Subscribe
Share
Share
Embed
Dentists, Puns, and Money is a podcast focused on two things: The financial topics relevant to dentists leaving clinical practice and the stories and lessons of dentists who have already done so.
1. The stories of dentists who have transitioned from full-time clinical dentistry.
2. The financial topics that are relevant for dentists making that transition.
If you’re a dentist thinking about your exit from clinical, and you’d like to learn from the experiences of other dentists who have made that transition, be sure to subscribe to your favorite podcast app.
Host Shawn Terrell also dives deep into the many financial components of exiting dentistry, including tax reduction strategies and how to live off your assets.
And, we try to keep it light by mixing in a bad joke… or two.
Please note: Dentists, Puns, and Money was previously known as The Practice Growth Podcast until March 2022.
DSO Secrets – Shawn as Guest Podcast – Transcript
Welcome to Dentists Puns and Money. I’m your host Shawn Terrell. And in this episode, it's another role reversal as I return to the hot seat and answer questions instead of thinking about this episode is a replay of a guest appearance I made on DEO growth secrets podcast, and it was originally recorded and released in February of 2023. podcast is hosted by Ken Kaufman, who has more than two decades of experience in this profession as an author, speaker and as a chief financial officer of various dental organizations. And I go in depth on this reading thing for dentists to sort out as they plan their transition out of dental practice and also spend some time discussing the pros and cons of a Roth IRA conversion strategy. It's a little more the technical side but it's good information nonetheless. Hey, as a reminder, our company that is Exit Planning helps dentists leading when it comes to the financial piece of that transition specifically how to build your financial freedom plan your life after dentistry. If you're interested guidance on your income and taxes and Social Security as you exit clinical, you can schedule an initial consultation with us no obligation. Use our website to do that. Our website is dentist x.com And with that introduction, my conversation with Ken Kaufman. Hello everyone. Welcome to the episode of diesel secrets on kick off in your host today. Very excited for the topic that we're gonna be talking about should be on overnights. But first I'm going to choose our guest Shawn, I wanted to go ahead and treat yourself to the audience. Tell him what you do, which expertise isn't even a gentleman and then jump into it. Sure. So my name is Shawn Terrell. I am the founder and the Chief Financial Advisor at Dentist Exit Planning, which is an independent financial services company that I founded myself.
Dentists all over the country. And my expertise is providing what I call personal financial planning for dentists who are soon to be or have recently exited clinical practice in some fashion. I'm standing so if you're okay, let's go ahead and jump in this. You're actually talking to a lot of dentists. Sometimes you might wonder two or three practices and they're obviously they spent a lifetime or some portion of lifetime trying to build up this asset, which is this business, which has lots of value for patients that come in and dreams being done and generating revenue, profitability, those sorts of things. If you were to if I was asking you what are the three top considerations that if I'm about to sell, I should be thinking about things that I can do my personal finances kind of lined up and ready to go. You told me I need to meet somebody like you and they were kind of the top three considerations that could be massive profiles for these dentists and costing more money in return. I'm sure they'll be questions. I think in terms of ideal timing, like what sometimes people tell me they won't leave in three months or six years. So in general, the longer the runway, you have to get some of the things in place in plan, the better. That being said you can't throw planning too far out. I like to use four years as like the end of the runway in the longest amount of time. The other one for thinking about this just because of my experience. We sell demographics all the time. We're doing a three year look back and valuation process in terms of the numbers there and so four years gives a little more time than that, just thinking about things. Ask any business owner like when they don't practice owner when they expect to exit their business? The most common answer given is always five years. So I try to stay away from five years, three to four years at a time. But hey, if something changes, you wanna do it sooner than later. You know, we only work with what we can work with that sort of time element. The question in terms of the big three things to think about I think number one is for dentists to really spend some time thinking about what I like all what is the question I was asking what he's calling for. And what I mean by that is what is what is money for them into your life and your lifestyle. So the first thing that I think needs to occur is for dentists to do an honest assessment of their life in their lifestyle. Some dentists are perfectly happy with about $10,000 A month or whatever the number is three or four times that amount money. So you're trying to come up with $10,000 a month in terms of how much cash will you need post clinical, that's my equation. If it was wonderful. That's an entirely different way to do it's my job to tell people how likely that is that isn't what we're trying to solve for. And it doesn't suit because as most dentists know, it's not uncommon to find some personal expenses that find their way into the business balance sheet. So as you know, they just want to do actual practice violations do right. We really tried to separate the cream in the coffee that was really costing you to live on a monthly or yearly basis and on how much cash flow is needed for the lifestyle that you desire. Post clinical, lets us figure out which lifestyle we're like. The closer you can get to a number, the better besides that when you do that.
So for example, a dentist what to do and says, here's my number, and you say, hey, based on what you've told me your business is worth what you've been offered for so far. You're just not gonna have enough. I mean, is it? Is it a factor of them changing their expectations on what their clinical outcomes gonna be? Or do you tell them hey, you need to get heads down and build this practice a little bit more make it worth more money, so that you can support that lifestyle.
I think the combination also if you know their practice, we were taking her for 6001 and a half million dollars in a 401 K international assets outside of that anything that he $40,000 A month literally where he doesn't know as much overtime it was my job isn't Euclidean with elevation, what's reasonable, it's not reasonable. Probably just not enough. Those things all fit together. So you're gonna compromise on what you want to live your lifestyle to look like you really want to or need to leave now or as you said you to put your head down and to get to work in forgot how to make your numbers outside of your practice be higher. It's about the internal drive value in your practice and maybe a little longer than you thought you want to increase and increase that number they're gonna take your practice exactly what you saw before with you and when you willing to or not willing to optimize on lifestyle or time scale in dentistry. I didn't dimensional other attachment three considerations. What do you think are the most critical as denitrify? Yeah, so the second one is to develop questions or have been clear on everything would be totally fine with that. But the second thing about it is it doesn't lead to clinical is really getting together a strategy on how to grow and distribute wealth post clinical so your practice with some of the dollars you have X amount of assets, hopefully outside your box and real estate or natural assets that could be 401 K's, IRAs, things like that. And just you know if to use a really simple, easy math example. You know, if you're practicing all your assets outside your practice, in total were worth a million dollars and you needed $50,000 per year to live. You could take that million dollars and put it in a savings account, take out $50,000 A year and consider your money will last for 20 years. So that's a really low number. But what we know is that we probably want to give that million dollars a chance to grow somehow over that next one to three years to increase what's there and increase how much we didn't get off with that many dollars. You just need to put together some sort of a distribution and a growth rate. You have to stand with your comfort level and your values for the next 20 or 30 years. That's kind of a sub point on that number two topic is pick a how long when is the last for you to be healthy? Are you gonna like it? These are you in the mid 70s I was only for 15 or 20 years or was only for 30 or 35 or maybe even 40 years. That'll factors in as well as other questions here because most of us just don't know how long we're gonna live right. And it seems like we hear in the news that life expectancy is increasing and medical advances and there's a lot of things that have been occurring that are expanding lifetime so you don't have a 50 year old trying to decide when am I going to die if that life expectancy keeps going up. So I'm curious how you search up, put that in a box because these aren't your numbers. And if you invest it, you may or may not get the return that you're looking for and all those sort of things. How do you tie that together for the benefit of helping? Yeah, no, it's a really good question. So you're all sorts of simulations and like Carlo analysis of the industry, and those are helpful to give you like a little bit of guidance and God really kind of where you are in a rough estimate. In my my belief is that you need someone along the way that's going to help you course correct over that 20 or three or four year journey, depending on what the conditions of that journey are. So I think my interview is a really bad job of selling people on Sunday. My position is that we can't possibly know what the next three or four years is gonna look like. Let's get a rough estimate what we think it's gonna look like start out on the journey and then be a regular indication on course corrections that are needed over the course of time. So there's there's a process of trying to do the best you can and then know that you're gonna need it right, because maybe the income needs change. Maybe there's a health crisis much earlier on maybe 100 or whatever, right? You got to be ready to of course graduate ladies you got like you said, absolutely. I think that's more very likely that that will be required. I think my position is let's accept that. Let's plan for how we're going to react ahead of time or when the the number of course corrections are going to happen. And we're going to do that and then when those inevitably happen to us thrown off we're not surprised we're not upset or anxious because this straight line isn't actually this 45 degree angle. It's all kinds of dips in mountains. Everything was right. That's right, great. Okay. So sorry, we're getting through your three here. So keep keep going. You'll want to head on over to was sort of with that that distribution and growth strategy. I do want you to have an idea like are you solving to bounce the last check that you write some people say jokingly, or would you like something to be left behind for your children for other causes that are important to you? If you finally settle down or do want to go there's X number dollars left for whoever that was?
Great Call out there because I see more and more especially in the DSL world where you've got a lot of calls and you're probably coming in and do transactions. I see And I'm hearing more more about people looking at what they've earned and realizing it does make sense for Hispanics in my lifetime. And so they didn't mind me that goes to generational wealth planning, which is a whole nother level of complexity in terms of what you want to happen with that money and how it should be shared and so on and so forth. And again, the more leeway you can give somebody that's an expert in those areas, the more efficient you can be with whatever you want to plan. The more time you have, the better off you can make a plan in the future in terms of leverage in terms of leaving the most amount to whoever you want to give for not letting the IRS take more than its fair share off the top of whatever that leftover amount is, which leads me to point number three on everything I think consider when when exiting, exiting clinical. This will get overlooked a lot and I think it's going to be a big part of the future of financial planning as I see it in that I think there needs to be a lot more proactive planning around taxes related personal financial planning for dentists. Taxes will almost always be the number one expense, kind of goalposts exit for dentists in the last third or half of their life. And so, way most dentists come to me after a long career is almost there almost a series of taxes has been in the rearview mirror looking backwards, right I think where there's a chance to really move the needle is by looking through the windshield looking forward and being proactive. Oftentimes identifies the for a lot of income in the profit sharing plan with 401 K during their practices their hiring year, that's been a really good movie, they're probably in the highest if not one, the highest tax rates. And so they'll have all this money this huge pool this huge pile of money in 401 k or IRA that will be taxed at unknown rate in the future. And what is real opportunity to not tip the IRS or the IRS more than to do is by the late 50s or the mid 70s when required no disruptions are taking some of that money to really be proactive about putting strategy together getting strategy in place about how and when you pay your taxes. And last point was that this is really the point is that most people, dentists anybody else are accustomed to trying to solve to pay the least amount of taxes the least were like dollar amount each year, in any given year like always trying to make that number as low as possible. If they see online, whatever it is on the 1040 it seems to be time so my position is a better way to look at that is actually to try to think about the total tax bill in retirement over the last three years someone's life. And that's gonna be in the seven figures for most dentists. Let's be honest, it's gonna be well over a million dollars someone has done a good job of concealing assets. And how can we make that total number lower than what it is with the default setting up we currently have How can we say it off the rough edges of that seven figure tax bill in retirement to make it a little bit less painful than it is continuing to grow. So getting a plan in place looking out the windshield instead of reviewing with that is so critical. This is because a very interesting set of circuitry considerations and I wanna jump into the texture a little bit. As you know, Sean early on in my career I was in the financial planning world stockbroker world you know, back in the day when you have to call somebody to buy stock. You didn't just open up that trade and whatever. There's some interesting things happening with with the Roth options versus your pre tax options. And you know, I'm the nerd that does their own numbers I'm sure you do too, like another spreadsheet some other analysis. The interesting thing is is if we believe that taxes are gonna go up in the future moving dollars that are have not been taxed at over there's interesting strategy for that. And like maybe the taxes are going down strategy for that and and into the future. So that is your sticking point guessing I mean, being willing to iterate as you go about getting educated guess what, I'm curious what your take is on that of somebody who's a dentist 40 5060 years old, is there sometimes a reason like a viable reason to start paying some tax on some of that before you get you get offered those later years, like basic I've seen differ from taxable or non taxable, which I think it's kind of a rough structure. So what you're referring to is gonna call the Roth IRA conversion strategy where you're converting pre tax IRA or 401 K dollars into a Roth IRA and extend basically saying, I would rather I think taxes are going to be the same or higher in the future than they are right now. And I'm gonna pay to double that. I know my taxes now, because I can save 10% A million dollars over my lifetime, like they have now doubled I know into the payment over the next three or four years.
And here's the thing that's not guaranteed to go up in the next four years based on the current tax code and legislation that in place the tax code is set to expire or sunset at the end of 1.5. So you have three tax rates in the article a bit more micro, they're guaranteed to go up by a few percentage points or seven percentage points. So does it make sense? Now that makes sense a 22%. tax on the right is gonna be point 4% or 28 or two, the bigger the number because we're going it might make sense to accelerate paying your tax bill in retirement. If you can now offset that with well, what if I took those dollars instead of paying the tax now if I use those dollars and invested them, ultimately creating all of this has been a combination of all that it's in I heard somebody I don't know who coined phrase at first, I know but tax diversification does obviously asset diversification. In fact, the first case where you have taxable sales, non taxable accounts, you're doing things to maximize or optimize the tax brackets from year to year and and all those sorts of things. If you're like, I'm fascinated by the financial planning world, and I know that some of the dentists are worried about this about when when I'm going to exit and am I gonna have enough and how do I make sure that I'm optimizing what I can get and obviously back to what you said. You said it's the biggest bill after clinical probably the biggest Bill during clinical.
I was trying to
throw the lights on. You're absolutely right. Yeah, it's the other expenses and just maybe I wanted to ask you something. So one last piece that I would say too, is just not a good strategy. Talk about tax diversification. It's a really good strategy to in retirement, have some buckets on big chunk of money that is not subject to any taxation in the future. So can you get your hands on to talk about in the future? You don't have to take 30 or 40% more than you actually need to net it down. What would be like if you take a million dollars over tax tax deferred account I'm going to take 1.4 $1.5 million, so getting money converted into posthaste places like Roth IRAs is a really good place to have a ton of money. And then you also are yourself in a position where you do actually get to the new requires are taking distributions out of those pre tax accounts RMDs those aren't these are not so big as to put you in a higher tax bracket. So you didn't really want to be from the Medicare surcharge perspective, a whole host of other areas as well. So that's exportation having a plan in place huge, fantastic. So it's been really three considerations. I want to ask a follow up question just kind of an overarching general one here, Shawn and it is so as I'm thinking about selling my books, we talked about what the right time to engage an advisor to help you think about planning for you know, tax and and money to live on and all those sort of things. I'm curious what what advice would you give dentists right now that are in their early years and they've got a high enough income cuz they're gonna they're great dentists, they were taking care to patients that they built a great practice or two or three practices, and so their incomes coming in? Here's my question, and I sometimes struggle with when should I take the money out and start diversifying outside of my practice versus leave it in and building right because especially those of us that are entrepreneurs, we all believe that we're gonna create a much better return on our money than stock market will. Now I didn't come here maybe that's that wouldn't be true. But if it doesn't turn around, and say, Hey, I'm gonna talk to my business, if I keep it in and I invest in this equipment is expanding this office, and I build an office over here that can create a great return. Have you run into this discussion? And how do you kind of coach these so I can ask the question, when is it time to start taking me out of practice or diversifying versus leaving and just keep growing you know, I'm full bore Go, go go so just make sure I was gonna question correctly. We'll just use a really easy example to get dentists and that $500 practice, they need $300,000 to live on. They have $200,000 in profit that hasn't had an ally around it. They could leave it in the rehab emergency cushion in the practice that they don't need that for just cash reserves with $200,000. I think it depends on dentists and they want their life to look like so my first question is gonna pose that to me would be thrown back in understanding what are you going to do? And that is a linear direction that I can try to steer the more I think, deep down subconsciously want to go anyway. I think it really depends. You want to go and sail and I was working on my podcast and we talked about the same question to like, that's a pretty big inflection point for Dennis is like, just wanna keep it with two dogs in one location. Do you really wanna start stacking things on top of each other? To use whatever currently in my words? This is not really a question. I like what you think do you think that you get a better rate of return? I think $200,000 and using a down payment device and practice to create more leverage and and more and more scalar that's absolutely what you can do with it. You also pay down debt. You could also you could reinvest in the practice by buying more equipment and more procedures. That was a lot of things. That's a question. I don't know I'm fully answering this, I think. I think we're all good options. It really depends. On that was once there when you're yours look like the people that just hate that and like, I've got the 3% loan, I don't even invest the money. I can't I really want to pay off this loan to be debt free. And I just don't have the money. There's a math aspect of financial decisions. There's an emotional component financial decisions, like a man says that you got 3% loan fix for the next 10 years. You're probably not accelerating that payment in the current conditions. We're in February 2023. But if they hate that, makes them sleep better at night to have honest. I told them I told you to pay off.
Around by the way, I hope I answered that question, but they really don't know what they want to look like. And I think ultimately, what's right and what's efficient. And I think to one thing you hit to this I'll just articulate this a little bit further. There's also an amount of risk tolerance where at some point it's like, these are better taking something else besides making sure the kids college education is funded and free, they pay off their house or they're those that wanted to feel more conservative and are more risk averse, that would rather use a cash to do that. And there are others that say, Hey, I want to double down here and I practice just generally 20,000 extra cash. I'm gonna use that to go and do X. I think one thing you and I would agree on here, Shawn, or anything else is before you spend 100,000 make sure you've paid in your quarterly estimated taxes. The biggest pain is when that dentist gets a bill and they just thought about and they're gonna find out that they need a few $1,000 pay taxes or taxes or something like that. So that's right. Yeah. 100% what you paid for every year or whatever. Awesome. Okay, cool. Well, I'm with every guest that I bring on my interview them I like to ask a series of lightning round questions. These seven questions on fire meant you were looking for quick answers. No, I don't even want explanations unless it intrigues me. enough that I started to unpack something there. So first question, what are you currently working on? So I am building a new website to make my website my brand and I'm also working on Facebook groups. I want to ground your
guys together. Because your podcast puns and money. Yeah, so you asked me for a favorite joke of mine so I'm you're gonna get questions. I'm gonna ask you what's your budget?
But I got like one okay. Like a joke now? Yeah, I'll do it. I'll just do it from this point of the joke that you gave me this. I remember corny joke somebody is on mine.
You call it dinosaur doesn't like to brush their teeth.
Floss. All right, there you go. A lot of people really do. But just tons of money. By the way, go check out Shawn's podcast. I think that episode we record it'll be there on there soon but it has great guests on and I encourage you guys to get that. Okay, what are you most proud of? That I bet on myself when I'm out on my own? For you? That's awesome. What was your favorite sports team? Guys, if you notice that a lot of times it from time to time every football game a basketball usually in front of TV orensanz way to travel pretty much by way not too much. Just one kid so I just to make sure that you're always watching on TV. Playing life. Nice. Alright, favorite.
I love to ride my bike. I got to second couple years ago and it's one of the things that I'm like, oh my life I can do about that. I'm similar. I love to get on my bike. The winters in Utah are not forgiving. Which means that I'm I spent like that during wintertime but as soon as it's warm enough, I'm liking Amazon Music I'm a huge music aficionado. I love that I love all genres. I like to curate and build my own playlists for different reasons and moods and things like that. Outstanding. Your favorite spreadsheet function. I am not a spreadsheet guy. I don't know anything about spreadsheets. gave me hope that I missed that class in college or somewhere thereafter. I say I can do for you now but I even got on that road. I'm back. I'm a counselor. All right. So your favorites multifunction is AI that's awesome. So and you want the old school computers because they can't wait to print all your money and all that stuff. Yeah, like everyone's gonna get into them. But I've I've tried to, as I've been called Kiss as I've gotten older you don't get the answer. Yeah, keep it simple. Keep it simple, stupid. So sometimes I like to be announced on my own how would I do it and then federal in crayon, like every client I work with that might my attention doesn't come out a grant. But that doesn't make sense. All right. If you had one piece of advice to give to the practice owners today, what what would you tell them?
I'm a big believer in paradigms being a bad thing. I would challenge people to think about their current life and how to practice in order to do that. And if they're truly happy, or not ask themselves if the way they're doing it is the way that it has to be done. Or is there a way to pull back and figure out a better way to do it so you can live the life that you want live outside of dentistry, and just challenge a paradigm that might exist in profession and just in life in general?
Right, we're all guilty of kind of getting into routines and following sort of paths and patterns that often when we ask ourselves questions, we realize we start to realize that maybe there's a better way differently or or maybe the entire we just need to be abandoned altogether. Right? Yeah. Tim Ferriss podcasts are kind of a follow in. He has a question. I remind myself of this all the time, which is what would it look like if this were easy to get started? Yeah, I'm complicit in making this art. So I'm talking myself as much as I am a work in progress, by the way, I'm missing my place. All right, so Sean's an absolute fantastic show. You are in the Facebook group. And if you have any financial planning related questions about where you're at now or thinking about selling and indeed start, think about planning for the future, definitely are anyone in a great secret? Facebook group definitely can picture on there. And Shawn, what are the other ways for them to reach out to you? Yeah, my email is shawn@dentistexit.com. So my website is also dentistexit.com, you can find a lot information there. I'm on LinkedIn, I'm on Instagram. I don't know how long they have right now. And Instagram is where you're asking yourself, Is there a way to do this right everything for example, like it right. I don't know. It all depends on the screen. But I can't tell if late career release agent is already on its way we're not gonna look at their headlines. That's fantastic. Great. Well, Sean, thank you so much for joining the show today and it's a pleasure to have you. I just as a quick wrap up here, as we get ready to in the episode again, thank you, Shawn. All of you who have joined in and listened, whether it was in the Facebook group or via the podcast, we encourage you like the podcast and just get engaged with us come over to Facebook group ask your questions. I mean, we get we get like three to five questions a day in there from practicing dentists and other folks that trying to hold on to organizations and it's a great place to curate ideas and have a little mini mastermind I'm urge you guys to do that. David, anything somebody join today just wrap up all things and just Exit Planning. Happy Day. thanks for listening and following along. Are you with your retirement from clinical or have you already gone through these? Would you like treatment plans or financial components of your exit from clinical, our company that is planning often it's like you raise taxes in retirement and optimize it as live off your assets, including the ideal time for you to start taking Social Security. If you'd like guidance on those critical pieces, or just a second opinion, schedule an initial consultation with us on our website. Our web address is dentists exit.com, and there's no obligation for your initial consultation. That was that again, just as a reminder that says Exit Planning and fertilizers LLC is a registered investment advisor. The information presented should not be interpreted or construed as investment, legal tax or financial planning or wealth management advice. It does not substitute for personalized investment or financial planning from that distinctive mining or federal visors LLC. Please consult with your accountant and attorney for tax and legal advice. This podcast conveys the views and opinions of Sean Carroll and his guests and information herein should not be considered a solicitation to engage in particular investment tax planning or financial planning strategy. information presented is for educational purposes only and past performance is not indicative of future results.
Keywords: dentists, question, practice, financial planning, money, taxes, clinical, dollars, tax, podcast, years, planning, strategy, assets, exit, call, give, facebook group, number.