structure of the plan. Most people do not have to think about the choice of the plan structure. They just get something. How much do you put into real estate? How much do you put into stocks? How much do you put into safe investments? How much do you put into cash? How much should be inside of a bond? How much should be international? How much should be domestic? How much in emerging countries? Should I have a second rental property? Should I have any rental properties? Should I own my building? Just the types of investment that you buy, take insurance. Let’s look at insurance.

Ryan Isaac: How much life insurance? If someone comes up to me at a party and asks if I have considered premature death lately, how much life insurance do I buy?

Reese Harper: Think about the number of policies that you have. You have your life insurance, you have life insurance to consider for your associate, you have life insurance to consider on a spouse. You also have disability insurance for your higher than normal income, you have business overhead disability, you have business reducing term.

Ryan Isaac: You have liability insurance.

Reese Harper: Yes, on person and operation. You have got your higher than average liability on vehicles and home. You have to think about whether you have any of the appropriate level of malpractice as you grow. I mean, there are probably like nine or ten policies that normal people don’t think about.

Ryan Isaac: They change every year too! Every time net worth, or spending, debts, or assets it should change.

Reese Harper: I can go on forever, and I won’t.

Ryan Isaac: Few, thank you.

Reese Harper: But you know, the overhead itself and practice growth and practice evaluation is a big question. How do you protect that huge investment? That is not an easy decision. Combine all of that with the fact that you have zero background in financial training. The advisor you are depending on for a lot of these choices, in most cases, will be a CPA. That guy has some ability to handle some of these questions. He has an extremely good ability to handle several of these, but no idea how to answer half of them well.

Ryan Isaac: Or even a strong opinion on them. He is just not in the business of giving advice around these areas. The alternative is the life insurance guy by the pool. So you have that guy or your CPA. I feel like his name was probably Larry, for some reason.

Reese Harper: It could be. I have some good Larry friends.

Ryan Isaac: That’s enough, but to me it is a big deal. Let’s go to a fourth one. This is one you have coined a term on. The fourth reasons that they retire later is because they are not only the entrepreneur but because they are also the professional working in the business that they have built. You would call that an entre-professional.

Reese Harper: Well, I guess you would call it that.

Ryan Isaac: I coined it, ya right I did. That is tough though. It is tough to be on both sides of that spectrum. All of the time and energy and resources that can be put into building a good business are different skill sets. It is a different amount of time and money than doing the work.

Reese Harper: You have observed that within our own practice here. Which is a lot like a dental practice. You have seen me be the doer of the work and struggle to balance that with being an entrepreneur. What have you noticed in our own evolution that has been insightful?

Ryan Isaac: One of the biggest problems that people face in that situation is that you in order to pay attention to one, you have to sacrifice the other. At some point, if you are going to spend a lot of time building a good business and maybe learning how to do marketing really well, that means that you have less time for patients and clients. In our case, you can have less clients if you want to learn how to build a podcast, or do online marketing, or spend time hiring the right team. You can’t have as many clients as you could if you didn’t have to deal with that stuff.

Reese Harper: Yes, I cannot produce as much.

Ryan Isaac: The dentist is the same way. He wants to learn what marketing is going to work in his area. Ya know, spending time and money that will take away from his ability to spend time with patients. Or analyzing out of all the insurance companies you can accept in this practice which one should I take and not take? That just takes away form other things. That is the first take away. It is hard, man. It is hard to be in that position.

Reese Harper: There are some financial tradeoffs too that people struggle with. They are different. The rewards for each of those.

Ryan Isaac: What are the tradeoffs? What are the tradeoffs that a professional that focuses on that faces? What happens?

Reese Harper: You can have income today. You can have higher, steadier, more predictable income today. You can just get more clients, in our case, or more patients.

Ryan Isaac: You can do all of the production yourself in the practice.

Reese Harper: Or you can delay income, take any that you might earn and hire people, build a business, pay for marketing and a nicer location plus equipment, and then build an asset that will build your net worth and balance sheet higher. However, you won’t feel those effects for decades.

Ryan Isaac: It is just an important tradeoff to articulate. I don’t think a lot of people want to embrace that. They want to have their cake and eat it too.

Reese Harper: I want a huge net worth, and income!

Ryan Isaac: I want high current income, plus a business that is worth a lot of money!

Reese Harper: I think this is an interesting parallel. Big, big, big, big companies work this same way. There are two types of businesses out there. One is called a growth stock and one is called a value stock. In a value stock there is actually a high amount of current income generally. There is cash left over in the operations and those typically pay what we call dividends. Certain types of business in the public market, they are businesses like Johnson & Johnson or a business with high current income these are growth. Sometimes people won’t refer to these as growth versus value, but maybe the better way to articulate is to say that some pay a lot of profits out and there is a lot of income. Some are high growth. Apple stock, ya know, has never really paid a dividend until the last few years. They finally declared a very, very, very small dividend because they said we are just going to grow this thing as big and fast as we can. They try to take all of the profits, reinvest them, and grow the company. Then other companies that might be at a steady state, let’s say we are selling toilet paper and we have 90% of the market, maybe we can’t really grow much more. Our goal at that point would be to make that thing be really profitable. Take all of the money out that you can, lower expenses as much as possible, and make profits. We can sit on this thing and enjoy the income. As a dentist, I think those are your choices as well. Both choices have really, really good tradeoffs.

Ryan Isaac: They will pay you at different times and in different ways. A lot of that choice just needs to be based on what your natural temperament is. What is your natural temperament for what kind of level of stress you want to have in your life? What do you want to have your lifestyle feel like and be like? Someone who is tilting towards the entrepreneurial route has to be living on a shoestring budget and cutting back on lifestyle expenses. You don’t have to starve, but a lot of times you won’t have what you want when you want it.

Reese Harper: You won’t have as much as the producer does. If you are going to hire an associate you are going to have to take some of your profits and give them to that associate. That is just the way it looks, or at least some of your production. Your current income will have to go down. That is a short term tradeoff that you will have to make. I think it is important to say which hat do I feel most comfortable with? Do I like the entrepreneurial hat? Do I like the professional hat? Or like many of us, do you like a little bit of both? Can you make concessions as you try to do both? Just know that they are different and when you start moving towards that entrepreneurial road of expansion and adding an associate you have to be ok with the fact that you are still going to make money, but the money you are going to make will come in the form of growing the business not in the form of current income, as much.

Ryan Isaac: A bigger business. I am glad that you bring that up. I get that question a lot. People are asking in context of what is the right way and the wrong way.

Reese Harper: What is the right decision, Ryan?

Ryan Isaac: I am getting started and it seems like three locations is the right way to do dentistry. We have clients who are three days a week, they do not own the buildings, they don’t have associates, and they are liquid and wealthy and on track for an early retirement.

Reese Harper: They are very happy and are early fifties!

Ryan Isaac: They have one or two hygienists and a small business. Then we have a lot of clients who have practices, partners, and locations. What do you value? It is personality driven. How much stress can you handle at night before you break?

Reese Harper: Part of it is just figuring out what you naturally find yourself doing throughout the course of your career.

Ryan Isaac: What are you drawn to when you have free time to work on something? Are you going to see more patients or are you going to the back office and working on marketing, or designing a different process for patients?

Reese Harper: If someone comes to you and says, “you should do this to grow,” and you think that you have never thought about that, it is overwhelming, and I don’t’ want to think about that then that entrepreneurial ambition might not be part of your DNA as much.

Ryan Isaac: Which is ok!

Reese Harper: Totally fine! Don’t let that get you distracted or feel bad. Don’t let that change your operation! Our financial philosophy and perspective is that there is not a right or wrong way to achieve some level of financial security, everyone can do it. There is just a right path for each person based on their temperament. You don’t want to force someone to take a path that is not part of their natural temperament or at some point it’s trouble. Maybe the right way to qualify that is that people can only make slight adjustments. Minor, slight adjustments work but major adjustments do not.

Ryan Isaac: Huge leaps really quickly…

Reese Harper: People just revert back. I tend to do it when I go on my diets, ya know? I think you can make minor adjustments and you can move towards the right outcome. One day maybe I really will be able to give up all dairy and wheat.

Ryan Isaac: You’ve done a good job though, man!

Reese Harper: Yes, I have cut back. But I am still going to have my dairy here and there. I’ll take my ox bile and digestive enzymes to help me through.

Ryan Isaac: Ox bile?

Reese Harper: If you don’t have a gallbladder you know what I am talking about. It was stolen from me at the ripe age of 16.

Ryan Isaac: That farm life is rough man.

Reese Harper: They are like, we are out of money, the barn burned down…

Ryan Isaac: Get the boys gallbladder! Harvest his organs!

Reese Harper: The barn burned down!!

Ryan Isaac: Let’s go to our last point which has everything to do with gallbladders. It is a sense of urgency around organization, financial planning, and having a good plan with your personal finances. There is not enough urgency. It doesn’t exist. It is not an exciting thing to go pay for. You brought up Apple, we are not Apple. Everyone is excited to go throw three grand at apple whenever they launch a product. Paying an advisor to keep stuff organized on a spreadsheet and talk to you about it every once in a while to help you from self destructing is just not very exciting or urgent. It feels like something you can definitely do later.

Reese Harper: It is definitely something that can wait until you are like 65. Then pick it up.

Ryan Isaac: We love the people who call us in their early thirties, all of you young bucks. All of you haven’t even graduated, you are in year one on our calendar.

Reese Harper: It is cool to see! Yes, keep calling in. You are doing great, but we will probably tell you to keep going back to school and focus on that for awhile. It is ok, go ahead and graduate first.

Ryan Isaac: But it is good to know! In that example, there is still a lot of those guys that are just wondering, “ok, the day I get a job do I just start paying down the student loan as fast as I can?”
I love that, ya know? It is good to ask the questions early on.

Reese Harper: Ryan is saying it the way that we put it in a lot of the conversations. With a higher income there is just is not a lot of urgency to do important things. There is just urgency to do fun stuff, and stuff that is urgent. Stephen Covey has got the box of urgency.

Ryan Isaac: I don’t know if you have ever looked at that. I could Google it.

Reese Harper: You should Google it, that could help the listers, I don’t remember it perfectly. The general concept is that there are ideas that are urgent, and non urgent versus important and non important.

Ryan Isaac: The management matrix, I have this memorized.

Reese Harper: Ultimately, if you think about four boxes, then in the top left hand corner are things that are both urgent and important. For Ryan that is like his gains are going down at Crossfit.

Ryan Isaac: Yes, I have not squared in three days and I can feel my thighs getting smaller. My pants are looser and I don’t like that feeling.

Reese Harper: Top right hand corner are things that are not urgent but they are important. Those are things that for most of you are things like financial planning.

Ryan Isaac: It is important, and it matters.

Reese Harper: It is really, really important, but it is not urgent. The bottom is not important stuff. There is not important stuff that is urgent. That is like someone walking into your office when you are on a phone call and they ask you about whether they can take the next thirty minutes off because they have got to go and they want to do it right now.

Ryan Isaac: They have got to leave, and it is not important.

Reese Harper: You are like, “ok, this is not important but this is very urgent.”

Ryan Isaac: Email seems to fall into that category frequently.

Reese Harper: Then you have you’re not urgent stuff that is also not important. That is where we spend a lot of time. Too much time in that zone. That is the phone games, checking out social media, binge watching something on Netflix, not saying any of us on this podcast have ever done any of that. If it did happen, theoretically, hypothetically, then we might understand how you feel.

Ryan Isaac: I am really into a World War II series on Netflix right now.

Reese Harper: That is a good investment. It is not urgent or important, but it is happening. The point of his whole management theory is that most people don’t spend time on that quadrant of things that are important but not urgent. Financial planning is definitely one of those. The more money you make then it compounds the lack of urgency in the area.

Ryan Isaac: Well, it is funny too because in his example the two most common, important not urgent things are finances and health. Those are the things that people always regret procrastinating later on. It is just hard to get to because it doesn’t feel urgent at all.

Reese Harper: We should be complimented for not procrastinating that then.

Ryan Isaac: Ya, sure! It depends what your interests are.

Reese Harper: It helps that fitness is your actual hobby.

Ryan Isaac: That is my medicine.

Reese Harper: If playing my C for Chi chime, if that was something for me that was urgent and not important, I would do it all the time. {chime} But it is not important, and it is not urgent.

Ryan Isaac: That is why you do it so much!

Reese Harper: That makes a ton of sense.

Ryan Isaac: Well, you have heard the five things here today.

Reese Harper: We would love to know if you agree with us. You want to recap real fast?

Ryan Isaac: Well, what I want is for people to go on to the episode on our site. dentistadvisors.com/listen and comment on this show episode. Tell me why you think that the average dentist retires later than the average person because we want to keep building our list and see what other insights people have that we don’t feel like are really relevant. I am always surprised how insightful the comments are that come in.

Reese Harper: You can also send an email directly to Ryan, ryan@dentistadvisors.com.

Ryan Isaac: Urgent not important? No, urgent and important.

Reese Harper: Email Ryan, give him your thoughts, post it on the show notes and let us know. We would also like to know if there is a particular topic that you would like us to cover on the show. Always email Ryan and ask him about a topic that you are interested in. We do have a six week editorial calendar people, we are planning this thing out! It takes some time. Give him some slack on incorporating your topic, but send him an email and let him know what you want to hear about. I also want to hear what you think about this episode.

Ryan Isaac: We would also love it if you could leave us a rating on iTunes. Rate our show, that would be cool.

Reese Harper: Too many calls to action, Ryan.

Ryan Isaac: Take a pick, rate us on iTunes, leave a comment, something. That is the call to action today. Leave a comment: Dentistadivsors.com/listen. You can get on our calendar there as well if you would like to. We would love to hear from you!

Reese Harper: Carry on!

Behavioral Finance, Spending