Douglas Carlsen, DDS
[Editor's Note: Doug Carlsen, DDS, is a dentist who retired at 53. He is a new columnist at The White Coat Investor. This is his second column. Let me know how you like his articles by email or in the comments section.]
In 2007, I wrote an article for Dental Economics titled “Retire by 50.” It described a small and quiet group of dentists who amass wealth early and then fall off the radar before the rest of us notice. They don’t feel their careers are unique, and they certainly are not flashy. Thus, they are difficult to find!
In the article, I followed a Dr. Howe (name changed to protect the innocent) of San Diego who was able to retire from active practice at age 43. Dr. Howe was able to pay off his practice loan in three and a half years and his personal residence in six years while saving an average of $120,000 per year for retirement.
Quotes from Dr. Howe on Dentist Retirement
“In your practice, don’t be a sucker for technology sold to you by someone seeking a high commission…Wait a few years and gather positive and negative information, especially in regard to your return on investment before purchasing anything new.
“Any decision to spend capital is a decision to work longer to pay for that decision. Your retirement age will be extended accordingly. Don’t get caught in the sizzle of the moment. People use shopping as a recreational activity. They become addicted to the next big ‘thrill’ purchase.”
The article then listed personal and practice traits that were found in a group of dentists who retired early. The trends found were much different than those heard at dental lectures and in the media. After the article was published, many more early retirees came forth with similar personal and practice traits. I now have a core group of well over 100 dentists who have had the choice to retire at the same level of consumption that they had while working. They all have been able to retire by age 55.
The Lindsey Interview
Several years after the article was published, Dr. Heather Lindsey (not her real name) offered additional insights in this interview.
Carlsen: You ran a private practice in the Los Angeles area for twenty years. What was your private practice vision?
Dr. Lindsey: Nothing! Upon further probing she relented, “To enjoy people and save money.”
Carlsen: Who was your guru for practice and personal advice?
Dr. Lindsey: “My husband and my kids.”
Carlsen: What was your practice like?
Lindsey: No high tech, no high production, no glitz. I had two employees with no hygienist. I rarely referred to specialists, and then primarily for orthodontics. If anything, I under-treated rather than over-treated; I never felt pressure to produce. The pride of my practice was that I had several four-generation families. My practice was geared toward relationships, honesty, and loyalty.
I employed simple practice systems. All finance (including billing and payroll) was done in-office, with a CPA monitoring once a year. My employees weren’t overachievers, rather the opposite. A big plus was that they were not highly paid.
Carlsen: What was the smartest financial move you made in your career?
Lindsey: Taking a low salary, at my associate level, for my entire private practice career. At the end of the year after paying all taxes (all monthly expenses were paid in full each month), I would bonus out my corporation.
For retirement, we set up a defined benefit pension and a profit sharing plan starting about 18-20 years ago. The rest was put into after-tax savings. Time was on our side for growth.
For college, I would first fund each kid’s account with a designated amount-usually 5-10 thousand, per year, per child— and invest it in zero coupon treasuries so we made sure the money would be there at age 18. Our investment advisor figured out a projection of college costs for four years at any university in the U.S. and we saved enough accordingly for each.
Carlsen: Do you have specific advice for young dental grads?
Dr. Lindsey: Get out of and stay out of debt. Pay off student loans as soon as possible, so it's not hanging over your head. Start fresh. Don't begin with your own practice, a new house, and loan debt all at once. Start a pension plan or IRA, even with minimum savings and contribute every year. Try not to get caught up in jealousy with friends who may already be in a house. Don't do it until you're ready. Don't buy anything other than a house on time—too much interest expense. Invest in your career experiences—take continuing education classes frequently and find a mentor. Other dentists are usually willing to help new grads learn techniques.
Characteristics of Early Dentist Retirees
Practice:
- Few had more than three employees.
- Half did not employ a hygienist.
- Very few had a “high tech” office.
- Specialist referrals were rare.
- All had practice overhead under 60%.
- Most owned a practice in only one location for their entire career.
- Less than half had significant practice debt for more than five years.
- Most worked in offices of less than 2,000 square feet.
There was a small group that had 2,500+ square feet offices, more than six employees, and high tech features. These doctors employed practice management consultants on an ongoing basis, had sophisticated tracking and communication systems, had incomes of over $500K per year, and saved 20%+ per year.
Personal:
- Most bought one home and stayed in it until retirement.
- All were consistent savers, averaging over 20% of net income per year.
- Most paid cash for cars, keeping for more than five years.
- 100% paid off any credit cards monthly.
- Investing: Here there were fewer similarities. Many used traditional brokers, although the trend in recent years has been to work with medical/dental -specific advisers that invest with a discount brokerage. A large group has invested on their own or through financial study clubs. Some have used active management, some passive. Very few were market-timers, having dodged the 2002 and 2008 debacles. The common trait was saving consistently every year.
Everyone interviewed saved substantially each year, averaging over 20% of net practice income. Few of the early retirees had what I call “sequel” loans. The norm was one home loan, one practice loan, and to always pay cash for cars. Any new home or anything expensive was normally purchased with cash the second and subsequent times. This was true before and after retirement.
Final Thoughts on Dentist Retirement
The characteristics of the early retirees may sound Spartan, yet these professionals had many of the characteristics of the millionaires interviewed in Stanley and Danko’s Millionaire Next Door series. Also, many live in larger, more expensive homes than when they practiced and now drive luxury autos. Please note that there are dentists that have made substantial fortunes with large offices and owning multiple practices. The important point is that one does not need to have a large high-tech office with many employees to generate the resources to retire at an early age.
What do you think? Are you a dentist planning to retire early? What do you see as the keys to getting there? Comment below!
Good article, thank you. Can you speak to the regulatory environment or lack thereof in Dentistry as a contributing factor in early retirement? For example, medical doctors cannot set their reimbursements, they are forced to buy expensive items like electronic medical records due to crushing regulation. My perception is the doctors of dentistry do not face these issues anywhere close to the same scale. Is that true?
Is there a perception in Dental circles that CMS will try to gain a foothold and start regulating you guys / gals at the same level? There are many articles out there that link dental hygiene to systemic diseases like heart attacks and stroke. Given our culture of healthcare as a right, will dental care also become a right? Obamacare requires pediatric dental insurance which reimburses at very low rates. Are doctors of dentistry headed down the same path that doctors of medicine went down many years ago in losing control over their own profession?
Great questions, Dennis!
Our reimbursements are set more and more by PPOs these days. According to Charles Blair, 80% of dental plans sold today are PPOs. So the days of indemnity plans are numbered!! And the cost of high-tech equipment can be over $200K for Cone Beams and $150K for CAD CAM crown fabricators.
“Are doctors of dentistry headed down the same path that doctors of medicine went down many years ago in losing control over their own profession?”
I think so, as corporate groups, especially private equity, are finding dental practices as a good future source of income. The amount of corporate influence is now at about 20%, I think, yet is poised to take off in the next ten years. We’re all worried about how the playing field may change, both in terms of income and quality of care.
I assume that CMS stands for Centers for Medicare & Medicaid Services. Right now, Medicare hasn’t established a foothold in dentistry, yet I hear via the ACA it might become an issue. Medicaid will probably become more of an issue as the ACA.
From the ADA site:
“About 3 million children are expected to gain some form of dental benefits by 2018 as a result of ACA. Roughly one-third will gain Medicaid dental coverage and two-thirds will gain private dental coverage through health insurance exchanges and employer-sponsored plans. Combined, this will reduce the number of children who lack dental benefits by approximately 55 percent.
Nearly 18 million adults will gain some level of dental benefits from the Affordable Care Act, but only 4.5 million of these adults are expected to gain extensive dental benefits through Medicaid. An additional 800,000 are expected to gain private dental benefits through health insurance exchanges. Combined, about 5 percent fewer adults will be without dental benefits. These increases will put pressure on the Medicaid system by generating an additional 10.4 million dental visits each year through Medicaid by 2018.”
Pretty good article, I agree with a lot of that.
Honestly I think the fastest and easiest pathway to wealth in dentistry (probably similar in medicine) is to live in a (most likely sucky) small town area with very little competition.
I don’t do this and most of my buddies who live in smaller towns just CRUSH me in terms of income and ability to save and make money.
I do think dentistry is getting worse every year much like I think medicine has with the rise of corporate dentistry and most likely impending regulations.
In addition dental insurance reimbursement rates may be good, but people have maximums on their dental insurance of a still paltry $1000-2000 and with the amount of out of pocket money people need to get major work done.. much of it goes undone.
Hey now…Loving our small town. Thank you very much!
Small towns away from the Coasts seem to offer much more income for many dentists. And a nice lifestyle. Living in San Diego from 2004-2009, I witnessed incredible competition and lower income. My practice was in Albuquerque, a smaller city of about 700,000. Competition was present, yet to a much smaller degree than on the East or West Coast.
Very good article. I identified myself in many aspects with the practice described. 2 employes, no hygienists, S corporation , high level of customer service and so on. Unfortunately , I am very pessimistic about the survival of this business model. This was good maybe until 5-10 years ago. Higher reimbursement rates, better insurance plans, people motivated to do more dentistry. We are facing now with an unprecedented insurance limitations, decrease or flat reimbursement , even denials for obvious treatment necessities. The administrative costs goes up, also insurance , marketing, taxes, payroll, just name a few. This is a reason why corporate dentistry will proliferate more, with more volume of work to compensate poor plans reimbursement. It is a ” fast-food ” in dentistry, in and out. The times where you go to the dentist and expect to have personalized service with a ” family guy” who knows all about you and relatives , will be long gone. Despite this , a lot of dentists tried to implement honestly the ” niche practice” model. They will be the last ” dinosaurs” and thinking that still will be a percentage of people who they want to be treated like human beings and not at the mercy of insurance companies.
I agree with this. I think the only area where you will continue to be able to practice the way you are describing is in smaller towns without the franchise proliferation, or really attempt to be a niche practice.
But the treatment denials I am getting for very obvious needed work (certainly not even remotely elective or marginally needed work) is downright shocking.
Because the dental business model is such that people have to pay for part of nearly every non-preventative procedure and a nearly all of most semi-elective and fully elective procedures, we really face a lot of resistance.
I wish i was farther along in my career because I don’t like where it is heading.
I would only have a child choose this job if he/she were willing to goto a small town and practice without competition, insurance involvement, or franchise proliferation…. in these areas the profession is not only extremely strong but the outlook is still excellent for the foreseeable future.
My guess is that the franchises and managed care offices will end up everywhere. According to many writers in the last year, future investors see big bucks to be made in the dental industry, in many cases due to the lack of management skills now seen in offices.
Hygienists and mid-level providers will perform much of the work for much less than dentists, often at low salaries of a bit over $100K in many areas, make. Dentists will probably be performing more “specialty” care, such as implants and root canals. This could theoretically increase their income.
If things are managed correctly, the dentists could make over $200K and not have to worry about what we hate most, managing employees. It could be a win-win long term, so don’t get too down on things…..yet.
I agree with the comments above. There seems to be a lot of pessimism in dentistry and I feel rightly so with the current direction. I often think what it would be like to have been working in the field 20 years ago, but it could be worse, I could be starting 20 years from now!
It seems that the takeaway from the article is simply, keep expenses low, don’t buy stuff you don’t need and put a ton away into retirement. Simple advice, sad that so many find it hard to follow.
Below is a comment that might assist new dentists in the future, yet may tie them to corporate dentistry during the early part of their careers.
This is yet another factor that shows the changes dentistry is going through….
From the California Dental Association Journal, Feb. 2014:
“The larger and mid-sized managed group practices (MSOs/DSOs) are now beginning to create strong packages for new graduates whereby they can reduce or pay off student loans and make decent dollars during their first five years of work. And at the end of this period of time, they may be sufficiently vested via stock or stock options in the company, binding them to the future of the company.”
Marc B. Cooper, DDS, “The Perfect Storm,”The Journal of the California Dental Association, Vol. 42, No. 2, February 2014, page 99.
This is good news and a confirmation that Im on the right path. I graduated in 2011 with $202K school debt and will be debt free in 2-3 years minus the house. I bought a practice from a 77yo Dr with one staff member (front and back) and have turned it into a three staff member pract (1 om, 1 hyg, 1 asst) in a small town but with plenty of competition. Nice to see that this model can pay for an early retirement as long as i dont get cerec/cadcam/expensive toys crazy! Thank you for your time and experience!
I just found this article through a Google search and wanted to share my perspective for any other dentists that are interested.
In my experience, there are two really good options for setting yourself up well financially when just starting out that are available today. I graduated from dental school five years ago and should be able to retire if I want to in about five years or less depending on the stock market. I had three years of dental school paid for by the Air Force. The financial benefit of not having that much debt is obvious. During the time I was in the Air Force, my wife and I tried to maintain a fairly similar standard of living to what we did during dental school. During that time of paying back the military the time I owed, we paid off much of the student debt I still had and started investing. Also during this time, we discovered early retirement websites like Mr Money Mustache and decided we wanted to get serious.
After my time in the military, I was uneasy about buying into a practice, because it just seemed like a big commitment, and I still wasn’t exactly sure what I wanted to do career-wise. I then discovered that you can work for some public health facilities as an employee and still do quite well. There’s an organization called NHSC that has a lot of those available jobs. Many are in places that some would call undesirable – small towns and inner cities. The other problem is having bosses and a bureaucracy above you to deal with. However, I’ve been able to find several places that offered $150,000 or more in addition to a nice benefit package. These NHSC sites qualify for a federal program that will pay up to $50,000 to your student loans if you commit to work at that site for 2 years. I was able to be rid of student debt last year, and when I decide I want to leave my current job, I just give a couple months of notice and I’m gone – no long sales and transfer process. I worked for a few months at a dental corporation, but I just would never recommend it to anyone. It’s really high stress. The public health office I work at is so much better than a corporation for me.
With all these perks and reasonably frugal living, I could end up being able to retire before I’m 40. I say reasonably frugal because I pay quite a bit more for travel and my daughter’s music lessons than the early retirement websites typically recommend. I’m really excited to have the flexibility to either continue doing dentistry but on a part-time basis – or not at all. I’ll have the freedom to choose exactly what I want to do.
New grad here. Been working in private office that functions like corporate for a few months now. The experience has been just soul crashing and taking a toll on my mental health. It’s nice to read this article and see a future where early retirement is possible.