Indecision is costing associate dentists millions of pounds in retirement, claims specialist financial planners, Vision Dental Wealth.
Based on the average earnings of an associate dentist, delaying retirement planning by ten years could wipe more than £6 million from an individual’s pension pot, due to the effects of compounding.
David Abel, a partner at Wakefield-based Vision Dental Wealth, said: “An associate told me 12 months ago he’d sort out his pension when life had settled down. A year later and nothing has changed. There’s always a reason not to put time aside for retirement planning – mortgage, kids, work – but the money invested at the start of the journey does the heavy lifting, as the first years have the longest to compound.”
Compound interest is the money earned not only on an initial investment, but the returns the investment accumulates. If an associate dentist was to pay £60,000 a year into a pension and invest a further £40,000 through a limited company, their combined value after 30 years would be £11,139,053.84, (based on average annual returns of 8% and 6.5% respectively, after charges). Doing the same over a 20-year period would see those combined earnings reduce to £4,579,836.88 – a difference of £6,559,216.96.
David added: “Even though our twenties and thirties are the decades when most of us can least afford to pay into a pension, it’s the early money we save that makes a real difference to the end result. Compounding doesn’t only apply to investment returns, but also to the money in our pocket. By choosing to spend less and keep more, even if those savings are modest to begin, the long-term rewards are substantial.
“If a dentist is only ten years from retirement, I would urge them not to give up. It is still possible to accumulate a pension worth more than £1 million in just a decade, with the right investment strategy.”
Vision Dental Wealth is an independent financial planning practice, regulated by the Financial Conduct Authority, that specialises in the dental industry. Its partners understand the unique pressures dentists face and are able to give clients the clarity and confidence they need to build a realistic and rewarding financial plan.
Vision has a financial health check tool associate dentists can use to find out what their own numbers will look like at retirement. Visit https://visiondentalwealth.co.uk/ to find out more or call: 0345 224 3175.
