The New Dental Practice Retirement Guide: Options Compared
Compare retirement plan options for new dental practices: 401(k), SIMPLE IRA, SEP IRA, defined benefit, and profit sharing. Costs, limits, and steps.
Retirement planning for a new dental practice is not about picking the first 401(k) your broker offers. It is about matching your cash flow, staff size, and owner goals to the right vehicle. This guide compares the five most common options, with realistic 2026 figures, so you can make an informed choice this week.
Why Retirement Plans Differ for Dentists
Dentists have a unique advantage: you can contribute far more to a retirement plan than most employees, but only if you choose the right structure. The key is the difference between employee limits and the overall plan limit. In 2026, the employee deferral limit is $23,500 (plus $7,500 catch-up for age 50+), but the total contribution limit (employer plus employee) is $70,000 per participant. Plans like a 401(k) or defined benefit allow you to reach that $70,000, while SIMPLE and SEP IRAs cap you much lower.
Option 1: Solo 401(k) or Individual 401(k)
Best for: solo practitioners with no employees (or only a spouse).
A Solo 401(k) lets you contribute as both employee (up to $23,500) and employer (up to 25% of compensation, capped at the total limit). For a practice owner paying yourself $150,000, that means you can put away $23,500 + $37,500 = $61,000 in 2026. If you are 50 or older, add the $7,500 catch-up.
Cost: $0 to $500 setup, plus $20 to $50 per month for administration if you use a provider like Fidelity, Vanguard, or a small business TPA.
Pros: High contribution limits, low cost, no annual filing if assets are under $250,000.
Cons: Not available if you have non-spouse employees. You must set up the plan before December 31 to contribute for that tax year.
Option 2: SIMPLE IRA
Best for: practices with 1 to 100 employees, especially if you want low cost and minimal paperwork.
A SIMPLE IRA allows employees to defer up to $16,000 in 2026 (plus $3,500 catch-up for 50+). As the employer, you must match dollar-for-dollar up to 3% of each employee’s pay, or contribute a flat 2% to all eligible employees. For a practice with 5 staff, that match might cost you $3,000 to $8,000 per year, depending on wages.
Cost: $0 to $50 per year per account, plus minimal admin. No annual IRS filing required.
Pros: Simple, low cost, employees can contribute immediately.
Cons: Low contribution limit for you (the owner), and you are locked into the match. If you have high-earning staff, the match can be expensive.
Option 3: SEP IRA
Best for: practices with few employees, where you want to contribute only for yourself and maybe a few key staff.
A SEP IRA allows employer contributions of up to 25% of each employee’s compensation, capped at $70,000 per participant in 2026. You must contribute the same percentage for all eligible employees (those 21+, with 3 years of service, earning $750+). If you contribute 25% for yourself, you must do the same for your staff.
Cost: $0 to $500 setup, no annual filing if assets under $250,000.
Pros: High contribution limit, flexible (you can skip contributions in lean years).
Cons: No employee deferrals, so staff cannot save pre-tax on their own. The 25% requirement can be costly if you have full-time staff.
Option 4: 401(k) with Profit Sharing
Best for: practices with employees, where you want to maximize owner contributions while offering a benefit to staff.
A traditional 401(k) allows employees to defer up to $23,500, and you can add a profit-sharing contribution up to 25% of compensation, hitting the $70,000 total limit. You can design it to favor the owner, for example, by using a safe harbor match (4% of pay) to satisfy nondiscrimination tests, then a discretionary profit share.
Cost: $1,500 to $3,000 per year for a small plan with a TPA, plus $50 to $150 per participant per year. Setup can be $1,000 to $2,500.
Pros: Highest flexibility, allows employee deferrals, and you can reach the $70,000 cap.
Cons: More expensive and requires annual IRS Form 5500 filing. You must run nondiscrimination tests unless you use safe harbor.
Option 5: Defined Benefit Plan (Cash Balance)
Best for: high-income owners (netting $300,000+) who want to maximize tax-deferred savings, often in addition to a 401(k).
A cash balance plan is a type of defined benefit plan that promises a specific benefit at retirement. In 2026, annual contributions can exceed $300,000 for a 60-year-old, but for a 40-year-old, it might be $100,000 to $150,000. The cost is significant: actuarial valuations every year, TPA fees of $5,000 to $10,000 annually, and you must fund the plan regardless of practice profitability.
Pros: Massive tax deductions, can catch up on retirement savings.
Cons: High cost, mandatory contributions, complex. Not practical for a new practice unless you have very high income and stable cash flow.
Comparison Table: 2026 Figures
| Plan | Owner Max Contribution | Cost (Annual) | Best For |
|---|---|---|---|
| Solo 401(k) | $61,000 (age <50) | $0-$600 | Solo owners, no staff |
| SIMPLE IRA | $16,000 + match | $0-$500 | Small practice, low cost |
| SEP IRA | $70,000 (25% of comp) | $0-$500 | Few employees, flexible |
| 401(k) + Profit Sharing | $70,000 | $2,000-$5,000 | Practices with staff |
| Cash Balance | $100,000+ | $5,000-$10,000 | High earners, age 45+ |
How to Choose: A Practical Decision Tree
- Do you have employees? If no, go Solo 401(k). If yes, move to step 2.
- How many employees? If 1-5 and you want low cost, consider SIMPLE IRA or SEP. If 5+ or you want higher limits, go 401(k).
- What is your net income? If under $150,000, SIMPLE or SEP is fine. If over $200,000, a 401(k) with profit sharing is worth the cost. If over $300,000 and you are 45+, consider a cash balance plan.
- Do you want to attract staff? A 401(k) with a match is a better recruiting tool than a SIMPLE.
Steps to Implement This Week
- Estimate your 2026 net income from your profit and loss statement. This determines which plan makes sense.
- Check your employee roster and their ages and service years. This affects eligibility and cost.
- Get quotes from 2-3 TPAs or providers. Ask for all-in costs, including setup, annual admin, and per-participant fees.
- Set a deadline: most plans must be established by December 31 to count for that year, but SEP IRAs can be set up by the tax filing deadline (April 15, 2027).
- Run a projection using a retirement calculator to see if you are on track. Aim to save 15-20% of your income.
FAQ
Can I switch plans later? Yes, you can terminate a plan and start a new one, but there are rules and potential costs. For example, you can move from a SIMPLE to a 401(k) after two years.
What if I have a spouse as an employee? A Solo 401(k) can include your spouse, and they can contribute their own deferrals, doubling your household limit.
Are there penalties for not funding a plan? For defined benefit plans, yes. For money purchase plans, yes. For profit sharing and SEP, no, you can skip contributions.
Do I need a TPA? For a Solo 401(k) or SEP, no. For a 401(k) with profit sharing, yes, to handle testing and filing.
The Bottom Line
For most new dental practices, the best starting point is a Solo 401(k) if you have no staff, or a SIMPLE IRA if you have a few employees and want simplicity. As your income grows, upgrade to a 401(k) with profit sharing to hit the $70,000 limit. Avoid cash balance plans until you have stable cash flow and a high income. The key is to start now: even a small contribution in year one builds the habit and takes advantage of compounding. Meet with a CPA or financial advisor who works with dental practices to run the numbers for your specific situation.