Smart Saving Strategies for Dental Business Owners: A Six-Step Guide

Running a successful dental practice requires more than just clinical expertise—it demands sound financial planning and strategic saving strategies. As a dental business owner, understanding the priority of saving is crucial for ensuring the long-term stability and growth of your personal and professional goals. In this article, we’ll explore a six-step saving strategy that can help enable you to practice well, live well and prepare to retire well.

1. Health Savings Accounts (HSAs): A healthier approach to savings

Health Savings Accounts (HSAs)1 are a powerful tool that dental business owners may be able to leverage if they are eligible. Eligibility is primarily based on being enrolled in a High Deductible Health Plan (HDHP), which you may be required to open for your employees. Be sure to explore the potential advantages, limitations, and other considerations before proceeding.

If an HSA is a good option for you, contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free. What some doctors miss is that you can save and invest your contributions now and use them later for healthcare expenses in retirement. By prioritizing these HSA contributions sooner, you can potentially take advantage of tax-free compounding interest to maximize your funds for retirement healthcare.

2. Qualified retirement plans: A foundation for your future

Prioritizing contributions to qualified retirement plans, such as 401(k)s and pension plans, is a crucial step for dental business owners. These plans not only provide a valuable benefit for your employees but can also offer tax-advantaged savings for you as a business owner. Contributions to these plans are tax-deductible, and any growth of the investments within the plan is tax-deferred until withdrawal. Qualified retirement plans lay the foundation for your retirement nest egg, so it’s important to take full advantage of them.

3. Tax-deductible education funding: Investing in your family’s future

Employing your children in the business is a unique perk of small business ownership. Once qualifying roles and duties are established, children can be added to the payroll and begin to generate their own income through the practice. This has the possible benefit of family tax reduction if the child is in a lower income tax rate. It also opens the opportunity for eligible children to fund a Roth IRA.

4. IRA/Roth conversions: Pursuing your tax-free growth

Consider the potential benefits of funding non-deductible IRAs and converting them to Roth IRAs on a tax-free basis. Known as the “backdoor Roth IRA,” this strategy allows doctors and their spouses to gain access to the potential tax-free growth benefit of a Roth IRA, even if their income exceeds the limits applied to Roth IRAs.

Normally, the question of whether or not you can make the maximum Roth IRA contribution ($7,000 annually, or $8,000 if you're age 50 or older) depends on your tax filing status and your modified adjusted gross income (MAGI). However, if your income is above a certain phase-out range, you are not allowed to contribute at all.

With this strategy, you would make your contributions to a Traditional IRA, which does not have income limits, then convert those funds to a Roth IRA. The tradeoff? You might trigger tax at the time of conversion, but your future withdrawals will be tax-free. Work closely with your wealth and tax advisors when considering this strategy to ensure that you are likely to benefit in the long-run.

5. Personal savings: A foundation for financial stability

Once the first four strategies have been fully optimized, personal savings play a fifth fundamental role in helping financial stability of dental business owners and their families. Think of personal savings as a “pour-over” strategy for the savings that don’t fit into the various tax-advantaged strategies. This money can be allocated to after-tax savings with goals such as creating short-term liquidity and long-term capital gains. Steady monthly contributions can drive personal planning objectives and feelings of success. Personal savings demonstrate your commitment to financial health, set a positive example for your family and could potentially lead to a more resilient and financially secure dental practice.

6. Debt reduction: Streamlining financial health

Lastly, prioritize debt reduction as part of your savings strategy. Whether it’s business loans, equipment financing or personal debt, reducing debt increases your overall financial strength. Allocate funds to paying off high-interest debts first, freeing up resources that can be redirected toward savings and investments. By prioritizing debt reduction, you not only save on interest payments but also position your practice for financial growth and flexibility in the long run.

In conclusion, dental business owners should adopt a comprehensive approach to savings, encompassing HSAs, qualified retirement plans, tax-deductible education funding, IRA/Roth conversions, personal savings and debt reduction. By prioritizing these strategies, you could enhance the financial health of your practice but also set the stage for long-term wealth opportunities.




Brett Miller, CPA, CFP

Brett Miller, CPA, CFP


Brett is Partner, Wealth Advisor in our Charlotte, NC, office. He joined from legacy firm Brightworth, where he led the Dental Services Practice Management group. Brett graduated from The Citadel with a degree in Business Administration (accounting concentration), obtained his Certified Public Accountant certificate in 2008 and became a CERTIFIED FINANCIAL PLANNER™ professional in 2010. He is a member of the American Institute of Certified Public Accountants and the North Carolina Association of Certified Public Accountants.

Brett is a native of Gastonia, NC. He and his wife, Sarah, have two children and live in Mint Hill. Outside of work, Brett enjoys running and golfing and is actively involved in his church and local Citadel alumni club.


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