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Retirement: Picking the Right Plan for You and Your Practice

Don’t let yourself get too distracted by the day-to-day demands of dentistry. You still have a future for which to plan. Dentists have many retirement account options, but they can’t take a one-size-fits-all approach to selecting the right one for themselves and their practices. These are some good IRA and 401k options.
Palmer Price
PUBLISHED: Thursday, March 23, 2017

Retirement plans are not one-size-fits-all. You need to think about your needs as well as those of your practice.

When you're running a business, the daily demands keep you plenty busy.
 
Not only do you have to worry about your patients, but you also have to pay bills and balance the books.
 
Along the way, don't forget about planning for your future.
 
That means you need a retirement plan.
 
RELATED: More Dentist’s Money Digest® Personal Finance Coverage
 
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“These plans can be great for owners who want to save money for retirement and save money on taxes,” said Amy Noel, a Boulder, Colorado-based certified financial planner.
 
Whether you're a solo practitioner or you have a practice with dozens of employees, and whether you want to save a lot or a little, there's a plan to suit your needs.
 
Here's some help to get started.  
 
SEP IRA
SEP IRA is short for simplified employee pension individual retirement account.
 
It is funded solely by employer contributions and provides the employer flexibility so that in lean years, the contribution can be skipped, said Andrew Samalin, a certified financial planner with offices in Chappaqua, New York, and New York City.
 
He said for the SEP IRA, an employer can contribute up to 25 percent of compensation — which is about 20 percent of the Internal Revenue Service (IRS) Schedule C net income and based on maximum compensation of $270,000 for 2017 — with a maximum of $53,000 per participant. 
 
A SEP IRA must be offered to all employees who are at least 21 years old, employed for three of the last five years and who had compensation of $600 for 2015 and 2016.
 
So, if you have a lot of part-timers, they'd probably be eligible for the plan.
 
Because part-time employee wages would presumably make up a small percentage of overall wages, a SEP IRA would not be too expensive for the business owner, he said.
 
“Contributions must be based on the same percentage for all participants and are immediately vested,” he said. “An employer may use IRS Form 5305-SEP to set up the plan but the costs to administer are low.”
 
And a bonus? Tax benefits. The business owner can deduct no more than 25 percent of aggregate compensation for all participants.  
 
SIMPLE IRA
Another option is the SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees Individual Retirement Account.
 
"The SIMPLE includes anyone who makes over $5,000 as an eligible participant," Noel said.
 
Employees can defer $12,500 — or $15,500 for those over age 50 — and the employer is required to contribute each year by matching employee contributions up to 3 percent of compensation. Or, the employer can make a non-elective contribution equal to 2 percent of employee compensation up to annual limit of $270,000 ($5,400) in 2017.
 
Samalin said this plan may be less expensive than a SEP IRA because some of the employees may choose not to participate.

Story continues on the next page.
 


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