Closing Costs: Selling A Practice to Supplement Retirement

Are you counting on your practice sale to fund your retirement?

If so, you may need a backup plan. Typically, after taxes and closing expenses, the profit from selling your practice is roughly equivalent to what you would take home from the practice after working an additional 1.5 – 2 years. As a result, many dentists fail to plan their finances for retirement.If you are considering retirement in the next ten to fifteen years, now is the time to start planning.

To start, ask yourself: How much will it cost to live once I retire? If you can’t answer that question, it is time to start calculating. Use your credit card statements and check register. You will need to include taxes, health insurance, medications, mortgage, travel, gas, insurance, repairs, maintenance, phone, clothes, gifts, entertainment, hobbies, food, utilities, and cable. Then, determine a monthly and annual cost of living.

Now is the time to get totally out of debt. Banks place liens on your practice when you borrow money or open a business line of credit. If you have borrowed money, the debt will have to be paid off before, or at the sale of your practice.

What investments and other assets do you own? Do you own stocks, bonds, fixed assets, cash, or money market accounts? How much income will these assets provide after retirement — and is it enough? Currently, social security is still viable, but will likely only fund a small portion of your retirement needs.

Determine whether your future total income from investments, social security, disability insurance, and any other sources will be enough to cover your future budget. If not, then you will either need to reduce your current and future standard of living, or lengthen your timeline for retirement.

The most common solution dentists see as the answer to retirement income is to sell their practice. If that’s your plan, you should probably be looking at other options to supplement your retirement.

If you haven’t started planning yet, now is the time.

• Jennifer Furey, CPA

How Well Does Your Practice Manage All The Different Dental Plans?

Does your staff see your production and think everything is great? Meanwhile, you have joined a variety of dental insurance plans and are left to review your lower reimbursements which make it a challenge to manage your dental practice. When you have joined several insurance plans, it is essential that you review the appropriate numbers. If you just look at production you will most likely be misled. Utilizing your software and setting up the system correctly can have a huge impact. Entering the fee schedule and identifying the correct claim format will save your office staff significant time as the negotiated fee will be entered on the patient ledger. This saves your office staff from manually entering an insurance adjustment for every patient, or even every code! Also, by setting up the proper tracking for the insurance plans, you will be able to run reports that provide information necessary to evaluate each PPO plan’s performance.

When you join several insurance plans, here are several  item you should consider:

• Fee schedule – how to enter the negotiated fees into your practice management system
• How to enter insurance payments so your system improves its insurance estimates in the future
• How to train your staff to add patients with certain employers and insurance plans
• Number of existing patients with this insurance plan – some patients will suddenly change from out-of-network to in-network and you need to know the effect this will have on your collections
• Subscribers in your zip code – so you know how many potential new patients you could gain by joining
• How to compare the different PPO plans so you know which are the best and worst – and determine which you want to join.

Getting your system set-up properly from the beginning will save time and money and provide you the resources you need to evaluate each plans reimbursements.

Tips For Financial Planning Before Year-End

Now that the fall season is upon us, what a great time to review your finances before year-end, in order to be well-prepared when 2015 begins.

Develop a budget for now and for next year. Perhaps you have some financial goals you would like to achieve in 2015. Think about what changes you need to make in order to achieve those goals.

Review your health insurance. Open enrollment for health benefits is provided in October and November by many employers. It is important to review your health benefits information since your employer may have made changes due to health care reform regulations.

Increase your retirement contributions. If you’re not already saving for retirement, start now! If you are saving, determine if you need to save more and, increase your contribution to your investment accounts.

Review the balance in your flexible spending account (FSA). If you don’t use your FSA before the end of the year, you’ll lose out on the funds you have remaining. Now is the time to purchase new glasses, have dental work performed, or manage other qualified healthcare needs.

Make charitable contributions. Fall is also the time to clean out summer clothing you don’t need and donate it to charity. You may also want to clean out your basement and garage and take good condition items to your church or local charity. You will be helping others and also will get a tax deduction for 2014.

Review your home, auto, and life insurance coverage. In addition to your health insurance, now is the time to take a look at any changes you may need to make to your personal insurance coverage, which should be reviewed annually. If you have had any significant life changes or have any additional assets , you may need to purchase additional coverage.

Plan for vacations and holidays. It’s not too early to start saving for next year’s vacation. If you begin saving now, you will be able to put money away without having to come up with a large amount when the vacation comes. Now is also the perfect time to put a little extra away to cover the money you may want for your holiday spending.

Meet with your trusted financial advisors. This time of year is a great time to meet with our firm to prepare for year-end and to start tax planning for 2015. It’s also the perfect time to review your financial status and discuss strategies to achieve your financial success.