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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 (00:03.658)
Every summer, Dr. Bill takes a week off work, a week out of his practice to ride his bike across the state of Iowa. It's an event called Rag Rye and on average, Dr. Bill and thousands of other cyclists
Shawn Terrell (00:25.536)
Every summer, Dr. Bill takes a week off work, a week out of his practice to ride his bike across the state of Iowa. It's an event called RAGBRAI. On average, Dr. Bill and thousands of other cyclists ride 70 miles for seven straight days to traverse the state of Iowa from the Missouri River to the Mississippi River. And it's not against the law or any sort of faux pas to
take a break, take a day off, or stop pedaling and hitch a ride for part of the ride, especially if you're injured, sick, or just really tired. But Dr. Bill always has a personal goal of pedaling every mile of the route every year, which means that he has to ride for seven straight days in July. And the weather in Iowa in late July is not always ideal for a 70-mile bike ride.
It can be hot and humid and worst of all, it can be windy. Apologies for talking about the weather on another podcast. Hi, I'm your host, Shawn Terrell, and welcome to Dentist's Puns and Money. This podcast is brought to you by Dentist Exit Planning. At Dentist Exit Planning, we work with dentists to build their financial treatment plan for life after clinical and life after dentistry.
Shawn Terrell (01:54.071)
So, back to the bike ride. There was a day on a recent RAGBRAI that was pretty high on the misery scale. There was a heat index or a feels like temperature of over 100 degrees and the headwinds were steady at 20 miles an hour or more for the entire ride. Which doesn't sound like a lot unless you've ever ridden your bike a long way with a lot of wind. So, on that day,
Dr. Bill got up way earlier than normal to start pedaling and start riding by 530 in the morning, which was about the time that there was enough sunlight to see the road in front of him. And his thinking was that he couldn't control how far he had to ride on this fateful day because the distance between where he was leaving and going to Forest City, Iowa to Iowa Falls, Iowa. It's 70 miles or so, and there's not really any shortcuts there.
But Dr. Bill did control when he rode that route. And if the winds were forecasted to be lighter and the heat would be lower earlier in the day, then his thinking was that the sooner he started, the sooner he started pedaling, the sooner he started his bike ride on that day, that the less hard that ride would be because he would be done before it got really hot and he would have to ride a lot less time in the heavy wind.
And that is a really good analogy for why dentists should consider converting deferred money into a Roth IRA sometime after leaving clinical practice.
Shawn Terrell (03:39.201)
And that's a good analogy for why dentists should consider conferring.
Shawn Terrell (03:51.703)
And that's a good example for why dentists should consider converting.
Shawn Terrell (03:59.392)
And that's a good ex-
Shawn Terrell (04:03.658)
And that's a good analogy for why dentists should consider converting deferred money, money in deferred accounts into a Roth IRA sometime after leaving clinical practice. Because Dr. Bill cannot avoid the misery of paying taxes on his deferred money. It's going to be taxed eventually, or his beneficiaries will be taxed on it if some of that money remains after he's gone. But Dr. Bill does have some control over when he is taxed on it.
and by controlling the timing of when he is taxed on that deferred money, he has more control over the tax rate on that money, and thus the amount of total taxes that he will pay over his lifetime.
Shawn Terrell (04:56.032)
So if someone converts $100,000 of a traditional IRA or money in a 401k with deferred taxes into a Roth IRA, in any given year, they are effectively increasing their taxable income by $100,000 in whatever year that conversion occurs. So if you were Dr. Bill and you could choose when you were gonna be taxed on deferred money, would you wanna have that $100,000 taxed at a 12 % rate?
or a 32 % rate. The difference there is 20%, which on this $100,000 example is $20,000 in taxes that must be paid or worked around. A little bit of an extreme example here, but hopefully it makes it easier to follow the math and sort of the thinking behind this. So.
Shawn Terrell (05:51.389)
So if you were Dr. Bill, would you want to do that Roth conversion or conversions before you leave clinical in your highest earning years? Would you want to do it in the year that you sell your practice and receive the proceeds from that on your tax return? Or would you want to get strategic and plan out the most efficient lowest tax year on the horizon to pay the piper?
Maybe that would be after you leave clinical and after you sell your practice, but before you turn on social security income as just one example. And it's just like that bike ride for Dr. Bill riding 70 miles is going to be hard no matter when he does it, but by controlling the timing of that ride and lessening the amount of it that will be hot and windy, he can lessen the amount of misery that he endures.
So Dr. Bill will look for low income years for no inheritance years to do Roth conversions in the years following leaving clinical practice. He'll also factor in state taxes too, which is something we haven't talked a lot about. It's been mostly federal focused. But if Dr. Bill was planning to move to a state with no income taxes after he leaves clinical, it would be smart to time that up or
Some states also don't have state income tax on retirement income. As an example, there's no tax due on Roth conversions in the state of Iowa after you turn 55 years old. So that might be a time when taxes are a little bit less miserable.
Shawn Terrell (07:36.362)
Speaking of taxes, if you would like a reference for the many rules and current numbers in effect, we have a free tax cheat sheet that we can send you. It includes the changes that go into effect now that it's a new year. So whether you're watching this on YouTube or you're listening to this podcast on one of the many podcast apps, you can scroll down to the show notes and look for episode resource. And if you click there, we will email you our tax.
cheat sheet. Also, if you're a dentist that's leaving clinical practice 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 if you want to do that, just go to DentistExit.com, click on free consultation at the top right corner of the screen, and then pick a date and a time that works best for you. One final 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.