How Much Do I Need to Retire?

Dentists want to know their Financial Independence Target (FIT#TM)

‘How much do I need to retire?’ is a common question we are frequently asked at TMFD Financial. Every situation is different depending on the time horizon to retirement, the value of the dental practice, and starting Net Worth comprising all financial assets less liabilities.

At TMFD Financial, we address this question as a part of our comprehensive “Financial Roadmap for Dentists,” where the dental practice is the main source of cash flow, and the roadmap aligns with the achievement of your goals.

Some commonly held beliefs are that the eventual sale of the dental practice and the accumulation of RRSPs will be sufficient to take care of your retirement needs. However, we find these two components make up only a portion of the amount needed. The starting point is to review current lifestyle spending patterns and determine how this can be maintained when practice income stops. Several strategies including the tax-efficient sale of the practice, evidence-based investment funds, income splitting, and tax-efficient withdrawal from savings all play a role in the complete picture. Once these strategies are implemented, we can determine the Financial Independence Target, or FIT#.


When we talk about financial independence, we mean freedom from worrying about your finances for your lifetime. It’s the ability to do the things you enjoy on your terms. If you work hard and make sound financial decisions, you should be able to sustain your lifestyle without having to watch every dollar as closely as you may have done when you started your career.

Financial independence is not just about having “X” amount of dollars. Yes, you’ll want to put a dollar amount on it, and that amount is different for every one of our clients. It might even change as your goals change. Because financial independence is about how you live your life, what it means is unique to you – and it’s unique to your dentist colleagues.


Let us now review the case of Dr. Adamson (58) and Mrs. Adamson (57) whose lifestyle needs are $125,000 after-tax per year upon retirement. Our analysis discussed here shows a FIT# of $3.3 million liquid investments at age 63, backed up by our detailed analysis in the “Financial Roadmap for Dentists”.

Music had always been a big part of Dr. Adamson’s life. The grand piano in the living room was his pride and joy. In fact, both he and Mrs. Adamson loved playing piano and guitar.  They first met each other years ago at a concert when some mutual friends invited them to come along.

That was over 30 years ago. Since then, Dr. Adamson had established a dental practice and Mrs. Adamson worked there also as Office Administrator. They had two children, both now young adults and finished post-secondary education.


The Adamsons were approaching the end of their working years and were looking ahead to retirement. With five years to go, their main concern was whether or not they would have a secure financial future.

The Adamsons had accumulated wealth in their home, cottage, dental practice, RRSPs, and other savings within the dental professional corporation. Thankfully, they had diligently paid down debt over the years and became debt-free recently.

When considering the retirement needs of the Adamsons, it was critical to consider their projected spending patterns. After a review of typical annual expenses, their projected spending in retirement would be $125,000 per year. This was determined by looking at their expected fixed expenses (to maintain the home and cottage, food, clothing, insurance, and auto expenses) in addition to discretionary lifestyle expenses (such as travel, recreation, dining out, and donations).


With the spending needs identified, the next step was to consider the different sources of income from various pockets of savings and government pensions, such as:

  • RRSPs & TFSAs
  • Corporate Savings
  • Proceeds of Practice Sale
  • CPP & OAS

The Adamsons could anticipate about $25,000 after-tax per year from CPP & OAS, which meant their savings would need to provide the remaining $100,000 per year after tax.

To determine how much was needed to provide a sustainable income throughout retirement, an estimated withdrawal rate of 3% to 4% provided a good starting point. In this case, a detailed analysis using our financial planning software revealed that Adamson’s needed to accumulate $3.3 million in liquid assets, or approximately a 3% withdrawal rate.


With five years before retirement, the Adamson’s had time to continue savings to ensure their goal of $3.3 million was reached. They had accumulated $900,000 in savings between RRSP, TFSA, and corporate investments. The cash flow within the practice would allow additional savings of $140,000 per year; this extra cash flow, together with future growth, would result in total investment reaching $2.2 million. Dr. Adamson estimated the future value of the dental practice to be $1.2 million.

Based on these projections, the Adamsons’ total savings would reach $3.4 million, therefore, exceeding their Financial Independence Target or FIT#.


The Adamsons were on their way to achieving the retirement goal using the existing savings and cash flow within the practice. The tax planning laid out through the Financial Roadmap was helpful in reducing their overall taxes. We prepared an investment strategy to manage their portfolio in a low cost and risk-controlled manner, using evidence-based strategies and avoiding the more common speculative style.

In the end, the Adamsons were pleased to know their financial future looked secure. To show his pleasure at the good news, Dr. Adamson quoted one of his favourite Billy Joel songs My Life: “I don’t need you to worry about me ‘cause I’m alright!”

After providing tax planning, accounting, and personal financial planning to families like the Adamson’s for over 30 years, TMFD Financial has developed an integrated financial plan to ensure that all your financial decisions are made with your end goal in mind, and ultimately, reach financial independence, faster.

To learn more about how you can align your dental practice with your dreams for your future, and determine your financially independent target number, please contact our office at 905-361-8004 or to set up a complimentary one-hour initial consultation.

*All Tax and Accounting services provided by TMFD Professional Corporation, Chartered Professional Accountants
 The material in this newsletter is for educational purposes only. It is distributed with the understanding that neither the authors nor the publisher is rendering legal, accounting, tax, investment, or other professional services by publishing this newsletter. These publications are not a substitute for the advice of your financial advisor, or any of your other advisors, personal or professional. Certain employees of TMFD Financial maintain a relationship with Assante Financial Management Ltd. (“Assante”) through which they sell mutual funds and bonds. The relationship that they have with Assante does not include tax preparation and accounting services for which TMFD Professional Corporation, Chartered Professional Accountants is solely responsible. TMFD Financial is not associated in any way with Assante, and Assante has no responsibility for the services offered by TMFD Financial.