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Retirement Benefits Give Dental Practices Edge

Issue: Winter 2007

It’s possible, however, to build a sturdy ship to help safely and smoothly navigate today’s rough seas-workplace retirement plans that help attract and keep employees and help to provide for a dentist’s own financial future are one way to begin that construction.

As with professional sailing, dentists must acknowledge current conditions, chart a course, and work with their crew to steer successfully toward the finish line.

Employment of dental hygienists and dental assistants is expected to grow much faster than average through 2014, ranking them among the fastest growing occupations, in response to increasing demand for dental care and the greater utilization of hygienists to perform services previously performed by dentists.1

Fidelity Investments research shows that 74 percent of Americans spend more time planning a vacation or birthday event than creating a retirement plan.

Simultaneously, demand for dental care should grow substantially through 2014. As members of the baby-boom generation advance into middle age, a large number will need complicated dental work. The need for preventative dental services will continue to increase, as good dental health becomes more closely correlated with good general health. In addition, elderly people are more likely to retain their teeth than were their predecessors, so they will require much more care than in the past. However, employment of dentists is not expected to grow as rapidly as the demand for dental services. As their practices expand, dentists are likely to hire more dental hygienists and dental assistants to handle routine services.1

The optimistic outlook for these professions makes attracting and retaining employees a key concern for many dental practices. In fact, according to a 2006 national Sullivan- Schein Dental (SSD) study,2 the most frequently stated challenge for private dental practitioners was finding and retaining quality staff (55 percent). Building upon the SSD research is the MetLife Study of Employee Benefits Trends.3

The fifth annual MetLife research study shows “an overwhelming majority of employers expect the competition for talent to increase or remain at current levels over the next 18 months, and they are relying more on the benefits they offer as a way to recruit and retain workers.”

Interestingly, employers in the MetLife study stated that keeping key employees, not controlling costs, is the number one objective of their benefits packages.

“The strong relationship between benefits satisfaction and job satisfaction indicates that there is more pressure than ever on employers to strike this balance and utilize benefits strategically to achieve both objectives,” stated Dr. Ronald Leopold, MetLife’s vice president of institutional business.

In fact, retaining employees is worth the investment. Studies have found that the cost of replacing lost talent is from 70 percent to 200 percent of that person’s annual salary. Expenses include recruiting, orientation, and training. Factor in lost productivity during that period and increased pressure on other employees and the cost can be much higher.4

If attracting and retaining employees is a primary concern for dentists, their second greatest challenge cited is having enough money to retire themselves. Retirement hardly sneaks upon the scene. Like most working Americans, dental professionals work decades before retiring. Yet 30 years after graduation from dental school, only from 5 percent to 10 percent of dentists will be financially able to retire.5

Fidelity Investments research shows that 74 percent of Americans spend more time planning a vacation or birthday event than creating a retirement plan.6 At the same time, 78 percent do not have a plan for retirement.7

Elizabeth Warren is a professor of bankruptcy law at Harvard Law School and co-author of “The Fragile Middle Class: Americans in Debt.” Warren predicts that people aged 55-64, now heading toward retirement, are “likely to suffer great difficulties.”8 And the Employee Benefit Research Institute 9, a nonprofit policy-research organization, anticipates insufficient savings and poor investments could leave the Baby Boom generation with a $45 billion retirement-income shortfall by 2030.

One way to help attract and keep key staff and help provide for dentists’ financial futures is to establish a Retirement Savings Plan. Retirement benefits can help address some of the challenges dental practices face. Many reasons for offering a Retirement Savings Plan are worth noting:

  • Employers can usually take a tax deduction for most of their contributions to employees’ workplace savings accounts.
  • Retirement plans benefit both rank-and-file employees and owner/managers.
  • If offered by the plan, salary deferrals allow employees to decide how much they want to contribute on a pre-tax basis and sometimes on an after-tax basis.
  • Contributions to the plan may grow through the plan’s investments options, which typically include a money market fund and a variety of mutual funds. Some may allow investments in individual stocks and other investment vehicles.
  • Earnings are not taxed as long as they remain in the plan.

Dennis Conner and his yachting crew have won the America’s Cup four times. His approach? “My goal in sailing isn’t to be brilliant or flashy in individual races, just to be consistent over the long run.”

Dental professionals, whose plans for the long run include providing consistent, quality care to their patients, top-notch compensation packages for their employees (including a topnotch savings plan), and who contribute to their own personal financial security, are well on their way to achieving business and personal financial success.

For more information about retirement planning for your dental practice, call Fidelity Investments at 866-467-0633.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

1. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2006-07 Edition, Dental Hygienists, on the Internet at http://www.bls.gov/oco/ocos097.htm

2. 2006 Sullivan-Schein survey of dental clients.

3. Metlife Study of Employee Benefits Trends, 4Q 2006

4. Thomas B. Wilson, Cost of Retaining Employees is Less than the Cost of Replacing Them. The Wilson Group, Boston Business Journal. 1998.

5. 2006 Sullivan-Schein survey of dental clients.

6. Planning Behaviors and Beliefs, Fidelity Investments, 2006. Collected by Richard Day Research online survey of more than 1,500 respondents representing the broad working population.

7. LIMRA International, Inc., “Retirement Planning: The Ongoing Challenge”: 2003.

8. The Fragile Middle Class: Americans in Debt, Teresa Sullivan, Elizabeth Warren, Jay Westbrook. Yale University: 2000.

9. Employee Benefit Research Institute: “Can America Afford Tomorrow’s Retirees.” Results from the EBRI-ERF Retirement Security Projection Model: November 2003.

Fidelity Investments Institutional Services Company, Inc.
82 Devonshire St., Boston, MA 02109
© 2007 FMR Corp. All rights reserved
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