Its Never Too Late

August 6, 2010 | Subscribe to our RSS Feed

Maybe you’ve just opened your first dental practice or maybe you are a seasoned veteran of the tooth wars.  Either way you want to make sure that you are contributing to a retirement plan.  There are a variety of retirement plans you can choose from and the “age” and profitability of your practice may help determine which one is best for you.

Let’s look at some of the available retirement plans:

1. SIMPLE IRA
   1. Very low administrative costs due to the fact that no special tax filing needs to prepared.
   2. Pre-tax salary contributions.  Current annual maximum is $11,500.  For people over 50 years old an additional $2,500 can be contributed.
   3. For any employees who participate in the SIMPLE IRA the employer must contribute the lesser of the employee’s salary contribution or 3% of their salary.  If an employee does not participate no contribution need be made for that person.  This is a relatively inexpensive cost to the employer.
   4. Based on eligibility criteria the dentist cannot discriminate against who is allowed to participate in the SIMPLE IRA.  This means you cannot allow your hygienist to participate while denying your dental assistant the chance to join the plan.
   5. Great employee benefit.
2. 401(k) PLAN
   1. Much higher administrative costs due to the need to have an third party administrator and tax filings.
   2. Pre-tax salary contributions.  Current annual maximum is $16,500.  For people over 50 years old an additional $5,500 can be contributed.
   3. Can establish 401K plans with add ons such as safe harbor contributions and profit sharing to increase the contribution to a maximum of $49,000 or $54,500 for those card carrying members of AARP.
   4. In order for the dentist to maximize his contribution he or she must contribute for any eligible employees even if the employee does not make pre-tax salary contributions.
   5. Make sure you work with a third party administrator who can help maximize your contribution relative to the employees.
   6. Great employee benefit.

While these are by no means the only retirement plan options for a dental practice they are the most common choices.  Sit down with your CPA to determine which plan is the best for you in your current situation.  The most important thing to do is set up a plan even if you cannot contribute the maximum amount.  The younger you are when you start your retirement plan contributions the longer the money can cook.  You would be surprised how large your plan can grow with the power of compound growth.  Now go get started.

Questions for Larry the Accountodontist?

larry.goldberg@glassjacobson.com