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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



SAFE HARBOR 401(K)
The Safe Harbor 401(k)/Profit Sharing Plan has a higher cost of administration and a higher potential cost of funding for employees, but also allows for high contribution limits. You can use employee salary deferrals for these plans, and they're easier to administer than a traditional 401(k). Samalin said you can offer employee-vesting schedules to incentivize long-term employment and lower turnover.
 
Anyone who works more than 1,000 hours a year would be eligible, Noel said.
 
“So, if you have part-timers that work less than 20 hours a week, a 401(k) can be an option,” she said. "Typically, most employers will choose a Safe Harbor plan which mandates a 4 percent match for participants or a 3 percent non-elective contribution for all eligible employees.”
 
SOLO 401(K)
If you have no employees, or only your spouse works with you, you could consider a Solo 401(k).
 
These plans allow the business owner and spouse to contribute elective deferrals up to 100 percent of compensation as the employee, up to $18,000 for 2017, plus there's a catch-up contribution of $6,000 for those over age 50.
 
Then as the employer, the business owner may also contribute up to 25 percent of compensation or earned income.
 
“Total employee and employer contributions, not counting catch-up contributions, may not exceed $54,000 for 2017,” Samalin said. "Business owners must file Form 5500 after plan assets exceed $250,000."
 
With this plan, you can still contribute to a traditional or Roth IRA every year, too.
 
OTHER OPTIONS
You can always consider a traditional 401(k), but that's usually best for a business with several dozen employees because they're more expensive to maintain and have stricter reporting requirements than some other plans.
 
A defined benefit plan is another option, Noel said, and could be appropriate for those who want to aggressively save for retirement and who don’t mind the extra costs associated with the plan. 
 
“This is not a good plan for a large group or one with many employees,” she said.
 
FLEXIBILITY
Because you may have trouble projecting your practice's income from year to year, you may prefer to choose the plan with the most flexibility.
 
Noel said a SEP IRA is the only plan that “truly has discretionary contributions.”
 
All the others have "substantial and reoccurring requirements," she said.
 
“A SIMPLE has an option that allows the employer to lower the contribution from 3 percent to 1 percent in two out of every five years,” Noel said. “This is helpful in this situation but the company still needs to fund the 1 percent.”
 
GETTING STARTED
Consider meeting with a certified financial planner who has expertise in small business retirement plans.
 
You can search for an adviser in your area on the websites of the Financial Planning Association at www.plannersearch.org or the National Association of Personal Financial Advisors at www.napfa.org.
 
You can also contact a plan custodian such as Vanguard or Fidelity.
 
"The laws are written to allow for employees to succeed alongside management when a retirement plan is set up," Samalin said. “As such, retirement plans are structured to require management to make contributions to an employee’s retirement if the employer is making contributions to their retirement.”
 
Discover more Dentist’s Money Digest® personal finance coverage here.


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