Best Annuity for Dentists Selling a Practice (2026)
TL;DR: A dentist selling a practice for $500K-$3M typically gets a mix of goodwill (capital gain) and hard-asset (ordinary income) proceeds. The IRC §453 installment sale spreads the tax over years. A MYGA ladder structures the proceeds for retirement income. A cash-balance plan rollover (if you have one) can fund a SPIA for guaranteed lifetime income that complements the practice sale. The combination, not any single product, is usually the right answer.
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CD vs MYGA, after tax
What $100,000 earns in 5 years: CD vs MYGA, after tax
Rates used: CD 5.00%, the top nationally available 5-year CD (Bankrate, October 14, 2026); change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| CD, interest taxed every year | $121,081 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the CD, after tax | $5,055 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
Why your situation is different
A practice sale is a once-in-a-career liquidity event. Three things happen at once:
- A 7-figure tax bill could land in one year if you don't structure it
- Your largest asset becomes cash, and that cash has to do a job for 25+ years
- Your retirement plan (often a cash balance plan or 401(k)/profit sharing) gets rolled at the same time
The opportunity is to coordinate all three. A purely transactional sale leaves money on the table. A coordinated structure with a CPA, an attorney, and an independent producer often saves 100-300 bps of effective wealth.
Components of the sale price (and why each matters)
Most dental practice sales allocate the price across several asset classes. Each has a different tax treatment:
| Asset | Tax treatment to seller | Typical % of price |
|---|---|---|
| Goodwill (Section 197) | Long-term capital gain | 50-75% |
| Equipment (Section 1245) | Ordinary income to extent of depreciation recapture | 15-30% |
| Supplies and consumables | Ordinary income | 1-3% |
| Patient records / charts | Long-term capital gain | 2-5% |
| Restrictive covenant | Ordinary income | 3-10% |
| Real estate (if owned) | Long-term capital gain + recapture | Varies |
The buyer wants more allocated to equipment and covenant (faster depreciation/amortization for them). The seller wants more in goodwill (capital gain rate vs ordinary). Negotiate this in the asset purchase agreement; the IRS expects buyer and seller to agree.
Three structures for the proceeds, with tax flow
1. All-cash sale + MYGA ladder
Buyer pays cash at close. You pay tax in the year of sale (capital gain on goodwill, ordinary on equipment depreciation recapture). Net proceeds go into a MYGA ladder, IRA bucket, taxable brokerage, and liquidity.
Pros: clean break, immediate diversification. Cons: largest possible tax bill in one year (NIIT, AMT, possibly state tax).
2. §453 installment sale
Buyer pays over 5-10 years. Each payment has a gain component (taxable that year) and basis-return component (tax-free). Spreads the tax over the installment period.
Pros: lower marginal rate each year, often avoids NIIT. Cons: buyer-credit risk; you become a lender. Mitigate with: personal guarantee, lien on practice assets, possibly a SBA-loan-style structure.
3. Structured Installment Sale (SIS, §453 + assignment to a third party)
Sale becomes installment, then the installment obligation is assigned to a regulated insurance company that pays you a fixed schedule. You get tax-deferral of an installment sale + counterparty quality of an A-rated carrier instead of the buyer.
Pros: tax-deferral + carrier-grade counterparty. Cons: schedule is locked at structure date; less flexibility than self-held note.
Cash-balance plan rollover: the second piece
If you set up a cash-balance pension plan in your last 5-10 years of practice (popular among high-income dentists), the rollover balance can be $400K to $2M+. This rolls into an IRA at termination of the plan.
Inside the IRA, you can place a MYGA ladder, buy a SPIA, or split. The cash-balance rollover provides the qualified-money bucket; the practice sale provides the non-qualified-money bucket. Coordinating both gives you tax flexibility for the next 30 years.
Top 3 MYGA carriers writing for dentist rollovers in 2026
- Athene: AM Best A+. 5-10 year MYGAs at the top of the shelf.
- Corebridge: AM Best A. Bonus tiers on $500K+ deposits.
- MassMutual Ascend: AM Best A+. Best for buyers wanting brand reassurance plus competitive rates.
Common mistakes dentists make at exit
- Selling for cash without modeling the tax hit first. A $2M cash sale can trigger a $600K+ federal tax bill plus NIIT plus state. An installment structure cuts that in half over 6-10 years.
- Underestimating goodwill versus equipment allocation. Buyers fight for equipment allocation. Sellers must push for goodwill.
- Rolling cash-balance into the same IRA they've had for 20 years. Pure logistics, but it can complicate distribution planning. A separate IRA for the cash-balance rollover gives you cleaner basis tracking.
- Locking the entire proceeds into a single MYGA or SPIA on day one. Phasing in over 3-6 months as rate environment moves is usually better than a single-day commitment.
- Forgetting the cash-balance plan needs IRS termination filing on a specific timeline. Coordinate the plan termination with the practice sale closing.
Worked example: $1.4M practice sale, age 58 dentist
Dr. Patel, 58, solo GP. Practice sale price: $1.4M ($1.05M goodwill, $250K equipment, $100K other). She also has a cash-balance plan with $900K and a 401(k) with $400K. She wants to retire fully at 62, semi-retire at 58.
Structure:
- Sale structured as a 7 year §453 installment, $200K per year. Net of cost basis, this spreads ~$1.1M of gain across 7 years, keeping her in 15% capital gain bracket each year (instead of 20%+NIIT).
- Cash-balance plan terminated, $900K rolled to a new IRA. 5 yr MYGA: $300K. 7 yr MYGA: $300K. Index funds: $300K.
- 401(k) rolled to existing IRA, kept in index funds.
- Year-1 installment payment ($200K): pay tax, place $100K in MYGA in non-qualified, $40K to taxable brokerage, $30K to liquidity, $30K to lifestyle.
Over 7 years, she has predictable cash flow, a stepping IRA balance growing in MYGAs, and her tax bill is roughly half what an all-cash sale would have produced.
Related reading
- Best annuity for chiropractors selling a practice
- Best annuity for small business owner exit
- How much does a $1 million annuity pay per month?
- Non-qualified annuity tax explained
- What's the biggest disadvantage of an annuity?
Frequently Asked Questions
Can I do a §1031 exchange on goodwill?
No. Section 1031 (like-kind exchange) is limited to real estate as of the 2017 tax law changes. Goodwill no longer qualifies.
What's the difference between an asset sale and a stock sale?
Most dental practice sales are asset sales (better tax for buyer, often worse for seller). Stock sales are simpler tax-wise for the seller but rare in dental because buyers don't want the inherited liability.
Should the practice sale go through my LLC or directly to me?
Depends on entity structure. If you're an S-corp, the sale flows through to you personally. If a C-corp, you might face double taxation. CPAs and transaction attorneys should structure this; the choice is not interchangeable.
How is a SPIA from cash-balance plan rollover taxed?
Fully taxable as ordinary income because it's coming from a qualified account. Each payment is 100% taxable.
What about deferred compensation arrangements with the buyer?
Sometimes structured as a 5-10 year consulting agreement post-sale. Taxed as ordinary income (W-2 or 1099). Useful for buyers who want continuity and for sellers who want to spread income, but loses the capital-gain treatment goodwill gets.
Will an annuity protect my proceeds from creditors?
State-dependent. Florida and Texas have strong annuity creditor exemptions. Most states have partial protections. Don't assume; have an attorney confirm for your state.
Can I roll the §453 installment proceeds into a MYGA each year?
Yes. Each annual installment can be reinvested into a fresh non-qualified MYGA, building a 7-deep ladder by year 7. The interest inside the MYGA is tax-deferred.
Is the §453 election available if I sell to a related party?
Yes, but there are anti-abuse rules if the related party resells within 2 years. Get tax counsel before structuring a related-party installment sale.
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Disclosure
This article reflects publicly available product materials and approximate rates as of the date stated above. Annuity rates, caps, participation rates, payout factors, crediting methods, and tax rules change frequently. Confirm current figures in the latest carrier disclosure and the contract before you buy. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product, nor is it tax or legal advice. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity and long-term care insurance market; specific appointment status with any carrier discussed may vary, and discussion of a carrier is not an endorsement or representation of carrier appointment. No compensation has been received from any carrier in connection with the publication of this article. Always read the actual contract and consult a licensed advisor and a CPA or tax attorney before purchasing any annuity or making rollover decisions. Annuities are long-term contracts with surrender charges; they are not suitable for funds you may need before the end of the surrender period. AM Best ratings, payout factors, and tax treatment are subject to change. References to the TSP, FERS, CSRS, OPM, USPS, Social Security, IRMAA, WEP/GPO, IRC §72, §453, and §1035 reflect rules as of 2026 and are subject to change.