June 25, 2021

Attention Young Dental Professionals – Here’s Why It’s a Great Time to Start Saving for Retirement


By Taylor Richardson, CRPS ®, AIF ®, Financial Advisor

As you graduate from dental school and begin your career, the last thing on your mind is saving for retirement. You probably have student loans to pay off, or you’re thinking about saving up to buy a practice in a few years, or maybe you just got married and are planning to buy your first house. I get it – saving for retirement just doesn’t feel that urgent when you’re in your 20’s. But the fact is, that’s the optimum time to start saving, even if it’s just a little each month.

Here’s why putting aside money for retirement when you’re in your 20’s is a great idea.

The Power of Compound Interest

This is the number one reason to start saving when you’re young. It’s one of the best ways to put your money to work over time, because in addition to earning returns on the money you invest, you also earn returns on those returns at the end of every compounding period. The longer the money is in the account, the more impressive the returns.

Example: Saving Small Amounts Early vs. Saving More Later

Let’s take a look at compound interest in action. Say you decide to invest $100 a month in the market and you earn on average 8% a year, compounded monthly, and you’re able to do that for 40 years. Your friend takes a different approach and doesn’t begin investing for 30 years. At that point, they invest $1,000 per month for 10 years, earning the same 8% annual returns compounded monthly. You both retire at the same time.

In this scenario your friend will have saved about $193,000 for retirement while your account will be close to $400,000. That’s a pretty big difference and it shows why saving small amounts early on is far better than saving a lot late in the game. That’s the power of compound interest.

Don’t Miss Out on the Match

Employer-based retirement plans represent another opportunity you’re more likely to have early in your career. As a new graduate you’re probably going to be employed as an associate for at least the first few years of your career. Most employers offer a benefits package that includes a 401K match. You owe it to yourself to maximize the match because it will provide an extra boost to your savings. Usually, your contribution will be pre-tax so it’s less likely you’ll even notice the deduction.

Working with a financial advisor as you start your career can also help you get a good jump on retirement savings. An advisor will work with you to set goals, make an overall plan and a establish a budget that allows for retirement savings while taking into account the totality of your income and debt. They can also help you steer you away from costly mistakes like annuity products.

As a young professional time is on your side so take advantage of it. Even a modest monthly deposit into an IRA can have a significant impact on your future savings. If it helps, instead of saving for retirement, think about it as building wealth. The point is, saving now will make a huge difference later and you’ll be glad you did it.

If you’re interested in learning more about how you can prepare for a financially secure future, give us a call. Engage Wealth Advisors have helped hundreds of dentists at every stage of their career meet their financial goals. Contact us today to talk about how we can support you.