Complicated Aspects of 401(k)s – Podcast #44

Podcast #44 Show Notes: Complicated Aspects of 401(k)s

We are going to be mostly responding to questions in this episode. Most of them have to do with 401(k)s.  You can listen to the podcast here or it is available via the traditional podcast outlets, ITunes, Overcast, Stitcher, Google Play.  Or watch the video here or on YouTube.  Enjoy!

Podcast # 44 Sponsor

[00:00:20]  This episode is sponsored by Adam Grossman of Mayport Wealth Management. Adam is a Boston-based advisor and works with physicians across the country. Unlike most other advisors, Adam offers straightforward flat fees for both standalone financial planning and investment management. Whatever stage you're at in your career, Adam can help you get organized with a personalized financial plan and can help you implement it with a low-cost index fund portfolio. Adam is a Chartered Financial Analyst and received his MBA from MIT, but more importantly, you'll benefit from Adam's own personal experience with many of the same financial obstacles and opportunities that face physicians. To learn more, visit Adam's website to download a free e-book especially for physicians.

Quote of the Day

[00:01:34]  “If you have a $2,000 monthly mortgage payement, Grandma can help. If you have a $20,000 monthly mortgage payment, no one can help.”  – Charlie Munger

Introduction

[00:01:12] We are thinking about doing the podcast live at some point, like a radio show, where people could call in and ask questions and have a little bit of back and forth on the phone with me. We are still working on the technical aspects but mostly we are just not sure we will have enough people call in to be on the show. So if you think this is something you'd enjoy let us know and we'll see if we can make it happen occasionally.

Main Topic

[00:01:49] We are going to be mostly responding to questions in this episode.  A lot of them have to do with 401(k)s .

Q&A from Readers and Listeners

1. [00:01:49]  “Can you talk about the (few) times that it might be appropriate to take a 401k loan?” (For example this doctor has the opportunity to buy into a new building that a large practice of physicians is buying and they are trying to raise money from the individual doctors.)
2. [00:06:20] Answering about a dozen questions concerning individual 401ks.
3. [00:12:41] Question from a doctor who is wondering what he can do about his crummy 401k that his employer offers.
4. [00:16:56] More questions about Backdoor Roth IRAs.
5. [00:21:37] “I would like to eventually rent out the first home I buy. Do you think this is a mistake? Can I get a second physician mortgage loan for the next home?”
   
6. [00:26:00] “You say put 20 percent in retirement. Do you have a recommendation to put into a savings account every month also?”

Ending

[00:29:13]  Your daily work matters and spreading this message of financial literacy to your peers makes for happier doctors and better cared for patients. Please help us spread it more by telling your colleagues about this podcast. Thanks!

Full Transcription

[00:00:00] This is the White Coat Investor podcast where we help those who wear the white coat. Get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host Dr. Jim Dahle.

 

[00:00:20] Welcome to podcast number 44. We are going to talk about some of the complicated aspects of 401(k)s. This episode is sponsored by Adam Grossman of Mayport Wealth Management. Adam is a Boston based adviser and works with physicians across the country. Unlike most other advisers Adam offers straightforward flat fees for both stand alone financial planning and investment management. Whatever stage you're at in your career, Adam help you get organized with a personalized financial plan can help you implement it with the low cost index fund portfolio. Adam is a Chartered Financial Analyst and received his MBA from MIT. But more importantly you'll benefit from Adam's own personal experience with many of the same financial obstacles and opportunities that face physicians. To learn more visit Adam's website Mayport dot com slash white coat to download a free eBook especially for physicians and let them know that the White Coat Investor sent you.

 

[00:01:12] We are thinking about doing this podcast live at some point. Like a real radio show, you know some evening actually have you guys be able to call in and ask your questions and have a little bit of back and forth on the phone with me. We're still working on the technical aspects but mostly we're just not sure we'll have enough people call in to be on the show. So if you think this is something you'd enjoy let us know and we'll see if we can make it happen occasionally.

 

[00:01:34] The quote of the day today comes from Charlie Munger who said if you have a 2000 dollar monthly mortgage payment grandma can help if you have a 20000 thousand dollar monthly mortgage payment no one can help. So keep your fixed expenses low as much as you can.

[00:01:49] All right we're going to be mostly responding to questions today. A lot of these have to do with 401(k)s though so that's why I gave the show the title it has but the first one comes up from someone asking about 401k loans, asking for a column actually discussing the few times that might be appropriate Take one out. For example this doc has the opportunity to buy into a new building that is a large practice of physicians is buying and they're trying to raise money from the individual docs. He says some of the primary care physicians want to invest but don't have big specialist money to throw around.

 

[00:02:24] So while 401k loans are usually a bad idea What about taking out a loan to invest in the medical office building? The projected return is seven point five percent. It's not like you're taking the money out to blow it on European vacations you're moving some of your investment from the 401k stock and bond offerings and diversifying into medical office buildings which can be a reasonably safe investment especially since we're paying ourselves the rent that ultimately generates the returns. I also see that the new tax law gives you until October the next year to pay back 401k loans if you leave the company.

 

[00:02:55] Well there's a lot to dissect in this question here. First of all I like the idea of opening and running and owning your own office building. That is an awesome kind of real estate. And the reason why is because the tenant is so darn reliable it's not going to trash the place. He's always going to pay the rent. You know you get a great tenant. And so I like the idea of being able to own both your home if you're in a stable professional and social situation. But also being able to own the building you practice in or your office building for your practice or whatever I think it's often a great investment. Mine has been good to me I know that and I recommend it in a lot of ways. But the question is how do you pay for it. Right. You may not have a bunch of money sitting around. So is it worthwhile borrowing from your 401k?

 

[00:03:43] Well I think to answer that you need to understand all of the issues with borrowing against your 401k. The first is that you can only borrow a maximum of either fifty thousand dollars or 50 percent of the 401k whichever one's lower. So if you don't have any money in your 401k you can't borrow from it. And if you need to borrow a lot of money you're not going to get it from your 401k. As a relatively minor part of your financial life. Second if you leave the company you have to pay back the loan. It used to be you had to pay it back within like 60 days. But since the new tax law passed at the first of the year you now have until October of the next year basically until you file your taxes and if you get all the extensions you can do that in October of the following year. So potentially you could borrow the money for up to 21 months after you left the company before having to pay it back. And so that makes it a little bit less risky to be able to borrow against your 401k. I'm definitely not a fan of borrowing against and using it like an ATM to pay for a European vacation. I'm much less against borrowing it in order to invest somewhere else. For example I know some people who have a lousy 401k it's really terrible you know high expense ratio funds all actively managed terrible track record etc.

 

[00:05:01] And so what they do is they make their 401k contribution get the tax deduction for it and then they basically pull the money out and invest it elsewhere in order to make a little bit higher return and get a little bit better investments. And so that's worked out well for them. So I can't say never borrow against your 401k but I think you ought to be careful when you do so.

 

[00:05:23] Bear in mind that about 10 percent of the people that take out a 401k loan never pay it back. And when you don't pay it back not only do you have to pay taxes on that money at your marginal income tax rate your ordinary income tax rate but you also have to pay a 10 percent penalty. That includes if you take it out for a hardship withdrawal while you're still working for the company. You still have to pay the tax and if you're under 55, the penalty. Remember with 401ks though , 55 is the rule not age 59 and a half. So can I give a blessing to borrowing money in order to invest in a medical office building? I think it's OK to do as long as the rest of your finances are set up OK. But if you're strong so tightly financially that you are having a very hard time coming up with money to invest maybe you ought to pass on that investment.

 

[00:06:11] This is one of those great reasons why it's great to pay off a mortgage and great to pay off your student loans. It just frees up the cash flow to do stuff like this.

 

[00:06:20] All right let's talk a little bit now about individual 401ks. I had somebody write in and ask about a dozen questions about individual 401ks. This is their first time doing it but this doc says in addition to maxing out my 403 b through my employer I do some speaking on the side and earn a few thousand honorarium a year as ten ninety nine income. I know 20 percent of that isn't much but contribute it to an individual 401k would save a few hundred bucks on taxes. My accountant is confused by this which isn't unusual at all I've run into a lot of people whose accountants are confused about multiple 401KS. So he's coming to ask some yahoo on the Internet namely me whether this is a good idea or not. I have questions related to the general process as well as some specific logistical questions. He notes that I understand I do need to get an employer identification number and then open an individual 401k with a brokerage firm and then I can contribute up to 20 percent of my net Ten ninety nine earnings up to the fifty five thousand dollar Max.

 

[00:07:21] OK so this Doc already has a pretty good understanding of how an individual 401k works. If you're already using your employee contribution of which you only get one per year no matter how many 401k employers you have if you are already using that at your main gig all you get to put into your individual 401k is employer contributions which means basically 20 percent of what you earn there. So here's the questions that he has for me are there any brokerage firms that will open an individual 401k account with the starting contribution of this small amount of currently just a few hundred dollars. Yeah they don't have any minimums when I opened mine Vanguard there was no minimum I could have sent them 10 bucks and they wouldn't have balked at it.

 

[00:08:05] I think occasionally the funds might have a minimum of 100 bucks or a thousand bucks. But in general within these sorts of accounts the minimums are basically a dollar. When completing W9 for your speaking engagements Do I need to list the employer identification number instead of my social security number on the forms? Well yes. You're running a business. You're an independent contractor. You're run a business. Use the tax identification number for the business. In that case this is the employer identification number. Now this particular doc is only a sole proprietor. So he didn't have to get an employer identification number in order to go do speaking gigs. He could have done it just with his regular old Social Security number as a sole proprietor That's all you need. But if you wanna open an individual 401k you have to get an employer identification number. It's a requirement of Vanguard and I believe all of the other Solo 401k providers as well.

 

[00:08:58] Do I have to open a separate bank and checking account with my EIN in this process? Well again that's just good business practice. You're running a business on the side. Go open a bank account for it. You might not need a savings account but you certainly need a checking account for that business. And usually the cost of that is so cheap that it's no big deal. And it sure makes your accounting a lot easier and if you ever have the business get audited it will be a lot better if you can just pull out one business statement and you're not trying to separate out your business expenses from your kid's piano lessons in your main checking account.

 

[00:09:29] Once I get a speaking honorarium check do I just deposited into my personal checking account and then contribute electronically 20 percent of the net earnings to the individual 401k. Yeah that's basically the way it works when you get paid you put the money into the business's account and the business account is used to make the 401k contributions. What do you recommend naming one's business. Well if you're a sole proprietor is perfectly fine to just use your name. Joe Smith M.D. is perfectly fine business name for somebody who's just doing some speaking gigs as a sole proprietor. Now if you're trying to build a brand like I am with the white coat investor it might make sense Put a little more thought into what you want to call the business or if you want to kind of disguise the fact that you're a doctor or something like that then sure change your name and come up with a business name and that's known as a DBA doing business as. But you're still taxed as a sole proprietor even with a different name.

 

[00:10:21] OK what tax filing implications does get in ten ninety nine income with an EIN as opposed to Social Security number have? Do I have to file additional or special taxes for this and no you don't file filing as a sole proprietor Either way. You're going to fill out a Schedule C with all of your business expenses as well as all your business profits on it and that will flow through to your 1040.

 

[00:10:41] What tax filing implications does having and or contributing to an individual for one have annually. Well you pay less money and tax the more money you put into a tax deferred retirement account the less money you're taxed on. And so it saves you very dramatically and you put the money into the account. And then of course is that money grows it grows in tax protected way. All right. I think I answered all of those questions. Bear in mind when you're opening an individual 401k that you want to know what you're planning to do with it before you open it. For example a lot of people open one in order to roll over a traditional IRA they have so that they can do Backdoor Roth IRAs without having to pay attention to the pro-rata rule. And if that's your goal you darn well better make sure you're opening an individual 401k at a place that accepts rollovers for example Vanguard's individual 401k does not accept rollovers. But a great place to do that might be Fidelity or Schwab or E-Trade for instance. If you really want to use the Roth 401k option you can do that at Vanguard and you can do that at E-Trade. But neither fidelity nor Schwab offer Roth individual 401k. If you want to take out 401k loans in order to invest in medical office buildings you better make sure that they actually offer loans neither Vanguard, Fidelity, nor Schwab offer 401k loans from the individual 401ks but E-Trade does. And so you want to ask about those things before you decide where to open it.

 

[00:12:11] My individual 401K is at Vanguard which works just fine for us. But if I was doing it all over again I'd certainly give significant consideration to doing it at E-Trade. One of the things I don't like about the Vanguard 401k for instance is that you have to buy the investor shares instead of the lower cost Admiral shares. And now that we've got a significant amount of money in there that's starting to add up to a significantly higher expense. Whereas if I had done it at E-Trade I could have just bought Vanguard ETF and enjoyed the lower expense ratios.

 

[00:12:41] All right here's another one from a doc who's wondering about his crummy 401k that his employer offers. He asks I was wondering if you could talk about how to convince your employer to switch to a better retirement plan like Vanguard in your podcast or blog. I'm a hospitalist working for an employer with 25 plus or 25000 plus employees. I have no leadership position so I'm not sure how to make my voice heard. Our employer currently uses Voya and as of 2017 Their target retirement funds have an annual expense ratio of zero point six percent plus a 12 B one fee of zero point 3 2 percent. Surprisingly they have four Vanguard index funds available which I do use and with expense ratios of point 0 4 percent plus an asset based fee. Point 2 percent. The rest are Voya American other funds some of which have a total fee of up to one point 3 2 percent.

 

[00:13:32] So I wrote an email to human resources explaining how expensive Voya's retirement plan is compared to Vanguard and that we should look into switching but the benefits director replied with an unenthusiastic and disappointing email. I got to read some of this e-mail. He says thanks for your question. It may be helpful to understand the process we use in choosing investment funds for the four O3b plan we appointed an investment committee that is responsible for choosing the investment funds made available under the 403 b plan. The committee acts in a fiduciary capacity in choosing these funds and monitoring their performance to support the committee with managing its fiduciary responsibilities. The Committee retained an independent advisory firm to provide support and guidance for governance and investment related activities. The committee along with its adviser utilizes a comprehensive approach for investment manager oversight search selection and monitoring investment management expenses are considered in that process but so are additional qualitative and quantitative measures including investment performance. The Voya solutions portfolios utilize active and passive investment management strategies within their portfolios. Vanguard's target date portfolios utilize only passive index funds. The Voya solution portfolios have higher expenses because of the costs related to active management.

 

[00:14:42] What a load of crap can you believe that, that's garbage. These guys say they're acting as your fiduciaries but they are putting funds in there with an expense ratio of one point 3 2 percent. That's what 40 times as high as the vanguard index funds. That is not your fiduciary duty. In fact this employer is setting themselves up to be sued by their employees which has happened in a lot of large companies throughout the country.

 

[00:15:04] If you have an investment if you have a retirement account that you're running as an employer and you're offering crap index or crap mutual funds. Don't be surprised if somebody comes after you and decides to sue you for not fulfilling your fiduciary duty to the employees. You can't give them crummy investments and expect that that's going to fly when anybody looks at it very closely and you could literally be on the hook for lots and lots of money. And so what can this person do. Well I wouldn't necessarily go hire a lawyer and start trying to sue this company. This is a very common problem that people have. One thing I would probably try to do if I were at this company is get on that investment committee. You'd be surprised the low level of sophistication that a lot of people on these committees are, for a lot of physician practices is just a bunch of docs like you, do you think they have any more experience than you do. Not really. And so when some investment adviser comes in and says oh look at this great Voya fund. Sure the expense ratio is one point 3 2 percent. But look at the past performance. Then they may Kind of not understand it. You know past performance does not indicate future performance. And so it helps to have some people that are truly financially literate on that committee so volunteered to get on the committee. That's one great way to change it. Believe it or not my 401k with my partnership used to be mostly actively managed funds and over the years it's been changed to be index funds.

 

[00:16:29] Now by the time I ever went to a committee meeting it was almost the transition are almost completely been made and there's really not a lot to complain about with my 401k. But there was a time when it wasn't that great of a 401k as far as its investment options went. And they were doing exactly the same thing as this company is. They were just looking at past performance and they had a process where something stopped performing and they took it out of the account. So it really was just a lot of performance chasing with high expense ratio funds.

 

[00:16:56] I'm amazed at how many questions I get about Backdoor Roth IRAs. I always thought this process was kind of simple but there an awful lot of nuances about them that I suppose I should have expected given the 1300 comments on my back to a Roth IRA tutorial blog post. But here's another one that's come in recently and that I thought was fairly interesting and illustrative of a few useful points. This doc writes in is a fairly new attention I've been trying to get my finances in order from the start. Hurray for that. I started contributing to a traditional IRA when I started my first job out of residency with the intention of converting it. Hurray for that. I then converted it in December of 2016. Then for the course of 2017 I contributed biweekly to a traditional IRA. That sounds like a big hassle. The plan was to convert prior to December 30 first after the last contribution was made.

 

[00:17:43] However when I went to do the conversion on December 29th Vanguard site would allow the entire process up until I submitted and then say our site is not available. Unfortunately customer service had left for the weekend. I was not able to convert until January 2nd.

 

[00:17:58] Well don't procrastinate that's the moral of the story there. Secondly don't make biweekly contributions to a traditional IRA. I mean it's 5500 bucks. If you make enough money that you have to fund your Roth IRA through the back door. You make enough money to do this all at one point as a lump sum. So instead of putting money in the 401k in January put it into your traditional IRA and convert it to a Roth IRA then there's no reason to drag this out and make your life complex by making what is that 25-26 different contributions during the year to your traditional IRA. And then of course you've got to give him a little bit of time. I mean this is not the quickest transaction to move money from a traditional IRA to a Roth IRA. It usually takes a business day or two sometimes a few depending on what's going on at Vanguard and what funds you had it in and all kinds of complicated things like that. So don't wait until the last week of December to do this conversion. At any rate this doc has a few questions about this. Does this mean that I'm going to have to pay taxes on this already taxed money? Well no you are not going to pay taxes you don't pay taxes on it before. Number one.

 

[00:19:07] Number two you haven't done anything that's a taxable event. You don't buy or sell or withdraw our contributor anything like that That's a taxable event. You put a bunch of money into it and you don't get a tax break because you make too much money. But there's no taxes do. Just because you left that money in at the end of December. Now on this conversion that was done the next year which is done a few days later on January 2nd well there's not going be much tax to pay for that either. Only you only pay taxes on the earnings for that money throughout the year. So there will be a little bit of tax due but Vanguard's computers can figure that out and tell you exactly how much tax you're going to have to pay or how much of it was taxable rather. And that'll end up on your taxes for the next year.

 

[00:19:51] One thing that could screw up of course is the Backdoor Roth IRA from the prior year because now you've got basically a pro-rata transaction that shows up on line 6 Form 86 06 which is the one you report your backdoor Roth IRA on. And so that's going to be a little bit squirrelly for this doc for a couple of years it's just going to have to go through and fill out the lines and follow the directions and it'll look a little funny. This is why it's so much easier if you just make the contribution in January do the conversion in January and you're 86 06 is really clean.

 

[00:20:24] You don't have to fuss about all the answers and go to Vanguard and try to get all the answers of how much of it is taxable and all that is just a lot easier if you do that. Then he asks Do I have to wait until next year to contribute to any IRAs now. No you don't. You get to make the contribution. Now you can do a contribution for 2018. In fact you can do the contribution for 2017 up until tax day of 2018. And so that's not going to be a problem for him. Can I still contribute to traditional IRA and convert to Roth in December of 2018. Yes you could. But I wish you'd do it in January or the 55 hundred limits per year on conversions to or only on contributions and this is an important point. You can convert as much as you like. The only limit is on the contribution. And if you're under 50 that's five thousand five hundred dollars per year if you're 50 or older you get an extra thousand dollar catch up contribution for a total of six thousand five hundred dollars per year. You can open another IRA for your spouse even if your spouse has no earnings as long as you have enough earnings to make the contribution for another 5500 or 6500 dollars respectively. And then his final question was should I be doing this completely differently. Yes you should. You're making your life way too complicated. Stop doing that.

 

[00:21:37] OK. Next question. This one's not 401k or an IRA question but I thought it was pretty interesting. So let's go to it. I'm in a surgical subspecialty and make around four hundred thousand dollars per year. Congratulations that's awesome. I rent and I know I pay way too much. Three thousand dollars a month. I don't know. That's too much. That's less than percent of your income. I have 140 thousand dollars in loans presumably student loans that are already refinanced with Laurel Road at three point thirty five percent. So there's a shout out to one of our sponsors. Thank you Laurel Road for such a great rate for this doc. I'm looking to buy a house as my lease is up in June. OK this is great. Doc rented for a few months to make sure that his professional and social life was stable before buying a house. I think that's great. Houses in the city aren't cheap I plan on getting a physician mortgage and plan to put down 5 to 10 percent hopefully. OK that's a reasonable thing to do especially if you still have student loans you're trying to pay down. Ultimately I would like to eventually rent out the first home I buy. I'm not sure if that will be in 1 5 10 or 20 years. So really I'm looking to kill two birds with one stone I'm looking to live in a modest two bedroom home in the city one that will rent easily when I decide to move. And I feel like this would give me flexibility in case I want to graduate to a bigger home or even if I had to move on to a different position.

 

[00:22:50] Question 1 Do you think this is a mistake If I don't stand at home for four or five years? yeah I think it probably is. And the reason why is that very few people buy a home They're going to live in using investment property criteria. When you choose an investment property. It's all about the numbers. It's about what you're going to collect and rent what your expenses are going to be what the capitalization rate of the property is going to be what you think it's prospects for appreciation are going to be how easy it's going to be to rent and all that kind of stuff. And when you get into investment property investing what you want to be doing is be in a secure position yourself probably already own your own home and have a significant amount of equity in it and have good cash flow coming. I mean this is the kind of thing that you don't necessarily want to rush too early in your career in this first few years when you're paying off the student loans still. So I think it's probably a mistake to try to be getting into investment property quite so quickly out of residency. I mean this is the time when you should be solidifying your medical skills really live in like a resident and try to get back to broke. It's not really the time necessarily to be branching out into investment property.

 

[00:24:02] If I do get a second home do you think I would be able to get a second position mortgage loan? Well I really don't like that question.

 

[00:24:08] You know at a certain point you've got to go. Don't you want to put some money down put money down not only get you a better loan but it also allows you a little bit more security in case the price of the property falls and you have to get out of it and go somewhere else. But this concept of using multiple physician mortgage loans suggests to me that you're just kind of going to live on over leveraged Life. It is too much debt. Part of the issue is typically with the rental property you got to put down 25 or 30 or 33 percent in order to make sure that sucker is going to cash flow for you. If you only put down five or 10 percent like he typically would with a physician mortgage loan you're going to be feeding the beast your income is not going to cover all the expenses from that property and that's even if the rent is higher than the mortgage payment. Because remember with an investment property there are a lot more expenses than just the mortgage payment. So could you get a physician mortgage loan for the second house. I think you probably could. Particularly if you're still relatively early in your career. But I don't know that I would, when you're going to the point where you're buying your second home. I mean come on. Save up a down payment it's not that hard.

 

[00:25:16] Next question will my debt to income ratio be a significant factor in buying a second home assuming I'm pulling in a matching rent. Yeah they'll always look at your debt to income ratio. But you know that rent counts as part of your income So that will likely help that ratio. Then the doc says a decent home the city will cost at least 400000. I anticipate spending somewhere between 300 and 600000. Well Doc makes four hundred thousand dollars a year. I think those are very reasonably priced houses for this doc. My general recommendation is you keep your mortgage to less than two times your gross income. So this doctor's case that would be a 8 hundred thousand dollars for a mortgage which might be you know with a 20 percent down payment it might be closer to a million dollar home. So I don't think there's docs going to have a problem with the 400000 dollar home.

 

[00:26:00] All right. Here's another question I got. You say put 20 percent in retirement. Do you have a recommendation to put into a savings account every month also. I'm talking about something beyond an emergency fund. Well when I put money into savings I put it after a certain purpose. It might be retirement and if I don't have anywhere else to put it that's where it goes. It might be for my kids college savings. It might also be what we call our short term savings. This is actually divided into two categories for us. One is for travel and vacations and the other one is for major purposes major purchases like buying a boat buying a car doing a home improvement project that sort of thing. But it's really more part of our budgeting process than it is savings. This is money we honestly expect to spend this year. We're not going to spend it this month.

 

[00:26:50] And so if that fun starts getting too high and we're not using it we will quit putting money in there. But basically it's what allows us to buy a car for cash when the next car purchase comes up. And so I wouldn't necessarily say there is a certain amount you need to put in there. There's not some recommendation I have. It's part of your budget. You know if you're going to buy a new car every five years and you expect that car to cost fifty thousand dollars while you've got to get ten thousand dollars a year into that account in order to pay for That car with cash. And so that's about how much to be beyond that savings account but that's not necessarily a percentage of your income it's based on how much you want to spend out of that account. So I hope that helps. I don't necessarily have the percentage. And when people are asking about percentages usually they're spending too much money, if they're OK if I can barely get in you know 8 percent for this and 4 percent for that and 10 percent for this. Well they're probably really scraping the barrel on just exactly what they're living on there probably live in a little too high on the hog. I mean you're a physician you're making 200 300 400 thousand dollars. If there's not a little bit of extra room in that budget you probably spent too much on a house you probably are dragging out your student loans too long you've probably bought too many cars Credit that sort of thing. Most physicians have their finances really lined up ask themselves at the end of the month. OK we've got an extra thousand or 2000 what are we going to put this toward? rather than trying to come up with the bare minimum that they can save for the various purposes.

 

[00:28:18] So I hope those questions were helpful to you and I'm sure a lot of you have struggled with the same questions I've definitely seen versions of them before in the comments on the blog or by e-mail.

 

[00:28:28] This episode was sponsored by Adam Grossman of Mayport Wealth Management. Adam is a Boston based adviser and worked with positions across the country. Unlike most other advisers Adam offers straightforward flat fees for both standalone financial planning and investment management. Whatever stage you're at in your career Adam can help you get organized with the personalized financial plan and can help you implement it with a low cost index fund portfolio. Adam is a CFA chartered financial analyst and received his MBA from MIT. But more importantly you'll benefit from Adam's own personal experience with many of the same financial obstacles and opportunities that face physicians. To learn more visit Adam's website Mayport dot com slash Whitecoat that's Mayport dot com slash white coat to download a free eBook especially for physicians.

 

[00:29:13] Thanks for what you do. Your daily work matters and spreading this message of financial literacy to your peers makes for happier doctors and better cared for patients. Please help us spread it more by telling your colleagues about this podcast. I'll see you next time.