Pharmacies today have found themselves caught in the middle of a vicious ongoing cycle of rising expenses upfront and delayed revenue. This cycle is wreaking havoc on cash flow for the average independent community pharmacy. Obviously, cash flow is extremely important in any business. With shrinking margins and decreasing reimbursements, the independent pharmacy industry is no different. As cash flow suffers, pharmacy owners are forced to focus on the short-term. Saving money for retirement typically takes a back seat.
Prices set by drug manufacturers and reimbursements from PBM's are fast to change and even harder to control. So most pharmacy owners will focus on what they can control, other expenses. Some look at reducing hours and/or staff, and many take bank loans hoping to pay them back when times are better. Others may reduce contributions toward retirement, or worse, they will withdraw from their retirement and take a tax-penalty. Unfortunately the ugly truth of business is that you have to do what you have to do in order to survive.
Typically no one likes to cut back hours or layoff employees. Taking a loan from a bank may solve short-term issues but cripples cash flow in the end with interest being paid, depending on interest rates of course. Not funding one's own retirement, which can be an easy short-term decision, can have devastating consequences down the road. Taking a step further, when one makes an unauthorized withdraw from a retirement account they must pay normal income tax plus a 10% penalty on the amount withdrawn. This type of depletion is nearly impossible to make back up.
So what is the answer?
Before I tell you that it is Pharmacy401k, please allow me to explain one other aspect of human nature. We are designed and encouraged by the world to seek instant gratification. It is natural for people, especially business owners, to not want to contribute to retirement in order to have a safety net during down times. With some forms of retirement such as SEP IRA's and SIMPLE IRA's, once that money is deposited, it is extremely difficult to access it without penalty until age 59 1/2. This can cause people to be reluctant to contribute toward their future.
A better option is out there...
In an effort to encourage pharmacy owners and employees to still save enough money to reach their own retirement goals, loans from one's own 401(k) is one of the many options available through Pharmacy401k. This allows the participant not only to contribute a substantial amount more than other types of retirement plans, but builds in the safety of being able to access that money during rough times. Although an advisor would never encourage removing any money from one's retirement account, at least with a 401(k) loan one pays himself or herself back with interest.
At Pharmacy401k we have worked hard to develop ways to help the independent pharmacy community. We strive to find ways to help owners and employees retire on their own terms, while being realistic to what is going on in the world. If you would like to learn more about how Pharmacy401k can impact the cash flow of your pharmacy, please visit our website at www.pharmacy401k.com or email me at tyler@waypointus.com.
