You work hard — maybe too hard at times — to build your veterinary practice, serve pets and their families, and care for your team. When you’re in the trenches day in and day out, raising your head long enough to gaze toward the retirement horizon can be difficult. That distant view is often elusive (slippery almost) and fraught with fear and doubt. Still, you should ask yourself these questions:

• Am I on track to retire? If not, what do I need to do?
• If I sell my practice, will it provide me with enough money?
• Do I need a retirement plan? If so, which one?
• Can I afford a retirement plan?
• How can I provide a retirement benefit to my team?
• What are the tax benefits?

We hear those questions all the time, and we love helping veterinary practice owners uncover how they can take retirement into their hands and worry less about selling for huge multiples. Here’s the beauty of it: You can start now.

So, let’s dive into retirement plans for practice owners.

Understanding Your Options

Our list won’t be exhaustive, but we’ll review the most common retirement plans at veterinary practices. See the table below for the key advantages, contribution maximums and employer requirements of three plans.

Tailoring the Plan to Your Practice

While many payroll companies and so-called bundled 401(k) providers want us to believe retirement plans are one-size-fits-all, nothing could be further from the truth. A few key considerations are:

• Number of employees: Your practice’s full- and part-time headcount determines how much you must contribute on their behalf and the overall fees.
• Profitability: The greater your net profit, the more income taxes you must pay. Money-making practices are terrific candidates for 401(k) plans with a profit-sharing provision.
• Owner and employee demographics: Everyone’s age and wages are significant variables in designing a retirement plan. Generally, a higher percentage of profit sharing goes to ownership when the owner is older than the employees and earns significantly more.

When you align a plan with your personal financial goals, you must:

• Understand the balancing act of investing in the practice, investing and saving for yourself, and investing for your retirement and your team members’.
• Ensure the plan offers low-fee, broadly diversified investment options consistent with your long-term objectives.
• Determine how much you need to contribute to meet your retirement planning goals. A veterinary-focused fiduciary adviser can help you.

Leveraging Tax Deductions

For many practice owners, taxes are the biggest bill in their financial life. Choosing the right plan can be a powerful tool to redirect into retirement accounts money that would have gone to the IRS and potentially your state.

With SIMPLE IRA, SEP-IRA and 401(k) plans, contributions you make on a pretax basis are tax deductible. However, this is where thoughtful plan design comes into play. While the deduction is nice, you must consider how much you spend on the plan and contribute to your employees’ plans.

If you’re running a profitable practice and don’t have a retirement plan, you likely are leaving money on the table — real dollars that could fall to the bottom line.

Let’s use a SEP-IRA as an example:

• Single-doctor practice.
• No full-time employees.
• Taxable income (wages) of $100,000.
• 18% federal tax rate.
• $18,000 in federal income taxes.

An owner who elects to open and fund a SEP-IRA — you can do it by the tax filing deadline — may contribute up to 25% of wages ($25,000 in this case). With a full SEP-IRA deduction, the federal income taxes total $13,500. By deducting $25,000, the owner pays taxes only on the remaining $75,000 in income, resulting in a tax savings of $4,500.

More examples of leveraging tax savings are possible through a powerful 401(k) plan design.

If you don’t offer a retirement plan, the IRS incentivizes you to start one through income tax credits. The bottom line is Congress knows that the average American worker’s retirement is underfunded and that relying solely on the Social Security trust fund is unwise.

Recruitment, Retention and Rewards

We argue that you cannot afford not to offer a retirement plan benefit for employees. Here’s why:

• Research from Gusto, a small business payroll service platform, found that workers are 40% less likely to leave in the first year when offered retirement benefits.
• A study published in the International Journal of Education and Research showed why certain benefits were more effective than others at retaining employees. Retirement plans are an “important factor to attract and retain capable and productive employees,” the study reported.

A generous and robust retirement plan for you and your team members could be one of your most effective mechanisms for attracting talent, reducing turnover and improving everyone’s financial life.

Professional Guidance

While this article can’t unpack all the considerations, we hope this practical guide helps you decide which retirement plan is right for you and your team members.

We strongly recommend that you work with a veterinary-focused plan fiduciary who is a certified financial planner. Work with someone you’re comfortable with and who gives you confidence that the financial professional understands you and your practice’s unique needs and goals.

Don’t let the elusive horizon of retirement radiate fear and doubt. Empower yourself with the knowledge to make informed decisions for your financial well-being and your team’s.