Making Sense of a 401(k) Plan at Your Practice – Episode #432

On this episode of the Dentist Money Show™ Ryan joins with Kiera Dent on the Dental A-Team podcast to outline how to set up a 401(k) retirement plan. The Dental A-Team recently established a 401(k) and Kiera talks about the process—provider options; costs and fees; why she chose the Safe Harbor plan. It’s everything you need to know if you’re considering a 401(k) at your practice.

Show notes:
Dental A-Team

The guest being interviewed on this episode is a client of Dentist Advisors.

No cash or non-cash compensation was provided in connection with our guest’s participation and his/her permission for Dentist Advisors to use, publish, stream, and broadcast all or part of this episode originally recorded on August 3, 2023, including the guest’s favorable testimonial of Dentist Advisors.

Dentist Advisors provides investment advisory services and other, non-advisory services for certain of its clients. The guest who participated in this episode provided the testimonial for Dentist Advisors’ use without any payment or arrangement for compensation, discounts, or other benefits.

 

 

 

 

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Podcast Transcript

Ryan Isaac:
Hello, everybody. Welcome back to another glorious episode of the Dentist Money Show brought to you by Dentist Advisors. The no commission fee only fiduciary comprehensive financial advisor just for dentists all over the country. Check us out dentistadvisors.com.

Ryan Isaac:
Today on the show, fun episode, what do they call this? A simulcast with Kiera Dent from the Dental A Team. I was a guest on her show and we were talking about 401ks and retirement plans and how to pick them, how to implement them, frequently asked questions, pros and cons, common mistakes, and I thought wow this would be a great topic for our audience as well. Very relatable and we get these questions all the time.

Ryan Isaac:
So, many thanks to Kiera Dent at the Dental A Team. Please reach out to them if you have anything, any questions you wanna know about your practice, of how to grow, be more efficient, implement systems, teams, processes. They are the people to do that with.

Ryan Isaac:
Kiera Dent, Dental A Team and thanks for the time. Thanks for having me on your show, Kiera and thanks for everyone for being here. If you have any questions for us, go to dentistadvisors.com. We’re happy to answer your money questions and point you in the right direction. Thanks for being here everybody. Enjoy the show.

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, Ryan Isaac.

[music]

Kiera Dent:
Hello Dental A Team listeners. This is Kiera and I’ve got the one and only Ryan Isaac with Dentist Advisors here today. Because we decided…

Ryan Isaac:
Yes.

Kiera Dent:
Why not have a podcast with the two, the two duo here. Ryan, how long have we known each other?

Ryan Isaac:
Let’s do it.

Kiera Dent:
It’s been a long time.

Ryan Isaac:
It’s been… I think it’s been a long time. What would it… So, what would it be now? Seven years?

Kiera Dent:
It’s got to be… Yeah, yeah probably. [chuckle]

Ryan Isaac:
Maybe like 2014?

Kiera Dent:
Well, I started the company in 2016, so I would have probably met you in 2017, and so we’re at least six years into this relationship.

Ryan Isaac:
Wait, you started A Team in 2016?

Kiera Dent:
Yeah, there was a…

Ryan Isaac:
No, I met you before A Team.

Kiera Dent:
No, ’16, I started in ’16.

Ryan Isaac:
I know I met you before Dental A Team.

Kiera Dent:
No. Well, it was Kiera Dental Consulting.

Ryan Isaac:
Oh yeah, yeah.

Kiera Dent:
It was Kiera’s Dental Consulting that morphed into it.

Ryan Isaac:
Yes. A couple of years. Yes.

Kiera Dent:
So I started the company before anybody even knew it was a company November 2016.

Ryan Isaac:
Okay, so we probably met slightly before that.

Kiera Dent:
And I only know that because I ran a marathon in December 2016 and I only trained from October to December and I’m still like regretting that decision in life. [chuckle]

Ryan Isaac:
Okay, well and you’ve never done one since so then you learned your lesson.

Kiera Dent:
I haven’t.

Ryan Isaac:
You learned the lesson. Good for you.

Kiera Dent:
But Ryan and I, we’ve gone way back and if you guys don’t know Ryan, please go listen to a lot of the podcasts we’ve put together. They have an incredible podcast too. A lot of this audio will be on theirs. They’ve got the Dentist Money Show.

Kiera Dent:
But Ryan and I were… So let me just take you guys on a quick little journey of Kiera and Ryan. We met on a, like he was at an event, I was there. He did a really funny presentation about cereal and that he weighs his cereal.

Kiera Dent:
Which Ryan, I haven’t told you this, this is a new update…

Ryan Isaac:
I don’t anymore.

Kiera Dent:
I weigh my food now.

Ryan Isaac:
Well okay, good for you.

Kiera Dent:
I’ve been macro tracking.

Ryan Isaac:
You are?

Kiera Dent:
So yeah, we’ll talk about it.

Ryan Isaac:
I’m highly interested. Do you wanna make that part of the show? ‘Cause I like this conversation actually.

Kiera Dent:
I know, the macro track. Anyway, so not yet. ‘Cause we gotta talk 401ks.

Ryan Isaac:
Okay. [chuckle]

Kiera Dent:
But anyway, so Ryan and I, we met at this conference. I went to Ryan and said, “Hey, I just started this business. I don’t really know what I’m doing.” I remember being on an airplane and we did a share screen of like my numbers spreadsheet.

Ryan Isaac:
Yeah.

Kiera Dent:
Ryan was nice, chatted with me and Jason and was like, “Listen Kiera, you don’t quite need a financial advisor.” Which is why I love you guys as financial advisors because it’s a no stress, no pressure.

Ryan Isaac:
Cool.

Kiera Dent:
I even have a client, you did a podcast with her. That’s all I’ll say. And she told me she loved working with you because you, she called you and you were like, “You honestly don’t need me. Let me give you some tips and on your way you go.” So that’s why I love you guys.

Ryan Isaac:
Cool.

Kiera Dent:
And then you helped me grow as like a little baby plant. And now here I am and I’ve hired you now as my financial advisor.

Ryan Isaac:
Bad analogy. We just got done talking about how I kill plants. Not a great analogy. [chuckle]

Kiera Dent:
But I’m just a succulent. I require no effort. That’s actually not true.

Ryan Isaac:
Okay, very fair though. That’s not also true. That’s also not even close to true. I do remember, here’s what I remember thinking, I have such like inconveniencing stranger anxiety.

Ryan Isaac:
I do remember multiple times talking to you when you would be like sitting in your chair in the airplane and you were that person on a phone call. And I was like, I’m so embarrassed right now that I’m making you be on the phone. You just hang up. We’ll talk later. Do you remember that?

Kiera Dent:
And I never knew that about you. ‘Cause I’m like, this is the best. Like these people, I don’t wanna talk to them for the next four hours of this flight. So I’m gonna be the jerk that’s finishing up a conversation. Like I’m just so busy.

Ryan Isaac:
They’ll be so annoyed.

Kiera Dent:
So they don’t wanna talk to me.

Ryan Isaac:
Yeah. They’ll be annoyed, good for you.

Kiera Dent:
It was perfect for both of us.

Ryan Isaac:
It worked.

Kiera Dent:
So anyway, so Ryan is actually my financial advisor. I love them. I recommend them all the time. I think that you guys are truly the greatest and we share clients back and forth. We help grow, you guys help invest those growths.

Kiera Dent:
And so this year it was kind of fun because like new business rookie over here, we’ve now hit the level of needing to bring a 401k into my business in Dental A Team, which I’m super excited for my team.

Kiera Dent:
But you and I were chatting on my personal call with you and we realized we were like, we should just hit record on this.

Ryan Isaac:
I know.

Kiera Dent:
Because so many of my questions I have about 401k I don’t know anything about a 401k. And you said, this is like a lot of dentists and a lot of offices. Like you guys, the words of 401k make no sense. Like, Ryan, what the heck? It’s “safe harbor”, it’s “pension”.

Kiera Dent:
It’s like, there’s so many words that honestly, I’m just curious, this is trivia. Who made those dumb words up? Because they make absolute utter no sense. So I’m guessing like 200 years ago these were made. That’s my… [chuckle]

Ryan Isaac:
200’s probably a little soon. It’s probably a little more recent than 200 but it’s probably maybe close. Yeah. I’d have to google it. The term “401k” actually is just describing the actual provision number and section of the tax code that allows a tax deduction for retirement plan contribution. Literally it’s like section 401, part K.

Kiera Dent:
No way.

Ryan Isaac:
Like that’s what it means. That’s what it means.

Kiera Dent:
Interesting. Okay.

Ryan Isaac:
Yeah. And you know what’s funny about that some… ‘Cause some people, and this is like a big TikTok thing, like TikTok financial advice these days, people will be selling like life insurance or crypto or something and they’ll be like, “401ks are bad investments. They get no returns.” And it’s literally a tax code provision number. It’s not an investment, you know?

[chuckle]

Kiera Dent:
So obviously.

Ryan Isaac:
It’s just a tax code thing.

Kiera Dent:
So obviously.

Ryan Isaac:
That’s where the number comes from.

Kiera Dent:
Interesting. I did not know this. So Ryan, Ryan was just helping me out, because I’m setting up a 401k and we were going through for me as a smaller business, I won’t exactly share the phrase you said ’cause we would probably have to cut it from the audio of what you told me of, “Kiera, I usually don’t have this small of clients setting up 401k.” ‘Cause…

Ryan Isaac:
I said that to you? “This small”?

Kiera Dent:
But it was funny. Yeah, because I have to like start up like we have like smaller team members and I’m like scrappy and like I don’t necessarily wanna pay all these fees and you’re like, “Man, it’s been a while,” ’cause I’m on 401GO…

Kiera Dent:
And we should probably cut this part. I’ll have sissy edit this part out.

Ryan Isaac:
No, whatever you want.

Kiera Dent:
Because…

Ryan Isaac:
No, whatever you want. Here I wanna say for the record though, if this stays in here, you are not running a small business. You have a small team and it’s a plan that’s starting out from the beginning, which is actually we should keep this because, having a plan that’s just starting, that’s what it means.

Ryan Isaac:
It’s just a small plan that’s just beginning and a small team. A small amount of people who’ll be participating. That can impact where you set up the 401k. So I actually think that’s relevant. Although…

Kiera Dent:
Okay. Well, and it wasn’t…

Ryan Isaac:
I mean we’re not disclosing numbers, but in terms of like you, A Team is doing awesome and you built a tremendously amazing business. So it’s not small small like that small.

Kiera Dent:
Thank you. I am a rookie to 401ks. So we wanted to really go through me being super open and vulnerable. Ryan being an awesome resource and expert. So for those of you in this spot of like, “Do I set up a 401k, do I not?”

Kiera Dent:
So Ryan, I know a lot of practices…

Ryan Isaac:
Yeah. Start at the beginning.

Kiera Dent:
Don’t open 401ks. For me, I’m doing it because I maxed out my SEP, which was a huge tax strategy that you helped me figure out how to do, with like how long my employees had been with me. But then like now there’s really no other tax benefits for me to set anything up for retirement without a 401k as an employer.

Kiera Dent:
But like, I don’t actually know how that happens. I just know I had a three-year rule and then I need to go to 401k. So I’ve been telling the team like, “It’s coming. It’s coming.” I actually don’t know why.

Kiera Dent:
So maybe you can help me and everyone else understand like how this works and why we have three years and then implement?

Ryan Isaac:
Yeah. So like just, and this is such a good conversation for our audience too. Because these are very common normal questions that tons of people have all the time.

Ryan Isaac:
So in the world of… Let’s start with how people earn their money. When you have a job and you have an earned income, there’s a tax rate that you have to pay, that’s your earned income tax rate. And that’s many, many Americans. If you have a job, a W-2, if you’re a business owner of like, in any service business, you know, like you guys are in the dental industry, obviously.

Ryan Isaac:
Your pass through entity, your S-corps that you either get a W-2 from or that just kick you out your owner distributions, that’s earned income. And why that matters is because the earned income tax rates are higher and there’s not as many, I don’t like the word “loopholes” ’cause they’re just, it’s just tax code.

Ryan Isaac:
There’s not as much advantageous tax code as say someone who is a hedge fund manager, which is really interesting why they have better tax codes than earned income average Americans. Or a real estate developer or a professional real estate person. Or a person who’s getting all of their income from capital gains, you know, maybe they’re buying and selling businesses. Those have different tax codes, different write-offs.

Ryan Isaac:
So the reason why I’m saying this is our audience, dentists, your company, you, you have high incomes, at earned income rates. Now through the business that you own, you have the ability to write some stuff off, but eventually, unless you’re gonna be pushing into crappy, shady investments that you shouldn’t have anyway, or into like some tax gray areas that your CPA’s not gonna like, there’s just a limit to the amount of tax deductions you can get.

Ryan Isaac:
And the reality, as unsexy as this is, the biggest ongoing like year over year proactive tax deduction you can get as a business owner with earned income is the retirement plan.

Ryan Isaac:
For example, let’s just use the 401k for example. The limit next year is 23,000 per person. So if you have an owner and a spouse on payroll, that’s $46,000 of pre-tax money that gets, that drops your income. And it someone’s high earned income tax rates, that could be close to maybe sometimes up close to a $20,000 tax deduction, 15 to 20, 15 to 18 tax deduction. Somewhere in there.

Ryan Isaac:
So which doesn’t sound like much if your tax bill’s quarter million dollars or half a million dollars. You know? But if you do that over an entire career, it’s very, very meaningful.

Ryan Isaac:
And it’s not the only tax deduction. And clearly if you buy something in the business or you have like a 179 deduction or you have like a building or something, there’s some depreciation or like cost seg studies on real estate, there’s some big like life event purchase deductions, but that’s not an ongoing plan year over year.

Ryan Isaac:
So the retirement plan I’m getting at is likely gonna be the biggest like proactive tax deduction you can get having earned income, as a dentist, as a business owner.

Ryan Isaac:
So that’s why it’s like really important to have the right one and always be thinking every single year if it’s the correct one. Because like you said, you were running a SEP IRA before this, which is amazing until your employees qualify.

Kiera Dent:
I was like, do I have Tiffany quit? Like can I do this? Like, “Hey Tiff, could you quit?”

Ryan Isaac:
You just quit and come back. [chuckle]

Kiera Dent:
“And then come back and I’ll give you a raise.”

Ryan Isaac:
I’m not giving that advice.

Kiera Dent:
I definitely did not. I don’t want people quitting. Tiff don’t listen to that.

Ryan Isaac:
Don’t listen, Tiff’s fine. I mean the reality is, and this isn’t against employees, it’s just a SEP IRA is amazing until your employees qualify, because you have to give them straight across the board the exact same percentage you’re giving yourself.

Ryan Isaac:
Which as a hiring business owner, it’s usually 25% of salary. You can’t do a retirement plan giving a dozen plus people 25% of their salaries retire… You know what’s crazy though is I’ve met dentists who are running a SEP every single year for like 15 years.

Kiera Dent:
No way.

Ryan Isaac:
And didn’t really realize that they were giving away like six figures amount of money in a retirement plan.

Kiera Dent:
Wow.

Ryan Isaac:
To employees over years. Yeah. It was shocking to me. I’ve met several people like that.

Kiera Dent:
Interesting.

Ryan Isaac:
So yours was the right plan until it wasn’t. And then we implement something different. And that’s why, thinking about it at least every year with somebody is really important. It, you know, at some point you might get a bigger one, you might need to change it completely like you did.

Ryan Isaac:
At some point a 401k might turn into something called a profit sharing plan, where you get additional contributions. Or something called a pension or cash balance plan where you get even more contributions.

Ryan Isaac:
So it is just worth… It’s worth looking at for any dentist because that will be one of your biggest tax deductions you’ll ever get. That’s why it matters.

Kiera Dent:
Well, and I think that that was helpful for me to understand. Because like, you’re right, there are minimal tax deductions that we can take. And I remember talking to my CPA about two years ago and he’s like, “Kiera, you’re basically tapped.” And I’m like, “That’s lazy. Don’t tell me that. I can definitely find different strategies.”

Ryan Isaac:
Yeah, sure.

Kiera Dent:
‘Cause I don’t… I mean, I love paying taxes for the country we live in, but I don’t like paying unnecessarily. And so whatever I can do to set myself up. And also I like to build different asset classes.

Kiera Dent:
And so yes, I’ve got the business, yes, we’ve got other investments. I think the 401k is just you’re saving up acorns for later on in life. And so, and also this sounds funny, Ryan, but I do genuinely get excited. Like I’m not excited to pay extra money.

Kiera Dent:
Like I was looking at all of my in like, I’m doing projections for next year and putting in the 401k and putting in the advisor fee and putting in the fee. I don’t like adding extra line items.

Kiera Dent:
But it does make me kind of excited as an employer to be able to set my team up for like an opportunity to be more successful in their future. They’re helping me build my business, and so to be able to help make sure they’re taken care of into retirement does give me a good feel-good.

Kiera Dent:
I haven’t paid the bill yet, so like we should do a repeat in a year and I’ll tell you like…

Ryan Isaac:
And we’ll see how you feel. [chuckle] Yeah.

Kiera Dent:
“Screw that.” I’m just kidding.

Ryan Isaac:
Well hold on, you’re bringing up something really important, which is, I mean we started this by talking about the strategy of tax deductions for you as a business owner, but really, taking care of a team and your employees. I mean for most people a retirement plan at work, especially one that has a match, might be some of their only savings they’ll ever have.

Ryan Isaac:
But it is enough. I mean, if you were able to max out a 401k at work your whole life and get a match from a company, that’s a significant amount of money. And so it really actually does help people for sure.

Kiera Dent:
And I just wanna put it out there, employers, like I’ve had to learn going from a team member to an employer, your employees will never be super grateful of this. They’re not going to look and be like, “oh my gosh, Kiera’s giving me a huge raise.” Just so you know, their amount that they see is their dollar per hour.

Kiera Dent:
And so you just have to realize like what is the benefit to risk. For me, my reasons for doing it are threefold and maybe Ryan has a fourth one that I don’t realize I should be doing, so chime in.

Ryan Isaac:
Yeah, I don’t know. Let’s see.

Kiera Dent:
One is for me to be able to have another spot to put tax savings, like if I can do this and set it up, that’s one of my main reasons for doing it, for me selfishly and for my life personally.

Kiera Dent:
Two is for my team because I realized, right now, especially with COVID and then we had the Great Resignation, 401ks are a hot thing in retirement that shockingly is coming up in a lot of interviews now. And so I wasn’t able to compete with best candidates because we weren’t having it there.

Kiera Dent:
Have I held out and waited until like I can’t max a SEP? For sure. I didn’t incorporate it. I found different ways to get around it. But that was my second one.

Kiera Dent:
And the ways that I’ve gotten around it, just so you guys know, is I actually, like Ryan is my financial advisor, he can tell you this. I had him come to a team activity. I’ve had him do team planning for my team. That was something I asked by hiring him of like, “Can you help my team out a little bit?”

Kiera Dent:
I signed up for Dave Ramsey for the team, so that way they had access to some of these things that were lesser items so I could still max my SEP while helping them. So that’s number two.

Kiera Dent:
And then the third one is like, I’m gonna just try it and see if I even like it, and if I don’t have to continue. And I’d rather do that when my business is smaller than later on when I think it’d be harder to change and be as nimble as I currently am.

Kiera Dent:
So those are my three reasons for moving forward on the 401k.

Ryan Isaac:
Yeah, I like it.

Kiera Dent:
Unless you see a fourth.

Ryan Isaac:
What I… As a financial advisor, here’s what I love about 401ks for my clients, is that you can get the money if you needed it. You put it away. It’s pre-taxed, so if you pull money out, you have to pay tax on it. And if you’re under 60 and you pull out the money, you have to pay a 10% penalty on top of the tax. So it’s very expensive to pull money.

Ryan Isaac:
But the reason why I love 401k is because it’s really one of the last places a client’s gonna go pillage money. If they’re, you know… I mean, unless there’s like a desperate emergency, it’s like we can get some of that money. But it’s like kind of, you’re not gonna touch it.

Ryan Isaac:
And you know what’s really fascinating, there’s a lot of studies around the… Which is funny ’cause on social media they talk against the returns of 401ks, which is not, it’s another concept that’s kind of silly, but a lot of studies show that people get high returns in their 401ks because they know they can’t touch it and they don’t mess with it.

Ryan Isaac:
Like in our business, a lot of our clients have multiple kinds of accounts. They have a 401k, they’ll have like a brokerage account that they’re putting money into all these places. And people are way more willing to try to mess with the brokerage account money because they can pull it in and out whenever they want.

Ryan Isaac:
You know, they wanna like, they’ll change how they’re behaving with their investments in a brokerage account based on the economy, their mood, their emotions, whatever, way before they’ll ever do… They don’t even think about a 401k. It’s like, “Yeah, I’m not touching this ’til I’m 70.”

Ryan Isaac:
So as a financial advisor, I love it as a tool for wealth building because people leave it alone. And the number one way to get a good return with your investments, assuming you built a good portfolio in the first place, is to leave it alone. It’s like the number one rule.

Ryan Isaac:
So my number four in there would be, I’d love them because people don’t, they don’t mess with them. And they just put money in and then it does its thing and it actually is a benefit to people.

Kiera Dent:
It’s really smart. You just need to teach all your clients Kiera Dent’s principle about brokerage account. And I feel like…

Ryan Isaac:
Okay.

Kiera Dent:
I’ve told Ryan, I think he’s like, there’s the image of the Cookie Monster, and I sometimes call Ryan the money monster. I’m like, I don’t know. I put money into this brokerage account, but like, I don’t even know. So I treat a brokerage account like a 401k. So if that’s helpful. [chuckle]

Ryan Isaac:
You do. Yeah, you do ’cause you’re always like, “Can I even get that money?” I’m like, you literally can have it tomorrow. Yes, you can have all of it, every penny.

Kiera Dent:
But I don’t know why it feels so stressful.

Ryan Isaac:
It’s fine.

Kiera Dent:
Anyway, so if you guys want an even better strategy, 401k and treat your brokerage account like a 401k.

Ryan Isaac:
Just send it and leave it alone. It really is…

Kiera Dent:
It’s like it’s locked down.

Ryan Isaac:
It’s crazy though, once you build a decent portfolio that’s diversified and low cost, just leaving it, it makes literally all of the difference in the world. Which sounds like the simplest job to do as an investor, but really our human emotions and behavior get in the way. I mean, that’s what every…

Ryan Isaac:
We know this, we know this with business, health, fitness, exercise, like anything we try to stick to our human behavior gets in the way. You just leave it. So the Kiera Dent principle of putting in there and believing that it never exists ever again, that’s great. Just keep thinking that, and then in like…

Kiera Dent:
It’s gonna a good surprise.

Ryan Isaac:
20 years it’ll be like…

Kiera Dent:
I can say like when 20 bucks are in my pocket, like, oh my gosh, I put on those winter coats. I mean this is gonna be like even better. Like Ryan, I honestly right now…

Ryan Isaac:
You will. [chuckle]

Kiera Dent:
I don’t even know what’s in there, ’cause I don’t look at it.

Ryan Isaac:
Perfect. It’s irrelevant.

Kiera Dent:
But I’m like, I can’t even touch that. I look at it like it doesn’t exist. [chuckle]

Ryan Isaac:
I like that. It’s a good, it is a good mindset though, honestly. So good for you.

Kiera Dent:
There’s a tip that I didn’t mean to give you.

Ryan Isaac:
Yeah.

Kiera Dent:
Okay. So 401ks. This is where it got psychotic for me. Because I remember calling you, I called my CPA. My CPA recommended someone. Honestly, the reason why I went with Ryan’s recommendation is because you guys manage my funds already. 401ks do get managed.

Kiera Dent:
And so for me, Ryan, you and I put it there. And this is Kiera, you guys are maybe different, but for me, I did not want at all another project on my hands. And I wanted the least amount of risk, the least amount of effort on my part with the lowest cost.

Kiera Dent:
I sound like most people. But some people might wanna…

Ryan Isaac:
“Give me the best thing with the cheapest cost.” Yes. Yeah.

Kiera Dent:
So that’s why I opted to go like, I went and met with 401k person from my CPA, I asked Ryan. ‘Cause at the end of the day I can go google search, but 401ks, Ryan tell me, can you just tell me the worst case scenario? Like let’s pretend I go set this up, like straight up DIY, like can I go to jail for doing… What is like…

Ryan Isaac:
No.

Kiera Dent:
Like how bad can 401ks be?

Ryan Isaac:
Well, okay.

Kiera Dent:
‘Cause there’s this thing called ERISA, but I don’t actually know. There’s all these weird words.

Ryan Isaac:
Let’s talk about what it means to actually have a 401k. And realize, there are, there’s a lot of different types of retirement plans. I mean, if we list them, you would say that there’s especially for a dental audience, you have simple IRAs, you have SEP IRAs, you have 401ks. You have various types of 401ks, like a solo 401k. Then you have pensions, profit sharing plans, cash balance plans. But the 401k is very common.

Ryan Isaac:
So let’s talk about the logistics of setting up a plan. You technically can do everything yourself. I would never, ever recommend this. It’s outsource-able for small amounts of money comparatively to an office collection. So it’s irrelevant. Don’t do it yourself. But you could.

Ryan Isaac:
See, in a 401k here’s where it gets a little tricky. The 401k is overseen by multiple government bodies, from the IRS, the Department of Labor, there’s a whole governing body called ERISA. E-R-I-S-A. I don’t remember what that stands for. Something something something Securities Act, I’m sure.

Ryan Isaac:
And what this means is it’s a highly regulated thing, number one, because the government gives you tax deductions. So if they’re gonna give you something, they’re gonna be all over us for sure to make sure that like we don’t, you know, that we’re doing everything right.

Ryan Isaac:
And it’s for the protection of employees. Retirement plans in the past, like ’80s, ’90s, even in the 2000s have been abused by business owners where they’ll set up things and exclude employees illegally to not have to pay them and put away their own money. So there’s a lot of laws and protections around that.

Ryan Isaac:
So when you set up a 401k, you have to, you should hire a company called a third party administrator. You’ll hear the acronym more often as TPA, third party administrator. Their job is to make sure all this compliance stuff and the testing is done according to all the Department of Labor and IRS and ERISA rules. And also there’s an actual tax return that your 401k has to file every year. And it’s called the 5500 and they file that for you.

Ryan Isaac:
So technically you could do your own record keeping, you could file your own 5500, you could do your own compliance testing and document form submission to the IRS and the Department of Labor to make sure you’re all cool. But that’d be insane. [chuckle] That would be real…

Ryan Isaac:
You can outsource a 401k to literally thousands of 401k companies out there. There’s some content on our show. We’ve done like multiple shows on how to pick a 401k company. But when you go choose a third party administrator, here’s some things that make them different.

Ryan Isaac:
Number one, there’s something in a 401k called a fiduciary responsibility. These you were just asking like, “Can I go to jail? Can I get in trouble?”

[chuckle]

Kiera Dent:
Just asking. I have rules.

Ryan Isaac:
You can get sued. You can get sued as the business owner that has a 401k. That has happened, it’s actually not uncommon. I have not personally seen it in 15 years in a dental office the 401k gets sued. Usually it happens at very big corporations and most of the time it has been over the lack of investment options and over like fee transparency.

Kiera Dent:
Okay.

Ryan Isaac:
In a 401k though, there are three different fiduciary responsibilities that you can get sued for, like three different ways technically in a court of law you can get sued for.

Ryan Isaac:
When you hire a third party administrator, a cheaper one, a less expensive one is gonna have you as the owner of the business, the signer of the documents be responsible for those things. So if there was a problem, a lawsuit, a fine, something you had to like do over again, it would be on your shoulders to like fix and take care of.

Ryan Isaac:
If you hire a slightly more expensive third party administrator, then if that happened and they take on the fiduciary responsibilities, then it’s on them. Like it’s all off your plate.

Ryan Isaac:
It is very, actually surprisingly, it’s very uncommon that a third party administrator for a 401k actually takes on all three fiduciary liabilities in a plan. It’s actually kind of uncommon.

Kiera Dent:
Interesting.

Ryan Isaac:
It’s more expensive for them. They have to have more insurance, more people. So anyway, that’s a part of it. The investment options that you get inside of a 401k are gonna vary. If you hire… If you do a 401k, let’s say through an insurance company, you know, you do your 401k through an insurance agent, that insurance company is going to give you investment options that are only mutual funds built by the insurance company, which are not historically great.

Ryan Isaac:
Or you set up a 401k directly through a mutual fund company, let’s say directly through Vanguard or American Funds. This isn’t meaning they’re bad or good, it’s just, when you set that up, your only investment options are gonna be Vanguard or American Funds. And that might be fine with you or you might want a bigger selection of that. So investment selection is another piece of that.

Ryan Isaac:
And then there’s the, you know, setting people up, coordinating with payroll filing all this stuff. That’s what a third party administrator does. So technically when you set one of these up, you have to hire one of these companies. And they can be cheap or expensive or middle of the road.

Ryan Isaac:
And what you were saying earlier, it kind of does depend on the size of your company, you know, and how they bill. Some companies bill like a flat fee. Some companies bill a percentage of the accounts. Some do both. Most do both.

Ryan Isaac:
And so you kinda have to weigh that like how, how do I make this cost effective while still covering my butt if something happened? Taking the work off my plate. I don’t wanna do a bunch of this paperwork, I don’t wanna be responsible for it.

Ryan Isaac:
There’s so many companies out there though. There’s so many third party administrator 401k companies, it can be a little confusing. So chatting with someone can give you some clarity.

Kiera Dent:
That was really helpful for me coming into this, because at the end of the day, I feel like something that is legal, something that I could as a business owner be responsible for, those are things that I hedge my bets against and I try hard to be like, let’s be more black and white, not gray on those areas. And so it was really helpful.

Kiera Dent:
I went through with someone else from my CPA, I went through with you. And really at the end of the day my biggest objective was like, I wanna be covered. I wanna be safe, but I don’t know how this is going to go. And clearly realizing that I think a brokerage account is gone, I’m sure you can only imagine how much I get stressed of like new fees in the company that I don’t know, and I like to plan for worst case scenario.

Kiera Dent:
So that was actually why I opted, like you and I went through several different ones. I think I ended up looking through about seven different options is what I ended up looking over. All of them have different percentages. All of them had different things.

Kiera Dent:
And the reason I opted for the one that I went with was because like annual fee I feel is, I mean I’m not here to say like two grand is not a lot of money, I’m not here to try and be that. But when like I look at a business expense, to me that annual fee was negligible no matter which one I went. That did not bother me.

Ryan Isaac:
I think it is for most dentists too. I think that’s true. Yeah.

Kiera Dent:
And then like the cost per participant again, but I was looking at fiduciary fee and advisor fee. And so while I wanted to go with another one, you and I both opted because looking at it, it cut my advisor fee less and it cut the fiduciary fee a lot less as well. And so based on those two things, I might have a little more cost per participant that I’ll be paying.

Kiera Dent:
But me that’s, that’s something that I can, I can know for sure versus the percentage, who knows how much is gonna be contributed, who knows how much of all those different pieces. So that was where I went with that.

Kiera Dent:
I’ll go through this of how you and I went through it hopefully so other people… Like I came to you, we knew I needed to get this set up. Also something for timing that you helped me realize is I needed to have this basically decided by September.

Ryan Isaac:
Yeah, those deadlines.

Kiera Dent:
Because I want this in place in January. What are those deadlines? Because I don’t actually know, I just know you said, “Be ready by September.” So I said okay.

Ryan Isaac:
Yeah, most of these companies, the actual deadline is, it’s in October and I don’t remember if it’s the beginning or the end of October. Most of these companies. And that’s for like a January 1 start date of the next year.

Kiera Dent:
Okay.

Ryan Isaac:
So most, most of these companies want to begin this process sometime in September, just to make sure it’s done and taken care of. Here’s another thing I wanted to say too, when you pick these companies. It was what we were talking about earlier and it’s based on the complexity of a company.

Ryan Isaac:
And that is, if someone needs just like a simple 401k, just a really straightforward run of the mill kind of 401k, maybe you’re starting it from scratch, small team, that’s all you’re gonna need. I think it’s fair to go try to find a lower cost 401k provider.

Ryan Isaac:
As long as they’re gonna, take the work off your plate, keep you protected and give you good investment selection. And those are all boxes we checked with you. Right? Then we were able to go out and say like, how can we keep our costs down?

Ryan Isaac:
If someone has a bigger plan, bigger meaning more employees, bigger balances, and especially if someone is gonna be in the realm of adding on top of the 401k a profit sharing plan or a pension plan, which is just a whole other plan on top of it that lets you put in even more money, but it’s way more complex, then you do need to pick a third party administrator, a 401k company that can handle that.

Ryan Isaac:
Because most of them are not built, especially like a lot of the lower costs like online do it yourself stuff, they’re not built with internal systems and employees to handle the design and compliance and testing of a bigger like profit sharing and pension plan.

Ryan Isaac:
Where in your case we’re like, hey, we’re not not gonna deal with that in the next 12 months, so it doesn’t matter. In the future if we do…

Kiera Dent:
But that was also because you and I went, something I thought was really smart that you had us do is we actually went… Because like again, we’re not sharing Dental A Team’s number here.

[chuckle]

Kiera Dent:
But I am married, we have a house, I have tapped every possible thing. We don’t have kids. And so like short of me adopting a child, I really am tapped on my ideas of how to lower this.

Kiera Dent:
But you and I were talking because… Well that’s not true. I have a second idea of Puerto Rico, which is like a whole nother conversation that Ryan…

Ryan Isaac:
Yeah, but now we’re talking about like lifestyle changes or second careers. Yeah.

Kiera Dent:
This is a mixed tape, guys. It’s just on repeat.

Ryan Isaac:
It’s okay.

Kiera Dent:
It’s Puerto Rico, cure retiring. How do we do this?

Ryan Isaac:
It’s alright, yeah.

Kiera Dent:
But I think, and don’t worry all of you listening, I’m not really retiring. I just have a stretch goal to see if I could actually do this and be financially secure by 40.

Ryan Isaac:
Yeah.

Kiera Dent:
But with that, you and I, we actually did talk about the pension plan, and we did talk about profiting.

Ryan Isaac:
We tested it. We ran numbers.

Kiera Dent:
Because even to look to see, that actually, like we looked at it and was like, well how much will I save if I were to move to Puerto Rico? How much would we save if we switched states?

Kiera Dent:
And then you’re like, “Well, let’s just run the study and see.” Which was super cool ’cause I didn’t know that 401k companies did that. But my hunch is, and they do this every year, right? Like how does this work? ‘Cause you test early.

Ryan Isaac:
Not all of them do. No.

Kiera Dent:
Okay. Tell me about it?

Ryan Isaac:
So you have a normal 401k, which is like you put in some money from your paycheck, you get like a 4% match, you know, pretty run of the mill stuff. The standard 401k out there is called a safe harbor. By the way, safe harbor, in the…

Kiera Dent:
Where did this come from? 200 years ago?

[chuckle]

Ryan Isaac:
200 years ago. That’s also in, that’s also another word in the tax code. Phrase in the tax code.

Kiera Dent:
This is why it makes no sense ’cause taxes doesn’t make sense.

Ryan Isaac:
Doesn’t make any sense. It’s insane.

Kiera Dent:
So I understand now. Okay.

Ryan Isaac:
It’s totally insane. It’s literally in the, the 401k section, the 401-section K of the tax code, “safe harbor” is the phrase that means… Here’s what it means.

Ryan Isaac:
Hey, business owner, if you set up a 401k and you just give everyone like a 4% match and you don’t restrict anyone, like when they get their match, it’s their money, you don’t like hold it back from, there’s no vesting schedule.

Ryan Isaac:
You can’t have super strict requirements of how they can and can’t join the plan. Like the most strict you can get is like a year and a thousand hours of working.

Ryan Isaac:
In exchange for that, in this provision, the safe harbor thing says, we’ll just let you bypass a whole bunch of testing and compliance testing. Because before without safe harbor, here’s the way it works. Let’s say Kiera sets up a 401k, you put in the max, next year the max is $23,000.

Ryan Isaac:
At the end of the year they run a test and they go, “Ooh. Your employees didn’t put in enough compared to how much you put in. And so you didn’t pass testing. Therefore you have to go into your 23,000 and you gotta pull out 17 of it.” And now instead of the full deduction, now you’re only gonna get a deduction of six grand because you didn’t pass the testing.

Ryan Isaac:
So the safe harbor provision lets you bypass testing as long as you do things like a match and you don’t restrict people too heavily from their vesting schedules or how they can participate.

Ryan Isaac:
So not every… Okay, so that’s what safe harbor means. I don’t even how we got on that. But to your question, not every company is equipped to do higher testing and adding profit sharing and pension.

Kiera Dent:
Interesting.

Ryan Isaac:
And it’s a whole separate, a lot of times they have on staff ERISA attorneys, they’re basically 401k attorneys and actuaries. And these are the people who run, there are very specific IRS formulas that tell you, “Hey, if me as an owner putting this much in profit sharing or as a pension, how much do I have to give each employee? And how does that look?” And there’s a certain threshold of where that makes sense and doesn’t make sense.

Ryan Isaac:
So we ran that for you through a company that was really helpful. They’re equipped to do this. They’re a bigger company. They’re equipped to handle bigger plans like that. A lot of companies are definitely not. And so when, when a plan gets to that point, you might have to switch to a different third party administrator and that’s okay.

Ryan Isaac:
But to your point, we were curious about it and we had this company run it for us and we determined that that didn’t make sense right now. So, you know, we’ll visit it again on another time. We can look at it every single year actually.

Kiera Dent:
And what was really helpful is I feel like their reports, I’m no actuary, my brother-in-law actually is.

Ryan Isaac:
Oh yeah. Yeah.

Kiera Dent:
I don’t know what the heck those reports even said. So I literally, I mean Ryan, I trust you clearly a lot ’cause I said, “So is this a good decision or a bad decision? Because I honestly don’t know what this is saying.”

Ryan Isaac:
Red or green, yeah.

Kiera Dent:
And so that’s where I actually thought it was really helpful to work with you on it, was I don’t know who to ask, I didn’t know what questions to ask. And so you were able to have them run the test and then we realized like it didn’t work.

Kiera Dent:
And so honestly, I’ll probably work with that company in the future when I’m bigger and…

Ryan Isaac:
Totally.

Kiera Dent:
We’ve got a more complex plan and we’ll run it every year to see. Because like you said, some years it will make more sense, which I don’t even know how you get it to make more sense. It’s like based on the census of the people.

Ryan Isaac:
Age.

Kiera Dent:
I knew it.

Ryan Isaac:
Yeah. That’s why every year… And it’s kind of funny how it’ll change, like you can get one year older and change someone in your payroll and it will either make it like really good or really bad. Because the IRS formulas use like an age-weighted formula that takes that into account.

Ryan Isaac:
So the bigger disparity between the owner’s age and the average of the employees, the more it’s gonna work out in your favor as an owner. And the younger you are or closer to their age, then usually it’s not.

Ryan Isaac:
That’s why most people doing profit sharing or pension plans are usually at least in their late forties, if not in their fifties and above.

Kiera Dent:
So that’s actually, ’cause most of my employees are pretty close to my age. We’ve got a little bit of like a 10 year span between all of us. Which isn’t big enough. But it was super helpful for me to go through that.

Ryan Isaac:
That’s what did it for you. That’s what ruined it for you, was the age disparity. Or the lack of it.

Kiera Dent:
And so I know a lot of newer owners and newer offices, you tend to have employees that are similar to your age ’cause you’re basically the age of working class at that point. And I’m guessing it will kind of start to shift and change.

Ryan Isaac:
Yeah.

Kiera Dent:
So that was helpful because like, it came of like there’s a… Like honestly when I went through a presentation with someone else telling me about it, it was like, “Kiera, you can get the traditional 401k, you can get the traditional with the Safe Harbor plan, you can get the Safe Harbor matching plan with profit sharing.”

Kiera Dent:
Then you can get the safe harbor, then you can get the match of 4% and 5%, and 5% is based on what I put away. Then I can apply a vesting schedule, then I can do profit sharing is not a requirement of this. Then I can get a defined… I’m like literally reading my notes of what I took.

Ryan Isaac:
Crazy, yeah.

Kiera Dent:
And I was like, I don’t even understand. And then they’re like, “And then there’s a record keeper and then there’s this person. And then this fee goes to the employee.” And I’m like, Ryan, I feel like I’m going to choose the wrong choice because I don’t even know what any of this says.

Ryan Isaac:
Yeah, it’s a lot. It’s overwhelming. Every time I do one for a client, I’m like, ugh. It feels, it feels like a necessary evil, but it’s kind of a pain in the butt. And they are expensive. I mean, it’s just a whole other company you have to hire.

Ryan Isaac:
But the math though is pretty straightforward. I mean the math, the… Especially if an owner can put a spouse on payroll, which talk to your CPA about that, it’s very common. Then the math is like, it’s a no brainer.

Kiera Dent:
But isn’t it true, because like Jason and I, we are both working. And so Jason… And even though he’s… And Jason does my events, he’s surely on payroll for events. But with that, I can’t max him in my, in Dental A Team’s 401k because he’s already maxed in his hospital’s 401K and so…

Ryan Isaac:
Yeah.

Kiera Dent:
But if you have a spouse that’s not working, I do think it’s a no-brainer, or if they’re on payroll, like you said, with CPAs I think it can definitely cut down some costs that people might not think of, that could definitely help boost your 401k for you as an owner, that I just thought was really interesting.

Ryan Isaac:
So I did not enjoy the process. I actually have done grown up things this year.

Ryan Isaac:
You did not enjoy the process. [chuckle] Okay.

Kiera Dent:
Ryan, I’ve done two grown up things. I did my will and made a trust, which…

Ryan Isaac:
Oh, good for you.

Kiera Dent:
That was big. And then I did a 401K. The 401k was way harder than the will. Even though I had to figure out my…

Ryan Isaac:
Whoa, really? That’s crazy.

Kiera Dent:
What’s gonna happen when I die? And who am I gonna send this to? ‘Cause I had choose two people and I told Jason, “Listen, if I’m out for two weeks, I just, I’m gone, get a younger, hotter wife. Move along.”

Ryan Isaac:
“Just go.” [chuckle]

Kiera Dent:
It’s fine, everything’s fine. I don’t want wanna come back and take…

Ryan Isaac:
“Take my money.”

Kiera Dent:
It’s fine. But the 401k, I just think it was so many terms that I didn’t know, and I felt very naive and I felt very like, this is something I’ve got to now file new tax laws, I’ve got to figure out…

Kiera Dent:
And I don’t wanna get in trouble with ERISA, that sounds like a really mean girl, and I don’t wanna fight with her.

[chuckle]

Kiera Dent:
It just felt daunting. The name ERISA, it’s like Marissa, but ERISA.

Ryan Isaac:
Yeah. Or Corissa. We’re not judging Marissas and Corissas. Yeah.

Kiera Dent:
If someone’s named Erisa out there, I’ll love to meet you, but like that kinda sounds like, “I’m gonna erase you out of my life.” And I’m like, gosh.

Ryan Isaac:
Yeah. They would too. Yeah. They would.

Kiera Dent:
They probably would.

Ryan Isaac:
Yeah, they would.

Kiera Dent:
And then it was scary ’cause I thought like there’s somewhere you just do an automatic where every person on your payroll gets it, and I was trying to figure out pros and cons of all that.

Kiera Dent:
So I really appreciated being able to ask all my questions, being able to… And I am actually excited. Once we solidified, and I’m not saying the process was bad, I just think it was more…

Ryan Isaac:
It’s a pain.

Kiera Dent:
So many things that I don’t even know what is talking about, and how do I know which one to choose that’s best for my company. And also, it’s my first year, I have no clue what this cost is going to be on the company, I don’t know what it’s going to run. And so being able to make that as the best decision was kind of daunting.

Kiera Dent:
So I am curious, ’cause I don’t know if this… Now I’m like, I’m a real client. We’re having a real call here.

Ryan Isaac:
Yeah, let’s go. Yeah. These are live questions. So these are organic, yeah.

Kiera Dent:
They are. ‘Cause now I’m on to next step.

Ryan Isaac:
I didn’t supply these to you, I have no idea what you’re gonna ask me.

Kiera Dent:
You didn’t.

Ryan Isaac:
Yeah, this is good.

Kiera Dent:
So my question is, based on the plan I set up, ’cause we were with just a traditional 401K, it was safe harbor, I should be able to, as an employer, go to my max amount of 401k, For my employees, I only match them if they put it. And my employees don’t have to just put in 4%, they can go up to 10%, right?

Ryan Isaac:
Well, they can go up to as much as they want until they’ve hit the limit, the dollar limit, which is $23,000.

Kiera Dent:
Okay. And then I would match them up to 4%, but they have to put it in first before I match.

Ryan Isaac:
Yes. Yeah.

Kiera Dent:
And even if, let’s say none of my employees decide to take this up, I would not get any penalties because I’m in a safe harbor, and I should be able to match my full amount. Is that right?

Ryan Isaac:
There you go. You explained it perfectly. Yeah. See, you actually, you learned everything there was to learn through the whole process. It just was really annoying and super overwhelming.

[laughter]

Kiera Dent:
Okay, but I have one other question. ‘Cause this one makes my mind feel funny. ‘Cause it really… ‘Cause technically, I’m an employee of Dental A Team and technically I’m the employer of Dental A Team. So how does a match work? I’m guessing I don’t get a match. I’m guessing I just do 4%? Or up to…

Ryan Isaac:
No, your company matches you. It’s your own money.

Kiera Dent:
Right. So this feels funny to me. I feel like I’m wearing two hats, like Dr. Jekyll and Mr. Hyde.

Ryan Isaac:
So you still get a match. You’ll max out your 401k, and then you your match will be 4% of your salary. That’s how the match works. Up to, that’s the ceiling of the match that your company is gonna give you.

Ryan Isaac:
So whatever your salary is, you’re gonna get 40% of that, up to… I mean, you can’t go over what you put in. And it won’t anyway. It wouldn’t. The match wouldn’t. But your company will match you, but it is your money. I mean, if it didn’t match you… You know?

Kiera Dent:
So guys, you are literally experiencing here…

Ryan Isaac:
But this is a deduction. So here’s what’s cool though, that 4% that your company is gonna match you for your contributions is a deduction. Where if you didn’t get a match and you pulled out that 4% as income through net distributions, it’s taxable.

Kiera Dent:
Interesting. Okay. So now everybody’s watching me in real life trying to figure out this.

Ryan Isaac:
That’s awesome. Yeah. Very organic.

Kiera Dent:
It is. This is our real call, so I hope you guys are enjoying them. We’ll just record from here on out, right? [chuckle]

Ryan Isaac:
We should start recording. I wonder if clients would ever just say yes to that, because I feel like so many people… We should start like a mastermind where we just do like one-on-one. Anyway.

Kiera Dent:
Yeah. This is thing. So the max next year is gonna be like, we’ll say $23,000.

Ryan Isaac:
It’s 23,000. Unless you’re over 50.

Kiera Dent:
But I don’t understand how this $23,000 work. Does that mean like I can contribute $23,000 and then the company will also match, so I could technically get more than$23,000?

Ryan Isaac:
Yeah, you will.

Kiera Dent:
That’s what I thought. Okay. That was what I needed.

Ryan Isaac:
Yeah, you’ll get $23,000. Here, I’m gonna do the catch-up. $23,000 next year, and if you’re over 50, the catch-up contribution… Let’s see, what are they changing it to? $7500. So if you’re over 50, you get your $23,000 plus 7500.

Kiera Dent:
Okay.

Ryan Isaac:
There is a new change with that. Some of it’s still kind of unknown, but there’s a new change where the catch-up contribution has to be Roth 401ks, and it’s not pre-tax. But it’s $23000… What was even your question?

Kiera Dent:
$23000, and then 4% of your salary that the company would match?

Ryan Isaac:
Up to… Yeah.

Kiera Dent:
But up to what?

Ryan Isaac:
Well, let’s say your salary is 100 grand. You put in $23,000, you’re getting four grand from your company.

Kiera Dent:
Okay.

Ryan Isaac:
If your salary is 200 grand… Yes, if you’re salary is 200 grand, you’re putting in your 23 and then you’re getting eight grand from the company.

Kiera Dent:
And employees can also only… Unless they’re over 55, can only do $23,000 next year?

Ryan Isaac:
Yes. Out of their own paycheck, yes. And then the company gives them up to 4% of their salary if they’ve put in that much money too.

Kiera Dent:
So you told me something else, which I’m gonna just ask here live. There’s something I want… There’s 3% and then the last 4$ is like something weird. How does that happen? ‘Cause really, I could only be doing 3%, but I don’t understand what the new rule… What is that?

Ryan Isaac:
So there’s various ways you can set up the match. We’ll just keep it on the safe harbor. Because if you get rid of safe harbor, you literally can design 401k plans, and this is how they used to be, you can design them kind of however you want. You can exclude people, but then that testing comes in at the end of the year and it can get kinda gnarly.

Ryan Isaac:
So in a safe harbor, we’ll start with 3%. You can elect to give away 3% no matter if people participate or not. Why would you do that? Some people would do that if it’s part of the bonus structure that’s very well integrated, and it’s like people… It’s acknowledged, people know it’s part of their benefits package. They might do that.

Ryan Isaac:
For people who are running profit sharing consistently every single year, having that 3% giveaway can actually make the profit sharing a little bit more efficient, skewed to the owner, the way that the formulas work.

Ryan Isaac:
So if someone has profit sharing that’s happening every single year, that 3% give away can actually be a benefit. But that’s a plan design thing later. You can do the 4% match, but here’s what’s kind of funny, you can do it like a straight 4. Like you match them 100% on the first 4% of their contributions.

Ryan Isaac:
Or to make it a little bit more efficient for the owner, not as expensive, you can do a 4%, but they do it like this. They do the first 3% that the person puts in, gets matched at 100%. And then the fourth and fifth percent that they put in get matched at 50%. So if you add them all up, you get a 4% match. But the person has to put in, the employee has to put in 5% of their paycheck to get a 4% match. It makes it a little bit cheaper.

Ryan Isaac:
But that’s a totally acceptable legal, safe harbor provision, and a lot of people select that too. So it just makes it a little… It makes the match expense a little cheaper to the business.

Kiera Dent:
Right. Because then the employee has to put more in before the business has to pay that extra… Right.

Ryan Isaac:
Mm-hmm. Exactly.

Kiera Dent:
Okay. That’s helpful. So I think my final takeaway of all of 401k is, so you know when you read the rules to Risk or Monopoly or like…

Ryan Isaac:
I have no patience for board game rules. [chuckle]

Kiera Dent:
That’s who I feel like the tax code is. Like who made up this safe harbor, and then they’re like, “Oh, by the way, let’s add one more, it’ll be 3% for the first one, but then for the next four and five it’s only a half a percent.”

Kiera Dent:
I feel like the most psychotic Monopoly game designer is who wrote the tax code.

Ryan Isaac:
Tax code is insane. It’s insane.

Kiera Dent:
So, bottom line is, use Ryan, use Dentist Advisors. It was really helpful. I feel less stressed. And that was actually super helpful. So I hope for everyone listening, there are so many different plans. And what I think…

Kiera Dent:
I think my greatest takeaway from all of what we did was I love the confidence of you running it for me to see, does a pension plan makes sense. ‘Cause I was terrified to put that in play. But if I could offset knowing I was only wanting to run it for X amount of time, would it offset? So that was super fun to figure out.

Kiera Dent:
And then it was also like, do I just set up a regular 401k with no safe harbor on it, and what’s the risk-benefit? Could I even qualify on that to set up more of like a vesting period or things like that?

Kiera Dent:
And then to realize safe harbor for me was the best option, with a cheaper one based on the number of people I have, and noticing that I don’t need the higher level 401k company, but knowing that every year, I’m guessing come August, you and I get a hang out every year, we run the test on me again, see.

Ryan Isaac:
Yeah.

Kiera Dent:
So I almost… I like cadences, Ryan, and so I know I meet with my CPA in July and September to make sure I’m on track for tax spending. I now think I’m just gonna plug in in August ’cause my 401k, make sure that that’s ready to go for end of year, and if I need to change, I’ve got time to do it.

Ryan Isaac:
Yeah, and I think everyone should do exactly what you’re talking about. I think most CPAs and financial advisors, if they’re good ones are, they would love to talk to each other.

Ryan Isaac:
Because like I just got off a client call this morning where my client has not been contributing to the retirement plan for three years, but it’s because he built a giant building and has so many deductions for the next seven years that it doesn’t make sense to put it in the 401K, we’re just doing it after. Paying the tax… ‘Cause last year he had a zero tax rate, was 0% because of all his write-offs.

Ryan Isaac:
So that’s a great plan. Talk about it once a year. You never know if it’s time to change, if you still have the right one, if you’re maxing it out, if you should stop contributing if a spouse has some kind of change.

Ryan Isaac:
Something you said earlier, there are certain types of government retirement plans, there’s like 457, 403bs, 401ks, these are all just tax code provisions. And healthcare systems, education systems and government systems will have different types. Most of the time, like the limited… It doesn’t matter how many jobs you have, you can only put in 23,000, right?

Ryan Isaac:
But there are types of plans that can be combined with a 401k. So someone could have a job with a 401k and then have like a government job with a different type of retirement plan, and they can do both. Max out both.

Ryan Isaac:
So to your point, talk about it once a year, life changes, career changes, spouse career changes, those things like alter…

Kiera Dent:
Laws change.

Ryan Isaac:
And there’s more changing for next year too.

Kiera Dent:
Right. You and I were even just setting this up literally yesterday, we’re setting up my 401k, and remember how I was like “enhanced safe harbor”, and you’re like, “What the heck?”

Ryan Isaac:
Like, “Why are they calling it that?” I’m like, “Oh yeah, that’s the new rules coming for next year.” Like the same with the catch-up contributions, they used to be pre-tax if you’re over 50, and now the new rules are making you do them Roth, after tax, next year.

Kiera Dent:
So interesting. So that’s where I feel this is just me. I wanted to thank you, Ryan, for one, being in my life for this, and two I thought it would just be a fun podcast for you guys to hear in real time, me learning, this is me learning with Ryan.

Ryan Isaac:
Real questions.

Kiera Dent:
They are. I don’t understand it. And so helping you guys just get a glimpse into what it was. But I do think like chat with your financial advisor, chat with your CPA. To me, it was really, really helpful though, Ryan. You know where my life I want it to go, more than my CPA does.

Kiera Dent:
You and I are sitting here constantly every month talking about where am I headed, what are my goals, which I think helped you and I have a better decision on the 401k. Because you know my short-term and long-term plans, therefore we could make the plan work for us.

Ryan Isaac:
Cool.

Kiera Dent:
So I would just say reach out, chat with… Who do you chat with? Should you to with CPA or financial advisor, Ryan?

Ryan Isaac:
Yeah, both.

Kiera Dent:
I did both. [chuckle]

Ryan Isaac:
Yeah, both of ’em makes sense. You’re gonna do… They’re gonna have just different perspectives on what they’re trying to accomplish. To your point, you might have someone that has investments for you, but they don’t know your life because they’re not like a planner. Which is okay if they’re just doing investments for you.

Ryan Isaac:
But someone who knows your life is gonna know how to integrate things. Like the product, my industry’s backwards because my industry has been built on the products driving the plan, because that’s where commissions are paid, but a good planner like advisor situation where like a good coach, it’s almost like a good money therapist situation.

Ryan Isaac:
Like the plan drives the product. Your life and what you need and want, determines what products we go implement. Not the other way around. So do you have a good advisor coach person, then hat’s a good conversation.

Ryan Isaac:
With your CPA, because you might learn a few things about your tax liability for any given year that might inform you of a different decision. So both.

Kiera Dent:
Right. And I definitely share with both. But like you said, something I just value in you, and this is like me giving you a true compliment on a podcast, I just have super appreciated that the number of times you’ve walked me off the ledge to not sell the business, which I found is every other day as a business owner, this is just real life.

Ryan Isaac:
It’s totally relatable.

Kiera Dent:
Just like emotions change, just like the weather changes.

Ryan Isaac:
Totally.

Kiera Dent:
But you keeping me on track, I think is invaluable that I never realized that a financial planner could and would do, like you said, a money therapist. I mean, the number of calls you and I have had, the number of things that we’ve talked about, the number of times, I’m like, “Ryan, I’m ready to go off.” And like I said, it’s the conversation on repeat of a favorite playlist.

Ryan Isaac:
It’s normal. Everyone does it.

Kiera Dent:
You just keep having it.

Ryan Isaac:
We all do it. Yeah.

Kiera Dent:
So I just think kudos that way, and if you guys are in that boat, definitely reach out. I think you guys are very approachable. I feel like we’re very similar styles, there’s no judgment in your practice, I think there’s no judgment in your financial life with Dentist Advisors.

Kiera Dent:
And so if you’re thinking about 401k, I had no clue. This was me and Ryan having a conversation four years ago, telling me to do a SEP for three years and then 401k would come into play.

Ryan Isaac:
Thank you.

Kiera Dent:
So this has been four years in the making, so thank you.

Ryan Isaac:
I’m excited. Thank you very much. And this is going to our audience too, so I will say the same thing, which is something I deeply appreciate, is that kind of like consultative nature and human nature.

Ryan Isaac:
The reason why A Team is so successful is because it’s not just that you have strategy, you have strategy, but you can help people stick to strategy. Which just, that’s a product of having data and frequent enough communication and staying on top of things.

Ryan Isaac:
And that’s why we send you clients, because it’s not just strategy, but it’s human behavior of can you stick to that strategy. So, much love to the A Team.

Kiera Dent:
Well, thank you. Thank you.

Ryan Isaac:
You guys do a fantastic job.

Kiera Dent:
Well, there’s mutual love between both companies. I feel like we’re sister companies and Ryan and I were brother and sister in another life. So for those of you guys looking, be sure to reach out to Dentist Advisors.

Ryan Isaac:
Ryan, how can they connect with you if they’re interested?

Ryan Isaac:
Dentistadvisors.com. And I’ll always field an email, ryan@dentistadvisors.com. Email me. Let’s do this. [chuckle]

Kiera Dent:
And if you put Dental A Team in the subject, he’ll definitely like answer faster.

Ryan Isaac:
I’ll totally answer. Copy Kiera, and I’ll be like, I’ll for sure answer. What about you? How do they find the A Team?

Kiera Dent:
You can email hello at thedentalateam.com. That’s a little bit easier than Kiera. But always email Kiera, K-I-E-R-A, @thedentalateam.com, listen to the podcast, come join us. Any way we can help you guys be more financially secure and be more business confident, practice confident, that’s what we’re here for.

Kiera Dent:
So Ryan, thank you. It was a good one.

Ryan Isaac:
Thank you. Thanks for having me. Thanks for being here. I appreciate it, as always.

Kiera Dent:
Alright. All of you listening, thanks for listening. I’ll catch you next time on the Dental A Team podcast.

Retirement Plans, Year-End Planning