"My worst day in the office is better than my best day on the golf course."

—One dentist’s twist on a familiar golfing expression, offered as his response to a JADA Question of the Month

More than 30,000 dentists are inventoried as "professionally inactive," the bureaucratic term for retired. That amounts to 16 percent of all registered dentists—a percentage expected to dramatically increase over the next 15 years as baby-boomer dentists leave their dental practices.

In 1995, 23.4 percent of professionally active dentists were 55 years of age or older. That percentage is projected to reach 33 percent by 2005 and 40 percent by 2010. Except for the occasional stalwart who vows to "work till I drop," dentists generally assign a high priority to the financial and psychological issues surrounding their eventual retirement from dental practice. For many, as the statistics indicate, that departure date isn’t far away.

Having a comfortable retirement is a high priority for the majority of Americans, and dentists are no exception. How well these dentists have planned for retirement will determine their future options. As small business entrepreneurs, they must initiate most of their retirement programs themselves.

How are they doing?

Last April, JADA’s Question of the Month asked, "In your view, are you adequately prepared for retirement?" Forty-six percent of responding dentists checked "No." Another 10 percent answered "I don’t know" to the same question. While surveys of this type hardly can be construed as representative of all dentists, the preponderance of "No" and "I don’t know" responses can’t be ignored.

Comments from respondents with 20 to 30 years in practice give some indication of their frustrations. "Not even close," wrote one dentist. Another who said he was not ready asked, "But who is?" A number of young dentists practicing less than 10 years echoed one another by pointing to high student debt as a barrier to initiating a retirement savings plan.

How much is enough? The inability to accurately define what would leave a dentist comfortable in retirement makes them fearful that quiting practice prematurely may result in outliving their financial resources.

Financial advisers agree that 70 percent to 80 percent of present adjusted gross income should be sufficient to maintain an "excellent" retirement life style. Assuming that percentage is correct, the average dentist may have difficulty meeting that mark. According to a 1995 ADA Survey Center report, exclusive of any proceeds anticipated from the sale of a practice or from Social Security, the average total amount of savings in all retirement plans for those aged 55 to 65 years of age was $563,433.

Depending on whether these savings are invested in high- or low-risk investments and what amount, if any, the dentists wish to preserve over a specific period will greatly affect their yearly retirement payoff.

For example, dentists who wish to preserve their entire capital over a 20-year period by investing it in a 10-percent yielding portfolio would receive an annual return of $56,000. Add to these dollars about $13,000 from Social Security and the total falls far short of the $110,000 estimate needed to reach the suggested 80 percent of total present income.

While most dentists have additional assets, such as their homes, these become liquid only when sold.

What about the sale of the dentist’s practice? For years, many dentists considered those proceeds an integral part of their retirement assets. Apparently that’s not so any more. Just 9 percent of dentists indicated they were depending "heavily" or "exclusively" on the sale of their practices to finance their retirements. Thirty percent said they were "moderately" reliant on practice sale, while 41 percent said, "just a little."

A "little" may be all many dentists will receive for their practices.

An experienced broker of dental practices estimates that applying an average sale factor of 60 percent to a practice with $500,000 in annual collections would yield $300,000 from a successful sale. Subtracting the necessary income taxes and the 10 percent sale commission, the practitioner receives about $190,000.

That $190,000 is only available if you can sell your practice. Demographic projections for 1999 through 2020 show that retirees will outnumber graduates by the year 2008. The gap will widen steadily after that. These projections are based on maintaining the present number of graduating dentists at 4,200 per year.

That number may be too high. Even with the present economic boom, the number of dental schools has declined by 4 percent and 7 percent, respectively, for the past two years. Based on the number of people who have taken the Dental Aptitude Test, educators expect the drop in applicants to continue for the year 2000.

This translates into negative pressure to increase dental class size. The result? Fewer candidates available to purchase dental practices. Under these circumstances, the value of dental practices will decline.

If, in the future, you are unable to sell your practice at the right price—or sell at all—you might consider donating it to your dental school. If the tax ramifications of a recent proposal on this issue prove favorable, they may provide at least a few dentists practicing in underserved areas with an unusual opportunity.

For many dentists who have made dentistry the total focus of their lives, the prospect of closing the office door for the last time fills them with trepidation, even if they’re financially secure. Imagine the retirement anxiety of those dentists whose finances are insufficient. Some dentists may even be pushed to practice long after their physical abilities have been compromised.

The nation is presently enjoying an unprecedented economic boom. Most dentists have shared in the good times. However, instead of following the national pattern of increased consumer spending and reduced savings, this is the time for dentists to funnel more of their assets into retirement investments—building an infrastructure that will ensure a secure and desirable retirement.