Mastering Your Year-End Finances: 11 Must-Do Steps for Dentists

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As the year draws to a close, it’s not just your patients’ oral health that deserves your attention – your financial well-being requires a checkup, too. Dentists have unique financial considerations that demand careful planning.
Whether you’re a dentist in the early stages of your career, building wealth for the future or contemplating retirement, there are several action items you should consider completing by year-end. While not every item below has a December 31 deadline, they’re all important steps toward ensuring your financial health is in its best condition.
Financial foundationsLet’s start with the essential steps you can take to build wealth and protect your financial future:

Maximize your retirement contributions: One of the most important financial moves you can make is to contribute to your retirement accounts. In 2023, the limit on deferral contributions to traditional and safe harbor plans is $22,500, subject to cost-of-living adjustments. These contributions need to be made by December 31. If you’ve already maxed out your retirement accounts, consider taxable accounts which have no contribution limits.
Take your catch-up contributions: If you’re 50 or older, you can take advantage of “catch-up contributions” to your retirement accounts. Catch-up contributions to traditional retirement savings plans, such as 401(k)s and IRAs, are made on a pre-tax basis. This means that you reduce your taxable income for the year by the amount of your catch-up contribution. For 2023, the catch-up contribution limit for 401(k) plans is $7,500, and the limit for SIMPLE IRAs is $3,500.
Use your FSA balance: If you have a flexible spending account (FSA), make sure you use up the balance before December 31. The FSA rollover maximum limit is $610 in 2023 (projected to increase to $640 in 2024). It is best to plan according to FSA annual spending and FSA rollover rules.
Utilize tax-loss harvesting: If you invest in a taxable account, this strategy involves selling investments that have incurred losses to offset capital gains. You can allocate up to $3,000 in net capital losses annually against ordinary income and interest income. If you have losses above that amount, the excess can be carried over to future years. Talk to your investment advisor or professional financial team to determine if you have underperforming investments that it would make sense to unload before year-end.
Evaluate your debt: With the continued rise in interest rates, now is the time to reevaluate any loans you have without fixed rates, including any student loans or business loans. Work with your financial advisors to strategize loan payments so you don’t end up paying more interest than necessary. However, if you’re considering buying or starting a dental practice, know that it’s more important to show cash in hand than a low student debt balance. Do not refinance until you get advice from specialized advisors who know the facts and fictions of dental lending.
Be sure you’re adequately insured: Did you make any significant life or business changes this year (e.g., marriage, new house, business expansion)? Check to see if your coverage still suits your needs. Consider how an unforeseen emergency would affect your family and your practice. Talk with your financial team about disability, liability and business interruption insurance, and consider whether your current coverage is sufficient as you head into the new year.

Estate plan and beneficiariesYour estate plan includes your will, powers of attorney and essential directives. If you’ve had any major life changes, such as a marriage, divorce, or the birth of a child, take time to make any necessary adjustments.

Update beneficiaries: Did you know that beneficiary designations generally supersede what is stated in a will? This can have unintended consequences as certain assets may pass directly to designated beneficiaries, outside the allocations you intended in your will. Avoid any tragic misunderstandings by keeping these designations current and aligned with your estate plans.

Charitable and family givingIf you’re inclined to make monetary gifts to family and charitable organizations, talk to an advisor about your gifting options. There may be tax-advantaged ways to make these gifts.

Donate using a qualified charitable distribution: If you’re 70½ or older, you may want to consider a qualified charitable distribution (QCD). This strategy allows you to make a tax-free distribution from your traditional IRA directly to one or more qualifying charities, excluding donor advised funds. Couples who submit tax returns with married filing jointly status each qualify for annual QCDs of up to $100,000, for a potential total of $200,000. It will be indexed annually for inflation starting in 2024.

Under the SECURE 2.0 Act, taxpayers are now allowed to make a one-time qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder trust or charitable gift annuity.What’s more, these transfers can be used to satisfy your required minimum distributions (RMDs) for the year and can lower your taxable income. That can help some taxpayers stay in a lower tax bracket or avoid phaseouts on other tax deductions.
Note that you can get the tax advantages of a QCD whether or not you itemize deductions on your tax return. For a QCD to count toward your minimum distribution, it must be made by your standard distribution deadline, which is typically December 31. As is the case with any financial transaction, it’s important for you to speak with a qualified tax professional before executing a QCD. With proper planning, the strategy can provide attractive savings for the right taxpayers.

Take a fresh look at 529 plans: While 529 plans offer a tax-advantaged way to give gifts to grandchildren and other eligible family members, some people have been hesitant to “trap” money inside these education-only accounts. But now, thanks to a change under the SECURE 2.0 Act, beneficiaries of a 529 plan will have an option to rollover up to $35,000 into a Roth IRA, without penalties or recognition of taxable income. Here’s what you need to know: A) The beneficiary must wait at least 15 years after the 529 account was opened, B) gifts made within the last five years are ineligible for rollover and C) annual rollover limits still apply. In other words, the $35,000 maximum rollover would need to be made over a six-year period, assuming limits stay the same. Families who gift money into a 529 account will no longer be penalized if the recipient chooses not to go to school or finds another way to pay for college. For some families, this change could mean that setting up a 529 account makes sense sooner rather than later.

Retirement plans Year-end is a good time to check on your retirement plan, and the plan you offer employees.

Plan for your RMDs: An RMD is the minimum amount of money that you must withdraw from your traditional IRA or 401(k) plan each year. The age at which RMDs kick in is shifting:

Born before July 1, 1949 – RMDs begin at 70½
Born July 1, 1949, through year-end 1950 – RMDs begin at 72
Born 1951 through year-end 1959 – RMDs begin at 73
Born 1960 and after – RMDs begin at 75

And, starting in 2024, investors with a Roth 401(k) will no longer need to take RMDs. (If you’re 73 or older, you’ll still need to take RMDs in 2023.) All in all, this means you have more flexibility to plan for a longer career or a longer retirement. Be sure you’re coordinating with your tax team and your financial planners to fulfill your RMDs and ensure the updated rules are factored into your retirement plans.  

Review your practice’s plan: If you’re a practice owner, now is a good time to review the retirement plan you sponsor for your employees too. Your financial team or retirement plan advisor can help you review your investment menu and help ensure your fees are still competitive with similar-sized dental practices.

The bottom lineIf you complete everything on this list, you’ll be well on your way to a secure financial footing. But there are several other planning strategies — like backdoor Roth IRA contributions, maxing out an HSA account and asset location strategies — that may also be beneficial to dentists.
Reach out to your Patterson representative for help. We’ll connect you with the specialized Dental Advisory team from our partners at Aprio. They’ll help you navigate the intricacies of year-end financial planning, ensuring that your financial health remains as bright as the smiles you craft.
About the author
Caroline Galbraith, CPWA®, CFP®, Aprio Wealth Management*, Wealth Advisor, Director, specializes in the creation, coordination and implementation of sophisticated wealth strategies that include estate planning, wealth transfers, tax management, risk analysis and personalized investment strategies. Caroline’s goal is to provide clients a better wealth management experience. She is a stickler about maintaining good communications, and believes in going the extra mile to make sure clients understand their financial plans and feel confident, informed and reassured that they are on track.
* Investment advisory services are offered through Aprio Wealth Management, LLC, an independent Securities and Exchange Commission Registered Investment Advisor. Securities are offered through Purshe Kaplan Sterling (“PKS”) Investments, Inc., member of FINRA/SIPC. Aprio Wealth Management, LLC and Purshe Kaplan Sterling Investments, Inc. are separate and unaffiliated. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

About Post Author

Patterson Dental

At Patterson Dental, we are committed to partnering with dental practices of all sizes to help oral health professionals practice extraordinary dentistry. We do this by living up to our promise of Trusted Expertise, Unrivaled Support every day.


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