Accounting, Planning, Tax (APT) Corner
We return to a topic dear to many dentists: retirement. In this interview you will learn about the differences between pension firms, CPAs and CFP’s. This is part two of an interview with my guest columnist who is a Certified Financial Planner CFP® who finds this topic exhilarating. And as you will see, he is also educational, somber, reflective and caring.
Sharyn: Okay, so I get it, retirement plan designs have nuances. What should a doctor look for when interviewing a pension firm?
Educational CFP®: They should look for a pension firm that is independent of the investment manager. This type of pension firm is known as a Third Party Administrator (TPA). If you have a TPA they are more apt to be aware and keep their eye on the nuances of the plan and adapt your plan to the changes in staff, income levels, etc. They should also confirm that the firm works with businesses with but a few staff members (which is a typical dental practice) because the demographic changes require the TPA to be nimble with plan changes when necessary.
Sharyn: Shouldn’t the doctor’s CPA be able to help the doctor with all of this?
Somber CFP®: Technically yes, but unfortunately not all CPA’s are knowledgeable when it comes to retirement plan design and consequently, they (much like the doctor) take the numbers as presented by the pension firm, put them in the appropriate box on the tax return and move on.
Sharyn: So you are both a CPA and a CFP®. Can you explain the difference between the two?
Reflective CFP®: The analogy often used is that the CPA looks in the rear view mirror (looking at the past, reconciling last month’s books, working on last year’s taxes, etc.) while the CFP® is looking ahead through the windshield. A CFP® is aware of the past, but is focusing on changes (annual plans, demographic changes, investment opportunities, exit strategies, etc.). Part of the CFP® credentialing process is related to retirement plans which is why we are able to advise business owners through the complexities of retirement plan designs.
Sharyn: How do I balance my desire to spend vs save? How do I establish how much I should put into retirement vs how much I should leave out for cashflow?
Caring CFP®: This is where your CFP®/Financial planner plays an important role. Much like when a doctor puts together their annual plan with Weiss Practice Enhancement, they should do the same when they put together their personal financial plan. Set goals and share with your CFP®, then together determine the projected cash available to match the short-, mid- and long-term financial goals and then use cash flow accordingly to save, spend, pay down debt, etc. according to that plan.
Sharyn’s Note: If you are intrigued by my guest columnist’s insights then drop me an email and I will connect you to him. And if you want more information about the Annual Plan he referred to, let me know and I will show you how to forecast your expenses so that you will have production and collection goals designed to match your practice’s needs.
