Imagine how much stronger independent community pharmacy could be if all pharmacy owners were saving enough money to be able to transition into life after pharmacy on their own terms. One of the main reasons that prevents this from happening is most pharmacy owners have the wrong retirement plan for their pharmacy. There are many reasons for this, but there are two that we hear the most. To clarify, when we talk about a retirement plan being expensive, there are two ways to look at it. The first is the expenses associated with the plan. The second is the percentage of the total company contributions that go to the owners of the pharmacy.
The first reason we hear most is that our advisor(s) or accountant recommend we do something simple and convenient. Being simple and convenient often is code for more expensive. SIMPLE and SEP plans are great examples of these types of plans. The SIMPLE most often doesn’t allow pharmacy owners to save enough because the contribution limits are low. This means that owners may not end up with the amount of money they need for life after pharmacy.The SEP has higher limits but includes part-time employees as well as requiring the same percentage of contributions to the employer that goes to the owner. This results in the owner spending a significant amount of money on the employees in order to save enough for life after pharmacy.
The second reason we hear most is 401ks and other similar types of retirement plans charge excessive fees. This may have been the case 15 - 20 years ago, but technology has driven down the cost of retirement plan service providers. Also, new fee disclosure rules have been effective (not as much as we would like) in helping plan sponsors understand the fees they are paying. These plans have become extremely cost effective and can be customized to give the majority of the plan benefits to the pharmacy owners. And with the demographics in pharmacy being the way they are (older higher paid pharmacy owners and younger lower paid staff), these plans are fantastic ways to save the amount of money pharmacy owners need for life after pharmacy.
