Notes from Dr. David Phelps, DDS
A dentist retirement plan … that’s what many practitioners ask me about on a regular basis. If I were starting over again today, knowing what I know, I would not invest in any of the tax deferred plans typically recommended by the majority of financial advisors (401k, defined benefit plans, even Roth IRAs).
The first reason is control. I want to be able to have choices and options for how I utilize my money without constraints dictated by the government (or anyone else). I have spoken with far too many practitioners who followed all of the rules, faithfully accumulating millions into a 401k only to realize that though they had done “enough” in their mid 40s to be truly financially free, they could not access or enjoy the fruit of their investing for a decade or more.
That is a terrible situation to discover yourself in. You work hard to accumulate your “nest egg” savings in this account, but you can’t touch it until your 59 ½. You can’t orchestrate the compounding effect yourself because it is in this lock box.
Financial advisors sell these plans as a tax strategy, but it is only tax deferral – you will still owe taxes. Do you believe taxes will go up or down in the future? Not only that, but the government can (and does) change the rules. There may well come a day in which the government will look at your income or net worth and tax you on a sliding scale. What's to stop the government from making a decision that they know more than you, and take receipt of retirement accounts to manage “for” us.
You may or may not agree, I'm just forewarning you.
Is your dentist retirement plan money in the financial markets?
There's a better way to do this, but it takes effort, work and foresight. Learning the skillsets to build a solid dentist retirement plan through real estate alternative investments is way, way better than abdicating your finances to third party money managers and other fiduciaries.
These opportunities are in the next quarters, the next years, like we haven't seen before. But if you are playing the long game in ETFs, index funds or whatever your advisor has you in, good luck. Good luck with that because the models that we have been used to over the last decades have completely changed. The game is changing due to the massive debt and annual spending deficits this country is addicted to right now.
We can’t maintain the reserve currency forever, and as we lose more and more of our power, it’s time for us as a country to pay the price.
If you are ready to take advantage of the upcoming opportunities, it starts with the way you think about finances, your skillsets and continuing education.
Have proximity to the investments that you understand.
Instead of abdicating your hard-earned money to others, become able to self-direct it. Learn about alternative, tangible, hard assets and understand how to invest in them. At the same time, avoid tax mitigation games. For example, conservation easements or “listed transactions,” are a big problem today. This is an agreement where you receive tax benefits as a property owner, but you agree to various development and use restrictions on the property.
Another big scheme is the tax-deferred sales trust. Here, your audit may come up years down the road when you’re out of active income and depending on that sale. By then, you’ve accrued lots of penalties and interest, and those savings that you thought you had, are gone. Plus, you've got a bigger deficit.
I’m not a tax attorney or financial advisor, but you should play these games at your own risk. If it sounds too good to be true, it probably is!
Instead, invest in your skillset. I know this works from personal experience and seeing members of our Freedom Founders’ community leave their practice and enjoy active income without worry. They're living their best lives ever because they are in charge of the money for the first time in their life. Reinvest in yourself with the skillset and relationships that you never lose. No one is going to do this for you. It's your freedom.