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What Dentists Want to Know — Listener Q&A #11 – Episode 180

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Are the returns you believe you’re getting on real estate fantastical … or practical?

What’s on the minds of Dentist Money™ Show listeners? Well, real estate for one. In this episode, Reese and Ryan explain the difference between the actual return investors get on real estate versus the return they think they’re getting — and they’ll show you how to calculate it correctly.

Plus there’s controversy about the actual retirement age of dentists. Find out what’s causing the ruckus. Hear both sides of the argument and then decide how the often quoted retirement statistics apply to you.

Podcast Transcript:

Announcer: Consult an advisor or conduct your own due diligence when making financial decisions. General principles discussed during this program do not constitute personal advice. This program is furnished by Dentist Advisors, a registered investment advisor. This is Dentist Money. Now, here’s your host Reese Harper.

Reese Harper: And welcome to the Dentist Money show where we help dentists make the smartest financial decisions. That was a bell rang by our compliance officer.

Ryan Isaac: Can’t say that.

Reese Harper: We can’t say smartest.

Ryan Isaac: You can say smart.

Reese Harper: I don’t even know if we can do that anymore.

Ryan Isaac: That’s probably true.

Reese Harper: As you grow, you get more compliance around you, and apparently-

Ryan Isaac: We help dentists make decisions.

Reese Harper: We help dentists make-

Ryan Isaac: Blank blank decisions.

Reese Harper: Decisions. Can we say financial?

Ryan Isaac: No. Don’t say financial.

Reese Harper: Welcome, sir Ryan Isaac to the show. I thought we’d start off-

Ryan Isaac: I also help … Yeah.

Reese Harper: With a compliance tip because today is about Q&A.

Ryan Isaac: Yeah. We’ve got questions.

Reese Harper: And we can’t give advice, but it’ll feel awfully a lot like it.

Ryan Isaac: That’s going to sound like advice.

Reese Harper: But we’ll know the words to avoid that we can’t say. And you won’t know the difference.

Ryan Isaac: Just say whatever you want, and there’ll be long pauses on the words that we have to take out. We help dentists make-

Jenni Colborn: We’ll just delete the whole thing.

Reese Harper: Jenni’s taking notes right now going-

Jenni Colborn: Yeah, I am actually.

Reese Harper: Okay. Yeah.

Ryan Isaac: Don’t say this. Bad intro.

Reese Harper: For those of you who don’t know, the people in financial services that take the most liability and the most risk are the fee only fiduciaries.

Ryan Isaac: The ones who are working in your best interest.

Reese Harper: And the ones that are working in your best interest also have the most regulation. And they can’t do hardly anything to actually run like a normal operating company.

Ryan Isaac: Isn’t it true? I think someone actually reviewed our business on Google and we had to ask them to remove the review.

Reese Harper: Yeah.

Ryan Isaac: We legally, you can’t leave-

Reese Harper: We’re just going to do this for 30 seconds. I got a LinkedIn recommendation from someone-

Ryan Isaac: Oh, yeah.

Reese Harper: Strongly advocating for who I was.

Ryan Isaac: Please remove this.

Reese Harper: I’m like, “Take this down, sir.”

Ryan Isaac: I’m going to get sued.

Reese Harper: “Will you take this down? Please. I cannot accept a testimonial.”

Ryan Isaac: No.

Reese Harper: For those of you who don’t know the context here, a fee only fiduciary, like us, who’s acting in your best interest, our customers cannot leave or give any kind of written testimonial or any kind of testimonial-

Ryan Isaac: Implied … can’t be implied.

Reese Harper: Implied or otherwise. Meaning you can’t even say, “I’m maybe … These guys were pretty good.” I mean, you can’t say anything.

Jenni Colborn: They can review the podcast, though.

Ryan Isaac: Review the podcast.

Reese Harper: You can only review the podcast.

Jenni Colborn: Hint hint.

Ryan Isaac: Which, please invite them, Jenni, yes.

Jenni Colborn: Please go do that on iTunes.

Ryan Isaac: We would love some more reviews.

Reese Harper: So, if you’re ever wondering why-

Ryan Isaac: What you can do to help us on the review department.

Reese Harper: Why are hundreds of happy clients don’t leave reviews on our website-

Ryan Isaac: Testimonials.

Reese Harper: Because we can’t. But they’re great people.

Ryan Isaac: Alas.

Reese Harper: We can let you talk to one if you want.

Ryan Isaac: We could just switch the business model and sell insurance and say whatever we want.

Reese Harper: If we started selling you whole life insurance with a vengeance-

Ryan Isaac: Regulation goes away.

Reese Harper: And a couple of indexed annuities here and there, and we tripled our revenue overnight, then we could do whatever we wanted.

Ryan Isaac: Yeah. The regulation disappears. The attorney fee goes away.

Reese Harper: Because why? We’re not advisors now.

Ryan Isaac: Make more money.

Reese Harper: We say that on our business card, even … anyway. We’re not advisors now if we’re in the insurance world, right?

Ryan Isaac: That was a good intro.

Reese Harper: And the reason it kind of went that road is because we’re actually doing some really cool Q&A questions.

Ryan Isaac: We have some good questions.

Reese Harper: That run that fine line between where compliance can nip us in the bud.

Ryan Isaac: That’s why we have the guy in the … is it the beginning still? Or the guy in the low voice speaks really quickly.

Reese Harper: Yeah. If you’ve ever heard our low voice anchorman to start out, know that we wouldn’t intentionally have that there. Regulated.

Ryan Isaac: This is not advice, don’t follow this.

Reese Harper: Okay.

Ryan Isaac: Question number one today is what is-

Reese Harper: Well, give me the context here. Is this a Facebook group? Is this a tweet?

Ryan Isaac: Context here was a conversation you and I had, actually-

Reese Harper: Oh, this is a live-

Ryan Isaac: This is what the people a couple generations back used to call a conversation.

Reese Harper: Okay.

Ryan Isaac: We saw a human, we smelled breath.

Reese Harper: The low convo, okay.

Ryan Isaac: There was body language being read.

Reese Harper: Ask me this question because I don’t know what you’re talking about still, but I’m excited about it.

Ryan Isaac: The question has to do with how to calculate real estate returns. And the question is what’s the right way to think about calculating my real estate returns?

Reese Harper: Man.

Ryan Isaac: What I’m going to add as, can I speak in third person?

Reese Harper: Yeah.

Ryan Isaac: Is that weird? As sir Ryan, can I? That just feels weird. Third personing it. What I would add to that is where do people go wrong when they calculate their real estate returns?

Reese Harper: Let’s do this.

Ryan Isaac: Okay. You want to throw out some example numbers? I was going to do that, but-

Reese Harper: Well, this is … I think let’s be clear here. We’re talking about a financial planning job.

Ryan Isaac: Okay.

Reese Harper: One that a financial advisor could be doing for you, if they were capable and competent, and actually advising you. The job I think … How would we describe this job? Calculate my-

Ryan Isaac: What are my returns?

Reese Harper: Calculate the cap rate on my real estate. Or calculate the return I got this year on my real estate.

Ryan Isaac: Okay. Here’s my-

Reese Harper: Talking about rental properties here. Talking about investment properties.

Ryan Isaac: Investment properties.

Reese Harper: We’re not talking about your own residence because we all know that there’s no positive return you’re ever going to get out of that.

Ryan Isaac: So, you know what, it’s funny is I’m selling a rental home that I lived in for 12 years, it’s closing in a couple weeks. And a friend in the neighborhood who has a similar house still owns his asked me, “What are you selling it for?” And we got talking about that, and I’m selling it for more than I owe on it. And he’s like, “Oh, that’s-”

Reese Harper: Substantially more.

Ryan Isaac: Yeah. He’s like, “Oh, that’s a nice little pot.”

Reese Harper: Shot in the old arm.

Ryan Isaac: And then I went back though and I calculated how much I paid in interest, HOA fees, repairs, taxes, insurance, and probably other things. And I didn’t make that much money on it.

Reese Harper: Did you calculate your annualized return yet? Have you gone there yet?

Ryan Isaac: Not that far. I just calculated out of this net proceeds that I’m getting.

Reese Harper: Okay.

Ryan Isaac: How much of that I’ve actually paid in all those fees … I’ve owned it for 15 years.

Reese Harper: Okay.

Ryan Isaac: And it’s not that much.

Reese Harper: So 15 years. What do you think you’re netting on the property? If you have to throw out your dollar amount.

Ryan Isaac: After all those actual expenses?

Reese Harper: Yeah. Yeah.

Ryan Isaac: I’ll bet you I’m netting … last time I looked at it, it was close to 20 grand.

Reese Harper: After all your fees?

Ryan Isaac: Yes.

Reese Harper: And from what I can tell, you’ve had premium rents on this thing. You’re being generous in terms of how … you’re actually taking into account your actual expenses and being honest about them.

Ryan Isaac: Yeah.

Reese Harper: And your interest expense and your repairs.

Ryan Isaac: HOA.

Reese Harper: And finishes and HOA.

Ryan Isaac: Yes.

Reese Harper: And so, what’s the sale price of the asset?

Ryan Isaac: Call it 330.

Reese Harper: Okay. So, $20,000 you could … someone could look at that and calculate this the wrong way and they could say, “You know what? I made a 6% return. Made $20,000 on 330.”

Ryan Isaac: 330.

Reese Harper: Yeah.

Ryan Isaac: Well, I think people would do it the even worse wrong way which is the note on the house is like 220.

Reese Harper: Yeah. So, they would say-

Ryan Isaac: I just made a 40% return.

Reese Harper: Yeah. So, they would say note on it is 220-

Ryan Isaac: I just cleared-

Reese Harper: But I netted 330.

Ryan Isaac: Yeah. Netted 100.

Reese Harper: I made $100,000 on my real estate. This is a gold mine.

Ryan Isaac: So, me and my friend were just having this conversation this morning.

Reese Harper: And he probably when he was talking to you about it, he’s probably-

Ryan Isaac: He was serious.

Reese Harper: Like, “Dude, you killed it, right?”

Ryan Isaac: I burst the bubble.

Reese Harper: You slayed it.

Ryan Isaac: And then he was kind of, “Oh, yeah. That’s kind of lame.”

Reese Harper: Excuse me. Allergy season.

Ryan Isaac: Allergy season. Because we both bought these homes in the same neighborhood at the same time. They’re really similar.

Reese Harper: So, you’re highlighting this issue. I appreciate you doing that. Let’s say-

Ryan Isaac: It’s very personal. That was hard for me to share. This is a safe place.

Reese Harper: I mean, simple, simple math. All right. If we really netted 20 plus thousand dollars on this property, again, bull market. Fairly significant, well purchase price would’ve been-

Ryan Isaac: Yeah. I mean-

Reese Harper: Purchase year 2006.

Ryan Isaac: Six. Five. Six. And so, it’s funny because … here’s what’s funny about this. I bought it in ’06. I refinanced it every smart intelligent home owner in ’06 and ’07, I refinanced it, pulled some cash out in ’07.

Reese Harper: Yeah. Finishing that-

Ryan Isaac: [crosstalk].

Reese Harper: Improve your property.

Ryan Isaac: I did finish the basement with some-

Reese Harper: Somebody’s got to improve the property.

Ryan Isaac: With some of the equity. I might have wasted a little bit of the other equity. But it’s funny because it appraised in ’07 for about 15 grand less than I’m selling it for now in 2019.

Reese Harper: Wow.

Ryan Isaac: In ’07 it appraised for almost what I just sold it for.

Reese Harper: Now, thank you for being the example here. But if you’d have bought this in 2010, you’d feel like a hero right now.

Ryan Isaac: For sure. I would’ve paid $60,000 less for that house.

Reese Harper: The hero.

Ryan Isaac: Yeah. Guitar hero.

Reese Harper: You’d have probably come here singing a different tune. Meaning I’m a savvy real estate investor.

Ryan Isaac: I’m savvy.

Reese Harper: I’m no sucker. I figured this thing out. I know when to buy property.

Ryan Isaac: It would’ve been smart if I had bought it in-

Reese Harper: Yeah. That would’ve been [crosstalk]-

Ryan Isaac: And if I could replicate it.

Reese Harper: That would’ve been incredibly lucky.

Ryan Isaac: Lucky, yep.

Reese Harper: But that’s the nature of that cycle.

Ryan Isaac: But it’s an interesting psychological experience because how often in 15 years did I price my house? So, I priced it when I bought it. I refinanced it once and I’m pricing it now 15 years later when I’m selling it. So, I’ve seen the price of my house, a market price, three times in 15 years. So, you never look at that thing. Just at the end. And it’s like, “Oh, cool. I made a bunch of money.”

Reese Harper: Yeah. You never look at it. But you just-

Ryan Isaac: And I didn’t track my expenses along the way either. I had to go back-

Reese Harper: You clear, you just look at. And then you look at it now, you still have some taxes you got to have to pay on it to earn this money.

Ryan Isaac: Yeah.

Reese Harper: And so, if you take all of it into account, and you just say, “Look. Ryan’s being … maybe he’s being conservative for the same of our example.” Let’s say it’s 30,000 you really cleared because we’re being generous. We’re gonna say your financial planner’s biased against real estate.

Ryan Isaac: Yeah. You real estate hater.

Reese Harper: You’re a hater.

Ryan Isaac: You hate real estate.

Reese Harper: So, we’re going to inflate it and say let’s say it’s $40,000 you netted. I know you say, “I did not net 40.”

Ryan Isaac: That’s fine. Let’s say it. Let’s say it.

Reese Harper: If that happened over 15 years, that means that on average your property went up, let’s say by $2,500 per year.

Ryan Isaac: Okay.

Reese Harper: Right. $2,500 in we’ll call it net proceeds per year.

Ryan Isaac: Value.

Reese Harper: On $330,000 which the end eventually sales price. On simple interest, just simple interest, not compounded. It would be worse if it was compounded. This is a generous statement. .7% per year in returns. Right? You got a .7%-

Ryan Isaac: Don’t forget I had a renter in there for three years, and I netted 500 bucks a month all of which went to fix stuff every year that I had a renter in there. Oh, and to put new paint and carpet in when she left.

Reese Harper: So, here’s the thing. This return was quite low. Because of the timing of when you bought that asset.

Ryan Isaac: Yeah. Yep. Exactly.

Reese Harper: We’re not saying that every real estate investor’s timing would be this poor.

Ryan Isaac: No. The point of this conversation is how would one calculate what this is actually [crosstalk].

Reese Harper: How would one calculate it.

Ryan Isaac: What’s actually happening.

Reese Harper: You had a conversation with a buddy that if you would’ve been the normal person.

Ryan Isaac: You’d be like, “Bro, killed it.”

Reese Harper: You would’ve been like, “I killed it.” I doubled-

Ryan Isaac: Six figures.

Reese Harper: Okay. Second example almost identical has happened to me last night. Client texts me and says, “I just got offered,” well I’m going to redo the numbers here to present … to preserve privacy. But the percentages will be identical. Okay. I just got offered a … we’ll call it a million dollars.

Ryan Isaac: Okay.

Reese Harper: No. I got offered 1.5 million dollars to buy some land that I bought for a million dollars only three years ago.

Ryan Isaac: Okay.

Reese Harper: Right? So, they bought that land three years ago for a million dollars, and the argument to me was like, “Look at how insane my return was.”

Ryan Isaac: Yeah.

Reese Harper: I just absolutely destroyed it, right? And I went back and I said, “Well-”

Ryan Isaac: Because it’s a 50% return over three years.

Reese Harper: That’s a 50% return, right?

Ryan Isaac: Yeah. In three years.

Reese Harper: During that period of time-

Ryan Isaac: Which-

Reese Harper: Do you know what the United States stock market was up.

Ryan Isaac: I was going to say, the last three years of markets have been good.

Reese Harper: Does the market sometimes correlate with appreciation in real estate values. Yes, in many cases that’s actually the case. In bull markets. Real estate tend-

Ryan Isaac: Assets appreciate.

Reese Harper: Yeah. Appreciate. And assets do well as markets rise. So, this person got a 13% annualized return which when I told them that, they were kind of bummed out because they just got done looking at their investment account a week earlier and that was at a 17.4% annualized return. During that same period. They had a lot of stock, during that period.

Ryan Isaac: Yeah. More aggressive.

Reese Harper: So, all I’m saying is that the real thing they were looking at was I just made $500,000.

Ryan Isaac: Yeah.

Reese Harper: I just made 500. You could’ve done the same thing. I just made 110.

Ryan Isaac: Yeah.

Reese Harper: I mean, 100,000. The raw dollars that you net from the sale of a property, or the equity you have in property, that is one way that people often calculate their returns mistakenly as opposed to looking at them from a real annualized return over your holding period minus your actual costs.

Ryan Isaac: And the actual cost thing is hard. I mean, this is just my personal experience because-

Reese Harper: Who tracks that stuff, right?

Ryan Isaac: I mean, it’s in 10 different places. I can-

Reese Harper: It’s hard to find.

Ryan Isaac: I can get my HOA history, I think. I don’t even know if the HOA has it, but out of my bank statements, I could get an HOA payment history.

Reese Harper: Yeah.

Ryan Isaac: And tax history, I can get. But that’s a different place. An investment account is easier. That’s why … I mean, it’s easier just to compare that, all the costs you’ve paid in, the pricing’s always … I mean, it’s instantaneous.

Reese Harper: Yeah.

Ryan Isaac: All day long. So, it’s in your face. It’s harder to go back and go, “What did I spend on this thing? What have my insurance premiums been? And what did I pay in taxes? And HOA. And when I refinanced, what points did I pay? What am I paying realtors to sell it?”

Reese Harper: Totally. Let’s moving this story forward to this second item, not in real estate analysis, there’s a second topic of return calculation which is let’s say you own a $500,000 property.

Ryan Isaac: Okay.

Reese Harper: And you’ve got debt of 200 on it.

Ryan Isaac: Okay.

Reese Harper: And your mortgage now is 1,500 a month.

Ryan Isaac: Yeah.

Reese Harper: 1,400 a month. And you’re like, “I’m collecting rents of 1,900 a month. This is the best investment. Where am I going to be able to pay 1,400 and get 1,900.” That’s a very common analysis people do. Where am I going to be able to pay 1,400 a month and get 1,900.

Ryan Isaac: Yeah. I was just doing that. I was paying 1,200 and getting 1,800.

Reese Harper: Yeah. And the truth is you had $110,000 of value parked inside of this house. That was causing you to only have to pay, what on the mortgage? Do your mortgage payment was 1,200.

Ryan Isaac: 1,200 bucks. And I was making six grand a year in rents. Net.

Reese Harper: Yeah. Net.

Ryan Isaac: 6% on my equity.

Reese Harper: Yeah. So, your equity on the house of $110,000 is getting 6% per year, essentially.

Ryan Isaac: Yeah.

Reese Harper: That’s what’s really happening. And so, you can’t really look at it and say, 1,200’s getting me 1,800. Which you wisely did. Or in my example, the $500,000 that you owe 200 on, you can’t say well I’m getting 3,000 a month in rent and I’m only paying 1,400 a month.

Ryan Isaac: Yeah.

Reese Harper: You’ve got to look at the equity you have in the property that’s causing this equation to be, to feel really awesome. And ask yourself the question what return am I really getting on the equity I have parked there.

Ryan Isaac: Yeah.

Reese Harper: I wouldn’t say that in your case the 6% you were making is a bad return. It’s not bad.

Ryan Isaac: It’s fine.

Reese Harper: That’s fine. It’s very-

Ryan Isaac: It’s great.

Reese Harper: It was your deferring tax which is nice. You’re not taxed on any appreciation that might happen.

Ryan Isaac: Yeah.

Reese Harper: You are taxed on the rent, right?

Ryan Isaac: Yep.

Reese Harper: So, what are you really getting your return on this after taxes, it might be closer to four.

Ryan Isaac: Yeah. And if I held it for another 15, 20 years, it would be paid off and then the return would be higher.

Reese Harper: Potentially.

Ryan Isaac: Potentially higher.

Reese Harper: Potentially higher. I don’t know if it would be substantially higher.

Ryan Isaac: Yeah. It would probably go up to closer to market averages.

Reese Harper: Maybe seven.

Ryan Isaac: Yeah.

Reese Harper: Seven and a half.

Ryan Isaac: And if I held that longer and averaged it back all the way since day one, then the average return would probably be a little bit better than it is currently.

Reese Harper: Yeah. I mean, today though, the truth is that $330,000 house probably market rents on that you’re saying 1,700, 1,800, right?

Ryan Isaac: Yeah.

Reese Harper: And so, I mean, if 1,700 a month is $20,000, 20,400 into your $330,000 gets you a 6.1% total return, if you were collecting.

Ryan Isaac: Yeah.

Reese Harper: What I’m saying is the return probably … the return generally won’t increase substantially when your house is paid off, on the equity you have. You just have a larger amount of equity.

Ryan Isaac: Yeah.

Reese Harper: That now gets the full rent.

Ryan Isaac: Right.

Reese Harper: But you have to say-

Ryan Isaac: But now it’s the full equity.

Reese Harper: Now it’s the full equity that’s there.

Ryan Isaac: Right now, it’s a smaller net income, but the equity’s smaller because there’s a note against it.

Reese Harper: Yes. People need to remember that. Remember when you start calculating your real estate returns, you really need to look at … some real estate returns are amazing, okay? This is where we’re going go tout good stuff.

Ryan Isaac: I was going to say, jeez, why are you so mean about real estate all the time.

Reese Harper: Some real estate returns are amazing. Denver in the last five to seven years. You own a piece of paid off property and you’re getting 11 and 12% cap rates because the value is growing so fast. And there’s so many tech jobs, there’s not enough houses and you can own a house there and you can make way higher returns, over a short period of time, because the market’s really inefficient right now.

Ryan Isaac: Yeah.

Reese Harper: I mean it’s a property owner’s market. So, renters are having to pay a lot. Some cities are like that. In some cases, you’ll find your returns a lot higher than other cities. Just important to break apart the return from the cash flow and really be able to look at the equity you have in a property and discount your returns by what opportunity costs you have by parking all that money in the property.

Ryan Isaac: Yeah. We talk about this a lot, but especially as someone who owns a business where you could put money.

Reese Harper: Yes. I think that was kind of something for you. You’re doing a lot of things right now both in your career and in your own investments and with your own housing. You’re having to say, “Is the 6% return that I’m getting on this real estate rental worth the opportunity cost of the other things that I really want to go do?”

Ryan Isaac: Yeah.

Reese Harper: That are more substantial, more significant than maybe what I’m currently earning from this. So, I think that’s just an important question for every investor of real estate is you have to ask yourself the question does this return compete with the alternative thing that I could go do with my money. And I think we’ve adequately I don’t want to say beaten a dead horse. This has been a live horse. It’s been lively.

Ryan Isaac: It’s been live. It was very personal to me.

Reese Harper: Yeah. And it related very much to the conversation we had this week with the individual you were referencing.

Ryan Isaac: Okay. Onto the next, as they say in the entertainment industry. Do they say that?

Jenni Colborn: I think so.

Ryan Isaac: Yeah.

Reese Harper: Never heard that once.

Ryan Isaac: Can I coin it?

Jenni Colborn: Yeah.

Reese Harper: Yeah. It’s your coin.

Ryan Isaac: You sent this to me. This was a lively discussion as sometimes they turn out to be. This was a Facebook group discussion. And this discussion was around-

Reese Harper: By lively do you mean personal attack?

Ryan Isaac: It was only five comments before it descended pretty quickly.

Reese Harper: Okay.

Ryan Isaac: It deteriorated rapidly.

Reese Harper: A dumpster fire of hundreds of comments, mostly personal attacks, but some advice.

Ryan Isaac: Mostly about mothers.

Reese Harper: I stay away from personal attacks on Facebook.

Ryan Isaac: You keep it classy.

Reese Harper: Too much respect.

Ryan Isaac: The whole concept was some well intentioned good advice about preparing for the future around the “statistic,” we’ll put that in quotes because that was called into question a lot. The “statistic” that dentists retire later than the average person.

Reese Harper: I like this.

Ryan Isaac: Do you remember? You recall this well?

Reese Harper: Yeah. I remember this one. This was a heated debate.

Ryan Isaac: It started off great. It started off good.

Reese Harper: The question that was posed was essentially do dentists retire later than the average person? Because a lot of people are sharing this statistic that dentists are retiring at a lot later date, and we share that statistic and we have multiple rationale for why that’s happening. But it was a very lively debate.

Ryan Isaac: Yes.

Reese Harper: Can you give us some context on your experience with reading that thread?

Ryan Isaac: Yeah. Well, it started off as somebody like you said giving some advice about hey, there’s this statistic that a lot of dentists are retiring later than the average person, for a lot of reasons. It’s not one reason. A few people pointed like, “Greedy monsters. That’s why they retire later.” They’re just greedy and dumb and they spend too much money.

Reese Harper: Someone was saying something like that.

Ryan Isaac: It got bad. But he’s just saying, look, that’s a thing and so prepare early. Earn as much as you can and don’t spend it, and save your money. Just some good advice. That’s where it began. But I thought we could kind of focus on this question just for a minute because that’s where the rest of the discussion went was is this statistic real? Where did it come from? And why?

Reese Harper: Is someone manipulating this for their own gain.

Ryan Isaac: Yeah. He’s trying to sell something. That’s a fear tactic. That’s a fear tactic to scare people into buying something from you.

Reese Harper: Yeah. I think the truth is probably that yes, it probably is used as a fear tactic by some people. And I feel like the opposite is probably also true, which is there is some real probably behavioral characteristics that dentists have that are causing them to make choices that are forcing them into a later retirement date. Some of the comments were either anti the statistic or pro the statistic, right?

Ryan Isaac: Yeah.

Reese Harper: It’s either this thing is a complete farce and it’s only used to scare people into buying products to make dentists try to … whether it’s equipment or expansion or whatever.

Ryan Isaac: Consulting or whatever.

Reese Harper: And then the other side is … so that was kind of where the real anger came from. And I think it’s worth pausing on that. Is this thing a fake statistic. No. It’s not a fake statistic. This is being referenced by American Policy Institute.

Ryan Isaac: I feel like there’s a-

Reese Harper: Okay.

Ryan Isaac: That’s a chime for not fake statistic.

Reese Harper: It’s not a fake statistic. It’s being referenced by the American Policy Institute, ADA. It’s got … there’s a lot of stuff. [inaudible] we’ll call them maybe biased studies that are done by consulting groups on this topic and then there’s if you consider the ADA objective, then they’re trying to be as objective as they can possibly be. And the statistics are consistent among all of these studies. Dentists are genuinely retiring later. Now what we don’t know perfectly is why that happens. There’s a lot of assumptions, right? And I don’t think it’s fair to just say that it’s-

Ryan Isaac: It’s totally not.

Reese Harper: But the truth is when someone graduates … If I’m in Dental Nachos Facebook group, shout out to Paul Goodman.

Ryan Isaac: PG.

Reese Harper: If I’m in that Facebook group, which tends to be younger demographic, I see a lot of people say the following question: Reese, I’m going to be graduating here soon, I plan on retiring at age 40-

Ryan Isaac: Fire. Fire. Fire.

Reese Harper: I’m part of the fire movement. And I just want to know what I can do to retire by the time I’m 40. I’m not saying that’s a bad goal. I generally don’t like to think in those terms. Retirement-

Ryan Isaac: Never spend more than $2,000 a month.

Reese Harper: Ages of retirement I don’t value as some badge of honor. We don’t think the guy that retired at 55 is smarter than the person that retired at 65. It’s not that way. Life isn’t measured in fast retirement equals you’re a genius.

Ryan Isaac: It does on Twitter.

Reese Harper: That being said, okay, I don’t believe there’s an aspirational young dentist that’s like, “Hey, Reese, I want to retire at 70. How do I get there?”

Ryan Isaac: Yeah. For sure.

Reese Harper: We know that ultimately-

Ryan Isaac: Early on in career that doesn’t really sound very appealing.

Reese Harper: That’s not appealing-

Ryan Isaac: That’s not a career goal.

Reese Harper: For most people.

Ryan Isaac: But you don’t know until you get there though.

Reese Harper: What I’m saying is there’s probably some truth to not … if everyone when they’re young wants to retire early, I’m pretty sure that still at least the average people at the later part in their career are not still working because they wanted to. The average person. I’m not saying there aren’t people that are choosing to still work longer. Many dentists do choose to. And obviously the people that they can study and survey who are out of the industry and retired early, they’re not part of the statistic. So, any survey that’s surveying people in their late 60s and saying, “When can you retire?” You kind of don’t have a sample population of people in their 50s who did retire. I’m not saying the average dentist retires necessarily at 70 because we don’t know what the average dentist is doing. We just know what the samples of people who are willing to respond to surveys are. And most of these surveys are only 500 people or 400 people or 300 people.

Ryan Isaac: Yeah.

Reese Harper: I just know that based on aspirations that most people have, most people would like work to be optional by at least the average date.

Ryan Isaac: Early 60s.

Reese Harper: And sometimes a little earlier than that. Do you ever have a client that’s like, “No matter what, even if I could, I definitely don’t want to stop until I’m 70.”

Ryan Isaac: No.

Reese Harper: Don’t even run numbers for me if they’re less than age 70. No.

Ryan Isaac: I don’t even care what’s going on. I’m winning Powerball this weekend.

Reese Harper: I don’t care. Don’t-

Ryan Isaac: I’m still going four days a week until I’m 70. We’re not even talking about it.

Reese Harper: I’m so in love with everything I do. I don’t even want to hear from you about anything less than an age 70 retirement date.

Ryan Isaac: Yeah. That’s not an aspiration that you start with.

Reese Harper: But of all the studies that are being done. That is more of the average date.

Ryan Isaac: Yeah.

Reese Harper: I’m just saying that’s the cautionary tale for the people that are like, “This is a farce.” Because I don’t think it’s a farce. I think that for a variety of reasons some educational, some they don’t have good advice, some they’re investing poorly, some they’re spending a lot and that makes-

Ryan Isaac: They just don’t want to cut back or can’t.

Reese Harper: Yeah. There’s a lot of reasons why dentists are retiring late. But many of them are not ideal scenarios. I think the ideal-

Ryan Isaac: That’s fair to say though.

Reese Harper: It’s fair.

Ryan Isaac: It just feels like a fair thing to say. There was a lot of comments in that thread too where people are like, “I have a lot of friends,” or, “I’ve worked with a lot of other dentists. That’s my experience.”

Reese Harper: And I’m just saying-

Ryan Isaac: They’re not ready.

Reese Harper: Is that is a dental industry unique feature. That is uniquely happening to dentists. That is not in every occupation, the average. That is not … not every professional career is that way. I think we’ve got to take some ownership, there’s something happening here systemically that’s causing dentists to probably retire later than they want to. On average.

Ryan Isaac: So, if we’re going to talk about the non-choice things, then I mean we know from our own statistics that dentists spend more money than the average person.

Reese Harper: Yeah.

Ryan Isaac: Lifestyle-

Reese Harper: Now we’re pivoting to the other side of the equation which is there are people choosing to work late. Okay. There are. And why are they choosing? Well a lot of them choose, I think, to work later because they’re not that burnt out.

Ryan Isaac: Yeah. They like it.

Reese Harper: They love what they do.

Ryan Isaac: Yeah. It’s a passion.

Reese Harper: And they’re like, “I’m used to spending a fair amount of money based on the fact that I’ve earned a fair amount of money during my life and if I stop right now, I’m going to have to cut back on a lot of stuff that I don’t want to cut back on.”

Ryan Isaac: Or it becomes unsure. And the reality is-

Reese Harper: I still like what I do enough to where I don’t want that risk-

Ryan Isaac: I do. And think about how unique the dental industry is. I say this all the time. I think it’s really cool to be in a career path where you could … you can divest yourself of any business ownership. You can do that in your 50s, or early 60s. What jobs can you work where you’re an employee and you work a day and a half to two days a week and make a six figure income into your 70s. That takes significant pressure off of the need for social security and the ability to still carry a mortgage if you have one.

Reese Harper: Why [crosstalk]. A day a week.

Ryan Isaac: Work a day a week and make 75 grand a year and you don’t have to touch your 401(k).

Reese Harper: Yeah.

Ryan Isaac: That’s such a good trade off if you like the job.

Reese Harper: And a lot of people do. So, I think the truth is about are the statistics inflated if used as a fear mongering tactic? Yes. They totally are.

Ryan Isaac: 99% of dentists retire.

Reese Harper: The comment I put in the Facebook thread was: Dentists are not crawling out on the pavement looking for roadkill that they can eat in their final days, trying to find a can of SPAM to crack open.

Ryan Isaac: Survive. Banging.

Reese Harper: A nice tuna fish sandwich. We’re not there, ever, on average.

Ryan Isaac: Yeah.

Reese Harper: Some people are like, “Yeah, you know what? This career’s going to be an extension of work life balance that I want to have and I enjoy it.” And they got used to spending a lot of money.

Ryan Isaac: That’s a big part of it, man.

Reese Harper: It’s tough to replace all that. It takes a very big portfolio.

Ryan Isaac: It’s a big chunk. I think about non-dentist retirees that I know just family or neighbors or whatever. Some of these retirees are living on 4,500 bucks a month. That’s their spend. Find a dentist that’s living on less than 10 grand a month. Even in retirement. Just got used to spending more money.

Reese Harper: You made more. And that’s our point is-

Ryan Isaac: You made more, you spent more. You got used to it.

Reese Harper: Life, and they’re not happier necessarily. What I’m saying is I don’t feel there’s a correlation between … There is a point where making more money actually allows you to do some things you’d rather do.

Ryan Isaac: Yeah. Sure.

Reese Harper: And on a dentist income, I think if you … This is the one point I made in that Facebook group is if you asked the average wage earner, “Will you work until you’re age 70 if you can 185,000 a year?”

Ryan Isaac: Yeah.

Reese Harper: Or alternatively, you can make more median wage, and you can retire at 62. Which one do you think people would pick? You can double your income, or triple your income maybe more than the average person and work later.

Ryan Isaac: Or make less.

Reese Harper: Or you could make less and retire sooner. Which one. And my guess is that most people if they could just flip a switch and do that, they would pick more money and work a little bit longer. Because they could be like, “I could pace myself and just enjoy it.”

Ryan Isaac: Well, along the way, you’re just-

Reese Harper: Take some more vacations.

Ryan Isaac: Yes. Yeah.

Reese Harper: Balance this thing out.

Ryan Isaac: Eat steak a little more often.

Reese Harper: I think most people would take that trade off.

Ryan Isaac: Lobster tail.

Reese Harper: It’s just not a trade off that most people have the luxury of making. Dentists, you went to school, you worked really hard, you got a high barrier to entry, you’ve taken a ton of entrepreneur risk. You deserve this. But I think there’s some trade offs there that are pretty … they’re conscious ones that you’re essentially making every year that you continue to spend the way you’re spending. You didn’t have to … let’s the average national median income is 60,000. And average spending is 3,700 a month.

Ryan Isaac: It’s 59,000.

Reese Harper: You could make five times that and still spend the same as the average person. You could choose to do that. You could make three times the money and spend the same-

Ryan Isaac: Humans just don’t do that though.

Reese Harper: As the average person. But you will not do that. Humans don’t do that.

Ryan Isaac: We don’t do that. This is America.

Reese Harper: You’re going to spend at least three times what the average person spends, if you make three times the amount of money. I know that will be the case for most dentists. That being said, they don’t have to do that. You could spend two times what the average person spends and then make three times and you have … still be able to retire early.

Ryan Isaac: Yes.

Reese Harper: But if you choose to spend the same ratio of your money, of your income, that the rest of the America is also spending, you’re going to have a harder time retiring than they do because their income, their spending compared to social security is close. The average person gets social security and it almost covers their whole nut. Social security covers only a third of yours. Or less. So, you have to have a bigger portfolio. If you choose to spend more of that, you’re going to be in a little bit of hot water.

Ryan Isaac: Yeah.

Reese Harper: I think that’s kind of a conscious choice they’re kind of making slowly over time going, “you know what, I’m just going to work a little longer then. I’m just going to work a little longer then.”

Ryan Isaac: Just want to spend it. You make it, you spend it.

Reese Harper: Anyway. Point is-

Ryan Isaac: It just reminded me of the Ariana Grande song. Is that going through your head?

Jenni Colborn: A little bit, yeah.

Ryan Isaac: Yeah.

Reese Harper: What?

Ryan Isaac: I see it, I like it, I want it, I got it.

Jenni Colborn: We can’t say that. That’s copyrighted.

Ryan Isaac: Can we not say that?

Reese Harper: Yeah. That’s not compliance though.

Ryan Isaac: That’s the American way.

Reese Harper: That’s a legal issue.

Ryan Isaac: I made the money, I want to spend it. I got it, I want it, I spend it.

Reese Harper: I just think that it doesn’t have to be that way. In my mind, we’re talking about a job here, financial planning job to be done.

Ryan Isaac: This is a huge one.

Reese Harper: Which is track your spending properly and make sure that it doesn’t inflate at an unreasonable rate as your income does.

Ryan Isaac: And if it does, then fine. Just know ahead of time how that’s going to affect you and what control you have today to do something about it.

Reese Harper: You need a financial advisor on this one though. I’m telling you, this is a hard one to self-diagnose. This is where a financial advisor can actually really help. If you’re wanting to track your spending properly, get some guidance and coaching on whether you’re spending too much for your income level, where to cut back, what you should be doing to still live a good lifestyle, but not feel like you’re cutting everything out that you want. It’s a hard thing to self-diagnose. And that’s one of the reasons why I think a financial advisor can add a lot of value to somebody’s financial planning decision making. Is this is one of the most emotional topics there can be.

Ryan Isaac: Oh yeah.

Reese Harper: You can sense it from that Facebook thread. It’s borderline attacking someone’s native, their high school mascot or something like that. I don’t know. That’s a bad example.

Ryan Isaac: It got personal. Well, I mean, there’s the four parts of planning we talk about. You have organize, analyze, decide, and act. And there’s cheap, free technology that’ll help you organize and analyze it for a minute. Because you could say, “Well, that’s not hard. I’ll just log into Mint and then I’ll know what I spend.” Two months later you’re not logging into Mint anymore. But it’s not just that part that’s hard. It’s the decide and act part. Now that I know my spending, if you’re actually tracking the right way, what does that mean? What do you do? What does that mean for your future? How do you adjust today?

Reese Harper: Yeah. It’s critical, man. These have been really good. I think we’ve been able to answer some great, two really great kind of main topics today.

Ryan Isaac: Okay.

Reese Harper: That we’re helpful. Do we keep going? Are we good? How long we’ve got?

Jenni Colborn: We’re about 40 minutes in right now.

Reese Harper: Do you want to do another one or are we good?

Ryan Isaac: This was kind of cool. It’s like TT Network-

Jenni Colborn: Don’t forget. Job [inaudible] done.

Reese Harper: And three, two, and …

Ryan Isaac: All righty. Well, thanks for the questions. There good ones.

Reese Harper: Thanks listeners. Keep posting to the old Facebook groups.

Ryan Isaac: We try to jump in everywhere. So, our Facebook group, if you haven’t already please join it It’s growing like hot cakes, if hot cakes grow. That’s probably not the saying.

Reese Harper: Dentist Advisors discussion group.

Ryan Isaac: It’s going. Everyday.

Reese Harper: We see you.

Ryan Isaac: See a lot of requests for that. So,

Reese Harper: Remember the financial planning jobs that we keep referencing here. I sometimes don’t do a good enough job at advocating for the power of another human being in helping you. But I strongly believe that for most of the listeners of this podcast, you’re better off with a buddy. You’re better off with a buddy.

Ryan Isaac: Do you remember My Buddy from the 80s?

Jenni Colborn: Should we just change the slogan?

Ryan Isaac: Did you have a My Buddy?

Reese Harper: Yeah.

Ryan Isaac: You did?

Reese Harper: Yeah.

Ryan Isaac: Did you have a kid sister?

Reese Harper: (singing).

Ryan Isaac: (singing). So good. Hasbro.

Reese Harper: (singing). You remember that? (singing).

Ryan Isaac: I was there.

Reese Harper: And then Teddy Ruxpin.

Ryan Isaac: Yeah. We learn this in our childhood, it’s better with a buddy.

Reese Harper: You need a buddy. Go to, click the book, a schedule button. Book the link. I don’t know.

Ryan Isaac: Book free consult.

Reese Harper: book free consult button. It’s green. It’s easy.

Ryan Isaac: Click the book button.

Reese Harper: We have it in so many places you can’t possibly miss it.

Ryan Isaac: You might accidentally click it and just follow through.

Reese Harper: And here’s my strong conviction, quote me on it, or disagree with me on the Facebook forum. I believe that hiring a financial advisor ultimately costs you way less money in net worth. Your net worth will be larger-

Ryan Isaac: Sooner.

Reese Harper: You will be more successful sooner if you just get someone helping you faster. There’s a point where you’re too young and broke and early on to afford it. And that’s probably D1s and that’s it. Your D1 dentist school students. After that-

Ryan Isaac: D2 you better be paying for a financial advisor.

Reese Harper: All right. D4s. Maybe you’re okay through D4. But you get out of school, you get going, there’s a service model that we offer that fits you. So, my buddy is better than I will go and hack at this online for and spin my wheels. It’s just not worth it people. That’s just my humble brag.

Ryan Isaac: I like it. Let’s coin that term. Finances are better with a buddy.

Reese Harper: Better with a buddy.

Ryan Isaac: All right. Well, thanks for listening. Again, you can book a free consultation or call or text us 833-DDS-PLAN. Thank you very much.

Reese Harper: Carry on.

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