Episode 751: To Set up a 401(k) or Not for Your Business

 Ryan Isaac of The Dentist Money Show (and common guest on the DAT process) joins Kiera to dive very deeply into 401(k) plans for your business. Ryan simplifies a lot of the intimidating information, including what the heck 401(k) even means, the logistics of setting up a plan, how to know what type of plan to choose for your company, and more.

Episode resources:

Tune in to The Dentist Money Show

Listen to episode 746, A Consultant, Financial Advisor + Dentist Perspective On Life

Listen to episode 590, Unfiltered Advice on Choosing a Financial Advisor

Reach out to Kiera

Subscribe to The Dental A-Team podcast

Become Dental A-Team Platinum!

Review the podcast

Transcript:

Kiera Dent (00:00.986)

Hello, Dental A Team listeners, this is Kira and I've got the one and only Ryan Isaac with Dentist Advisors here today because we decided why not have a podcast with the two duo here. Ryan, how long have we known each other? It's been a long time.

 

Ryan (00:08.248)

Yes.

 

Ryan (00:13.206)

Let's do it. It's been, I think it's been a long time. What would it, so what would it be now? Seven years?

 

Kiera Dent (00:20.914)

It's gotta be, yeah, probably. Well, I started the company in 2016, so I would have probably met you in 2017. And so we're at least six years into this relationship because, yeah, there's a dental team, no, 16. I started in 16.

 

Ryan (00:24.078)

Maybe like 2014?

 

Ryan (00:33.386)

Wait, you started 18 in 2016? No, I met you before 18.

 

I know I met you before dental 18. Oh yeah, yeah.

 

Kiera Dent (00:42.75)

No, well, Keira's Dental Consulting, it was Keira's Dental Consulting that morphed into it. So I started the company before anybody even knew it was a company, November 2016. And I only know that because I ran a marathon in December 2016. And I only trained from October to December and I'm still like regretting that decision in life. So I have it. But Ryan and I...

 

Ryan (00:46.683)

Yes, yes, a couple years, yes.

 

Ryan (00:52.818)

OK, so we probably meant slightly before that.

 

Ryan (01:02.95)

Okay, well, and you've never done one since, so you learned your lesson. You learned the lesson, it's good for you. Yeah.

 

Kiera Dent (01:10.47)

We've gone way back and if you guys don't know Ryan, please listen to a lot of the podcasts we put together They have an incredible podcast too. A lot of this audio will be on theirs They've got the Dennis money show but Ryan and I were so let me just take you guys on a quick little journey of kira And Ryan we met On a like he was at an event. I was there He did a really funny presentation about cereal and that he weighs his cereal which Ryan I haven't told you This is a new update. I weigh my food now I've been macro tracking

 

Ryan (01:32.414)

Yes, I don't. I don't anymore. Well, okay, good for you. You are? I'm highly interested. You wanna make that part of the show? Because I like this conversation actually. Hmm. Okay.

 

Kiera Dent (01:39.219)

Yeah, we'll talk about it.

 

I know the macro try anyway, so not yet. Cause we got to talk 401ks, but, but anyway, so Ryan and I, we met at this conference. I went to Ryan and said, Hey, I just started this business. I don't really know what I'm doing. I remember being on an airplane and we did a share screen of like my number spreadsheet. Ryan was nice, chatted with me and Jason and was like, listen, Carrie, you don't quite need a financial advisor, which is why I love you guys as financial advisors because it's a no stress, no pressure. I even have a client.

 

You did a podcast with her. That's all I'll say. And she told me she loved working with you because she called you and you're like, you honestly don't need me. Let me give you some tips and on your way you go. So that's why I love you guys. And then you helped me grow as like a little baby plant. And now here I am and I've hired you now as my financial advisor.

 

Ryan (02:14.548)

Okay.

 

Ryan (02:20.683)

Yeah.

 

Cool.

 

Ryan (02:29.762)

Bad analogy, we just got done talking about how I kill plants. Not a great analogy, but okay, I have very little. That's not also true. That's also not even close to true. I do remember, here's what I remember thinking. I have such like inconveniencing stranger anxiety. I do remember multiple times talking to you when you would be like sitting in your chair in the airplane and you were that person on a phone call and I was like, I'm so embarrassed right now that I am making you be on the phone. You just hang up, we'll talk later.

 

Kiera Dent (02:34.014)

I'm just as succulent. I require no effort, but that's actually not true.

 

Kiera Dent (02:40.618)

So.

 

Kiera Dent (02:52.822)

Mm-hmm. Oh, yeah

 

Kiera Dent (02:59.926)

And I never knew that about you because I'm like, this is the best. Like these people, I don't want to talk to them for the next four hours of this flight. So I'm going to be the jerk that's finishing up a conversation. Like I'm just so busy. So then they don't want to talk to me. It was perfect for both of us. Yeah. So anyway, so Ryan is actually my financial advisor. I love them. I recommend them all the time. I think that you guys are truly the greatest and we share clients back and forth. We help grow you guys help invest those

 

Ryan (03:00.483)

I do remember that.

 

Ryan (03:10.062)

They'll be so annoyed. Yeah, they'll be annoyed. Good for you. It worked, okay.

 

Kiera Dent (03:30.818)

like new business rookie over here. We've now hit the level of needing to bring a 401k into my business in dental 18, which I'm super excited for my team. But you and I were chatting on my personal call with you and we realized we were like, we should have just hit record on this because so many of my questions I have about 401k, I don't know anything about a 401k. And you said, this is like a lot of dentists and a lot of offices. Like you guys, the words of 401k make no sense. Like, Brian, what the heck?

 

Ryan (03:44.574)

I know.

 

Ryan (03:50.433)

Yeah.

 

Kiera Dent (03:58.31)

It's safe harbor, it's pension, it's like, there's so many words that honestly, I'm just curious, this is trivia, who made those dumb words up? Because they make absolute utter no sense. So I'm guessing like 200 years ago these were made. That's my guess. That's...

 

Ryan (04:03.236)

Yeah.

 

Ryan (04:09.026)

Yeah. 200, it's probably a little soon. It's probably a little more recent than 200, but it's probably maybe close. Yeah, I'd have to Google it. The term 401k actually is just describing the actual provision number and section of the tax code that allows a tax deduction for retirement plan contribution. Literally, it's like section 401 part K. Like that's what it means. That's what it means.

 

Kiera Dent (04:30.844)

Interesting.

 

No way. Interesting. Okay, good to know.

 

Ryan (04:36.938)

Yeah. And you know, it's funny about that. Some, because some people, this is like a big tick tock thing, like tick tock financial advice these days. People will be selling like life insurance or crypto or something. And they'll be like, 401ks are bad investments. They get no returns. And it's like, it's literally a tax code provision number. It's not an investment, you know, it's just a, it's just a tax code thing. So that's where the number comes from. Yeah.

 

Kiera Dent (04:58.62)

So obviously. Interesting. I did not know this. So Ryan, Ryan was just helping me out, um, because I'm setting up a 401k and we were going through for me as a smaller business. Um, I won't exactly share the phrase you said, cause we'll probably have to cut it from the audio of what you told me of, here, I usually don't have the small of client setting up 401k cause it was, but it was funny. Yeah. Because I have to like start up like.

 

Ryan (05:18.202)

I said that to you? This small?

 

Kiera Dent (05:23.282)

We have like smaller team members and I'm like scrappy and like, I don't know if I want to pay all these fees. And you're like, man, it's been a while cause I'm on 401 go and we should probably cut this part. I'll have Sissy edit this part out because.

 

Ryan (05:33.482)

No, whatever you want. Here, I want to say for the record though, if this stays in here, you are not running a small business. You have a small team and it's a plan that's starting out from the beginning, which is actually, we should keep this because having a plan that's just starting, that's what it means. It's just a small plan that's just beginning and a small team, a small amount of people who will be participating, that can impact where you set up the 401k. So I actually think that's relevant. Although,

 

Kiera Dent (05:42.828)

Thanks, Ryan.

 

Kiera Dent (05:56.296)

Yeah.

 

Kiera Dent (06:02.075)

Okay. Well, and it wasn't, let's.

 

Ryan (06:03.342)

I mean, we're not disclosing numbers, but in terms of like, UA team is doing awesome and you built a tremendously amazing business. So it's not small, small like that small. Just to clarify.

 

Kiera Dent (06:09.354)

Let's just say, thank you. Well, and I didn't, I didn't, I'm glad we're clarifying this because I didn't want to take it as I'm small potatoes and you're like amazing clients. I will say I do, I appreciate that a lot and you've taught me so much and I'm grateful for that because the things I learned are literally learning from basics to advance to be able to then take that to clients. And so, well, yes, I said it's small and we're like the smaller company.

 

Ryan (06:19.04)

No.

 

Kiera Dent (06:36.174)

But it's also because I'm younger in my career. I also have a very different Ryan I have like My conversations with Ryan. I feel like we're listening to your favorite cd from like 1990 On repeat of the exact same song because every call is the same conversation. I have these strong goals to retire by 40 Not really like retire and ryan. I was talking to jason last night after our call and i'm like j

 

Ryan (06:53.59)

this.

 

Kiera Dent (07:02.898)

Ryan just has to tell me the same advice every call and get me back on track for 30 days. And then I'll talk to him again about the same idea. So that's where this comes from. But with that, I mean, I am a rookie to 401ks. So we wanted to really go through me being super open and vulnerable, Ryan being an awesome resource and expert. So for those of you in this spot of like, do I set up a 401k, do I not? So Ryan, I know a lot of practices don't open 401ks. For me, I'm doing it because I maxed out my SEP.

 

Ryan (07:08.598)

Yeah. Hm.

 

Ryan (07:26.71)

Yeah, start in the beginning.

 

Kiera Dent (07:32.542)

which was a huge tax strategy that you helped me figure out how to do with like how long my employees had been with me. But then like now there's really no other tax benefits for me to set anything up for retirement without a 401k as an employer. But like, I don't actually know how that happens. I just know I had a three-year rule and then I need to go to 401k. So I've been telling the team like, it's coming, it's coming. I actually don't know why, so maybe you can help me and everyone else understand like how this works and why you have three years and then implement.

 

Ryan (07:54.454)

Yeah. Okay.

 

Ryan (08:00.626)

Yeah, so like just, and this is such a good conversation for our audience too, because these are very common, normal questions tons of people have all the time. So in the world of, let's start with how people earn their money. When you have a job and you have an earned income, there's a tax rate that you have to pay. That's your earned income tax rate. And that's many, many Americans. If you have a job, a W-2, if you're a business owner of like,

 

in any service business, you know, like you guys are in the dental industry, obviously, your pass-through entity, your S-corps that you either get a W-2 from or that just kick you out your owner distributions, that's earned income. And why that matters is because the earned income tax rates are higher and there's not as many, I don't like the word loopholes because it's just tax code, there's not as much advantageous tax code as say,

 

Kiera Dent (08:44.17)

Mm-hmm.

 

Ryan (08:59.606)

someone who is a hedge fund manager, which is really interesting why they have better tax codes than earned income average Americans, or a real estate developer or a professional real estate person, or a person who's getting all of their income from capital gains, you know, maybe they're buying and selling businesses. Those have different tax codes, different write-offs. So the reason why I'm saying this is our audience, dentists, your company, you,

 

You have high incomes at earned income rates now through the business that you own you have the ability to write some stuff off but Eventually unless you're gonna be pushing into crappy Shady investments that you shouldn't have anyway or into like some tax gray areas that your CPA is not gonna like There's just a limit to the amount of tax deductions you can get and the reality as unsexy as this is the biggest

 

ongoing like year over year proactive tax deduction you can get as a business owner with earned income is the retirement plan. Um, for example, let's just use the 401k for example. Um, the limit next year is 23,000 per person. So if you have an owner and a spouse on payroll, that's $46,000 of pre-tax money that gets the drops your income and someone's high earned income tax rates, you know, that could be, um,

 

Kiera Dent (10:04.181)

Mm-hmm.

 

Ryan (10:23.094)

that could be close to maybe sometimes up close to a $20,000 tax deduction, 15 to 20, 15 to 18 tax deduction somewhere in there. So it, which doesn't sound like much if your tax bill is quarter million dollars or half a million dollars, you know, but if you do that over an entire career, it's very, very meaningful. And it's not the only tax deduction. And clearly if you buy something in the business or you have like a 179 deduction or you have like a building or something, there's some, you know, depreciation or

 

Kiera Dent (10:36.426)

Mm-hmm. Right.

 

Ryan (10:51.874)

like cost seg studies, you know, on real estate. There's some big like life event purchase deductions, but that's not an ongoing plan year over year. So the retirement plan I'm getting at is likely gonna be the biggest like proactive tax deduction you can get having earned income as a dentist, as a business owner. So that's why it's like really important to have the right one and always be thinking every single year if it's the correct one. Because like you said, you were running a SEP IRA before this.

 

which is amazing until your employees qualify. You just quit and come back. I'm not giving that advice. I'm just, yeah. So.

 

Kiera Dent (11:25.447)

I was like, do I have Tiffany quit? Like, can I do this? Like, Hey, Tiff, could you quit and then come back and I'll give you a raise? I definitely did not. I don't want people quitting Tiff. Don't listen to that.

 

Ryan (11:35.586)

Dull is it? It's fine. I mean, the reality is, and this isn't against employees, it's just a SEP IRA is amazing until your employees qualify, because you have to give them straight across the board the exact same percentage you're giving yourself, which as a higher earning business owner, it's usually 25% of salary. You can't do a retirement plan giving a dozen plus people 25% of their salaries. You know what's crazy though, is I've met dentists who are running a SEP every single year for like 15 years.

 

Kiera Dent (12:04.114)

No.

 

Ryan (12:04.85)

and didn't really realize that they were giving away like six figures amount of money in a retirement plan to employees over years. Yeah, it was shocking to me. I've met several people like that. So yours is the right plan until it wasn't. And then we implement something different. And that's why thinking about it at least every year with somebody is really important. At some point you might get a bigger one. You might need to change it completely like you did.

 

Kiera Dent (12:11.723)

Wow.

 

Kiera Dent (12:17.615)

Interesting.

 

Kiera Dent (12:21.725)

Mm-hmm.

 

Ryan (12:33.63)

At some point, a 401k might turn into something called a profit sharing plan, where you get additional contributions or something called a pension or cash balance plan, where you get even more contributions. Um, so this is just worth, it's worth looking at for any dentist, because that will be one of your biggest tax deductions you'll ever get. That's why it matters.

 

Kiera Dent (12:33.661)

Mm-hmm.

 

Kiera Dent (12:52.554)

Well, and I think that was helpful for me to understand because like you're right, there are minimal tax deductions that we can take. And I remember talking to my CPA about two years ago, he's like, Kira, you're basically tapped. And I'm like, that's lazy. Don't tell me that. I can definitely find different strategies. Because I don't, I mean, I love paying taxes for the country we live in, but I don't like paying unnecessarily. And so whatever I can do.

 

Ryan (13:09.003)

Yeah, sure.

 

Ryan (13:16.255)

Oh yeah.

 

Kiera Dent (13:18.122)

to set myself up and also I like to build different asset classes and so yes, I've got the business, yes, we've got other investments. I think the 401k is just your saving up acorns for later on in life and so, and also, this sounds funny Ryan, but I do genuinely get excited. Like I'm not excited to pay extra money. Like I was looking at all of my, like I'm doing projections for next year and putting in the 401k and putting in the advisor fee and putting in the fee. Like I don't like adding extra line items, but it does make me

 

kind of excited as an employer to be able to set my team up for like an opportunity to be more successful in their future. Like they're helping me build my business. And so to be able to help make sure they're taking care of into retirement does give me a good feel good. I haven't paid the bill yet. So like we should do a repeat in a year and I'll tell you like, screw that. I'm just kidding.

 

Ryan (13:54.614)

Yeah.

 

Ryan (14:04.97)

We'll see how you feel. Yeah. Well, hold on. You're bringing up something really important, which is, I mean, we started this by talking about the strategy of tax deductions for you as a business owner, but really taking care of a team and your employees. I mean, for most people, a retirement plan at work, especially one that has a match, might be some of their only savings they'll ever have. But it is enough. I mean, if you were able to max out a 401k at work your whole life and get a match from a company.

 

Kiera Dent (14:28.511)

Mm-hmm.

 

Ryan (14:34.75)

That's a significant amount of money. And so it really actually does help people for sure

 

Kiera Dent (14:39.686)

And I just want to put it out there, employers, like I've had to learn going from a team member to an employer. Your employees will never be super grateful of this. They're not going to look and be like, Oh my gosh, care is giving me a huge raise. Like, just so you know, their amount that they see is their dollar per hour. Um, and so you just have to realize like, what is the benefit to risk for me? My reasons for doing it are threefold. And maybe Ryan has a fourth one that I don't realize I should be doing. So chime in. Um, one is.

 

Ryan (14:56.632)

Mm-hmm.

 

Ryan (15:05.03)

Okay, yeah, I don't know. We'll see.

 

Kiera Dent (15:09.25)

for me to be able to have another spot to put tax savings. Like if I can do this and set it up, that's one of my main reasons for doing it. For me, selfishly and for my life personally. Two is for my team because I realized right now, especially with COVID and then we had the great resignation, 401ks are a hot thing in retirement that shockingly is coming up in a lot of interviews now. And so I wasn't able to compete with best candidates because we weren't having it there.

 

Ryan (15:36.123)

Oh, yeah.

 

Kiera Dent (15:36.882)

have I held out and waited until like I can't maxus up? For sure. I didn't incorporate it. I found different ways to get around it. But that was my second one. And the ways that I've gotten around it, just so you guys know is I actually like, Ryan is my financial advisor. He can tell you this. I had him come to a team activity. I've had him do team planning for my team. That was something I asked by hiring him of like, can you help my team out a little bit? I signed up for Dave Ramsey for the team so that way they had access to some of these things that were.

 

lesser items so I could still max my step while helping them. So that's number two. And then the third one is like, I'm going to just try it and see if I even like it. And if I don't, I don't have to continue. And I'd rather do that when my business is smaller than later on when I think it'd be harder to change and be as nimble as I currently am. So those are my three reasons for moving forward on the 401k unless you see a fourth.

 

Ryan (16:24.018)

Yeah, I like it. What I, as a financial advisor, here's what I love about 401ks for my clients is that you can get the money if you needed it, right? You put it away, it's pre-tax. So if you pull money out, you have to pay tax on it. Um, and if you're under 60 and you pull out the money, you have to pay a 10% penalty on top of the tax. So it's very expensive to pull money. The reason why I love 401ks is because it's really one of the last places a client's going to go pillage money.

 

Um, if they're, you know, I mean, unless there's like a desperate emergency, it's like, we can get some of that money, but it's, it's like, kind of, you're not going to touch it. And you know, what's really fascinating. There's a lot of studies around the re which is funny because on social media, they talk against the returns of 401ks, which is not, it's another concept that's kind of silly, but a lot of studies show that people get high returns in their 401ks because they know they can't touch it and they don't mess with it. Um, like in our, um,

 

Kiera Dent (16:53.494)

Mm-hmm.

 

Ryan (17:21.086)

in our business, a lot of our clients have multiple kinds of accounts. They have a 401k, they'll have like a brokerage account that they're putting money into all these places. And, um, people are way more, uh, willing to try to mess with the brokerage account money because they can pull it in and out whenever they want. You know, they want to like, uh, they'll, they'll change how they're behaving with their investments in a brokerage account based on the economy, their mood, their emotions, whatever, way, way before they'll ever do it. They don't even think about a 401k. It's like,

 

Kiera Dent (17:48.656)

Mm-hmm.

 

Ryan (17:49.258)

and I'm not touching this Talmic 70. So as a financial advisor, I love it as a tool for wealth building because people leave it alone. And the number one way to get a good return with your investments, assuming you built a good portfolio in the first place, is to leave it alone. It's like the number one rule. So my number four on there would be, I'd love them because people don't mess with them and they just put money in and then it does its thing and it actually is a benefit to people.

 

Kiera Dent (18:14.262)

It's really smart. You just need to teach all your clients care dense principle about brokerage account. And I feel like I've told Ryan, I think he's like, like there's the image of the cookie monster. And I sometimes call Ryan the money monster. I'm like, I don't know. I put money into this brokerage account, but like, I don't even know. So I treat a brokerage account like a 401k. So if that's helpful, I'm like, I guess it's gone. But I don't, I don't know why it feels so stressful.

 

Ryan (18:19.656)

Okay?

 

Ryan (18:32.711)

You do. Yeah, you do. Because you're always like, can I even get that money? I'm like, you literally can have it like tomorrow. Yes, you can have all of it, every penny.

 

Kiera Dent (18:42.266)

Anyway, so if you guys want like an even better strategy 401k and treat your brokerage account like a 401k like I feel like it's like locked down

 

Ryan (18:42.89)

That's fine. Just send it and leave it alone. It really is, it's crazy though. Once you build a decent portfolio that's diversified and low cost, just leaving it, it makes literally all of the difference in the world. Which sounds like the simplest job to do as an investor, but really our human emotions and behavior get in the way. I mean, that's what every, we know this, we know this with like,

 

Kiera Dent (19:05.802)

Yeah.

 

Ryan (19:10.742)

business, health, fitness, exercise, like anything we try to stick to, our human behavior gets in the way, you just leave it. So the cura dent principle of putting in there and believing that it never exists ever again, that's great, just keep thinking that. And then in like 20 years, I'll be like, yeah, yeah. You will.

 

Kiera Dent (19:18.442)

Yeah.

 

Kiera Dent (19:22.802)

It's gonna be a good surprise. Like, I mean, I get excited like when 20 bucks are in my pocket, like, oh my gosh, I put on those winter coats. I mean, this is gonna be like even better. Like right, I honestly right now, I don't even know what's in there because I don't look at it in my, and it's in the Elements app even, but I'm like, I can't even touch that. I look at it like it doesn't exist. So on that, there you guys go. There's a tip that I didn't mean to give you. Okay, so 401ks.

 

Ryan (19:35.555)

Perfect. It's irrelevant. I like that. It is a good mindset though, honestly. So good for you. Yeah.

 

Kiera Dent (19:49.422)

This is where it got psychotic for me because I remember calling you, I called my CPA, my CPA recommended someone. Honestly, the reason why I went with Ryan's recommendation is because you guys manage my funds already, 401Ks do get managed. And so for me, Ryan, you and I put it there, and this is Kira, you guys are maybe different, but for me, I did not want at all another project on my hands and I wanted the least amount of risk, the least amount of effort on my part.

 

with the lowest cost. I sound like most people, but some people might want to DIY this. Could you? Please. So that's why I opted to go. I went and met with a 401k person from my CPA. I asked Ryan, because at the end of the day, I can go Google search, but 401k's... Ryan, tell me, can you just tell me the worst case scenario? Let's pretend I go set this up straight up DIY. Can I go to jail for doing... How bad can 401k's be?

 

Ryan (20:20.174)

Mm-hmm. Give me the best thing with the cheapest cost. Yes, yeah.

 

Ryan (20:42.302)

Okay. Now.

 

Well, okay. Yes. Yeah. So let's talk about what it means to actually have a 401k and realize there are, there's a lot of different types of retirement plans. I mean, if we were to list them, you would say that there's, uh, especially for a dental audience, you have simple IRAs, you have SEP IRAs, you have 401ks, you have various types of 401ks, like a solo 401k. Then you have pensions, profit sharing plans, cash balance plans.

 

Kiera Dent (20:47.358)

Cause there's this thing called Arisa, but I don't actually know. There's like all these weird words.

 

Ryan (21:14.83)

But the 401k is very, very common. So let's talk about the logistics of setting up a plan. You technically can do everything yourself. I would never, ever recommend this. It's outsourceable for small amounts of money comparatively to an office collection, so it's irrelevant. Don't do it yourself, but you could. See, in a 401k, here's where it gets a little tricky. The 401k is overseen by

 

multiple government bodies from the IRS, the Department of Labor. There's a whole governing body called ERISA, E-R-I-S-A. I don't remember what that stands for. Something, something, Securities Act, I'm sure. And what this means is it's a highly regulated thing, number one, because the government gives you tax deduction. So if they're going to give you something, they're going to be all over us for sure to make sure that we don't, you know, that we're doing everything right. And it's for the protection of employees.

 

Retirement plans in the past like 80s, 90s, even in the 2000s have been abused by business owners where they'll set up things and exclude employees illegally to not have to pay them and put away their own money. So there's a lot of laws and protections around that. So when you set up a 401k, you have to, you should hire a company called a third party administrator. You'll hear the acronym more often as TPA, third party administrator. Their job is to make sure all this compliance stuff and the testing

 

is done according to all the Department of Labor and IRS and ERISA rules. And also, there's an actual tax return that your 401k has to file every year. It's called the 5500 and they file that for you. So technically, you could do your own record keeping, you could file your own 5500, you could do your own compliance testing and document form submission to the IRS and the Department of Labor to make sure you're all cool, but that'd be insane.

 

That would be really, you can outsource a 401k to literally thousands of 401k companies out there. There's some content on our show, we've done like multiple shows on how to pick a 401k company. But when you go choose a third party administrator, here's some things that make them different. Number one, there's something in a 401k called a fiduciary responsibility. These, you were just asking like, can I go to jail? I get in trouble.

 

Kiera Dent (23:34.045)

Just asking. I have rules.

 

Ryan (23:35.286)

You can get sued, you can get sued as the business owner that has a 401k that has happened. It's actually not uncommon. I have not personally seen it in 15 years in the dental office, the 401k gets sued. Usually happens at very big corporations. And most of the time it has been over the lack of investment options and over like fee transparency.

 

In a 401k though, there are three different fiduciary responsibilities that you can get sued for. Like three different ways, technically in a court of law, you can get sued for. When you hire a third party administrator, a cheaper one, a less expensive one is going to have you as the owner of the business, the signer of the documents be responsible for those things. So if there was a problem, a lawsuit, a fine, something you had to like do over again, it would be on your shoulders to like fix and take care of. If you hire a slightly more expensive.

 

third party administrator, then if that happened and they take on the fiduciary responsibilities, then it's on them. Like it's all off your plate. It is very actually, surprisingly, it's very uncommon that a third party administrator for a 401k actually takes on all three fiduciary liabilities in a plan. It's actually kind of uncommon. It's more expensive for them, they have to have more insurance, more people. So anyway, that's a part of it. The investment options that you get inside of a 401k are gonna vary.

 

Kiera Dent (24:48.575)

Interesting.

 

Ryan (24:58.622)

If you hire, if you do a 401k, let's say through an insurance company, you know, you do your 401k through an insurance agent, that insurance company is going to give you investment options that are only mutual funds built by the insurance company, which are not historically great. Or you set up a 401k directly through a mutual fund company, let's say directly through Vanguard or American funds. Um, this isn't meaning they're bad or good. It just.

 

when you set that up, your only investment options are gonna be Vanguard or American funds. And that might be fine with you, or you might want a bigger selection of that. So investment selection is another piece of that. And then there's the, you know, setting people up, coordinating with payroll, filing all this stuff. That's what a third party administrator does. So technically when you set one of these up, you have to hire one of these companies, and they can be cheap or expensive or middle of the road. And what you were saying earlier, it kind of does depend on the size of your company.

 

Kiera Dent (25:29.732)

Mm-hmm.

 

Ryan (25:53.718)

you know, and how they bill. Some companies bill like a flat fee. Some companies bill a percentage of the accounts. Some do both, most do both. And so you kind of have to weigh that like, how do I make this cost effective while still covering my butt? If something happened, taking the work off my plate, I don't want to do a bunch of this paperwork, I don't want to be responsible for it. So there's so many companies out there, there are so many third party administrator 401k companies it can be a little confusing. So,

 

Kiera Dent (26:16.089)

Mm-hmm.

 

Ryan (26:23.522)

Chatting with someone can give you some clarity.

 

Kiera Dent (26:26.154)

That was really helpful for me coming into this because at the end of the day, I feel like something that is legal, something that I could as a business owner be responsible for, those are things that I hedge my bets against and I try hard to be like, let's be more black and white, not gray on those areas. And so it was really helpful. I went through with someone else from my CPA, I went through with you. And really at the end of the day, my biggest objective was like, I wanna be covered, I wanna be safe, but I don't know how this is going to go. And clearly,

 

Ryan (26:36.971)

Mm-hmm.

 

Kiera Dent (26:55.922)

realizing that I think a brokerage account is gone, I'm sure you can only imagine how much I get stressed of like new fees in the company that I don't know. And I like to plan for worst case scenario. So that was actually why I opted like, you and I went through several different ones. I think I ended up looking through about seven different options is what I ended up looking over. All of them have different percentages. All of them had different things. And the reason I opted for the one that I went with was because like annual fee I feel is

 

Ryan (27:01.577)

Yeah, it's fair.

 

Kiera Dent (27:24.73)

I mean, I'm not here to say like two grand's not a lot of money. I'm not here to try and be that. But when I look at a business expense, to me, that annual fee was negligible no matter which one I went. That did not bother me. And then the cost per participant, again, but I was looking at fiduciary fee and advisor fee. And so while I wanted to go with another one, you and I both opted because looking at it, it cut my advisor fee less and it cut the fiduciary fee a lot less as well.

 

Ryan (27:34.478)

Mm-hmm. I think it is for most dentists too. I think that's true. Yeah.

 

Kiera Dent (27:53.466)

And so based on those two things, I might have a little more cost per participant that I'll be paying. But to me, that's something that I can know for sure versus the percentage, who knows how much is gonna be contributed, who knows how much of all those different pieces. So that was where I went with that. But I think, Ryan, some of the things I really struggled on as, and again, I'm gonna pretend to be a client today, not pretend I actually am. So I'll go through this of how...

 

Ryan (27:59.018)

Yeah.

 

Ryan (28:15.818)

It's great. Yeah, just do you.

 

Kiera Dent (28:20.998)

You and I went through it, hopefully. So other people, like I came to you, we knew I needed to get this set up. Also something for timing that you helped me realize is I needed to have this basically decided by September because I want this in place in January. What are those deadlines? Cause I don't actually know. I just know you said be ready by September. So I said, okay.

 

Ryan (28:32.158)

Yeah, there's deadlines.

 

Ryan (28:37.31)

Yeah. Most of these companies, the actual deadline is, I think it's in October and I don't remember if it's the beginning or the end of October. Most of these companies, and that's for like a January 1 start date of the next year. So most, most of these companies want to begin this process sometime in September just to make sure it's done and taken care of. Here's another thing I wanted to say too, when you pick these companies, that is what we were talking about earlier and it's based on the complexity of a company.

 

Kiera Dent (28:51.304)

Okay.

 

Ryan (29:05.918)

And that is, um, if someone needs just like a simple 401k, just a really straightforward run of the mill, kind of 401k, maybe you're starting it from scratch, small team, that's all you're going to need. I think it's fair to go try to find a lower cost 401k provider, as long as they're going to do the, take the work off your plate, um, keep you protected and give you good investment selection. And those are all boxes we checked with you, right? Then we were able to go out and say, like, how can we keep our costs down?

 

Kiera Dent (29:29.802)

Mm-hmm.

 

Ryan (29:35.538)

If someone has a bigger plan, bigger meaning more employees, um, bigger balances, and especially if someone is going to be in the realm of adding on top of the 401k, a profit sharing plan or a pension plan, which is just a whole other plan on top of it that lets you put in even more money, but it's way more complex. Then you do need to pick a third party administrator, a 401k company that can handle that because most of them are not built, especially like a lot of the lower costs, like online do it yourself stuff.

 

They're not built with internal systems and employees to handle the design and compliance and testing of a bigger like profit sharing and pension plan, where in your case, we're like, Hey, we're not going to deal with that in the next 12 months. So it doesn't matter in the future. If we do.

 

Kiera Dent (30:17.002)

But that was also because you and I went, something I thought was really smart that you had us do is we actually went because, like, again, we're not sharing dental team's numbers here. But I am married. We have a house. I have tapped every possible thing. Like, we don't have kids. And so, like, short of me adopting a child, I really am tapped on my ideas of how to lower this. But you and I were talking because, well, that's not true.

 

Ryan (30:27.03)

Yeah.

 

Ryan (30:40.974)

Mm-hmm.

 

Kiera Dent (30:43.718)

I have a second idea of Puerto Rico, which is like a whole other conversation that Ryan, that's like, that's CD. This is my mix tape guys. It's just on repeat. It's Puerto Rico, care retiring. How do we do this? But I think, and don't worry, all of you listen, I'm not really retiring. I just have a stretch goal to see if I could actually do this and be financially secure by 40. But with that, you and I, we actually did talk about the pension plan and we did talk about profit sharing.

 

Ryan (30:47.33)

Yeah, but now we're talking about like lifestyle changes or second careers or yeah. It's okay. Yeah, that's all right. Yeah.

 

Ryan (31:02.587)

Yeah.

 

Ryan (31:09.806)

Mm-hmm. We tested it. We ran numbers.

 

Kiera Dent (31:12.126)

because we went to look to see that actually like, we looked at it and it was like, well, how much will I save if I were to move to Puerto Rico? How much would we save if we switched states? And then you're like, well, let's just run the study and see which was super cool because I didn't know that 401k companies did that. But my hunch is, and they do this every year, right? Like, how does this work? Because you test your, okay, tell me about this.

 

Ryan (31:28.01)

Well, okay, not all of them do, no. So not, yeah, so you have a normal 401k, which is like you put in some money from your paycheck, you get like a 4% match, you know, pretty run of the mill stuff. The standard 401k out there is called a safe harbor. By the way, safe harbor, 200 years ago, that's also another word in the tax code, phrase in the tax code. Doesn't make any sense, it's insane.

 

Kiera Dent (31:43.479)

Where did this come from? 200 years ago.

 

Kiera Dent (31:50.078)

This is why it makes no sense, because taxes make no sense. So I understand now, okay.

 

Ryan (31:54.206)

It's totally insane. It's literally in the 401k section, the 401 dash section K of the tax code safe harbor is the phrase that means here's what it means. Hey, business owner, if you set up a 401k and you just give everyone like a 4% match and you don't restrict anyone, like when they get their match, it's their money. You don't like hold it back from, there's no vesting schedule. You can't have super strict requirements on how they can and can't join the plan. Like the most strict you can get is like,

 

a year and a thousand hours of working. In exchange for that, in this provision, the Safe Harbor thing says, we'll just let you bypass a whole bunch of testing and compliance testing. Because before, without Safe Harbor, here's the way it works. Let's say Kira sets up a 401k. You put in the max next year, the max is $23,000. At the end of the year, they run a test and they go, ooh, your employees didn't put in enough compared to how much you put in.

 

And so you didn't pass testing. Therefore, you have to go into your 23,000, you gotta pull out 17 of it. And now instead of the full deduction, now you're only gonna get a deduction of six grand because you didn't pass the testing. So the Safe Harbor provision lets you bypass testing as long as you do things like a match and you don't restrict people too heavily from, you know, their vesting schedules or how they can participate. So not every, okay, so that's what Safe Harbor means. I don't even know how we got on that. But to your question, not every company

 

is equipped to do higher testing and adding profit sharing and pension. And it's a whole separate, a lot of times they have on staff, ERISA attorneys, they're basically 401k attorneys and actuaries. And these are the people who run, they're very specific IRS formulas that tell you, Hey, if me as an owner putting this much in profit sharing or as a pension, how much do I have to give each employee? And how does that look? And there's a certain threshold of where that makes sense and doesn't make sense. So

 

Kiera Dent (33:24.424)

Interesting.

 

Kiera Dent (33:30.602)

Mm-hmm.

 

Ryan (33:49.386)

We ran that for you through a company that was really helpful. They're equipped to do this. They're a bigger company. They're equipped to handle bigger plans like that. A lot of companies are definitely not. And so when a plan gets to that point, you might have to switch to a different third-party administrator and that's okay. But to your point, we were curious about it and we had this company run it for us and we determined that didn't make sense right now. So, you know, we'll visit it again another time. We can look at it every single year actually.

 

Kiera Dent (34:04.269)

Mm-hmm.

 

Kiera Dent (34:15.765)

Well, and what was really helpful is, I feel like their reports, I'm no actuary, my brother-in-law actually is. I don't know what the heck those reports even said. So I literally, I mean, Ryan, I trust you clearly a lot because I said, so is this a good decision or a bad decision? Because I honestly don't know what this is saying. And so that's where I actually thought it was really helpful to work with you on it was, I don't know who to ask, I didn't know what questions to ask. And so you were able to have them run the test and then we realized like it didn't work.

 

Ryan (34:23.903)

Oh yeah, yeah.

 

I know.

 

Ryan (34:31.714)

Mm-hmm. Yeah. Red or green? Yeah.

 

Kiera Dent (34:44.998)

And so honestly, I'll probably work with that company in the future when I'm bigger and we've got a more complex plan and we'll run it every year to see, because like you said, some years it will make more sense, which I don't even know how you get it to make more sense, is like based on the census of the people I knew it. Okay.

 

Ryan (34:48.418)

Mm-hmm, totally.

 

Ryan (34:57.586)

Yeah, age. Yeah, that's why every year and it's kind of funny how it'll change. Like you can get one year older and change someone in your payroll and it will either make it like really good or really bad because the IRS formulas use like an age weighted formula that takes that into account. So the bigger disparity between the owner's age and the average of the employees, the more it's going to work out in your favor as an owner. And the younger you are or closer to their age, then usually it's not. That's why most people.

 

Kiera Dent (35:11.923)

interesting.

 

Kiera Dent (35:22.576)

Interesting.

 

Ryan (35:26.966)

doing profit sharing or pension plans are usually at least in their late 40s, if not in their 50s and above. That's the most normal.

 

Kiera Dent (35:32.998)

So that's actually, because most of my employees are pretty close to my age, we've got a little bit of like a 10 year span between all of us, which isn't big enough, but it was super helpful for me to go through that.

 

Ryan (35:38.227)

Yeah.

 

Ryan (35:42.262)

But that's what did it for you. That's what ruined it for you was the age disparity or the lack of it.

 

Kiera Dent (35:46.93)

And so I know a lot of newer owners and newer offices, you tend to have employees that are similar to your age because you're basically the age of working class at that point. And I'm guessing it will kind of start to shift and change. So that was helpful because like, it came of like there's a, like honestly when I went through a presentation with someone else telling me about it, it was like, Kira you can get the traditional 401k, you can get the traditional with the safe harbor plan. You can get the safe harbor matching plan with profit sharing. Then you can get the safe harbor. Then you can get the match of 4% and 5%. And 5% is based on what I put away.

 

Ryan (35:53.326)

Mm-hmm.

 

Ryan (35:57.823)

Yeah.

 

Kiera Dent (36:16.494)

then I can apply a vesting schedule, then I can do profit sharing is not a requirement of this, then I can get a defi... I'm like literally reading my notes of what I took and I was like, I don't even understand. And then they're like, and then there's a record keeper and then there's this person and then this fee goes to the employee. And I'm like, Brian, I feel like I'm going to choose the wrong choice because I don't even know what any of this says.

 

Ryan (36:23.086)

Crazy. Yeah. I don't know.

 

Ryan (36:34.654)

It's a lot. Yeah, it's a lot. It's overwhelming. Every time I do one for a client, I'm like, it feels like a necessary evil, but it's kind of a pain in the butt. And they are expensive. I mean, it's just a whole other company you have to hire. But the math, though, is pretty straightforward. I mean, the math, especially if an owner can put up spouse on payroll, which talk to your CPA about that. It's very common. Then the math is like, it's a no-brainer.

 

Kiera Dent (36:42.038)

I'm sorry.

 

Kiera Dent (37:02.082)

But isn't it true because like Jason and I, we are both working. And so Jason, he, and even though he's, Jason does my events, he's surely on payroll for events. Um, but with that, I can't max him in my, in dental ATMs 401k because he's already maxed in his hospitals 401k. And so, but like, if you have a spouse that's not working, I do think it's a no-brainer or if they're on payroll, like you said with CPAs, I think it can definitely cut down some costs that people might not

 

Ryan (37:13.089)

Yeah.

 

Ryan (37:17.302)

Mm-hmm.

 

Kiera Dent (37:30.666)

think of that could definitely help boost your 401k for you as an owner, um, that I just thought was really interesting. So I love, I did not enjoy the process. I actually have done two grown up things this year, right? I've done two grown up things. I did my will and made a trust, which that was big. And then I did a 401k. The 401k was way harder than the will, even though I had to like figure out my like, what's going to happen when I die and who am I going to send this to? Cause I had like choose two people and like,

 

Ryan (37:34.377)

Oh yeah.

 

Ryan (37:41.578)

Did not enjoy the process. Yeah, okay. Oh, where are they? Oh, good for you.

 

Ryan (37:52.426)

Whoa, really? That's crazy. Wow.

 

Kiera Dent (37:59.154)

I told Jason, listen, if I'm like out for two weeks, I just, I'm gone. Get a like younger, hotter wife, like move along. It's fine. Everything's fine. I don't wanna come back and take, it's fine. But the 401k, I just think it was so many terms that I didn't know and I felt very naive and I felt very like.

 

Ryan (38:03.39)

So.

 

Just go. Take my money. Yeah.

 

Ryan (38:15.101)

Mm-hmm.

 

Kiera Dent (38:18.066)

This is something I've got to now file new tax laws. I've got to figure out, I don't want to get in trouble with Arisa. Like that sounds like a really mean girl and I don't want to fight with her. Like it just felt daunting. Like the name Arisa, like it's like Marissa, but Arisa like erase you out of yeah, like stress. They're not bad names. But I'm saying if someone's named Arisa out there, I'd love to meet you. But like that kind of sounds like I'm going to erase you out of my life. And I'm like, gosh, Ryan, they probably would. And then it was scary because I thought like,

 

Ryan (38:30.746)

Yeah or Carissa, I mean not, we're not like judging Marissa's and Carissa's, yeah.

 

Ryan (38:42.612)

Yeah, they would too. Yeah, they would.

 

Kiera Dent (38:47.206)

There's somewhere you just do an automatic where every person on your payroll gets it and I was trying to figure out pros and cons of all that. So I really appreciated like being able to ask all my questions, being able to, like, I am actually excited. Like once we solidified and I'm not saying the process was bad. I just think it was more. So many things that I don't even know what is talking about and how do I know which one to choose that's best for my company? Um, and also.

 

Ryan (38:50.742)

Mm-hmm.

 

Ryan (39:01.815)

Yeah.

 

It's a pain.

 

Ryan (39:12.223)

Yep.

 

Kiera Dent (39:14.226)

Like it's my first year, I have no clue what this cost is going to be on the company. I don't know what it's going to run. And so being able to make that as the best decision was kind of daunting. So I am curious, cause I don't know this now I'm like, I'm a real client. We're having a real call here. They are. Cause now I'm not to next step. You didn't. So my question is based on the plan I set up, cause we went with just a traditional 401k with safe Harbor.

 

Ryan (39:26.602)

Yeah, let's go. Yeah, these are live questions. So these are organic, yeah. I didn't supply these to you. I have no idea what you're gonna ask me. Yeah, this is good.

 

Kiera Dent (39:41.938)

I should be able to, as an employer, go to my max amount of 401k for my employees. I only match them if they put it, and my employees don't have to just put in 4%. They can go up to 10%, right? And then.

 

Ryan (39:45.882)

Mm-hmm.

 

Ryan (39:54.877)

Well, they can go up to as much as they want until they've hit the dollar limit, which is $23,000.

 

Kiera Dent (40:00.474)

Okay, so and then I would match them up to 4%, but they have to put it in first before I match. And even if let's say none of my employees decide to take this up, I would not get any penalties because I'm in a safe harbor and I should still be able to match my full amount. Is that right?

 

Ryan (40:05.526)

Yes. Yeah.

 

Ryan (40:13.842)

Exactly. There you go. You explained it perfectly. Yep. See, you actually learned everything there was to learn through this whole process. It just was really annoying and super overwhelming. And you're right, it is. Yeah.

 

Kiera Dent (40:26.155)

Okay, but I have one other question because this one makes my mind feel funny. Because it really makes me, because technically I'm an employee of Dental A Team and technically I'm the employer of Dental A Team. So how does a match work? I'm guessing I don't get a match. I'm guessing I just do 4% or up to like, right. So this feels funny to me. Like I feel like I'm like wearing two hats, like Dr. Jekyll and Mr. Hyde. Like I'm kidding.

 

Ryan (40:30.19)

Okay.

 

Ryan (40:35.106)

Mm-hmm.

 

Ryan (40:38.413)

Mm-hmm.

 

Ryan (40:43.072)

No, your company matches you. It's your own money. Yeah.

 

Ryan (40:51.226)

Yeah. So you still get a match. You'll max out your 401k and then your match will be 4% of your salary. That's how the match works. Up to the, up to that's the ceiling of the match that your company is going to give you. So whatever your salary is, you're going to get 4% of that up to, I mean, you can't go over, you know, what you put in and it won't anyway. It wouldn't, the set, the match wouldn't, but your company will match you, but it is your money. I mean, if it didn't match you, but it's, you know.

 

Kiera Dent (41:15.658)

Right. But well, but so guys, you were literally experiencing Cura in real life. Yeah.

 

Ryan (41:19.97)

But this is a deduction, so here's what's cool though. That 4% that your company's gonna match you for your contributions is a deduction, where if you didn't get a matching, you pulled out that 4% as income through net distributions, it's taxable, so.

 

Kiera Dent (41:29.014)

Hmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm

 

Interesting. Okay. So now everybody's watching me in real life trying to figure out this

 

Ryan (41:36.974)

This is awesome, yeah, very organic. Yeah, huh? Yeah, we should just start recording. I wonder if clients would ever just say yes to that because I feel like so many people, we should start a mastermind where we just do one-on-one. Anyway, yeah.

 

Kiera Dent (41:39.454)

Because it is this is our real calls. So I hope you guys are enjoying them. We'll just hit record from here on out Ryan every call

 

Kiera Dent (41:53.178)

Yeah, this is a thing. So the max next year is going to be like, we'll say 23,000. But I don't understand how this 23,000 work. Does that mean like I can contribute 23,000 and then the company will also match so I could technically get more than 23,000? That's what I thought. Okay, that was what I needed. I can go up to 23,000.

 

Ryan (41:58.606)

It's 23,000, unless you're over 50.

 

Ryan (42:11.722)

Yeah, you will. Yeah, you'll get 23,000 here. I'm gonna do the catch up. It's 23,000 next year, and if you're over 50, the catch up contribution, let's see, what are they changing it to? $7,500. So if you're over 50, you get your 23,000 plus $7,500. There is a new change with that.

 

Some of it's still kind of unknown, but there's a new change where the catch up contribution has to be Roth 401ks. Um, and it's not pre-tax, but so, but it's $23,000. What was even your question? 23,000. Yes.

 

Kiera Dent (42:42.919)

Interesting.

 

Kiera Dent (42:47.594)

So the 23,000 and then 4% of your salary that the company would match because I've, but up to what? I think it's up to, okay. Yes. Okay, so then I get a total of 27.

 

Ryan (42:51.442)

up to, yeah. Well, let's say your salary's 100 grand. You put in 23,000, you're getting four grand from your company. If your salary's 200 grand, yes. If your salary's 200 grand, you're putting in your 23 and then you're getting eight grand from the company.

 

Kiera Dent (43:07.558)

And employees can also only, unless they're over 55, can only do 23,000 next year. That would be the max they could contribute.

 

Ryan (43:12.726)

Yes, out of their own paycheck, yes. And then the company gives them up to 4% of their salary if they've put in that much money too.

 

Kiera Dent (43:22.11)

So you told me something else, which I'm gonna just ask here live. There was something like this 3% and then the last 4% is like something weird. How does that happen? Because really I could only be doing 3%, but I don't understand what the new rule is. Like, what is that?

 

Ryan (43:30.014)

Oh yeah. Mm-hmm.

 

Ryan (43:36.586)

Mm-hmm. So there's various ways you can set up the match. We'll just keep it on the safe harbor. Because if you get rid of safe harbor, you literally can design 401k plans. And this is how they used to be. You can design them kind of however you want. You can exclude people. But then that testing comes in at the end of the year, and it can get kind of gnarly. So in a safe harbor, we'll start with 3%. You can elect to give away 3% no matter if people participate or not. Why would you do that?

 

Kiera Dent (43:49.716)

Right.

 

Kiera Dent (44:01.096)

Right.

 

Ryan (44:04.222)

Some people would do that if it's part of the bonus structure that's very well like integrated and it's like people, it's acknowledged. People know it's part of their benefits package. They might do that. Uh, for people who are running profit sharing consistently every single year, having that 3% giveaway can actually make the profit sharing a little bit more efficient, uh, skewed to the owner. Um, the way that the formulas work. So if someone has profit sharing, it's happening every single year, that 3% giveaway can actually be a benefit, but that's a plan design thing later.

 

Kiera Dent (44:17.647)

Mm-hmm.

 

Ryan (44:32.754)

Uh, you can do the 4% match, but here's what's kind of funny. You can do it like a straight four. Like you just, you know, you match them a hundred percent on the first 4% of their contributions or to make it a little bit, um, more efficient for the owner, not as expensive. You can do a 4%, but they do it like this. They do the first 3% that the person puts in gets matched at a hundred percent. And then, uh, the fifth or the fourth and fifth percent.

 

that they put in get matched at 50%. So if you add them all up, you get a 4% match, but the person has to put in, the employee has to put in 5% of their paycheck to get a 4% match. It makes it a little bit cheaper, but that's a totally acceptable legal safe harbor provision and a lot of people select that too. So it just makes it a little, it makes the match expense a little cheaper to the business.

 

Kiera Dent (45:03.934)

Mm.

 

Kiera Dent (45:12.315)

Mm-hmm.

 

Kiera Dent (45:19.39)

Okay, that helps me understand.

 

Right, because then the employee has to put more in before the business has to pay that extra. Right, okay, that's helpful. So I think my final takeaway of all of 401k is, so you know when you read the rules to risk or monopoly or some of these psychotic, that's how I feel like the tax code is. Who made up this safe harbor? And then they're like, oh, by the way, let's add one more. It'll be 3% for the first one, but then for the next four and five, it's only a half a percent. Like,

 

Ryan (45:25.578)

to get the four. Mm-hmm, exactly.

 

Ryan (45:38.228)

I have no patience for board game rules.

 

Ryan (45:49.823)

Oh yeah.

 

Kiera Dent (45:51.394)

I feel like the most psychotic monopoly game designer is who wrote the tax code. So bottom line is use Ryan, use Dennis Advisors. It was really helpful. I feel less stressed. And that was actually super helpful. So I hope for everyone listening, there are so many different plans. And what I think, I think my greatest takeaway from all of what we did was I love the confidence of you running it for me to see.

 

Ryan (45:53.822)

It is, it is psychotic. Taxco is insane. It's insane.

 

Ryan (46:01.147)

Yeah.

 

Kiera Dent (46:16.638)

does a pension plan make sense? Cause I was terrified to put that in play, but if I could offset knowing I was only wanting to run it for X amount of time, would it offset? So that was super fun to figure out. Then it was also like, do I just set up a regular 401k with no safe Harbor on it? And what's like the risk benefit? Could I even qualify on that to set up more of like a vesting period or things like that? And then to realize like safe Harbor for me was the best option with a cheaper one based on the number of people I have and noticing that like, I don't need the higher level.

 

Ryan (46:19.96)

Mm-hmm.

 

Ryan (46:25.154)

Yeah.

 

Kiera Dent (46:46.25)

401k company, but knowing that every year, I'm guessing come August, you and I get to hang out every year, we run the test on me again. See, so I almost, I think I like cadences, Ryan, and so I know like I meet with my CPA in July and September to make sure I'm on track for tax spending. I now think I'm just gonna plug in August as my 401k, make sure that that's ready to go for end of year, and if I need to change, I've got time to do it.

 

Ryan (47:05.666)

Great. Yep.

 

Ryan (47:10.986)

Yeah, and I think everyone should do exactly what you're talking about. And, um, I think most CPAs and financial advisors, if they're good ones are, they would love to talk to each other because like, I just got off a client call this morning where my client has not been contributing to the retirement plan for three years, but it's because he built a giant building and has so many deductions for like the next seven years that it doesn't make sense to put it in the 401k where it is like doing it after paying the tax because like last year he had a zero tax rate, a 0% because of all his write-offs.

 

Kiera Dent (47:20.604)

Mm-hmm.

 

Kiera Dent (47:38.539)

Mm-hmm.

 

Ryan (47:40.638)

Um, so it's, that's a great plan. Talk about it once a year. You never know if it's time to change. If you still have the right one, if you're maxing it out, if you should stop contributing, if a spouse has some kind of change, something you said earlier, there are certain types of government, um, uh, retirement plans. There's like four 57, four Oh three B's, 401k's. These are all just tax code provisions and like healthcare systems, education systems and government systems will have different types most of the time. Like.

 

the limited, it doesn't matter how many jobs you have, you can only put in 23,000, right? But there are types of plans that can be combined with a 401k, so someone could have a job with a 401k, and then have like a government job with a different type of retirement plan, and they can do both, max out both. So, to your point, talk about it once a year, you know? Like life changes, career changes, spouse career changes, those things like alter, and there's more changing for next year too, yeah.

 

Kiera Dent (48:14.692)

Mm-hmm.

 

Kiera Dent (48:22.631)

Mm-hmm.

 

Kiera Dent (48:29.895)

Mm-hmm.

 

Kiera Dent (48:33.575)

laws change.

 

Kiera Dent (48:37.714)

Right. You and I were even just setting this up literally yesterday. We were setting up my 401k and remember how it's like enhanced safe harbor. And you're like, what the heck? You got enhanced on here.

 

Ryan (48:42.614)

Yeah. I go, why do they call into that? I'm like, oh yeah, that's the new rules coming for next year. Like the same with the catch up contributions that used to be pre-tax. If you're over 50 and now the new rules are making you do them a Roth after tax next year.

 

Kiera Dent (48:48.399)

Mm-hmm.

 

Kiera Dent (48:57.202)

So interesting. So that's where I feel this is just me. I wanted to thank you, Ryan, for one, being in my life for this, and two, I thought it would just be a fun podcast for you guys to hear in real time. Me learning, this is me learning with Ryan. They are, I don't understand it. And so helping you guys just get a glimpse into what it was. But I do think like chat with your financial advisor, chat with your CPA. To me, it was really, really helpful though, Ryan. You know where my life I want it to go more than my CPA does. Like...

 

Ryan (49:07.346)

Oh, yeah.

 

Real questions. Yeah.

 

Kiera Dent (49:25.266)

You and I are sitting here constantly every month talking about where am I headed? What are my goals? Which I think helped you and I have a better decision on the 401k because you know, my short-term and long-term plans, therefore we could make the plan work for us. So, um, I would just say reach out, chat with who do you chat with first? You to go with CPA or financial advisor, right? I'm like, what's I did both.

 

Ryan (49:44.834)

Eh, both. You know, yeah, both of them make sense. They're going to do, they're going to have just different perspectives on what they're, what they're trying to accomplish. To your point, you know, you might have someone that has investments for you, but they don't know your life because they're not like a planner, which is okay if they're just doing investments for you. But someone who knows your life is going to know how to integrate things like the product. My industry is backwards because my industry has been built on the products driving the plan because that's where commissions are paid.

 

Kiera Dent (49:59.154)

Mm-hmm.

 

Kiera Dent (50:12.031)

Right.

 

Ryan (50:12.518)

But a good planner, like advisor situation, more like a good coach, it's almost like a good money therapist situation. Like the plan drives the product. Your life and what you need and want determines what products we go implement, not the other way around. So if you have a good advisor, coach, person, then that's a good conversation with your CPA because you might learn a few things about your tax liability for any given year that might inform you of a different decision. So both, yeah. Uh-huh.

 

Kiera Dent (50:25.758)

Mm-hmm.

 

Kiera Dent (50:38.806)

Right. And I definitely chatted with both. But like you said, something I just value in you, and this is like me giving you a true compliment on a podcast. I just have a super appreciated that, like the number of times you've walked me off the ledge to not sell the business, which I've found is like every other day as a business owner, like this is just real life. Just like our emotions change, just like the weather changes. But you keeping me on track, I think is invaluable that I never realized that a financial planner.

 

Ryan (50:57.729)

It's probably relatable. Totally.

 

Kiera Dent (51:07.082)

could and would do. Like you said, I'm money therapist. I mean, the number of calls you and I have had, the number of things we've talked about, the number of times I'm like, Ryan, I'm ready to go off. And like, like I said, it's the conversation on repeat of a favorite playlist from before and we just keep having it. And so, so I just think kudos that way. And if you guys are in that boat, definitely reach out. I think you guys are very, very approachable. I feel like we're very similar styles. Like there's no judgment in your practice. I think there's no judgment in your financial life with Dennis advisors. And so

 

Ryan (51:07.126)

Mm.

 

Ryan (51:14.338)

Mm-hmm.

 

Ryan (51:17.806)

It's normal. Everyone does it. We all do it. Yeah. Thank you.

 

Ryan (51:31.63)

Mm. Mm-hmm.

 

Kiera Dent (51:35.174)

If you're thinking about 401k, I had no clue. This was me and Ryan having a conversation four years ago, telling me to do a set for three years and then 401k would come into play. So this has been four years in the making. So thank you.

 

Ryan (51:43.282)

Yeah. Thank you. Yeah. I'm excited. Thank you very much. And this is going to our audience too. So I will, I will say the same thing, uh, which is something I deeply appreciate is, um, that kind of like consultative nature, I mean, and, and human nature, the reason why a team is so successful is because it's not just that you have strategy, you have strategy, but you can help people stick to strategy, which is, which just

 

that's a product of having data and frequent enough communication and staying on top of things. And that's why we send you clients because it's not just strategy, but it's human behavior of can you stick to that strategy? So much love to the A team. Yeah. You guys do a fantastic job.

 

Kiera Dent (52:27.018)

Well, thank you. Thank you. Well, there's mutual love between both companies. I feel like we're sister companies and Ryan and I were brothers and sisters in another life. So for those of you guys looking, be sure to reach out to Dennis Advisors. Ryan, how can they connect with you if they're interested?

 

Ryan (52:34.578)

Yeah, let's go. Yeah.

 

Ryan (52:42.786)

dentistadvisors.com and I'll always field an email. Ryan at dentistadvisors.com, email me, let's do this.

 

Kiera Dent (52:49.626)

And if you put dental A team in the subject, he'll definitely like respond a little faster.

 

Ryan (52:52.586)

I'll totally answer. Copy, care. I don't be like, I'll, I'll first your answer. What about you? Uh, how do they fund the a team?

 

Kiera Dent (52:57.39)

Likewise, you can email hello at the dental a team.com. That's a little bit easier than Kira, but always email Kira K I E R A at the dental a team.com. Listen to the podcast, come join us. Anyway, we can help you guys be more financially secure and be more business confident, practice confident. That's what we're here for. So Ryan, thank you. It was a great time.

 

Ryan (53:16.91)

Thank you. Thanks for having me. Thanks for being here. Appreciate it. As always.

 

Kiera Dent (53:20.274)

All right. All of you listening. Thanks for listening. I'll catch you next time on the Dental Team Podcast.