How to Build the Right Retirement Plan for Your Practice – Episode #701

On this episode of The Dentist Money Show, Matt and Ryan break down what dentists need to know about retirement planning. They explore the different types of retirement accounts—from 401(k)s and simple IRAs to profit-sharing and defined benefit plans and explain how each fits into a broader financial strategy. Matt and Ryan also touch on the behavioral side of retirement planning, sharing why consistency and professional guidance are important to building wealth and avoiding costly mistakes.

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Podcast Transcript

Matt Mulcock: Welcome to the Dentist money show where we help Dentist make smart financial decisions. I’m a guy Sometimes people call the mountain and I’m here with sir Ryan Isaac Ryan. What’s up? I’m a guy. Yeah

Ryan Isaac: Say it. You’re more than a guy who sometimes is referred to as a mountain. One of my favorite stories about the mountain is at the summit in Park City this year and someone, I was talking to somebody and they were looking for you and they were like, I’m looking for the mountain. And then they saw you across the room as a mountain peak does stick out above the clouds and the valleys. And then they were like, there, that’s the mountain. Can you introduce me? And then we made an intro and then I, don’t know what the phrasing is, but I slinked off into the shadows.

Matt Mulcock: Yeah. There he is. Yeah. Amen. Just like did the little back, the little back pedal into the bushes. Yeah. he and I chest bumped sparks flu emotions ran high. ⁓ it’s all good.

Ryan Isaac: Just like the Homer Simpson into the bushes, just like Okay, yeah, so good let’s go. What are we doing? What are people signing up for today?

Matt Mulcock: Today. We are talking about, people are signing up for everything you need to know about retirement plans. we’ve been doing this for a long time as people, the cool ones know, we do this for a long time and We’re on episode. don’t even know what almost 700, almost 700.

Ryan Isaac: Yeah. I don’t know. Yeah.

Matt Mulcock: So we thought little what let’s go back and refresh some episodes some things that I think would be helpful So we’ve gone back to the archives and found some so this was officially this was our second ever I say we I wasn’t here at the time This was the second ever episode that you and Reese did on the Dentist money show, which was everything you need to know about retirement plans number two,

Ryan Isaac: Was the number two? So the fall of 2015. Yeah, yeah, holy crap.

Matt Mulcock: Uh-huh. This was the second. Oh, sorry. You know what? I misspoke. I misspoke. This was actually number 53. I, I built, I built another outline we’re going to be doing soon. think actually today we’re going to record this after this one, another number two episodes. So I misspoke, but it was the, was 53rd. So it was still in the first like

Ryan Isaac: Okay. On number two. Okay. Dude, you know what’s crazy is I remember as we were coming up on episode 100, just feeling like this is a scam. There’s no way, like there’s no way we’re getting past a hundred episodes. We’ve already repeated ourselves five times. Like I don’t know what we do from here. It’s so funny to be here and not only to be this far down the road, but to be repeating things that we used to do, but it’s so relevant. So we can jump into it. One of my first questions in just hearing this title alone, Matt, is do you think people have a connotation of what retirement plan means. Like we say retirement plan as a phrase meaning one kind of specific thing. What do think people are hearing when they actually hear that phrase?

Matt Mulcock: I would imagine people think immediately of 401ks. That’s what I think people would think. Is that what you were thinking?

Ryan Isaac: Mm-hmm. Yeah. okay. Yeah. Like, just, yeah, the plan at the office. I did wonder if some people, and just so we can just clarify as we get into this, I did wonder if some people view retirement plans as just a broader category of what’s gonna happen. Yeah. Where do we put money in general? And where do we put it in general? could be real estate portfolios as my retirement plan. So specifically, we’re talking about the type of, like investment account retirement plan that usually sits at a corporate level, the office level.

Matt Mulcock: Broader plan, that’s a good point.

Ryan Isaac: The different types, the thresholds, when they make sense. And we’ll probably, I think, get a little ⁓ bit on the personal side of, you don’t quite make enough, right? And for a retirement plan in the office, or it’s not an option for you, yeah, it’s cool.

Matt Mulcock: Yeah. Yep. Yeah, that’s a good point. I probably answered that question through the lens of a nerdy advisor, because that’s what I immediately think of when I say retirement plan. But, ⁓ you’re right. I’d say most people might be thinking more broadly, like, just my plan for retirement. So, ⁓ but to your point, we are going, we’re going deep. We’re going deep in, ⁓ how do I know like which plan to have?

Ryan Isaac: Just generally? Yeah, okay. Mm-hmm.

Matt Mulcock: At the office and the practice. So let’s just start with kind of the questions that we hear generally from dentists around this topic. I actually just had a conversation with the dentist yesterday, not a client, they were calling to inquire about our services and she was asking a ton of questions around.

Ryan Isaac: The most common?

Matt Mulcock: Deadlines and she’s transitioning from a simple to a 401k and all this kind of stuff. So we’ll get into all that, but I thought maybe we break down common questions we get depending on career stage. like, for example, a practice or a dentist who buys a practice and there’s already a 401k in place. What do I do? Do I keep it? Do I get rid of it? Do I start a new plan? ⁓ another question for like an earlier career owner.

Ryan Isaac: Oof. Yeah. Mm-hmm. Okay. Yeah.

Matt Mulcock: Question might be, my staff wants to put a plan in place, where do I start? Any other questions come to mind for you?

Ryan Isaac: Mm-hmm Yeah, I you know, it’s funny I think this conversation gets backed into sometimes from the tab that leads with taxes So a lot of times the question begins with a tax question like how do lower taxes or you know? Am I paying too much in taxes? How how will I know if that’s the case and then eventually the retirement plan becomes I’m sure that’s part of this here It becomes a huge part of the discussion which retirement plans you have at the practice. Is it the biggest most efficient one you can have for that given year? and your exact scenario and are you maxing it out to its fullest capacity, including maybe even spouse, kids, whatever it’s gonna be. So yeah, I think it gets backed into from the tax question all the time. maybe it just relates to the first question, which is just like, what am I supposed to do? I have a business now. Aren’t I supposed to have like a plan at the practice and like do something with it? So yeah, really common stuff.

Matt Mulcock: Yeah, that’s a good point. Yep. I’m glad you brought that up too about the taxes because I think it would be helpful for us to highlight as we get into this of like what’s like the sequencing of priorities of setting up a plan in the first place? why would you set up a plan? Is it just for tax savings? Is it for retention of the office? Is it to save more money for retirement?

Ryan Isaac: Yeah, uh-huh.

Matt Mulcock: I think there’s a lot of different reasons to do it. I guess with that said, is there like a go-to thing for you, Ryan, if you’re like, ⁓ this is where I would start of like the main priority for setting up a plan in general.

Ryan Isaac: Mm-hmm. Yeah, it’s our boring go-to answer, which is get organized first. I have no idea. I have no idea if you should be just have like a little all the way down from a, you know, an actual, you might even qualify for a raw straight up Roth IRA all the way up to a huge pension plan. I have no idea. I mean, it’s just, we’ll probably get into this, but yeah, there’s just a lot of questions to know, which is, I mean, you could probably overlay this onto the insurance conversation. This is what’s interesting about our industry.

Matt Mulcock: Yeah.

Ryan Isaac: Is you could go to a retirement plan person who specializes in just one type and probably get sold something within five minutes of like, yeah, have this, right? Set up this type of plan without knowing. And there’s just a lot of things to know about someone’s situation before getting into them, especially the higher you climb on the ladder of like complexity and bigger size plans. Once you start getting into even let’s say 401k, but for sure profit sharing and cash balance plans and pensions, there’s a lot of data that needs to. You just have to understand it and you have to understand it in a, not in a vacuum. It’s not just about how much money they have left over or what’s your tax bill. It’s what else is going on in your huge picture. So again, that’s why our whole process, our first client engagement, all the work we ever do always begins with organization data and some kind of metrics and reporting that tell a story before we dive into it or help us ask more questions as Christy. What does Christine say about data? It doesn’t tell the full story, but it gives us more questions to ask. Yeah.

Matt Mulcock: Yeah. It just gives you the right questions to ask. Yeah. I think it’s a good point. I, and I liked that you brought up like talking about all the different options that are there. Well, you might qualify to make a direct contribution to a Roth all the way up to like a cash balance plan. I think all that comes down to understanding what is your income. So like what, level of income are you at, ⁓ because qualified to make a direct contribution to an IRA, sorry, to a Roth IRA, your income is going to be much lower in that case.

Ryan Isaac: I love that. that’s what I would say. Yeah.

Matt Mulcock: Than if we’re talking about a cash balance plan. So I think the one data point this comes back to would be what is your income?

Ryan Isaac: Yeah, if you had to point to one single thing, huh? Yeah, it’s what is your income? Yeah, that’s probably and Yeah, what’s left over from it? Yeah, most definitely it’ll have a huge impact, but you’re right I think that’s that’s the question was your income which is an interesting one because Most dentists in our experience that we’ve met with don’t know that number Really? Well, which is understandable. It’s hard to pin down and then most dentists are really familiar with collections or what’s sitting in the

Matt Mulcock: And probably your overall cashflow situation. Yep.

Ryan Isaac: Bank account or what got filed on the personal tax return, but what was the gross amount of money that you actually made that does impact your cashflow and what’s left over and also impacts your tax filing status. So, and that’s a hard one to pin down. We’re probably, it’s probably not the scope of today’s podcast. That’s probably number podcast 73, I think from 2016. I don’t remember. I don’t know.

Matt Mulcock: Yep. Yeah, Exactly. ⁓ I think there’s also an important distinction to make here if we’re talking about where are you in your career? So there’s a big difference of an associate to asking about how to handle like a 401k, let’s say, versus a practice owner of like, should I set one up or should I not? So really simple answer for an associate. We can go there really quickly is If you’re an associate and you have any level of match from the practice, the answer in almost all cases is it is at least contribute right away. Whenever you’re eligible, at least up to the match. That’s like a really simple, like if you’re an associate, you take nothing else away from this. It’s if there’s a plan at the office and you get a match contribute at least to that match. is a guaranteed hundred percent rate of return on those dollars.

Ryan Isaac: Mm-hmm. Totally agree. Yeah. Yeah.

Matt Mulcock: Like you are literally getting the dollar for dollar match. That’s 100 % rate of return.

Ryan Isaac: Now, now this is making me think about another general thing we could have said in the beginning. Such a good point, is why we, I mean, why I love them. I think we could say why we love retirement plans for clients, for dentists specifically. People familiar with our content will hear us say this all the time. There’s never a shortage of times in a dentist’s life and career where they need money. They need access to cash all the time and it’s really common to be grabbing it from different sources. The retirement plan is just this. I mean, you can get the money, but it’s gonna be taxed and penalized in most cases. But it’s this place that just locks away money, guarantees you’re not gonna mess with it, and it’s just gonna have its chance to do its thing and grow over long periods of time. And it is kind of amazing. ⁓ You’ve probably seen this in more cases than you could ever remember, which is people go through phases and struggles and they need money, but the retirement plan is like the untouchable thing. And then sometimes it ends up being the only thing that doesn’t get touched or messed with, ⁓ you know, from like a bad, like it just doesn’t get, people don’t touch it. It just stays there and grows. I want you to actually say something about the fidelity study of people who have passed away in their 401ks. ⁓ But secondly to that, I also want to say what I love about retirement plans is when there’s market volatility and certain people are tempted to go mess with their investments and they want to like jump in and out or like try to trade news or whatever. It’s funny because it’s usually the 401k is like they don’t want to day trade the 401k. They’re like, I don’t really care. don’t know. It’s the brokerage account. It’s the, you know, it’s the things that feel more urgent and accessible. It’s why I love retirement plans. I just feel like there’s so many positives. So to your point, if you’re an associate and you have a chance to get a match, it’s like put some money in and get, get, know, get that bag as they say, as the young people say, sorry producers. They hate that.

Matt Mulcock: Exactly. Yep, it’s, course, the young people, the cool people.

Ryan Isaac: Our marketing team hates that we talk too much and that we try to use young lingo and slang. I’m sorry.

Matt Mulcock: Although I did, I did hear from Michelle that she’s at the last episode she edited for us. She did giggle. said, she said, and I quote, I laughed and I cringed. So we covered the whole spectrum. ⁓ so it’s interesting you said that Ryan, because, ⁓ it’s interesting how the people, the people on social media that you see from time to time, we see on the talk, the tech talk and Instagram and all that on the tick on the talks, ⁓

Ryan Isaac: Well, then we did our job. So, yeah. Mm-hmm on the tick and the talk ticks and yeah

Matt Mulcock: So the people that will disparage 401ks, let’s say, or retirement accounts in general, the people that will disparage them are disparaging them for the very reasons that like we think, like they’re highlighting what they’re saying are weaknesses that we would highlight as strengths. And it’s what you just said, like the behavioral aspect of

Ryan Isaac: Yeah.

Matt Mulcock: Putting your money away and, and even though you can touch it. And if you actually know the rules, there’s a lot of ways to get money out of a 401k or an IRA or whatever. ⁓ yeah, but, but the mental block that is put in place is actually a benefit in our opinion when it comes to saving for retirement.

Ryan Isaac: There’s some stuff you do. Yep. Especially in IRA. A little bit more fluid. It’s huge benefit. Yeah. What’s the fidelity study about returns on retirement plans from deceased people? Or is it people who forgot about it or something?

Matt Mulcock: Yeah, this is kind of become Yeah, so fidelity to a famous study. mean, we say famous. It’s all in it’s all relative famous to us to us nerds. But fidelity, I actually don’t know how many times they’ve replicated this. I think it’s been a couple where they did studies internally. And if you don’t know, fidelity is one of the biggest if not the biggest ⁓ brokerage firms in the in the world. They did studies on

Ryan Isaac: Us. Mm-hmm,

Matt Mulcock: Basically internally the best account or the accounts that the best returns. So not like the investments, but the actual accounts account account by account. And they found pretty unequivocally that the two categories of accounts, they found a theme, the two categories of accounts that did the best were two fold. Number one, people that were dead and that Pete family had not claimed their accounts.

Ryan Isaac: Mm-hmm. Yeah, which is two different things. huh.

Matt Mulcock: And then number two were people that literally straight up forgot that they, that they had the money there. We’re the best performers. Yep.

Ryan Isaac: Mm-hmm. Best performers, yeah. Yeah, yeah, so anyway, we can go back to your question, which was, or your point, which is around if you’re an associate and that’s what’s available to you, but that, I’m glad we went there. That just helped me remember why I love these things so much. They become one of the best, not the biggest over time. I mean, if a dentist is truly building a really balanced balance sheet, it’s not usually because of limits. It’s usually not gonna be the biggest asset on a balance sheet, but it can be one of the most consistent, maybe highest performing based on behavior and longevity and just more like, most like solid pieces that’s just always there. And sometimes when people just go through rough patches and they have to drain lots of accounts, it’s often the last thing standing that still puts them in an okay spot, you know, for future retirement goals. So yeah.

Matt Mulcock: Yep. Well, this is why I have become, we did this on two cents a while back, the new rule that Trump signed an executive order giving private equity companies now can access the money that’s in 401k. There’s $12 trillion in 401ks today. That really frustrates me because of what you’re saying, Ryan, where Foreman case should be treated like that where set it and forget it. you don’t, shouldn’t day trade your form. shouldn’t day trade period, but certainly not these types of accounts. it, I find myself really frustrated with that rule change because it does, there’s no argument you could make that it benefits the end person, the end consumer.

Ryan Isaac: Yeah. No, no, it’s someone has a little bit of lobbying power and they’re like, can we have can we get into that cookie jar? Cool

Matt Mulcock: A little bit. Yeah, private equity wants access to the $12 trillion that are in 401k. So shocking.

Ryan Isaac: Shocking, For the average person’s benefit, totally though. I mean, it’s totally for the average person’s benefit, you know, because it’ll outperform their mutual funds and blah, blah, blah. Okay.

Matt Mulcock: Yeah, definitely for. Yeah. Yeah, exactly. Let’s so we K so the, the associate it’s pretty straightforward. If you get like, from a decision standpoint of how to use these a 401k specifically, if you get it up to a match or at least up to the match right away from there to your point, Ryan, it’s going to come down to a lot of decisions around cashflow and, liquidity and all that kind of are you are you gonna what’s your tax rate?

Ryan Isaac: Yeah. What’s your tax rate? Yeah.

Matt Mulcock: Are you gonna be buying a practice soon or not? I think maybe breaking down more on the practice owner side of How much can you actually save? Give some kind of like maybe some benchmarks Because we’re saying and I and I think we agree that cash flow and income are the biggest Factor here of like of what type of plan to put in place

Ryan Isaac: Try, yeah. Yeah.

Matt Mulcock: And like where to put that money, generally speaking, would you say that?

Ryan Isaac: Yeah, for sure. And was gonna ask you, it is in the notes here, and I think it might be an important point. Do you wanna say anything about understanding your tax rate? Which is, this is an interesting thing too, because even if you pick the right plan for the right time of your life, the right scenario, everything, there are tax circumstances year to year, depending on other things you have going on, purchases, depreciation, write-offs, whatever, income fluctuations. Losses who knows that might change whether or not you should at least utilize or max out that plan that year So did you did you want to say anything about like just understanding your tax rate at a high level? Yeah

Matt Mulcock: Yeah. Yeah. I think it’s super important to understand your tax rate and understand something that’s often misunderstood. Understandably so by the way, the tax code is like 70,000 pages. ⁓ taxes are like intentionally meant to be confusing, but the one fundamental piece of this that I think a lot of people, a lot of dentists confused is the difference between effective and marginal tax rates. So marginal being the The marginal tax rate being the tax rate that’s attached to each bucket, right? It within that bracket. So it starts it. I mean, it technically started at 0%, but the first taxable bracket is 10, then it goes to 12, so on and so forth up to the max that have now been made permanent by the current administration. The max marginal rate, top marginal rate is 37%. But that is vastly different than your effective rate, which your effective rate is the average taking where you fit in all those buckets based on your income, and really what’s the average rate based on how high your income is. So your effective rate will always be lower than your marginal rate.

Ryan Isaac: Yeah, yeah, always. Not everyone understands that, which is a funny paradox. Not everyone understands that understandably.

Matt Mulcock: Yeah, understandably. But here’s, here’s the key point here that I think, again, this is misunderstood. And I think this, I’m glad you brought this up because when we talk about how, why a retirement account can be so effective for high earners is because when you’re putting money into, so this is, this is debated in with nerds on social media of like, should you always do Roth or should you always do, or should you do pre-tax? ⁓

Ryan Isaac: All the time. Yeah.

Matt Mulcock: Again, there’s nuance to this, but just generally speaking, if you are high income or what say in the top marginal rate, every dollar you put into a retirement account into, I could say a 401k is tax deducted at your highest marginal bracket. When you go to pull money out down the road in retirement from that account, it is pulled out at the effective rate. You’re filling up the lower bucket. So that’s a, again,

Ryan Isaac: Big distinction.

Matt Mulcock: Big, big distinction. Your effective rate is always lower than your marginal rate. So if I just told you, you’re going to get the tax deduction at your marginal rate and you’re going to pull the money out at your effective rate, chances are there’s a solid, what we’d call tax arbitrage, tax benefit, tax premium to beat, to be using a retirement account, assuming you’re in the high, high brackets.

Ryan Isaac: Yeah, assuming, yeah, which is, I keep thinking of things to talk about generally speaking with retirement plans. Do you think, Matt, again, you mentioned the arguments of like pre-tax versus after, you do you use Roth or pre-tax or whatever. The argument is, a common argument is that it’s impossible to know what’s gonna happen to the tax rate in the future, but most people argue it’s gonna be higher, taxes will always be higher. I know.

Matt Mulcock: I don’t know why everyone says that. Honestly,

Ryan Isaac: It’s not supported by history, data, it’s not supported by data. That’s

Matt Mulcock: Taxes have only gone down for the last 70 years. Not supported by data. Yeah.

Ryan Isaac: Usually the argument. Do you want to talk about why we still feel like even though we don’t know what’s going to happen in the future, why it seems like it makes sense, tends to make sense for a high income, high bracket, peak earning years dentist to do pre-tax deductions now versus try to do everything Roth or after tax and then, you know.

Matt Mulcock: Yeah.

Ryan Isaac: The assumption is that they’ll just like, tax will be so much more money in the future. So pay them now. That’s the whole basis of the argument.

Matt Mulcock: Yeah, I it’s always that assumption and again might be the case for sure I have no idea but taxes have only come down for the last 70 50 70 years so ⁓ It’s really hard to raise taxes in america now if you’re making the argument that and I think this again, this is valid of saying We are really going down a road here But just broadly speaking if if the argument is we are in an unsustainable path as a country with our deficit every single or our

Ryan Isaac: Could be, yeah.

Matt Mulcock: With our negative deficit year to year that has been going on since the turn of the century and are very much can continue increasing debt load as a country. And you can just see the aging population. People are having less kids. If you’re making an argument out there and saying, well, taxes are going to have to go up because to sustain or to like eventually stop this. Okay. But just to say, well, taxes are low. they’re going up again. Data does not support history does not support that. It’s really, really difficult to raise taxes in America because no one likes them.

Ryan Isaac: Yeah, yeah, and just so yeah, no, yeah, I mean they’re gonna get fought against forever and we’re trying to make the assumption that again dentistry being one of like the top if not the top income earning profession in the country’s statistically is Department of Labor, but when you really know how dentists make money the argument is that like look, it’s just highly likely that the Income that you pay taxes on and your it’s earned income dentistry is an earned income So it’s highly likely that the income you have to pay taxes on in the middle of your career throughout the whole career Will the income number will be lower than the income number when you’re done working? Because your income number in the future is whatever you pull out of your investment accounts and you know if you have like rental properties that’s income too, but we’re making the argument that your income today not the rates because who knows but the income today is gonna be higher than the income in the future and

Matt Mulcock: Yes.

Ryan Isaac: Everyone I mean it’s interesting that there’s such an argument but then again every high-income person wants to save taxes at due to do they’ll do anything to save taxes So it’s interesting that argument exists, but you know

Matt Mulcock: Well, again, such a good point, Ryan, because I think, I mean, I know, cause I’ve had, we’ve seen this firsthand of the assumption that dentists make when you tell dentists that a lot of times you’ll get kind of like a confused look, like, wait, I’m going to make less in the future. Like my lifestyle is the same. think people don’t often think about that in retirement. Most of the time your income is just going to be matched with what you spend. It’s what you spend.

Ryan Isaac: It’s your spending. Yeah, your incomes, your spending. huh. Yeah. Yeah. There’s caveats. Yeah. Yeah. Ooh, passive.

Matt Mulcock: Yes, for the most part, again, unless you’ve got a bunch of real estate and you’re bringing in passive income. Okay, great. But if you’re, let’s say you are a typical dentist who saves a bunch of money within brokerage accounts and 401ks and has a big practice they’re going to sell and eventually transition that into a brokerage account and you’ve piled up all this money, your income, generally speaking, is going to be basically very much tied to how much money you need to live where when you’re working, whatever you pull out.

Ryan Isaac: Mm-hmm. Yeah. Yep. Whatever you pull out has been.

Matt Mulcock: But when you’re working, your income is actually what you make. So when the typical dentist that we work with makes 500, 550 in that range, you’re most likely not going to be putting that on your tax return in retirement.

Ryan Isaac: Yeah, no, no, no. And if you are, if you’re a dentist who built a net worth where your income, your forced taxable income after you’re done working is higher than when you were working, good for you. That’s pretty hard to pull off. That means you amassed so many assets that are forcing you to take income from them. And it was more than you ever earned in your whole career while you had a job. So it’s okay.

Matt Mulcock: Congratulations, you won the game. You won the game. Yeah. You’re congratulations. You’re clearly a dentist advisors client. So you did it. You followed us. ⁓

Ryan Isaac: Yeah, you did it. You followed the DA way. Okay, let’s go back. were, we were going down the road of different, not just income ranges, but like cash flow ranges and what cash flow ranges, like what we mean is how much money do you have left over on average in a typical month and try to match up the most appropriate likely retirement plan with that savings amount, right? Okay. Very, very, it’s good benchmarks.

Matt Mulcock: Yeah, cause think that’s helpful again, if we’re giving general advice on a, to, a bunch of people and we’re saying the real answer is this depends. We’ve got to look at your balance sheet, get you organized, understand goals, concerns, what you’re trying to accomplish, all of that. But if we’re just saying you’re out there listening and thinking, okay, give me a general benchmark of if we’re saying income and really exactly.

Ryan Isaac: I’ve got two grand a month left over. What’s the plan that should look like? Well, profit sharing’s off the table, 401k’s probably off the table. Yeah, they’ll love it, uh-huh, yeah.

Matt Mulcock: Yep. Yep. So let’s start it. Let’s start at level one. So trying to match the plan with where your savings number is. So you just said it. So you let’s say the starting point is one, let’s say a thousand to $2,000 a month, a of thousand bucks a month. If we’re just focusing on

Ryan Isaac: Yeah, a couple thousand bucks a month in savings. Yeah.

Matt Mulcock: Your situation as a dentist. not factors like, my staff is bugging me to set one up. I’m having retention problems. We think this would be a big help. If we’re just saying your specific situation, what should I be looking at setting up a plan or what type of plan to, to contribute to? So one to 2000 bucks a month in savings. that’s going to be IRAs all day long, whether that be a traditional or a Roth, depending on your situation, would you, any thoughts there?

Ryan Isaac: Totally, yeah. Yeah. Mm-hmm. So most likely. Yeah. Yep. No, yeah. And ⁓ I just always like to reverse the math in it. You know, if you have a couple thousand bucks left over every month, it could be because that’s just where your income’s at and that’s just what happens to be leftover. Your income could be higher. I mean, you might be in a higher, and this is where it gets frustrating for some people. You might have a higher income and higher tax rate and tax bracket. And you’re like, man, I want more deductions. But the leftover money you have, is just lower, it could be a product of you spend too much money, so there’s just not enough to save. It could also be a product of the way you finance your practice and the debt load you carry right now and the payment structures that you have where the payments just chew up a lot of your free cashflow, a lot of your after-tax dollars. So there are possibilities where your income’s higher and the amount you have to save left over every month is lower. A lot of times though, it’ll match up, a lower amount of savings. At least the people we work with will match up with a lower income.

And with the lower incomes, you’re just a great candidate for personal IRAs and even a Roth, like you said. So yeah, and man, I love, I remember doing these. I like these benchmarks to just as a place to begin. These are just starting points. Got, got two grand a month left over some IRAs and a Roth and call it good.

Matt Mulcock: Yeah. And probably if there’s any extra leftover beyond that brokerage account, it’s a great place to go. But in that range, one to two grand a month. And I like the distinction that you make of, you know, there’s a lot of reasons why you might only have one to two grand left that we’d have to dig into. Like, again, it could just be really high debt load. Normal. It could be you’re spending too much money and we got to talk about that.

Ryan Isaac: Yeah. yeah. Yeah. Yeah, you Mm-hmm. Yeah, exactly would say the I mean it’s probably Dentist carry tons of debt and have a lot of debt service especially early on but the spending’s a culprit like more often than not. So yeah

Matt Mulcock: Yep. So one to two K a month, when we get to three, I’m going to say, I’m going to say, I’m going to change this up a little bit and say, when we start to get in above $3,000 a month, we’re saying in free cashflow money that you need leftover there, or that you need to be proactively putting somewhere 3000 a month is the minimum that we’d want to look at before we would even like broach the topic of any type of plan at the office. Yep.

Ryan Isaac: Yeah. huh. Yeah. Leftover. You can save some more. A retirement plan. ⁓

Matt Mulcock: At the office.

Ryan Isaac: Yeah, ⁓ here’s another, yeah, I was gonna say between three and five, right? Yeah, and so another side of this logic is that ideally, and this doesn’t happen perfectly in a vacuum like year in, year out, but ideally, and this is the way we work with our clients, we don’t want dentists putting all of their free cash flow in a retirement plan. For the exact reason we said it’s a benefit earlier,

Matt Mulcock: I’d say more like five to be honest, but.

Ryan Isaac: Dentists do need access to liquidity. It’s very, very important to build liquidity as a dentist. It’s a part of the financial planning and investment ⁓ management process that we do with all of our clients. So we’re trying to get to a point where you could take advantage of maxing out a plan while also still having something left over to build liquidity with. So when you start to hit that three to 5,000 range of leftover cash every month, it does start to put you as a good candidate for like a simple IRA based on the max limits of a simple IRA and being able to take advantage of those limits while still having some leftover outside of that to build liquidity and keep yourself safe and secure in those stress with liquidity. So I think that’s the range, three to five somewhere in there, simple IRA.

Matt Mulcock: Yeah. Yeah. We don’t want you to be house poor. also don’t want you to be 401k poor. Like, we, well, we, yeah, we put a premium on optionality and flexibility. And I’m glad you brought that up too, Ryan, because the other factor here that we need to consider if we’re going through like a checklist and a dentist mind of like, when do I consider any of these things prior to understanding your cashflow? And again, you said it earlier.

Ryan Isaac: Yeah, that’s great. That’s a great way to put it.

Matt Mulcock: This is why it’s so important to be organized, but, understanding your liquidity and do you have proper liquidity at home and at the office? first, and then turning to your cashflow. think those are kind of two huge factors here. And to your point, we don’t want you putting every last dollar you have in a 401k.

Ryan Isaac: No, no, again, we said this in the beginning there it is is always true that dentists throughout their career just need more they need access to money and liquidity more often than they ever think. I mean, it’s opportunities and emergencies alike. And yeah, so that’s I like that we went there. That’s another part of these thresholds. Why we put them so yeah, if you’re like, I’ve got three to five grand left over a month. What’s the retirement punish should start thinking about a simple array could be a good entry level candidate and true to their name. I this isn’t probably the podcast where we like, where we like, yeah, or like compare them, you know, but they they are easier. They are more simple to set up. Yeah, I mean, not ongoing is the problem. I do think they are a little easier to set up than like a 401k just based on the stuff that has to happen. But it’s probably also the 401k company running it.

Matt Mulcock: Rip on simple iris. Are they? I don’t know if that’s true anymore. Hey, we’re going to, we’re going to put a pin in this for real because there’s another part of this as we get through this, that we’ll talk about what goes into setting up a four one K and we’ll, want to, we’ll bring back, this comparison at that point. Let’s do that.

Ryan Isaac: Yeah. Well, yeah, that’s a subject for another day. So it does beg the question. But a simple is a good place to start asking questions. Like that might be a good place to begin in that three to 5,000. Yeah.

Matt Mulcock: Yep. Yeah. So that three to five range, three to 5,000 a month. We’re starting to talk about cashflow makes sense. Assuming you’ve got liquidity of starting to think about a retirement plan of the office of some kind. ⁓ once you get above that, you’re above 5,000 a month you’re saving or you have the ability to save six, seven plus now. I mean, golly.

Ryan Isaac: Love it. Yeah. Yeah, six, seven, sorry. I’m around teenagers, dude. can’t not. I’m sorry, Michelle. I’m sorry, marketing team. Six, seven. If you say six, seven these days, I can’t not hear it.

Matt Mulcock: But if you’re above that range, well, then then you should have probably most likely already have a plan at the office of the 401k. And then that’s where we start talking about layering in profit sharing. So,

Ryan Isaac: I hope so. $6,000 $7,000 a month starts to put you. Yeah, uh-huh. Yeah, fast, like just some of the math on a 401k, limits, what’s the limits in the next coming year, do know? Is it 23 in the next coming year? 23.5? You can check or you can go and update. But if you’re talking about an owner and a, yeah, six, coming up.

Matt Mulcock: 235 I will double check that real quick. What you’re saying 2026 or 2025 2026. Yep. I got you.

Ryan Isaac: Just curious, since we’re like almost in October 2025, just so crazy.

Matt Mulcock: Yep. Uh, 2026 is going to be 2035. I, oh no, sorry. Sorry. So sorry. 23.5 is for 2025 for 2026. It’s going to 24,500.

Ryan Isaac: Yeah, okay. Right. So it is going up. So if you take an owner and a spouse both on payroll maxing out a 401k, $48,000 a year, almost 50 grand, we’re talking about $4,000 per month in savings, in cash flow savings. So this is where, to your point, I love that we’re on these benchmarks, 4,000 of your seven is gonna go to the 401k if you and a spouse are on both on payroll, which still leaves a few thousand dollars left over to build equity in ideally and likely a brokerage account.

Matt Mulcock: I’m glad you brought that up because if you, I want to push these ranges up actually. So I wouldn’t even really be talking about it with the client or if you’re out there thinking about it, we’d want to look at your cashflow. think a four one K I’d want to see a sustainable. Probably minimum five more like a six, seven, probably more like six, seven, ⁓ in a month in, in savings because we want to leave that buffer. So I think that’s, I think that’s where we’re at is.

Ryan Isaac: I like that. ⁓ Yeah, yes. You do. You do. need that liquidity. Dentists just have to have it, which is why you might have a person with 2,500 bucks left over, or you might have a person with $2,000 left over who goes and sets up a 401k for themselves, because technically they could max that out with 24 grand a year, two grand a month. But what does that leave someone with after tax?

It’s just it’s not there. I mean then I don’t know if we’re going here, but there’s an entire Mathematical part of this where it’s like all right if you maxed out a 401k with a You and your spouse if you were both on there, that’s a tax savings of x amount of dollars What are you doing with that in your cash flow? Where is that gonna go every year as your taxes do come down? So which is Yeah, well, yeah, that’s I’m saying unless there’s a meticulous process as someone’s kind of obsessed with and the data and the numbers and the tracking

Matt Mulcock: Yep. Yep. You know what’s happening with that? It’s getting spent. It’s getting spent. Yep.

Ryan Isaac: You can save 15 grand in your taxes this year, but if you don’t realize that somewhere from last year’s cashflow or comparatively, then you’re just gonna spend the extra tax savings. So then you’re gonna be in the same boat where you’re like, I paid too much in taxes. Like, well, you actually lowered it last year, but you spent it. And you didn’t even know you spent it.

Matt Mulcock: And then spent it. Yeah, just to give you an idea. Yeah, it’s so true. And this is actually one of the arguments that is made for Roth, for doing a Roth, even within a 401k, because in reality, when you put money into a Roth, you’re technically saving more money unless you actually go and take that tax savings that you would get and invest that elsewhere. So just to give you an example, put some…

Ryan Isaac: Mm-hmm and do something with it. Yeah, I get it.

Matt Mulcock: So put some real numbers to this. you, you and a spouse are maxing out a 401k, $49,000. You are the highest tax bracket of 37%. That’s a tax savings because those contributions literally reduce your taxable income. So your tax savings on those dollars, just at the federal level is 18,130. It’s $18,000 in tax savings at the federal level. But if a lot of times it’s just numbers on a piece of paper that’s like, cool.

Ryan Isaac: That end

Matt Mulcock: But if you actually just go spend that money, did it really do anything for you?

Ryan Isaac: Yeah, which spend $18,000 then, but do it intentionally. Like actually know that you saved 18,000 in taxes because of your strategy and your plan. And you took that extra money that last year you had spent on taxes and now you vacation three times fully paid for in cash and like whatever, you know, be intentional with it. But yeah, it’s a, it’s a really good point between Roth. Where do we end up? ⁓ That’s kind of 401k.

Matt Mulcock: So, so, so we’ve clarified, well, we’ve clarified the range up words. I would really want to see more like six to $8,000 in free cashflow. I’m going to avoid saying six, seven, for the 401k. And then if we get, above in those ranges, we want to start considering profit sharing. just to highlight, a review of profit sharing, this gets confused a lot, I think for people. so retirement plan of the office, 401k specifically, there’s three funding sources that go into a 401k.

Ryan Isaac: Mm-hmm. Yeah, just skip it.

Matt Mulcock: There’s the employee contribution as a practice owner. are both employee and employer. So there’s employee contribution. that’s the cap of 24,500 next year that we were highlighting. Uh, then there’s the employer match. So your company, the practice actually matches for you. And then the third, uh, way to fund a 401k is through profit sharing every year, uh, is discretionary. So you can decide each and every year, it has to go through what’s called testing a RISA rule, regulated testing to say based on your staff, the size of your staff, the ages, their income, how much, much you’re matching a formula, the actuaries basically tell you based on regulations. Here’s how much you can put into four or sorry, to profit sharing. Here’s how much goes to you versus your staff that each and every year you can decide based on the numbers. Yes, I want to do it or no, I don’t, but

Matt Mulcock: That’s another layer into this that can go above and beyond your 24,500 plus your match. could literally through all of these sources, between the three we just highlighted, if it’s you and your partner on staff, you can get into the six figures of putting money away. It’s like 70,000.

Ryan Isaac: Mm-hmm. I’m just searching. Do you know off the top of your head what the… Yeah, it’s right up there, right? Because it used to be in the mid-60s and now it’s climbing up there. Yeah, it’s got it. ⁓

Matt Mulcock: I want to say it’s 70,000 now. We’re saying, you’re saying the total amount you can put in between those three sources.

Ryan Isaac: Total amount between your 401k paycheck deferrals and yeah, extra profit sharing and the portion that the company kicks into you, including the match and everything. Yeah, but now we’re talking, that’s for one person. So an owner and a spouse on ⁓ payroll who are both eligible, mean, know, of course it does get more complex and depends on a lot of scenarios, but now we’re talking about almost 50 grand of just pure 401k deferrals and then what another like, 45,000 or 40 grand ish. Yeah, 45,000 of extra elected referrals through profit sharing that’s possible. That’s where you get your six figure per couple is very, very possible. And even more possible when the spouses are both high income dentists. It’s a little less possible to get a lot of profit sharing for a spouse who’s just like on payroll for the 401k and doesn’t have a lot of like high income in the practice. yeah, profit sharing’s really cool.

Matt Mulcock: Yeah, yeah, true.

Ryan Isaac: When you, so what would you put that savings number at every month if you got eight to 10 ish leftover 10 plus.

Matt Mulcock: Yeah, I think you’d want to be at age of 10, age of 10 grand a month in free cashflow to be considering profit sharing in most cases. and then as you get above and beyond that, and this is usually going to be a later stage dentist in your, you know, late forties, early, early to mid fifties and you’re maybe you paid off some debt. Now the cashflow has really opened up. Now we’re starting to talk about layering in a defined benefit plan, a cash balance plan.

Ryan Isaac: Yeah, is it worth saying here that usually for these plans starting with profit sharing and then as you get into defined benefit cash balance and pension plans, though the calculations that decide how much your team gets when you put in certain amount of dollars, those calculations are heavily age dependent. So maybe it’s just worth saying that typically this isn’t, when we get into this level of plans, it’s not just about how much money you have left over and what’s possible. it’s about team dynamics, which includes how big is your team? How many people is it? You is the highest paid person than a bunch of team, like normal pay team, or like, is it you and a bunch of highly paid associates in team? And is there 10 of you or 60 of you? And are you 38 or are you 58? Those things start to matter a lot in the calculations. So it’s not just about cashflow, but that’s the cashflow has to be there, especially when you get it above profit sharing into the, and you can just talk about this. It’s no longer discretionary or optional. Where profit sharing you can say like, no, I don’t want to do it. It’s too expensive this year. But once you get into the cash balance and the pensions, once you sign up, it’s a minimum of five year commitment that you have to run. Is it three? Okay. You can get away with three. Okay. Okay.

Matt Mulcock: Cash balance. I think it’s the minimum of three, Yep. Yeah. You can get away with three, but it’s, it’s a commitment and you got to know you’ve got stable cashflow that’s at that level that you’re going to put it in place and keep it in place for a minimum of three years. yeah, that’s a much bigger commitment. keeping it like they’re, they’re complex and to keep them in, to keep them in line with the regulations from you to year is, is, is a lot.

Ryan Isaac: Yeah, you’ll pay more in fees to ⁓ some third party administrators, especially with pensions and cash balance and defined benefit plans. You’ll pay more in fees because you have to have actuaries and sometimes ERISA attorneys review it every year and make the projections and assumptions. You have to run the reports multiple times. And then in all of these, profit sharing and anything above that, you can’t even really fund it until the year is totally over because you have to have total year end census data from your practice. So it’s a whole thing.

Matt Mulcock: Yep. The, the one thing I will say pro tip on the profit sharing piece, that if you are out there trying to figure this out and running tests and your administrator comes back with it, with the, with numbers that don’t look good, meaning the percentage that’s coming to you as the owner is not great. want to see that above 70 % in most cases for it to make sense. But let’s say you’re one of those younger docs. Let’s say you’re in your thirties or early forties. And you’ve got some older staff members, which is common. see this. ⁓ Keep in mind. Yeah, exactly. But keep in mind, there are more ways than one to run testing. And oftentimes it takes some pushing by you or your advisor to actually figure that out. So we don’t need to go into the great detail, but just know that they’re going to come back with a default way to test and you’ve got to be fast, as easy, usually going to do like a

Ryan Isaac: Yeah. Oh yeah. Especially in like buyouts. Yeah. Yeah. Mm-hmm. That their software is like the fastest, easiest way their software kicks it out. Uh-huh.

Matt Mulcock: The default is usually either going to be pro rata, which never looks good, or most likely what it is, is it what’s called new comparability cross testing, but there’s other ways to do it. Just keep in mind that you can push back and say, well, have we thought about these other ways to test to make the number I’ve seen this happen where it didn’t look good. And then we pushed back and said, Hey, let’s actually run it with a, like, for example, social security integrated testing. And now it comes back and looks better. So

Ryan Isaac: Yup. That’s a no, no, no, it’s, it’s a really good point. I just think it illustrates that at some point retirement planning is a very complex subject. ⁓ it, it impacts tens of thousands of dollars of tax savings either way. and it often is not a set it and forget it thing. It has to be reviewed at least once per year. And some of these bigger plans, it’s, you’re going back multiple times, to the actuaries or wherever’s running everything to

Matt Mulcock: You don’t have to go too far into the weeds there.

Ryan Isaac: Double check numbers and run different scenarios. mean, this is not a, it’s not an easy, fast little job to do, but it’s, it’s tens of that level that you were talking about a tax impact of tens of thousands of dollars either way. So yeah. Cool. Yeah. I like, I like that range. Yeah. I mean, yeah. A couple thousand bucks a month, IRAs or Ross three to five, a simple, again, these are like places to begin asking questions.

Matt Mulcock: Very true. Okay, so we feel good with that breakdown, I think.

Ryan Isaac: Five to seven 401k, eight to 10 plus profit sharing, 10 to 12 plus, 15 plus cash balance to find benefit. More complex the bigger those plans get.

Matt Mulcock: Yep. ⁓ and then let’s just break down really quick. If you’re an associate again, we already hit the 401k. If you’ve got a match, great. If you’re a, let’s say independent contractor associate much more rare. don’t see it as much. I don’t see it as much.

Ryan Isaac: Yeah. More rare now, right? I was gonna ask you, how often are you seeing this? I’m not seeing it that much anymore. We should ask Tom and

Matt Mulcock: But let’s say that either they’re still out there. If you’re a, if you’re an independent contractor, that you’re going to be basically down to either a SEP or a solo 401k. I’ll say this. In my experience, very rarely does a sep beat a solo 4-1k. I would prefer a solo 4-1k in almost every case. Yep.

Ryan Isaac: Yeah. and they’re getting easier to administer solo 401ks, they didn’t used to be that easy to do. Ceps were always just way easier to set up. But yeah, the solo k’s are just, yeah, more efficient. Much more efficient.

Matt Mulcock: Yeah, I think they are. usually you can get more money in to a solo than a set. ⁓ the, the caveat to that, sorry, really quick. The caveat to that is steps have some flexibility to them of like setting up, at different deadlines, where a solo forming is a little bit more restrictive. So there are situations where it’s like, Hey, let’s get this up, up really quickly and all that, before the deadline. Cause they’ve got.

Ryan Isaac: Yeah, more money more efficiently. Hmm. Yeah, okay.

Matt Mulcock: Again, different deadlines in a solo, but in most cases solo would be better.

Ryan Isaac: Well, I was gonna ask about, we’re gonna get in, I think, to parts of these, like who’s involved when you set up these retirement plans? Are we gonna go there? There’s not a part two to this, right? Just to be clear. Okay. Our team will kill us if we do part two also. Okay. So deadlines. Let’s get into, as we get into this other part here of what goes into setting up a plan like this, like who’s involved? We can talk about deadlines too, but let’s jump into this. What’s involved when you set up, let’s say,

Matt Mulcock: Yes, no, we’re going to do this right now. Yeah, we’re not doing part two. We’re we are going to carry on and push through.

Ryan Isaac: Anything, a 401k and above. That’s what we’re talking about. Who’s involved with this? Because it’s simple, a little bit easier. Less people. Okay.

Matt Mulcock: Yep. Yeah. Great. So this is where I wanted to bring this back up is when we talk about a simple versus 401k, technically, yes, a simple IRA is easier to set up because you don’t need these things that we’re going to highlight. But I’m going to argue that this is why a 401k in most cases is better because you have these other things involved. Yeah.

Ryan Isaac: Like this this is my argument too. Yeah, it’s easier and faster to go set up the simple because it’s kind of like everyone just gets their own little IRA and it’s like done. But because of that, that we almost always will come back at some point down the road when you run your simple IRA and make you deal with something that if it was a 401k, someone else would be dealing with. Yeah.

Matt Mulcock: Yeah, you’d have, you’d have someone else to do it. So with that said, let’s talk about four, one K and above lists, four in case specifically the parties involved, We’re going to say the first three you have to have. And then the fourth is an option that can often make it better or easier, but the

Ryan Isaac: Okay. Yeah. Yeah. And the fifth kind of is an option because it can be you. The fifth one is like, it could be you. So it’s an optional if you want to outsource it.

Matt Mulcock: True, Yep. Okay. So number one, you need a TPA, a third party administrator for a 401k. secondarily, you need a record keeper. yeah. So their main job is what we’d say administrative, administrative duties and, making compliance tax filing, making sure the plan’s being administrated correctly. Yep. And then

Ryan Isaac: The TPA do? What’s their main job? You wanna say? Yeah. Yeah. Falling rules. Yeah, especially the more complex it gets. I don’t think people know that if you have a 401k, it files its own tax return. If 401k has its own tax return that has to be filed, you’re welcome to do it. Don’t. You’re welcome to do it, but don’t. Yeah.

Matt Mulcock: Yep. Don’t don’t. and then the next is record keeper. Oftentimes you can, well, I shouldn’t say often, but it is possible and it’s becoming more common that these are the same group that you have a bundled service. sometimes you’ll have a TPA that works with a separate third party record keeper, but like, for example, the group that we use, ⁓ for like our preferred group.

Ryan Isaac: Sometimes they’re. Yeah, same. They do the same job.

Matt Mulcock: Is a bundled approach. do third party administrator and record keeper.

Ryan Isaac: Yeah, have it all in house. Yeah. Record keeper is like account management. It’s your logins. It’s like your training. It’s like working with payroll. It’s getting things like filed week to week when, you know, funds are moving around and accounts are getting set up and yeah. was just going to say like, it’s where the statements come from a lot of times. I’d like the keeper of the records. Why don’t we call things like that anymore? I feel like in medieval times, we probably call it like the keeper of the records. Now we’re just like record keeper.

Matt Mulcock: Dare we say they’re the keeper of the records. Yeah, yeah. The keeper of the records yeah, we need to go. We need to go back to that. ⁓ third is the custodian. So this is where the, basically the platform where the money is, is sitting, this could be Charles Schwab. This could be matrix trust company. This could be fidelity, but the custodian is where you, the bank where the money is held and the platform in which you invest on. Not optional. You need them. You need these three no matter what.

Ryan Isaac: We should get back to that. OK. Yeah, it’s the bank. Cause those three are not optional. If you have a 401k or above, you have to have those three. And I’ll say this, not optional. If you have a profit sharing and especially cash balance or pension or defined benefit, you also have to have an actuary on top of those, which again, might all might be a part of the record keeping team or the TPA team most likely usually is they’re the ones who run that separate set of calculations. Matt was talking about earlier to determine which way to fund profit sharing and yeah.

Matt Mulcock: Would most likely be, yeah. Yep. then, optional here would be investment advisor. what technically would be called in the plan, a three 38 investment advisor. handle, they are what the ones taking on the responsibility of do we have the the proper investment kind of lineup and menu within this plan to make this compliant. Yep.

Ryan Isaac: Everything being managed correctly and yeah.

Matt Mulcock: Just for what it’s worth, it’s not super, super common, but it is like, it’s not uncommon, that, a plan sponsor. So a dentist who runs is your practice would be considered the plan sponsor who has a 401k is sued at some point by an employee for 401k. And almost always the number one reason for a lawsuit is because of the investments, because of

Ryan Isaac: Mm-hmm. Yeah. Lack of selection, poor investment selection. Yeah. Have you seen a 401k lawsuit in dental?

Matt Mulcock: Exactly. Yep. I have personally not seen it.

Ryan Isaac: I’ve only seen it with bigger plans like pension, cash balance plans where funding didn’t happen properly for many years in a row and then a retired employee came back and was like, my pension’s not correct. You were supposed to add more amounts to it and I’ve seen that actually. Which begs the whole DIY thing question later.

Matt Mulcock: Yeah. Yeah. So I, ⁓ if you’re, if you’re setting up a cash balance plan or you’re at that level, I would not be doing it yourself. That’d be crazy for sure.

Ryan Isaac: That’s insane. That would be insane Even the 401k there’s there’s so many redundant bureaucratic processes and compliance issues that you know things you have to check off the list even in a Pretty typical 401k that can get messed up Yeah, it’s just not worth it

Matt Mulcock: Yep. Yeah. I probably most likely not be doing a retirement plan on your own, but up to you. ⁓ so, and so again, ⁓ we’ve got that third TPA record keeper, custodian, investment advisor are usually the team that most people we’d recommend. the first three required and then investment advisor, again, totally up to you. That’s an optional piece, but if not, then you are acting as the three 38, meaning you as the doctor owner of the practice, ⁓

Ryan Isaac: No. No. Yeah. Yeah. So if there is a problem, if there is a lawsuit, if it’s back to you, it’s not on your advisor, it’s not on the bank, it’s not on the TPA. If you are the one who are the end point fiduciary, and this is something you sign in the documents when you set up a 401k, if you are the end fiduciary, it’s coming back on you if there’s a big problem, which is why picking a good third party administrator that will… take on the fiduciary roles as much as possible. An advisor who will take on the fiduciary roles as much as possible is really important, really helpful.

Matt Mulcock: Yep. Yeah. I think so. I think so too. And to your question earlier of what the TPA does, they act as another level of fiduciary responsibility, which is called the three 16. ⁓ to your point, you want someone to be taking that on because you don’t want to have to deal with the administrative burden. ⁓

Ryan Isaac: Yeah. You don’t want deal with that. Yeah. Cause the cost of what every year, if you have a 401k, you have a whole, all these people doing this stuff, not the advisor advisors. that’s a separate thing and how you pay your advisor, but having a TPA, someone run your 401k was the cost you every year approximately. Yeah.

Matt Mulcock: To actually do run one. the, the, mean, it’s, it’s a range. but I would say expect a couple thousand bucks a year, 3000 bucks a year, ⁓ to run a plan, every single year. And by the way, there’s oftentimes now, tax credits that you actually cover the cost of setting up a plan. Cause the government is incentivizing you to set up 401ks. Oftentimes tax credits will cover the entire cost.

Ryan Isaac: Yeah, that’s right. Well, now that private equity is involved. Like, hey, you guys, we’re just feeling generous over here at the IRS and the government. We’re gonna just make it little bit easier to get a 401k and get some money in there. No reason, no reason in particular. We just want you to have bigger balances, so.

Matt Mulcock: Yeah. Yeah. And then, and then, yeah. You can invest right in these private equity funds that are high fee crap. Yeah. Real big deal. We don’t have strong feelings about this at all. ⁓ any, okay. Anything else you’d say on any of that? We’ve covered that thoroughly.

Ryan Isaac: Yeah, yeah, they have two and twenty, but ⁓ you know, look, you know this anyway Yeah No, it’s just, that’s good structure. That’s good setup. I mean, I people going to just appreciate that this stuff is, it gets complex and this is not worth your time. If you’re talking about an expense that might cost you two to $3,000 per year, that is just not worth your time as a high producing dentist. Get it off your plate. Don’t deal with it. Don’t have backlash. Come back 10 years later after running a plan the wrong way because he saved a little bit of money upfront. Just do it the right way and go, do, I don’t know, do one more crown.

Matt Mulcock: Yeah, there you go. Yep.

Ryan Isaac: Do one more implant that month and then like pay for the whole thing for five years. I don’t know.

Matt Mulcock: Yeah. ⁓ okay. I think that third, we, let’s let’s recap. Anything else you want to say on any of this?

Ryan Isaac: No, high level again. There was a point you made in the notes I thought were really good was, which is, and you kind of, when you talk about, finance influencers on social media who disparage retirement plans, they’ll usually disparage it by talking about a retirement plan as if it’s an investment itself. For example, let’s say 401k is performed poorly. They have bad performance, which is nonsense because for 401ks don’t have performance 401k.

Matt Mulcock: Yes. They’re just an account.

Ryan Isaac: It’s an account, it’s a shell. It’s a thing that holds investments. Those investments might have poor performance, but that has nothing to do with the fact that it sits inside of a 401k. So it’s a misleading scare tactic in marketing to sell something else for two owners of 401k. So you have that in the notes. So the distinction between these things, these are account types. They just hold investments. It’s a good distinction to remember and make,

Matt Mulcock: Yep. I, I, yeah, I think it’s a great distinction. I’ve actually heard this so many times in my career, people being like, Roth IRAs are crap. And it’s like, well, what do you mean? It’s like, well, I’ve had one for 10 years and I’ve it’s done nothing. And I’m like, well, have you invested it? What do you mean? It’s a money market. It’s like, well, yeah, of course you haven’t earned any. So that’s a really good distinction to make. And again, coming back to the social media, ⁓

Ryan Isaac: Returns bad, yeah. Yeah. Well, it’s in a money market inside there, you’re like, well, yeah.

Matt Mulcock: Gimmicks, let’s, let’s call it what it is. They’re gimmicks trying. So if you ever see a video like that, that says something about 401ks being bad investments, re and they reference anything about returns that right there tells you they don’t know what they’re talking about or they’re, they’re intentionally deceiving you. So it’s a really good distinction.

Ryan Isaac: Yeah, it tells you. Uh-huh, yeah, good. Wrap up for me, I think the most important stuff besides the details, I’m just a huge fan of this stuff. It’s forced savings, it’s matched savings, it’s the untouchable part of a net worth. It’s kind of, like, you know, it’s the closest thing you can get to putting money into an investment that’s similar to like a business or a piece of real estate that you just can’t get at easily and therefore you leave it and let it grow and you don’t mess with it and. It’s just, ends up in everyone’s best interest. And again, I’ve seen many, many cases where just things happen in a dentist’s life. And one of the last things left standing besides the building or the practice was the big 401k that got to seven figure balance while we had to wipe everything else clean. And so, I mean, I’m a huge fan of this stuff just done the right way and checked up on at least once per year in a review with your advisor. I’m a huge fan of this stuff.

Matt Mulcock: Yeah. I couldn’t agree more. think you, you think about like the general principles of like that, you know, taught or taught by people like James clear, other people like him that talk about, habit formation, right. And making good habits, like removing the obstacles of good habits and then putting obstacles in your way of habits you’re trying to break. Right. When you talk about that with 401ks and retirement accounts, I can’t help, but think about that of the behavioral kind of built in obstacles that again are disparaged, disparaged online of like, these are why you can’t access this money until you’re 50 or 60, you know, whatever. It’s like, yeah, that’s why you should have one because we are our own worst enemy with all of this stuff. So, and we can all admit it, me, you, Ryan, we’re all our own worst enemy when it comes to this kind of stuff. We need structures in place. And that’s one of the biggest reasons why we’re fans of 401ks, even at times when we’ll be totally honest.

Ryan Isaac: Exactly. Yes. Yeah, we are. Yeah.

Matt Mulcock: That we’ve gotten frustrated at times, like meaning specific client situations when we’re like, you know what? It would sometimes just be easier not to have this thing because like if it is, yes, they are, but it’s worth it over the course of someone’s career in most cases because of the behavioral confines that puts you in. The other thing I’ll say of why I like these pre-tax or, you know, retirement accounts in general is again, assuming that you’re in that high tax bracket and you’re doing this in a traditional format where you’re taking the deduction.

Ryan Isaac: They’re harder to deal with. Yeah, I agree.

Matt Mulcock: It is the one of the very few things that you can get a deduction by using it and then actually keeping the money. So 401k’s traditional IRAs, simples, SEPs, HSAs are pretty much the only thing in existence that you can put the money away, keep it for a later date and also get a deduction. Every other deduction that’s out there is a net negative to you. It’s meaning you’re spending money.

Ryan Isaac: Yeah. Because you spent money. Yeah.

Matt Mulcock: Charitable giving, buying equipment, taking

Ryan Isaac: Mm-hmm. Yep.

Matt Mulcock: A loss on an investment. The deduction is a tax savings, but a net negative overall to your after tax wealth. And that’s why I like these because, and I think you should take advantage of them because there’s only a things out there that you can actually do that with.

Ryan Isaac: Wow, that’s, you know, and I was just gonna, that was another thing that I’m not sure we touched on totally. It is unfortunately one of the first answers to when dentists say, how do I save money on taxes? It’s unfortunately at the top of the list and it’s a boring list of things dentists can do proactively every single year to maximize their tax savings. It’s have the biggest, most efficient maxed out retirement plan that’s most appropriate in that given year, every single year of your career. it’s such a good tool, so.

Matt Mulcock: Yeah, it’s so true. Shout out return plans. So really quick, let’s just, yeah, you know who you are guys. so let’s just summarize this really quick of things that go into deciding, where to put the money or what plan to have. So, ⁓ savings. your ability to save and the level of savings you have, which is consequently part of where your income level is, but really just your overall cashflow. What is your savings?

Ryan Isaac: Shut out retirement plans, you know. You know who you are. Yeah.

Matt Mulcock: Depending on the range you are in savings is going to dictate what type of plan to put in place. your tax bracket, like where you are on the tax bracket range, is going to be a huge factor. I think stage of career is a factor here. And what are your career goals? Because this is something we didn’t hit on a lot, Ryan, but there are, there might be situations. In fact, there are pretty common that you might check the box of like cashflow of like, you’re saving easily five, 10 grand a month, because of career stage and career aspirations, we would still advocate to not set up a plan yet. Depending on what you’re trying to do.

Ryan Isaac: Total, ⁓ that’s not uncommon yeah, 100%. Yeah, you might have purchases or goals or yeah, practice strategy coming up that you need money for something else. million percent.

Matt Mulcock: Are you buying a building? Yep. So career stage is big. And then just your practice staff demographics is going to be a factor, bigger plans for sure.

Ryan Isaac: Yeah, especially those bigger plans. Yeah, that has a wow. guarantee the, see those early episodes had Justin with a timer and a script. And so I guarantee we didn’t go an hour six on the first time we did this. Yeah, we know where that’s going to be edited. The important stuff though, this was actually a fun exercise. I’m glad we’re to be doing this more to see what we would update this time around. ⁓ Cause it’s been years and ⁓ things are cost more inflation’s higher.

Matt Mulcock: But you know what, we got editors to cut this down for us. ⁓

Ryan Isaac: It’s just, it’s more to run a practice. Dentists need more money for more things than when we first did this episode. So this is cool. I like doing this. ⁓ Shout out to us from all those years ago. Shout out to us.

Matt Mulcock: Yeah. Yeah. Really cool. ⁓ if you’re still here, shout out, shout out to freaking us. ⁓ for still being here 10 years later, still here, still kicking, still, still doing the thing. ⁓ if you’re still here listening to this, you’re one of the cool ones. You know who you are. We, appreciate it. If it was helpful, we would ask that you share it. If you’re as a dentist out there, you think needs to hear the message. We’d love for you to share it.

Ryan Isaac: Yeah, thank you. It’s impressive.

Matt Mulcock: We love educating the dental community and hopefully adding value. So we’d love to share the episode, Ryan, any other words of wisdom for the people.

Ryan Isaac: Thanks for being here all these years really. This is cool. New listeners were showing up for the first time. So that’s what we got for you today. Hope you enjoyed it.

Matt Mulcock: Yeah. If you want to talk to us, ⁓ where can they go? Ryan.

Ryan Isaac: dentistadvisors.com and then there’s a huge button, free consultation, chat with us, tell us your story, we’ll point you in the right direction, we’d love to hear from you.

Matt Mulcock: We’d love to talk to you. So everyone, thanks for listening, Ryan. Thanks for sharing the wisdom until next time. Bye bye.

Ryan Isaac: Bye bye.

Keywords: retirement plans, financial planning, tax rates, dentists, 401k, Roth IRA, cash flow, retirement savings, effective tax rate, simple IRA, cash flow, profit sharing, defined benefit, tax savings.

Retirement Plans