Bridging the Financial Gap For Dentists

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Retirement Planning

I don’t think there is any doubt that you know if you want to enjoy retirement some day, you are going to have to save some money. So I’m not going to go into this long dissertation on why you need to save money for retirement. There’s an old saying, “If it is to be, it’s up to me.” And the fact is, in relation to retirement planning, this statement has never been truer.

So when and how do you get started? First of all, the sooner you get started the better. Why? The magic of compounding interest, that’s why! One of the best examples I can give you of someone who started early and will be rewarded greatly during her retirement is my sister, Jeri. Jeri isn’t a dentist but she has accumulated a great deal of money over the last 27 years. And the amazing thing is she’s done it on less than half the income of most dentists I know.

I recently visited my sister in Des Moines, Iowa. (By the way, I don’t recommend going there in February if you can avoid it.) When I got to Jeri’s home she met me at the front door, saying to me, “I’m a half-amillionaire!” I looked at her and said, “what?” “I’m a half-a-millionaire,” she said again, as she showed me her 401(k) statement. Her statement showed she had $502,000 in her account. “Wow, I said, you are half a millionaire! Way to go Jer!”

How did she accumulate $502,000? She did it with the magic of compound interest. My sister started saving one percent of her income at age 22 when she was making about $1.70 per hour and as her income increased she gradually increased her savings rate. Now at age 49, she is saving about $8,000 per year and has over $500,000 in her retirement plan. And here’s another amazing thing. It took her 27 years to accumulate $500,000 during a period when the Standard and Poors (S&P) 500 averaged approximately 11.5%. In the next 10 years, if she averages only a 7.2% return and without saving another dime, her account will grow to over $1,000,000! And if she averages 11.5%, it will grow to nearly $1,500,000. That is truly amazing!

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