Financial Management

Retirement Plan Myths Dentists Should Know About (Part 1)

As I’ve been giving presentations about business systems to dentists, I’ve discovered that there are six prevalent myths surrounding 401k retirement plans. In this brief article, I hope to help dentists who are also small business owners develop a better understanding of what is actually possible.

Myth 1: Fees for 401k Plans Are Similar

Based on research I have done and the dentists’ existing plans they have shared with me, there are marked fee differences between similar plans. In comparing two “young” plans with just over $200,000 invested for 16 employees I discovered a $3,000 difference in annual fees. This $3,000 annual fee difference represented a 60% increase in cost between the plans. The compounding effect of these fee savings over many years is hundreds of thousands of dollars.

Myth 2: Setting Up a 401k Plan Is Difficult

As dentists shop around for a plan, they often are told that it is difficult to set up a 401k plan that meets the government’s requirements for a broad investment strategy. I view this myth as a sales scare tactic. You can set up your own plan and easily meet the government’s standards. The federal government offers a plan for federal employees—the Thrift Savings Plan (TSP), which is a plan they can easily simulate.

Myth 3: Employers Must Hire a Professional Investment Advisor for 401k Investment Funds Selection

With every 401k plan, there are three responsible parties:

  1. The plan sponsor
  2. The plan administrator
  3. The investment platform provider

The plan sponsor is the dentist/employer and has the overall fiduciary responsibility for the plan. What does this mean? You are going to act in good faith to administer the plan. A hired financial advisor cannot assume this responsibility for you. The plan administrator creates the plan documents, completes annual audits, and prepares annual filings. The platform provider is the custodian of the financial assets and contributions. The platform provider maintains financial statements, updates them online multiple times per hour, and distributes summary statements to investors monthly.

Many dentists choose to hire a professional financial advisor/manager who helps participants select funds, provides investment education, and also acts as the plan administrator, shouldering the documentation and audit work that dentists and their office managers rarely want to do themselves. But some 401K providers have made these tasks easy to accomplish with automation – a robust plan can be designed and administered in as little as 15 minutes.

IN PART 2 OF THIS SERIES…I will present three additional 401k myths that are relevant to dentists as small business owners.

Related Resources:

Additionally, you can take a Financial Management course with me. Essentials 2 will help you reach your goal of financial freedom by gaining the tools you need to get there. Develop philosophical-based fee schedules and continue to deepen your knowledge of investment strategies and debt management.       

Mark Kleive DDS

Dr. Mark Kleive earned his D.D.S. degree with distinction from the University of Minnesota School of Dentistry in 1997. Mark has had experience as an associate in a multi-clinic setting and as an owner of 2 different fee-for-service practices. For the last 6 years Mark has practiced in a beautiful area of the country – Asheville, North Carolina, where he lives with his wife Nicki and twin daughters Meighan and Emily. Mark has been passionate about advanced education since graduation. Mark is a Visiting Faculty member with The Pankey Institute and a 2015 inductee into the American College of Dentistry. He leads numerous small group study clubs, lectures nationally and offers his own small group programs. During the last 19 years of practice, Dr. Kleive has made a reputation for himself as a caring, comprehensive oral healthcare provider.

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