Retirement: What dental hygiene graduates need to know about retirement funds
By Amber Auger, RDH, MPH
Prior to graduating dental hygiene school, I enrolled in a financial course that was led by financial expert Dave Ramsey. The seven-week course changed the way I viewed money. With over $80,000 in student debt, it was imperative that I used my hygiene salary wisely to not only pay off debt but to allow compounding interest in a retirement fund. According to Time.com, 42% of millennials have no retirement savings.(1) The important thing to remember is the sooner you start, the better.
A 401(k) is a retirement plan that an employee is offered through their employer. The funds for the 401(k) are contributed directly from the employees’ paycheck. Taxes are paid when the funds are withdrawn. The funds are typically spread into mutual funds with a target date to allow the investments to become more conservative when approaching retirement.(2)
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Other articles by Auger
- 4 questions to ask the interviewer during a hygiene job interview
- Teledentistry: An alternative for hygienists to practice outside of the traditional op
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Employers offer a match, typically 3-6% of the funds added by the employee. It is important to determine the percentage of the match and invest enough to take advantage of the “free money” from the employer. For example, if the employer matches 3% of your $60,000 salary ($1,800), the company offers $1,800 in matching funds. At a minimum, in this scenario, the employee should contribute $1,800 a year.
The funds added to a 401(k) should not be withdrawn until age 59½, or if you leave the employer after age 55 to avoid tax penalties.(2)A 10% penalty fee is added to the tax if one withdraws funds prior.(2)
Roth IRA’s are more flexible than the traditional 401(k). Funds are added to the account after tax, which allows any future deduction of the funds to be tax-free. After the account is five years old, the money can be withdrawn without penalty. This type of account is beneficial if the tax rate is expected to be higher during the retirement age.(3) There are no minimum required distributions, which means the money can be left untouched if not needed.(3) Additionally, account holders can contribute to the Roth at any age. The Roth IRA is beneficial for a wide variety of incomes and age brackets, and its flexibility is enticing for a new graduate who may be purchasing a vehicle or home in the next five years.
Please make sure to check with a financial adviser to get a full understanding of the 401(k) and Roth IRA before making any decisions.
Dave Ramsey suggests placing $35 a week in an investment fund such as a 401(k). After 30 years of continued contributions he estimates a return of $330,00 to $490,000!(3)This return could be more if working with a financial adviser who will help manage the mutual funds to your advantage. Don’t wait on investing. Your future self will thank you!
Amber Auger, RDH, MPH, is a hygienist with experience in multiple clinical settings, including facilities abroad. Amber obtained a master's degree in public health from the University of New England and a bachelor's in dental hygiene from the University of New Haven. She holds a part-time position at an elite dental office in Boston. Amber Auger is a key opinion leader for several dental companies, speaker and published author, and can be contacted at amberaugerrdh.com.
References
- Kirkham E. Time.com. 1 in 3 Americans Has Saved $0 for Retirement. 2017. Available at: http://time.com/money/4258451/retirement-savings-survey/. Accessed October 6, 2017.
- The Wall Street Journal. What is a 401 (k). 2017. Available at: http://guides.wsj.com/personal-finance/retirement/what-is-a-401k/. Accessed October 6, 2017.
- Ramsey D. Retire a Millionaire on Just $35 a week. Available at: https://www.daveramsey.com/blog/retire-a-millionaire-on-35-a-week. Accessed October 9, 2017.
