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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.
Shawn Terrell (00:19.988)
If you've ever purchased a home, then you might have a checklist in your head for things to look for if you ever decide to sell that home and buy a different house at some point down the road. And you could probably apply that same logic to other long-term purchases and commitments in your life. It's sort of this list in your head that says, hey, if I ever do this again, I'm going to make sure to look for this because this is something I didn't think about before I bought the last house.
Turns out that's a really big deal and it sort of annoys me. For Dr. Bill, one of the things he will never do again is buy a house with the driveway that is on the north side of the house. Hi, I'm your host, Shawn Terrell. Welcome to Dentist Puns and Money. This podcast is brought to you by Dentist Exit Planning. At Dentist Exit Planning, we help dentists within a few years of leaving clinical build their financial treatment plan for their life.
after dentistry. So we're going to continue the theme of tax related topics in this episode. More specifically, we're going to talk about required minimum distributions and the consequences associated with not having a plan or not being proactive about handling RMDs leading up to and during retirement. And a good analogy for this is Dr. Bill's driveway on the north side of his house.
You see, Dr. Bill lives in the upper Midwest and it snows and gets pretty cold there in the winter months because
Shawn Terrell (02:00.053)
And a good analogy for this is Dr. Bill's driveway on the north side of his house. You see, Dr. Bill lives in the upper Midwest and it snows there and gets pretty cold in the winter months. And because of how his house is oriented, his driveway does not get much sunlight from November through the end of February, which means that if it snows and his driveway doesn't get cleared before people drive on it,
or it gets walked on, then he might have an icy, bumpy, downright, treacherous driveway for several months. And because his house blocks most of the sunlight that time of year, if he gets behind on the snow removal, then he doesn't get much help with Mother Nature. He doesn't get much help from Mother Nature with natural melting. So when the forecast calls for snow in the winter,
Dr. Bill has to be really proactive and put together a plan for how and when he's going to get that snow removed. Now, ideally, this was something
Shawn Terrell (03:10.856)
Now, ideally, this is something that he could outsource to a snow removal company. And he has tried that in the past. But the issue is that when big snowstorms hit his area, the companies get busy and it might be 24 hours before they get to his house and clear a path. And that means that when that happens, his driveway is packed and it's icy anyway, and it's likely to stay that way for a while. So.
Shawn Terrell (03:40.246)
So while Dr. Bill will never again buy a house with a driveway on the north side of the house, until he's ready to move somewhere else, he has to be proactive with a working snowblower and a plan for when he or one of his kids is gonna take care of snow removal when it snows before it turns into a big icy mess. And that's kind of the way dentists need to think about required minimum distributions in retirement.
that if you just sort of show up or you reach retirement age without a plan for how to handle these RMDs and you're reactive instead of proactive, there is a decent chance that things might not turn out how you'd like. And my standard disclaimer.
Shawn Terrell (04:30.035)
My standard disclaimer any time I talk taxes is that my philosophy with them is always that the objective is to pay the least amount of total taxes over your lifetime. Even if that means paying more in taxes than you otherwise would have to do in any given year. And so this topic is for those that want to be as tax efficient as possible, either because they have to be or just out of sheer principle.
So what are the consequences of not having a plan for required minimum distributions potentially? As I just alluded to, the consequence of
Shawn Terrell (05:15.989)
So what are the consequences of not having a plan, potentially? As I just alluded to, the consequences are paying more in taxes than perhaps you need to, and that's gonna show up in a couple ways. The first way is being required to withdraw more money than you need in a given year in retirement, and that will lead to more taxable income. The second piece of that is that
that could cause a surcharge on what you pay for Medicare in retirement, which effectively means more money leaving your pocket and going somewhere else. But the part that I think sometimes gets missed is that not having a plan for RMDs can lead to higher taxes for someone else, likely someone you care about, whether that's your spouse or your kids or someone else that's close to you. And let's dive into those things.
Shawn Terrell (06:16.895)
Let's dive into those things. Let's dive into those things. Let's say Dr. Bill gets to RMD age with $5 million in tax deferred money. That's a pretty big number, but probably not out of the question given the way that he's been stuffing money away throughout his practicing years and then also how the market has performed the last few years.
At age 75, the required minimum distribution on $5 million is $200,000 per year. Dr. Bill would like to take $100,000 or less out of these tax-deferred accounts because he doesn't need more than that to fund his lifestyle and retirement, but he has no choice. These distributions are, as the name indicates, required. So...
That extra $100,000 that he has to take out puts him into a higher tax bracket with a higher tax rate. And at the risk of too much math, let's say the end result for Dr. Bill is that he owes $10,000 more in taxes in that year than he otherwise would have had to owe. Even at age 85, assuming 10 years of distributions that are required and almost no market growth, a $3 million
tax-deferred account still has an RMD in the same $200,000 a year ballpark. In addition, for those with a modified gross adjusted income above a certain threshold in retirement, their Medicare premiums can be higher. There's a surcharge or an additional cost associated with Medicare for those with higher taxable income in retirement.
So that can be a double whammy. RMDs can cause deferred income to be taxed at a rate that's higher than necessary. And then that can trigger additional costs for Medicare in retirement. But the part that doesn't get talked about enough and not having a plan, not having a proactive approach for RMDs is that it can lead to a tax hit for someone else and that someone else is likely gonna be somebody that you care about.
Shawn Terrell (08:30.461)
The way Dr. Bill has his beneficiaries set up on his tax-deferred accounts is that if he passes away before his wife, his wife receives 100 % of those accounts. If he survives his wife when Dr. Bill passes away, his two kids will evenly receive the remainder of those accounts.
Shawn Terrell (09:02.835)
So let's say Dr. Bill passes away before his wife and leaves the remaining money all to her. His wife is the same age, by the way. From a tax perspective, because Dr. Bill dies, Mrs. Bill will likely go from a married filing jointly tax status to a single tax filing status in the year after he passes away.
When your spouse dies, you are not married anymore, so you can't file as married filing jointly.
Shawn Terrell (09:40.189)
And that's sort of something that a lot of people don't think about, but that means different tax brackets and different tax rates when you're filing single instead of married filing jointly. And that means that there's different deductions and rules around those deductions. And while the cost of living will probably go down some after Dr. Bill passes away in this hypothetical scenario, that cost of living is unlikely to go down by enough to offset those tax filing.
status changes.
And then the required minimum distribution, even though the amounts might change some, all things being equal, they're still gonna be required for Dr. Bill's wife in that scenario. And then the final example here is let's say Dr. Bill is the last spouse standing. And then the final piece that a lot of people forget about is let's say Dr. Bill is the last spouse standing to put it.
bluntly. In that scenario, his kids will receive the remainder of his deferred money in equal parts. Based on the rules that are currently in place as of this recording, all the money in the deferred accounts that is received by his kids will have to be withdrawn by his kids within 10 years of his death. And all that money that's withdrawn by his kids will be treated as ordinary taxable income
on their tax returns. But both his kids have good careers and make good money, so it just means higher taxes down the road for them. Now,
Shawn Terrell (11:27.299)
Now given the choice between free money with taxes and no free money at all, getting the money even with the taxes is better.
Shawn Terrell (12:46.851)
Now given the choice between free money with taxes and no free money at all, getting the money even with the taxes is better, but there might be a better way to leave that money and maybe it's with no taxes due on it at all. The point I want to leave you with is not that deferring money is bad or that having any deferred money when you get to retirement is bad, rather having a huge pile of deferred money
and being at the mercy of RMDs is not ideal. That's the point to take away. Like Dr. Bill and the skating rink of a driveway that he has currently, if you plan ahead, like Dr. Bill and that skating rink of a driveway, if you plan ahead, can be like, like Dr. Bill and that skating rink of a driveway, if you can plan ahead, it can be
Shawn Terrell (13:46.873)
like Dr. Bill and that skating rink of a driveway, if you can plan ahead, if you can be proactive and strategic, you have a good chance of paying less tax over your lifetime, then you would have to pay without any strategy at all.
Like Dr. Bill and that skating rink of a driveway, if you can plan ahead, if you can be proactive and strategic, you have a good chance of paying less tax over your lifetime than you would pay without any plan or strategy in place at all. And real soon, we're going to dive into one strategy on how to do that. Speaking of taxes, if you'd like a reference.
Shawn Terrell (14:35.238)
Speaking of taxes, if you'd like a reference of the many rules and current numbers in effect, we have a free tax cheat sheet that we can send you. And that includes the changes that go into effect now that it's 2026. Whether you're watching this on YouTube or you're listening on a podcast app, you can go to the show notes, look for episode resource. If you click there, we will email you our tax cheat sheet.
Also, if you're a dentist and you're hoping to leave clinical in the next few years and you're interested in a personalized consultation with Dentist Exit Planning, you can schedule a no obligation virtual meeting with me. And to do that, just go to DentistExit.com, click on free consultation at the top right corner of our homepage, and then pick a date and the time that works best for you. One reminder before I go, and that's that Dentist Exit Planning is a registered investment advisor.
The information presented here should not be interpreted as investment, legal, tax, financial planning, or wealth management advice. It's for educational purposes only, and past performance is not indicative of future results. Thanks for watching and thanks for listening. I'm Shawn Terrell, and we will talk to you again very soon.