Wealth Accumulation Strategies for Dentists: Part I

February 1, 2024

By Roger P. Levin, DDS

Dentistry is a personally and financially rewarding career, but many practitioners and practice owners still encounter specific challenges related to wealth accumulation. Dentists enter the workforce four to five years later than many of their contemporaries, which increases their student loan debt and delays income generation.

Of course, every dentist hopes that their investment in their often-enjoyable and satisfying career creates long-term financial security, opportunities for substantial wealth accumulation, and a comfortable retirement. But dentists can’t reap those benefits without taking measured, active steps to secure a solid financial future.

Understanding wealth accumulation

Recognize that wealth accumulation is not automatic and that every career path has a defined range of financial potential. If you want to own several houses on the French Riviera and purchase Ferraris in every color, then dentistry is not the right career choice from a financial standpoint. While dentists have a promising opportunity to amass significant wealth, dentistry as a profession has its limitations on how much income and savings one can accumulate. Most graduating dentists have student loan debt. Furthermore, dentists who enter a private practice and buy into that practice or purchase a practice of their own will also accrue additional investment debt. Some dentists choose to work as practice employees post-graduation, which places a natural ceiling on their income potential and leaves them with no major asset to sell toward the end of their career. These are financial realities — and when you add in a mortgage, car payments and life expenses, dentists quickly realize how much income they will need to maintain their desired lifestyle and have financial security when retirement rolls around.

Current wealth accumulation trends for dentists

While dentistry can be a lucrative profession, current wealth-accumulation trends are making the endeavor slightly more challenging. According to the 2022 Dental Economics/Levin Group Annual Practice Survey, practice production was basically flat, while inflation factors have increased practice expenses by approximately 6.4%. This means that for every $100,000 of collections, $6,400 extra dollars were going toward expenses instead of practice profitability or doctor income. In other words, a practice collecting $1 million would lose $64,000 a year out of practice profit and income.

Another trend that adds to wealth accumulation challenges is that dental insurance companies are not increasing reimbursements at anywhere near the rate of inflation. This means that even if a practice increases basic fees, all patients with dental insurance plans may be covered at the same rate as the previous year. In some cases, dental insurers are even decreasing reimbursements in order to increase their own profitability.

Finally, dentists will also have to manage how the economy is impacting the financial markets. A major component of wealth accumulation for dentists is investment strategy, with compound interest being one of the most effective; to benefit from compound interest, however, you must have sufficient savings to invest.

Unfortunately, many young dentists do not think about the value of compounding interest over time because the impact seems so small in the early years of their careers. I encourage young dentists to understand that while the initial gains may seem low, they will multiply over time and create significant wealth over the course of their careers.

Take the next step

Stay tuned next week for part II of this article, where we’ll discuss specific strategies and actions dentists can take to start accumulating wealth today. In the meantime, reach out to me at rlevin@levingroup.com with any specific questions you may have.

ROGER P. LEVIN, DDS

Roger P. Levin, DDS is the CEO and Founder of Levin Group, a leading practice management consulting firm that has worked with over 30,000 practices to increase production. A recognized expert on dental practice management and marketing, he has written 67 books and over 4,000 articles and regularly presents seminars in the U.S. and around the world.