Why the Need for Career Associates Is Booming – Episode 315

The growing number of multi-practice owners and DSOs is causing a major shift in the need for career associates. What could this mean for you? On this episode of the Dentist Money™ Show, Ryan and Matt look at what to consider—earning potential, tax strategies, retirement—if a dentist is wondering about the big differences between ownership and being a long-term associate.

 

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Podcast Transcript

Ryan Isaac:
Hello and welcome back to another episode of the Dentist Money Show brought to you by Dentist Advisors, a no-commission, fee-only fiduciary comprehensive financial planner just for dentists like you all over the country. Check us out at dentistadvisors.com. Today on the show, Matt and I are going to talk about the career associate, but this episode is not just for those thinking or in the middle of being a career lifelong associate. This is definitely an episode for owners as well because these career associates are the kind of people you wanna have in your practice. If you’re an owner running a business on an associate model, these are the people you want to stick around and you wanna keep them happy because they wanna do this for their whole career and build your brand and your business and the community, just as much as you do.

Ryan Isaac:
So this episode, by the way, came from a question from the Dentist Advisor’s discussion group on Facebook. If you have any questions, go there, post a question, we’ll answer it and we’ll feature it as an episode, more than likely, of the Dentist Money Show or a webinar. And if you wanna chat with one of us directly, go to denstistadvisors.com, click the “book free consultation” button, have a chat with one of our very friendly dental-specific advisors, and thanks again for being here everybody. Enjoy the show.

Announcer:
Consultant Advisor, 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.

Ryan Isaac:
Welcome to the Dentist Money Show where we help dentists make smart financial decisions and avoid the bad ones along the way. I am Ryan Isaac and I’m here with a very festive holiday celebration-y. Matt the Hollywood Mountain Mulcock. Matt, what is up?

Matt Mulcock:
Wow. What’s up, Ryan? I am festive.

Ryan Isaac:
Are you?

Matt Mulcock:
I’m feeling pumped about this. Last night, we got in our Christmas jammies.

Ryan Isaac:
What?

Matt Mulcock:
We took both my kids to see Santa.

Ryan Isaac:
Oh, okay.

Matt Mulcock:
And they both did fantastic. Our son, we were a little bit concerned with, he’s six months old, and we were like, “Oh, you never know with those little babes.”

Ryan Isaac:
A little weird.

Matt Mulcock:
But he loved it, he was grabbing Santa’s beard. And by the way, this Santa that we went…

Ryan Isaac:
Legit?

Matt Mulcock:
He is the best Santa of all time. He’s incredible.

Ryan Isaac:
Real beard? He grows it all year long?

Matt Mulcock:
Real. Oh, it’s real. I’m pretty sure it might be Santa.

Ryan Isaac:
[chuckle] That wasn’t at a local Salt Lake City orthodontist office, was it?

Matt Mulcock:
[chuckle] No, it was not.

Ryan Isaac:
No, I ask seriously, because we have a long-time friend and client, we won’t mention names, but he always has or has for years, there in Salt Lake City, had a Santa and Mrs. Claus show up. And it was like that was their job during the winter months and it…

Matt Mulcock:
It’s probably the same guy. This guy is a very famous Santa here. He comes to a place called Jolley’s. Shout out to Jolley’s, all our Jolley’s listeners. It’s a store in Salt Lake.

Ryan Isaac:
Cool.

Matt Mulcock:
And he’s the Jolley’s Santa. He could be for hire going to orthodontist’s office as well, who knows?

Ryan Isaac:
[chuckle] An orthodontist near you.

Matt Mulcock:
Yeah, he’s for hire to go to dental practices and whatnot.

Ryan Isaac:
Well, that is very jolly. And speaking of orthodontist’s offices. [laughter] I don’t know, I’m…

Matt Mulcock:
Speaking of, let’s make this transition smooth. Here we go.

Ryan Isaac:
Today we’re talking about a question, we’re gonna give an answer to a question. We’re bringing our As to your Qs in this… It’s not really a Q and A session, this has one topic, but this came from a question.

Matt Mulcock:
It’s one Q that we have one A to.

Ryan Isaac:
We’ve got one A for your Q. We probably have a lot of As for your Q.

Matt Mulcock:
Yeah, we do, we always have a lot of As.

Ryan Isaac:
But we’ll bring them, we’ll bring the As and we’ll bring strong As, the strongest of As as we can possibly bring to your Qs. And so this one, this is a plug though, because this is a plug for the Dentist Advisors discussion group on Facebook. And if you’re not a part of it, you should go there. And if you haven’t posted in a while, you should post because we love answering questions in there, and we love using questions for topics, webinars and Facebook Lives and podcasts. And the more specific the question, the better. This one, we won’t name names ’cause it’s a private group, but if you’re in there, you can go find it.

Matt Mulcock:
Yeah.

Ryan Isaac:
First of all, thanks for asking the question, to this good doctor. And really excited to talk about this question. Here’s the question. First, we’re gonna start with the first thing they said, which is, “Love the show.” We’re gonna start there.

Matt Mulcock:
We’re gonna take that, of course.

Ryan Isaac:
We’re gonna let everyone know that they said they love the show.

Matt Mulcock:
They do.

Ryan Isaac:
And if you start with that, your question gets priority. [laughter] It gets answered with better answers. We bring…

Matt Mulcock:
If you give us a shout out, we will most likely read the entire question.

Ryan Isaac:
Yeah.

Matt Mulcock:
And we will give you a shout out back and we will probably feature you on the show.

Ryan Isaac:
Feature you on the show, but we’ll bring better As to the Q.

Matt Mulcock:
Yes.

Ryan Isaac:
If you compliment us. We’re that needy. Okay, so love the show. And they said, “I know a vast majority of your listeners and clients are owners,” which is pretty true.

Matt Mulcock:
Probably true.

Ryan Isaac:
It’s true. I’m going slow on that part, because about 18 months ago, we made it a little easier for brand new associates, graduates to hire us with a service model that’s kind of catered to them, and we’re still always trying to make that available. We’re trying to make access to a financial advisor for a dentist as easy as possible. We’re always working on that, still working on some cool stuff right now.

Matt Mulcock:
We’re making that easier. Hint, hint, things coming soon.

Ryan Isaac:
Making moves, man. That’s what you say.

Matt Mulcock:
Making moves. We’re making money moves, as they say.

Ryan Isaac:
Money moves, yeah. You’re supposed to say money moves. Anyway, so it’s probably true. But yes, anyway, they said, “I was wondering if you guys could do an episode targeted to long-term, W2 associates, like tips on how to build wealth, tax strategies, 401k, retirement accounts, 529s and preparing for retirement without ownership. Would also like to hear your perspective on how much of a disadvantage or impact long-term associates could hurt financially, ha-ha.”

Ryan Isaac:
They’re a little tongue-in-cheek there. Is it gonna hurt? Is it gonna be a big impact? Today we’re talking to, but we’re talking about that long-term career, W2 associate, non-owner. But I just wanna say this before we jump in and get started on this, ’cause there’s a lot to say, is I still think this is important content for owners, because on the other side of a non-owner…

Matt Mulcock:
You’re just saying that so they won’t turn off the show. [chuckle]

Ryan Isaac:
Please don’t leave.

Matt Mulcock:
Don’t leave us. We’re needy. We need you.

Ryan Isaac:
We’re gonna try to title this in a way that makes you listen this long.

Matt Mulcock:
Yeah, at least you get to this part.

Ryan Isaac:
Yeah, but the other side of a career W2 associate is someone who owns the practice. And as dentistry continues to evolve and change, and business models and partnership and associate models change, it’s just important to stay on top of what will motivate a long-term career associate to stick with your practice and be part of the brand and the experience for the community. Because the downside for an owner who has an associate model, of course, is when the associates kind of they get trained, they spend time and then they leave, ’cause they wanna go do what you’re doing as an owner. So people running an associate model should be and are highly motivated to make sure those associates will want to be there for a very long time. Especially, if you find a career associate person who says, “Yeah, this is a job I want in the town I want for a very long time.” How do we make sure that person is willing and able to stick around for a long period of time and not bounce? So everyone needs to keep listening, that’s the moral of the story.

Matt Mulcock:
Yeah, so everyone, listen, do not hang up.

Ryan Isaac:
No one’s turning this off right now.

Matt Mulcock:
Please don’t hang up.

Ryan Isaac:
Let’s just talk about… Matt, let’s just kind of spitball a few scenarios on why someone would be a long-term career associate W2 dentist and never be an owner. And I guess what’s really cool that I’ve, you’ve seen this too, Matt, over the years, is how the career of dentistry is evolving. It really used to be you just have to own a practice, and more than likely, it’s one location, one doc, you start with six days a week, you’re probably doing your own phone answering and hygiene. Eventually, you whittle down to four, then three, then maybe two, and you probably just let the practice die, you don’t even sell it, it just dwindles into oblivion, and then you’re done.

Matt Mulcock:
You just say goodbye to it, it rides off into the sunset.

Ryan Isaac:
Yeah, and then you just kind of walk away slowly at 70 or something. And you know associates were not as common, and partnerships were kind of a different thing in multiple locations, but now those are all just commonplace. So there’s just so many different business models. So having said all that, what is your experience, Matt, talking to associates and career associates? What are some of the reasons people are thinking about doing that or maybe should consider just being an associate? Just what’s your experience talking to a lot of associates over the years?

Matt Mulcock:
Yeah, I think the first thing that comes to my mind is they understand the trade-off they’re making, of the likelihood of making more money if they’re an owner. I don’t think it’s true in every case, there’s always exceptions to that rule, but I think even the comment by this wonderful doctor who said that she loves the show, shout out. She says at the end, jokingly sort of, “Tell me how I’m screwing this up” kinda thing. So I think it’s kind of understood that most likely, you’re gonna make more money as an owner than you are an associate. And I think, again, all the career associates we’ve talked to understand that.

Ryan Isaac:
Realize that, yeah.

Matt Mulcock:
Yeah, I think the trade-off they’re making there though, and why I think probably the number one reason why the career associates I’ve talked to, the reason they’re willing to make that is what they’re basically doing is they’re buying simplicity. They’re like, “I don’t wanna deal with… I’m willing to deal with the lower income.” And again, I’m looking at that as, I’m purchasing for that lower wage, a simpler life, where I don’t have to worry about staffing and retirement plans, and what type of insurances are we on, and just… ”

Ryan Isaac:
So many things.

Matt Mulcock:
The list goes on. I’m gonna come in. I love working with patients, that always comes back to, I’d say, a theme I hear a lot. “I love working with patients.”

Ryan Isaac:
I love the clinical, I’m a scientist, I’m an artist.

Matt Mulcock:
I love the clinical side of things, I don’t wanna run the business. I just wanna do my thing and go home and turn on Netflix,” and so that’s what I hear most times.

Ryan Isaac:
Yeah, there’s just all these different reasons. Dads and moms wanna just have more of a dad/mom life than a business owner life, so career associate. Sometimes, like you were saying, owners, mid-career, just realize like, “Man, this ownership thing is not for me, I’m probably making less money, I hate it, it’s driving me crazy. It’s a huge stress. I just want the patient experience and the clinical.” And they go back to being associates. I’ve had clients who have done that. Frankly, there are dentists who own practices who should not be business owners, they know it.

Matt Mulcock:
Yeah, we see that a lot.

Ryan Isaac:
Yeah, they know it when we talk, I know it. I’m like, “Man, it’s killing you from the inside, because you just have such a grading relationship with this entrepreneur life and business owner life that wasn’t… ” That’s the funny thing about dentistry, I get this all the time when I just meet new people, friends or neighbors or something, and they ask what I do for a living, and when they’re like, “Why dentists, what makes them so different?” And man, it’s just such a huge key part, a dentist usually becomes a dentist for the clinical to do dentistry. That’s usually why he became a dentist, to do dentistry.

Matt Mulcock:
Yeah, that’s usually their first hint.

Ryan Isaac:
Although nowadays, it’s funny, when we’re talking about the business of dentistry, it’s now an industry where you don’t have to do clinical, the funding to grow an operation is basically unlimited from any number of banks, cheap, really great locked-in financing. Margin’s a killer.

Matt Mulcock:
There’s one of two reasons why dentists go into dentistry, it’s to become a dentist or to become a real estate mogul. There’s only two reasons.

Ryan Isaac:
Shout out to our moguls. So true. So I just think about the reasoning and then the training for dentists is to do dentistry. And then you spend 10 years in schooling and training and residencies and clinical practice. But the unique thing is why when people ask, “What’s unique of a dentist? Is their whole life is clinical training, it’s like scientific clinical training, and then they’re like, “Oh, yeah, by the way, you have to be an entrepreneur, if you want to do this job.”

Matt Mulcock:
You also have to run a business.

Ryan Isaac:
Yeah, you gotta run a business, which takes so many other paths that have nothing to do with how good you are as a dentist. And I have met many excellent clinicians, and people listening might be in this category, or they might know of this, excellent clinicians. Their peers would describe them as, “Oh, that person is a killer dentist,” their clinical skills are amazing. But just not cut out, built for, or even desiring the entrepreneur business owner life. It just could be further from being…

Matt Mulcock:
And that’s okay.

Ryan Isaac:
Yeah, totally okay. And I think the career of dentistry needs to be more okay with people who are just saying, “I don’t wanna own a business for a living.”

Matt Mulcock:
Yeah.

Ryan Isaac:
Yeah, all these different reasons. And I like that you said that a career associate is just they’re buying… What did you call it? Buying flexibility or buying…

Matt Mulcock:
They’re buying simplicity.

Ryan Isaac:
Simplicity. Yeah, they’re buying it with their income.

Matt Mulcock:
They’re buying it with a lower wage.

Ryan Isaac:
They totally are, man. So, I guess that’s the first thing I wanna just kinda talk about, is the reasons why people would do it and just to kind of make it normal. And think about if the DSO takeover, the trends, I have no idea how to forecast this. My crystal ball, it broke a while ago.

Matt Mulcock:
Yeah, mine too.

Ryan Isaac:
I was working super hard on the crypto markets with it and it cracked, and then I can’t even… It died. Doge broke it. [chuckle]

Matt Mulcock:
Doge broke yours. Yeah.

Ryan Isaac:
My crystal ball. Yeah, I had a back-up, but Tesla broke that, and so anyway. [chuckle] So I have no idea how to prick this, but I’ve heard some smart people say that the DSO or the multi-practice kind of corporate model could get up to almost a third of the dental industry. And I don’t know where it’s at right now, I think it’s…

Matt Mulcock:
I think it’s close to 20%, isn’t it?

Ryan Isaac:
Yeah, I was gonna say it’s over 15, it’s gotta be close to 20. It’s not crazy to think it could be headed there, close to a third of the dental industry. And believe it or not, and this is a side bar, but Matt, you’re seeing this too. I have clients who are running gigantic businesses with huge offers and they’re turning them down all day long ’cause they’re like, “No way, I’m gonna do this forever and I’m gonna do this thing forever.” So at some point, it’ll stop. Where I’m getting with that though, is that’s still a big chunk of the industry, and it means that there’s gonna be a need for career employees, career dentists. And a lot of these DSOs and these new group models, they’re thankfully turning some of the old corporate dentistry on its head. It’s no longer cheap, crappy, impersonal service from nameless, faceless doctor that just switches out every time you go.

Ryan Isaac:
These are businesses that will be ran by community people who are there to stay. Their face is still part of the brand and the experience of that practice, whether they’re an owner or not. And if it is a third of the industry one day, that means there’s a lot of associates that’s gonna be out there, a ton of employees, they’re gonna be out there. So we gotta start dealing with the fact that it’s normal, it’s probably gonna become even more normal. I’d like that option for a lot of people who they’ve done the math in their lives. Like you said, they wanna buy simplicity, they wanna buy more of their time back. And that’s just the path they’re choosing.

Matt Mulcock:
And they’ve probably established at some point, whether it be conscious or not, they’ve probably established what their enough is when it comes to income. They know what they produce, they know the percentage they’re gonna get paid on that production, and they’re like, “Yeah, I’m good with that.”

Ryan Isaac:
Very true.

Matt Mulcock:
And I think that’s fine.

Ryan Isaac:
Yeah. Well, I’m just thinking of the math. Life is expensive. If you’re listening to this right now, we’re recording December 2021, inflation is pretty high right now.

Matt Mulcock:
Inflation’s going wild.

Ryan Isaac:
Yeah, it’s pretty high.

Matt Mulcock:
Have you seen the cost of bacon?

Ryan Isaac:
Oh, freaking bacon. I’ve got a little pack in my fridge.

Matt Mulcock:
Don’t even get me started.

Ryan Isaac:
I’m scared to crack it open.

Matt Mulcock:
I know, I wouldn’t. I’d sell it.

Ryan Isaac:
Get the bacon sizzling. [chuckle] Yeah, but life’s expensive. You throw kids in the mix, housing is as expensive as it’s ever been. Life’s expensive. But I’m just thinking of the math, and you can make $250,000 and still live a life and save for the future. You can make $200,000, $220,000, $300,000. And those are associate wages, those aren’t even top-end associate wages, they’re not bottom-end, but they’re not entry level, but those are normal associate income, totally, quarter million, $300,000, that’s normal associate earnings for a good producing associate, and you can build a whole life. Now, you’re not gonna live in the most expensive neighborhood, drive the best cars, you’re not gonna have the most extravagant vacations, but you can live a life and a normal one, have stuff you want and save for the future and retire by being a career associate with an average associate wage, a normal. I’m not talking about new grad, $120,000.

Matt Mulcock:
You’ve got some people listening right now being like, “What are you talking about?”

Ryan Isaac:
Yeah, you just graduated, got your first job for $120,000 and you’re like, “That’s not true.” I’m like, that’s not what I’m talking about, man. Let’s just talk about, let’s be optimistic, let’s throw some hope out here in the show. What are top earning associates making? People who are making a good living as an associate, who have you met? Not who, but what are they making?

Matt Mulcock:
Yeah, let me name their names and give…

Ryan Isaac:
[chuckle] Addresses.

Matt Mulcock:
Addresses and account numbers.

Ryan Isaac:
Yes.

Matt Mulcock:
No. I know several associates, I work with several associates, or we as a firm work with several associates. And again, I know personally who are making $400,000 to $500,000. I don’t think that’s…

Ryan Isaac:
Does that seem like, “Wow. That’s a one-off situation, $400,000 to $500,000, $450,000?” Does that seem crazy to you?

Matt Mulcock:
I think that’s high. That’s on the high end of the spectrum, for sure. I’d say that associate is in the top 10%, I would imagine.

Ryan Isaac:
’cause here’s what’s interesting about that data when you think about that. It’s not because it’s an impossible target that’s an anomaly, it’s because most associates, when they start becoming high-producing associates, they bail and they go start a practice.

Matt Mulcock:
Exactly.

Ryan Isaac:
Or they buy one. So the longevity associates who get through that learning curve when they’re slow and they’re learning and they need mentors, there’s just not, by sheer numbers yet, I think there will be more, just 40-year-old associates who’ve been doing it for a decade making half a million dollars. Because most of the time they go on practices.

Matt Mulcock:
Yeah, there’s some selection bias there, right?

Ryan Isaac:
Yeah, is that what it would be called, selection bias or survivorship?

Matt Mulcock:
It sounds good.

Ryan Isaac:
Survivorship.

Matt Mulcock:
Survivorship bias, yeah, let’s go with that.

Ryan Isaac:
It’ll be kind of the… I don’t even know.

Matt Mulcock:
Some type of bias that makes it sound really fancy.

Ryan Isaac:
Guys, there’s a bias at play here. We don’t really know what it is yet.

Matt Mulcock:
Yeah, there’s a bias at play, for sure.

Ryan Isaac:
We’re gonna research that. But anyway, so I think that’s part of it. It’s top end, but another part of it is high producing associates usually leaving to start a practice. But what I wanted to illustrate with that is it’s not crazy and we all have owner clients who are paying associates almost that much money. I can think of quite a few offices that are multi-location, 10-associate practices and their top earners are in the 400s because they’re doing all the production. So what we’re trying to say here is that the income range, you can… Let’s put this in perspective, actually. If you’re making 400 grand as an associate, what does that translate to as an owner? Let’s back into that. What would that be as an owner? So let’s just say that as an owner, and this would be general dentistry, it’s gonna vary a little bit for the specialties, but as an owner, having let’s say a 40% profit margin, 40% profitability, would be respectable.

Matt Mulcock:
Do I need to bust out the old calculator?

Ryan Isaac:
You can, yeah. It’d probably be smart.

Matt Mulcock:
Or should we just do it by hand?

Ryan Isaac:
Probably smarter than me doing it in my head. What I’m trying…

Matt Mulcock:
Do it by your head, I’ll test your numbers.

Ryan Isaac:
Yeah, I’m just trying to get some context here. So if we’re just saying that a normal practice with 40% profitability, that’s 60% overhead. So people get way better than this. That would be like being a producer in a million dollar practice with a 40% profit margin, making 400 grand as an owner. And then you making 400 grand as an associate, that’s the equivalent of what you’d have to go own. If you’re an associate making 400 grand, you would have to have a million dollar practice with 40% profitability, you still doing all the production and hygiene, it’s gotta be cranking, for you to make up that income. And so it’s not nothing. As an associate, when you start getting up, I would say, into the mid to high threes and then over four, now you’re starting to talk about the equivalent career path is a fairly substantial single doc, single-location practice. It’s not nothing practice. It’s a 750 to a million plus practice in order to have that 350-plus thousand dollar income as an owner. And as an owner…

Matt Mulcock:
And there’s more.

Ryan Isaac:
And, wait.

Matt Mulcock:
Wait, there is more.

Ryan Isaac:
This is such a side note but my wife was showing me these cool knives she wanted to buy me because it looked all old and cool and stuff for like chop…

Matt Mulcock:
Did she give you the pitch?

Ryan Isaac:
Well, their actual ad was, “Watch as it slices and dices.” [laughter] It’s like these 90s infomercials anyway. Wait, there’s more. What I’m saying is this is assuming that the equivalent ownership path that you actually hit that kind of a profitability. Matt, how many owners have you met where their profit margin is less than what they would pay their associate? Call it 30%.

Matt Mulcock:
Oh yeah. Yes, that happens. I don’t want to say all the time, but it definitely happens.

Ryan Isaac:
A lot. It happens a lot. So the assumption is that you’d have to not only own a practice, but you’d have to be such a good business owner, which is so much more than just being good clinically, that your profit margin is high enough to pay you more than you could pay as a high producing associate. And that’s a whole other life that we started this thing by saying not everyone wants to have. Now, more than ever, that’s completely fair and open. So just know, for part of this question here, that if you’re considering the life as a career associate, the income range is totally there and there, more than ever, are now practices where owners of these multi-location practices, especially, more than likely, the bigger they get, they’re not wanting to even do clinical. The other side of this that we see all the time are the owners who are like, “I’m trying to get out of clinical. I need to be out of it. I’m two days still, and it’s too much. I gotta run these businesses.”

Matt Mulcock:
They’re trying to build three, four, five locations, and just treat them as businesses.

Ryan Isaac:
Treat them as businesses and just run it and mentor and teach and be the leader of the people, which is very grand vision. [chuckle]

Matt Mulcock:
Yeah, leader of the people. It’s like you, you are the leader of our people.

Ryan Isaac:
Oh, that is a scary thought. Yeah. So on the other hand of it, other side of this, we’re seeing the owners that are like, “I’m trying to get out of clinical,” which means there is now room for top producers, top producing associates to come in and make 350, 4-500 grand, ’cause the owner doesn’t wanna produce it all. They need a full- time… You’re running the show, you’re producing all the revenue here. So the income potential, more than it ever has been, is there for an associate and I think it’s just more normal because of all these different business models and people are starting to just say, “I’m not sure running the practice is for me.”

Matt Mulcock:
Is for me, yeah.

Ryan Isaac:
I wanna use this quote, I told him I would. I have a friend in my new neighborhood that I’ve met, coolest dude ever, and his career is he runs…

Matt Mulcock:
Wow, that hurt a little. Just saying.

Ryan Isaac:
Yeah. [chuckle] Sorry.

Matt Mulcock:
That hurt a little.

Ryan Isaac:
He runs fast food franchises. His family group, they own 40 or something, it’s insane. They have 600 employees. I can’t even wrap my head around it. But he was telling me, ’cause we were talking about running teams of people and how I was saying, “Yeah, people, it’s the best part of running a business and also the hardest.” And he goes, “You only say that people are the best part of a business if you’re writing a book about it.” [laughter] Yeah, he runs fast food.

Matt Mulcock:
He’s not wrong, I’m sure.

Ryan Isaac:
He’s not totally wrong. He runs fast food businesses, it’s a little bit different than probably dental office, but…

Matt Mulcock:
Well, maybe not. Based on what we hear, who knows?

Ryan Isaac:
Yeah, so there’s just so much to, “I’m gonna be an owner. I’m gonna have five locations and seven associates or 10 and I’m just gonna be in charge of the people.” It is probably really rewarding sometimes but maybe the bane of your existence and the reason why you might die young.

Matt Mulcock:
Yeah, right. And I think it goes without saying that by taking on those risks, by taking on that stress, the potential as that owner…

Ryan Isaac:
They make more money.

Matt Mulcock:
Is far greater than an associate. I don’t want people to get confused here.

Ryan Isaac:
It’s not equivocal.

Matt Mulcock:
We’re not saying that it is not even close. As an owner, your potential to make more money than even that 400 is far greater.

Ryan Isaac:
Not even close. The person that… Yeah.

Matt Mulcock:
But what we’re highlighting here is there are true costs to that, the stress, the sleepless nights potentially, the risk you’re taking on obviously. There is true cost to that but some associates, career associates, again, they just don’t wanna take it on.

Ryan Isaac:
Matt, it’s time.

Matt Mulcock:
Time for what, Ryan?

Ryan Isaac:
It’s time to book a free consultation at dentistadvisors.com. Just click on the big book free consultation button on the homepage and talk to one of our friendly advisors today. So let’s talk about some of the specifics. Matt, tell us why retirement plans for associates are kind of awesome compared to owners, especially owners with huge practices and 100 people teams.

Matt Mulcock:
As far as an associate goes?

Ryan Isaac:
Yeah. We’re setting up a retirement plan for an associate, just a career associate, a 1099 associate. Well, let’s make the distinction. Yeah.

Matt Mulcock:
Yeah, I was gonna say we probably need to make a distinction here. There’s kind of two types here. If you’re a 1099 independent contractor associate, what that basically means is they pay you at what we call a gross level. They basically just give you your money from your production and then you have to pay your taxes and worry about all the details there. The beauty if you’re able to be a 1099 is a lot of flexibility. You’re basically a business owner. But guess what? There’s no staff. You’re the only staff member. So retirement plans are great ’cause you can utilize the same plan as an owner but you don’t have to worry about the staff. The alternative to that is a W2 associate. You are a staff, you are actually part of the staff. They are taking out your taxes for you. You could be part of their retirement plan if they have one, but you have very little control over that if you’re a W2 employee.

Ryan Isaac:
Yeah, we’ve covered this in another episode. W2s are getting to be more common than 1099s, but it’s still not unheard of at all to be a 1099 associate, at all.

Matt Mulcock:
Yeah.

Ryan Isaac:
So as a 1099 associate, your retirement plans are a little bit more flexible, like Matt was saying. You can put in a bigger retirement plan in your own personal S Corp, you have no employees likely and you can max fund a pretty big retirement plan without having to give any of your employees, which is cool. However, like you said, man, you’re in charge of doing your own accounting or running your own expenses and paying both sides of the payroll taxes, that’s on you too. And it can be more complex and it can be more stressful, a 401k. And I guess here’s where the message to owners, if hopefully you’re still here with us, comes in.

Matt Mulcock:
They turned it off long ago.

Ryan Isaac:
The reality is these are the questions long-term associates are asking. Can I make enough money? Can I save enough in a retirement plan? Do I have access to health care? Do I have good benefits? Is this a good long-term place for me? So one of the things you can do as an owner, and this also helps you selfishly so I have no problem with this, you should have a retirement plan in your practice. And as an associate, if there’s a retirement plan in your practice, get that free match, get that free money all day long.

Matt Mulcock:
Oh, yeah. Definitely.

Ryan Isaac:
It’s a good chunk of money. It increases your savings rate that someone else is gonna chip in every single year. And yes, believe it or not, maxing out a 401k as a career associate can build up to a very large portfolio by the time you’re done working, huge. We could do some math on that. Right now, in 2022, 401k max is gonna be…

Matt Mulcock:
20,500.

Ryan Isaac:
20,500. So let’s just…

Matt Mulcock:
If you’re under the age of 50.

Ryan Isaac: $20,000. Plus, you’ve got…

Matt Mulcock:
This is on the fly, people. This is on the fly.

Ryan Isaac:
Plus a match. Okay, if you’re making $250 or we’ll say $300. If you’re making 300… What do you wanna use? 300?

Matt Mulcock:
Yeah, the max that you can use for income to match as a W2 employee is 290, I believe.

Ryan Isaac:
290, and that goes to… Does it go 305 next year? Whatever.

Matt Mulcock:
Oh yeah, might go up.

Ryan Isaac:
Let’s just say it’s a 4% match on the maximum. That’s another $11,000. So here’s the deal. You max out as an employee under age 50, we’re gonna say it’s just an average of about $30,000 a year. How’s that? That’s fair, right?

Matt Mulcock:
Yeah.

Ryan Isaac:
We’re gonna go 20 years on this sucker and is this illegal? Can we do this? [laughter]

Matt Mulcock:
What? Give them the numbers?

Ryan Isaac:
Yeah. We can give them the numbers.

Matt Mulcock:
Yeah, we can give them numbers.

Ryan Isaac:
Alright, 20 years, we’re gonna go $30,000 a year. That’s your contribution plus your match. Let’s go a measly 7% rate of return, okay?

Matt Mulcock:
Puny, that’s piker return right there.

Ryan Isaac:
At 20 years, you’re at about $1.3 million, just shy of it.

Matt Mulcock:
Just 20. Go to 25 and then go to 30.

Ryan Isaac:
Well, we’re gonna increase. So we’re gonna take the $1.3, the $1.2.

Matt Mulcock:
I like this game.

Ryan Isaac:
Now, instead of 30 a year, now you’re 50. So now your contribution is just out of your check or 25 grand, plus your match is still another 10. So now we’re gonna do $36,000 a year, is now our… And so from age of…

Matt Mulcock:
0:31:09.7 Matt: Am I keeping the total here on my end?

Ryan Isaac:
I’ve got it.

Matt Mulcock:
Okay.

Ryan Isaac:
So from age 50, let’s go to 65. 15 more years, okay? We’re gonna keep our 7% return from age…

Matt Mulcock:
Puny returns.

Ryan Isaac:
Let’s recap what we just did. From age 30 to 50, we were saving an average of 30 grand a year from the 401 [k] plus the match and we got to about… It’s actually $1.23 million for those 20 years and a 7% return.

Matt Mulcock:
Yeah, tiny.

Ryan Isaac:
That’s where we get in trouble. We can’t start talking about returns and what we’ll get.

Matt Mulcock:
Okay, you’re right. It’s a solid return.

Ryan Isaac:
That’s a fair but very conservative assumption. Now we’re gonna go 15 years from age 50 to 65 and you’re gonna use… In a 401k, there’s what’s called the catch-up contribution. A lot of retirement plans have them. IRAs have them, simple IRAs have them. You can put more is what it’s saying. So now we’re gonna do more often as 15 years, same rate of return. And now, by age 65, if you started at 30, we’re sitting on a $4.3 million portfolio, just in the 401k.

Matt Mulcock:
Booyah!

Ryan Isaac:
$4.3 million is enough to give you…

Matt Mulcock:
Give me that withdrawal rate.

Ryan Isaac:
If you pull out about 4% a year, which is arguably historically sustainable forever, meaning you’ll begin and die with that much money, you can pull out about $172,000 a year without ever running out of that money. We’re not talking about inflation, today’s dollars is another… These are on the fly. [laughter]

Matt Mulcock:
Come on. We’re doing this on the fly, people. Give us a break. We’re just going on the fly.

Ryan Isaac:
If this was confusing, which it might be ’cause this is more webinar-y style topics, what the math is telling us to answer this person’s question, is that just being a W2 associate maxing out a 401k and getting a match for a whole career is more than enough money than you would need. This doesn’t even count for outside of the 401k investing or another income in the household from a partner or spouse that’s also saving money for retirement or any other assets you’re owning. Things like tax deductions, if you’re a W2, you’re just not gonna have unless you’re a 1099 and you have your own S Corp or LLC. You don’t get a lot of the write-offs ’cause you’re just a W2 employee, right, but you can still build the wealth. You can’t put a spouse on payroll or kids on payroll ’cause you don’t own a company if you’re a W2. So that was kind of the question too is: What about kid’s savings and all that kind of stuff? But I think that’s pretty clear to me that a career associate person, and I haven’t found that it’s difficult for a long time associate to max out a 401K. Have you? That’s not…

Matt Mulcock:
No.

Ryan Isaac:
Not a brand new graduate, it’s usually the guy…

Matt Mulcock:
Yeah. We’re talking established. Yeah.

Ryan Isaac:
We’re talking about the person who’s asking, I’m gonna do this into my 60s as an associate, and it’s gonna be my full-time job. And so yeah, the math checks out. The things you’ll give up, some tax breaks if you’re a W2 ’cause you just can’t write things off ’cause you don’t own a company, you can’t put kids and spouse on payroll, those are some of the things you’d give up but it’s okay.

Matt Mulcock:
Yeah. It’s like what you’re gaining in simplicity, you’re maybe giving up in, again, we’ve totally established, you’re giving up in some income potential and you’re giving up the ability to be more customized and more strategic with your taxes. You’re getting a simpler life which leads to, again, less ability to do different tax strategies as what a business owner would do.

Ryan Isaac:
That’s the trade off. You, as a career associate, will be able to do the thing that our owner clients sometimes complain that they can’t do which is just let the office know that, “Hey, two weeks from now, I’m gonna leave town for a week.” And, “Cool, see you later.” And the owners are the ones who are like, “I have to plan vacations six months in advance ’cause I’m the owner and I have to be here to cover everything and I gotta do it all myself and if I’m not here, then no one works and there’s no jobs and there’s no income.” And so there are those trade-offs. Will a successful owner of a large practice or multiple locations earn more money and have a bigger net worth? Yeah, they will if they do it right.

Matt Mulcock:
For sure.

Ryan Isaac:
And they’re gonna do it right.

Matt Mulcock:
And hopefully, though, like you said, those numbers weren’t too confusing for people. I think the essence of what we’re going over there is, and I think what I gathered from her question, kind of the point of her question is, can I still make this work and build a retirement and build wealth as a career associate?

Ryan Isaac:
The answer is?

Matt Mulcock:
The answer is 100%, yes. Whatever direction you go, success comes down to the same thing. It’s being disciplined with your cash flow. It’s investing over a long period of time. Those things remain the same. The details in the middle when it comes to your lifestyle, yeah, there’s gonna most likely be some differences there.

Ryan Isaac:
Yeah. Now, you talk a lot about this, having balance and defining what success even means. So define what the term lifestyle even means. For some people, that actually means having the money to spend on expensive items. For some people, that’s it. For other people, it’s just having the time where they’re not dealing with employees or the marketing or the P&L or the meetings or whatever and they just clocked out and they’re done and then now they could just go walk the dog down the neighborhood or go watch soccer practice or coach a team or something.

Matt Mulcock:
Yeah.

Ryan Isaac:
I think most people who are in the boat of debating whether or not to be a career associate are debating, they’re digging into those questions: What does success mean to me? What does lifestyle mean to me? What does happiness mean to me? And then they’re asking kind of ancillary, Can I support a pretty good life as a career associate? The answer is totally, yes. And yeah, I guess one of the other points to this is even a career associate, as I’m thinking of all the possible pieces of advice and strategy and logistics of even just running a high income careers in associate, they’re still intricate and they can still be complex because the reality is, if you’re a high earning career associate, you have more money left over that can fit in a 401k every year. 401k can fit 20 grand if you’re under 50. And if you’re…

Matt Mulcock:
Yeah. Hopefully, you have more left over if you’re making good money.

Ryan Isaac:
Yeah, if you’re making good money and you have a decent savings rate, you’ve got more money than can fit in there. That means you’ve got money that needs to go to other places and that’s where it can get complex. So again, it might seem more simple, it might seem a little bit easier, but on the financial side of things, decision-making over maybe a 30-year career, and then what? After you graduate, it could be another 50 years of life. There’s still a lot of questions you’re gonna need to have answered and it can still be of a high benefit to have a financial advisor working with you. We kinda have this data now where we can say, yeah, we’ve been hired by quite a few associates. A lot of them younger but a lot of them… There’s a chunk of them that are career associates that have hired us and their questions and their financial decision making, especially if they’re another income in the family, there’s money there that makes decision-making more complex.

Ryan Isaac:
Now, maybe the business side isn’t as much, obviously as an owner, but it’s still beneficial to make sure that you’re not making big mistakes, that you’re not setting yourself backwards by a bad decision once or twice a year or even once a decade and having the right advice, organization, accountability, tracking, benchmarking. That’ll still help you head in the right direction. So thank you for being here everybody, for joining us. And if you’re new, welcome to the show. We hope this stuff is helpful to you ’cause we love doing it. And if you’ve been around for a long time, welcome back. Thank you. If you have any questions, post, first of all, in the Dennis Advisors discussion group, that’s where the…

Matt Mulcock:
And if you say it was a great show, we’ll dedicate a whole show to you.

Ryan Isaac:
You get your own show, alright. You get your own show. And let us know…

Matt Mulcock:
We should have asked this doctor if we could name her by name.

Ryan Isaac:
I was just gonna say that. Let us know in the comments if you want to be named by name or we keep it first names only, but we’ll do a little shoutout. If you wanna chat with one of our advisors, then go to dentistadvisors.com, click the Book Free Consultation button and let’s have a chat about all the stuff about your whole situation, see if we can point you in the right direction. Matty, thank you very much for being here.

Matt Mulcock:
Thanks Ryan.

Ryan Isaac:
Thanks everyone for joining us and we’ll catch you next time. Bye-bye.

Practice Management