Content Dam Diq Online Articles 2016 04 Piggy Bank 1

Wise-up Wednesday from Zane Benefits: Retirement savings for dentists

April 13, 2016
When thinking about offering employee retirement benefits, it is key for your dental practice to understand these four key tax terms.

Does your dental practice know these 4 key tax terms?

When it comes to retirement savings, understanding tax implications is a key component of successful retirement planning for any dental practice. Here I break down four key terms needed to understand retirement savings and tax options for dental practice owners and employees.

1. Employer contributions (“free money”)

An employer contribution to a retirement account is money made available for employees for the specific use of being added to a retirement investment vehicle. Many dental practices provide contributions toward employee retirement accounts. For example, an employer may match a 401(k) contribution up to 3%. An employer may also contribute to eligible employees' Health Savings Accounts as a strategy for providing retirement savings.

For dental practices, this offers an attractive benefit and encourages employees to save for their own retirement. For staff, this is essentially free money they can invest for their future. Remember, free money, whether taxable or tax-free, is still free money!

2. Tax-free money

Tax-free money is income you do not need to pay taxes on, now or in the future. Money earned in certain types of retirement accounts is tax-free when withdrawn, as long as specific conditions are met. Examples of common accounts that allow tax-free money to be earned include Roth IRAs, 529 college savings plans, municipal bonds, and HSAs under certain conditions.

It may be helpful to note the money initially deposited into these accounts occurs after taxes, and these accounts are generally not included in income tax deductions. As the accounts earn interest, that interest will not be taxed when withdrawn according to the stipulations of the account.

3. Tax-deferred money

Tax-deferred savings plans are very common and allow people to put money into retirement accounts without paying taxes on the money that is contributed. The investments accumulate over time, and the money in the account is taxed at the time it is withdrawn. With tax-deferred money, you defer taxation on your income either until withdrawn from the account or until a particular date.

Tax-deferred money is accounted for when calculating your modified adjusted gross income for your annual tax returns. Tax-deferred savings plans are used most commonly in retirement savings accounts such as IRAs, 401(k)s, and RRSPs, but are also available for education savings plans and other accounts.

4. Taxable money

The last definition is taxable money. This is all money not otherwise classified and is taxed whenever it is received.


When thinking about retirement savings for yourself as well as your staff, the tax savings received is an important contributor to the overall money saved. When thinking about offering employee retirement benefits, it is key to understand these four key definitions—free money, tax-free money, tax-deferred money, and taxable money.

Making health benefits affordable for small dental practices
Employee retention strategies for dentists; real costs of losing an employee
How much will individual health insurance reimbursement cost your dental practice?

To learn more about HR management for dental practices, download the free guide “
The Dental Practice's Guide to Human Resources.” Wise-up Wednesday is presented bi-monthly from the experts at Zane Benefits. One Wednesday a month features Human Resource issues, and the other Wednesday discusses health benefits.

For the most current dental headlines, click here.