I decided to make a Frequently Asked Question (FAQ) page for the site. Hopefully this not only reduces the size of my email box, but also enables readers to get a rapid financial education. In fact, you can even use this page as a test of your own financial literacy. Read through the FAQs and count up how many answers you didn't know prior to reading the FAQ.
- 0: You're brilliant and should sign-up to moderate the forum!
- 1-5: Congratulations! You've been paying attention.
- 6-10: Not bad, but you have some work to do.
- 11-15: You need to spend a lot more time on the site.
- >15: Holy cow! You should send me a check for all the money I just saved you!
#1 Blog Questions
How do I sign up?
How can I get the books?
The easiest place to buy The White Coat Investor: A Doctor's Guide to Personal Finance and Investing and The White Coat Investor's Financial Boot Camp: A 12-Step High-Yield Guide to Bring Your Finances Up to Speed is on Amazon. They are both available as a print book (usually ~ $24), an e-book ($9.99), and an audiobook via Audible ($14.95). The books are also available on Barnes and Noble and iBooks. Bulk orders of the print books are also available. If you purchase 25 or more copies, we charge $15.99 each including tax and shipping. Contact [email protected] to do a bulk order. A bulk order generally takes 12-14 days to arrive as it is printed on demand, although for an additional charge it can be rushed in about a week. If you need it faster, you'll need to order directly from Amazon.
Who writes this blog?
Most of the posts on this blog are written by Jim Dahle, a practicing emergency physician. You can learn more about him and his passion to help high-income professionals get a fair shake on Wall Street here. Once a week we run a guest post. Be sure to read the guest post policy before submitting one.
Why are there so many ads?
The White Coat Investor, LLC has a three-prong mission:
- Help those who wear the white coat get a fair shake on Wall Street
- Fuel my entrepreneurial spirit (i.e. make money)
- Connect high-income professionals in need of financial advice and services with the “good guys” in the industry
The ads help fulfill the 2nd and 3rd mission. Learn more about our financial conflicts of interest.
How can I apply for or support The White Coat Investor Scholarship?
The White Coat Investor Scholarship contest ran for the first time in 2015 and is now a highly anticipated annual event giving away more than $90,000 in cash and prizes. We generally start accepting applications (a 1000 word essay) between June 1st and August 31st. You can support the scholarship by donating money, buying sponsorships, and/or volunteering to judge the essays.
How can I advertise on the site?
We have numerous opportunities available to advertise the good guys in the financial services industry. That said, we make plenty of money around here and are not desperate for advertising dollars. All advertisers must be a firm we would be comfortable referring readers to. Contact [email protected] for more information.
#2 Personal Finance Questions
How much do I need to save?
A typical doctor can ensure a comfortable retirement after a 25-30 year career by saving 20% of her gross income for retirement. Saving for other goals (house down payment, new car, college, paying off student loans etc) is all in addition to that. If you are not saving that much, try to increase how much you save by 1% each year and as you accomplish your other financial goals, redirect that income toward retirement savings.
Further Reading:
Safe Savings Rate
6 Reasons to Have a High Early Savings Rate
7 Ways to Increase Your Savings Rate
How do doctors get wealthy?
The most significant wealth-building factor for most physicians and other high-income professionals is their earned income. If you carve out a significant portion of your earned income and invest it in some reasonable manner, you are highly likely to become wealthy over a two to three-decade period.
Further Reading:
How to Become Wealthy on a High Income
Financial Advice for Low-Income Doctors
The Wealthy Pediatrician
How can I get rich faster than 2-3 decades?
Unfortunately, the “get rich slowly” method of working hard, earning a lot of money, carving out a big chunk of it to invest, and investing it in some reasonable way cannot be rushed. (Although in extreme examples where you save more than 50% of your gross income you can shorten the period to financial independence to less than 10 years.) If you wish to become wealthy faster than that it will require you to take on significant risk, such entrepreneurial risk and leverage risk. Done poorly, these methods may be just as likely to make you poor as rich. Done well, you may be able to punch out of a job you hate in less time than it takes to finish medical school.
Recommended Reading
The Savings Rate
An Appropriate Amount of Investing Risk
6 Ways to Increase Your Risk Tolerance
How to Get Rich
How to Retire Early
Why You're Going to Be Rich
Why are doctors so bad with money?
People who go into medicine and other healing professions are generally less interested in finances and building wealth than similarly ambitious and intelligent people in other fields. Their educational institutions promote a taboo against talking about money and provide no education in business, personal finance, or investing all while charging incredibly high amounts of tuition. This normalizes the experience of carrying large amounts of debt, which results in doctors starting out their financial lives not only a decade, but also hundreds of thousands of dollars behind their college roommates.
Doctors also tend to be trusting of other professionals, mistakenly assuming that all professions share the same code of ethics. The financial services industry takes advantage of this trust to charge high fees and sell doctors products they do not need. Due to their high income, doctors are deliberately targeted by financial advisors, insurance agents, mortgage lenders, realtors, and attorneys. Many doctors also assume that because they know a lot about medicine that they also know a lot about the financial world, which is unfortunately rarely true. Ignorance and overconfidence are a dangerous combination and even a high income cannot overcome them.
Further Reading
What Do Advisors Think of Doctors?
Average Medical School Debt
Fire Your Financial Advisor! A Step By Step Guide to Creating Your Own Financial Plan
How to Find a Good Financial Advisor at a Fair Price
How to Be a Do It Yourself Investor
WCI Recommended Financial Advisors
What are the four most important words on this website?
LIVE LIKE A RESIDENT!
A doctor willing to continue to live a lifestyle very similar to what she lived as a resident, for just 2-5 years after residency, will be able to pay off all of her student loans, save up a down payment on her dream home, and catch up to her college roommate's retirement savings accounts. The financial jump-start created by living like a resident while earning as an attending is likely to result in a doctor becoming a millionaire less than a decade out of training using nothing besides her earned income.
Recommended Reading
What Does Live Like a Resident Really Mean?
How To Live Like a Resident As a Resident
What To Do If You Forgot To Live Like a Resident
Should financial considerations affect my specialty choice?
The most important consideration when choosing a specialty is what you will be happy doing for many hours a week for many years. Longevity in your career choice is likely to have a larger effect on your finances than anything else and it seems silly to spend so much of your life doing something you do not enjoy. That said, realize that you will likely care much more about your income and lifestyle ten years out of residency than you did as an MS3. If there are two specialties you like equally, pick the one with the better income and/or lifestyle.
Recommended Reading
The Wealthy Pediatrician
Quantifying the “Pediatrics Opportunity Cost”
How to Double Your Income as a Primary Care Physician
The Financial Advantages of Emergency Physicians
#3 Student Loan Management Questions
Should I refinance my student loans?
If you are an attending (or a resident with contract in hand) and you will not be directly employed by a 501(c)3 (and thus eligible for Public Service Loan Forgiveness) you should almost surely refinance your loans. The White Coat Investor has negotiated a special deal for you with these companies.
Variable 4.54% - 11.72% APR
Fixed 3.95% - 9.19% APR
† Bonus includes cash rebates and value of free course. Borrowers who refinance more than $60,000 in student loans using the WCI links will be enrolled in The White Coat Investor’s flagship course, Fire Your Financial Advisor for free ($799 value). Borrowers will still receive the amazing cash rebates that WCI has negotiated with each lender. Offer valid for loan applications submitted from May 1, 2021 through June 30, 2023. Free course must be claimed within 90 days of loan disbursement. To claim free course enrollment, visit https://www.whitecoatinvestor.com/RefiBonus.
What refinancing terms should I take?
If you are fully committed to living like a resident for 2-5 years until your student loans are paid off (i.e. throwing a high four to five figure amount at them each month), then I recommend you use a 5 year variable interest rate loan in order to get the lowest possible interest rate. In that scenario, you can afford to “self-insure” against interest rate risk. If you are not committed to this course, then you may wish to pay the bank to run that interest rate risk for you by using a fixed loan for a longer term. Be aware that almost every doctor I've ever run into has been glad she paid off her loans ASAP, and the very few who were glad they stretched them out had fixed rates under 2%.
How should I manage my student loans in residency?
Student loan management as an attending is very straightforward (refinance unless going for PSLF). As a resident, it can be far more complicated. In fact, this is one of the most complicated financial decisions a doctor ever faces and a great time to consider professional advice.
For most residents, enrolling in REPAYE even before graduating from medical school is the best choice because REPAYE effectively subsidizes your interest rate and all of those payments count toward the 120 required payments for PSLF.
However, if you are married to another high earner, you may wish to file your taxes Married Filing Separately and enroll in PAYE instead of REPAYE. If you are going for PSLF, you may also wish to switch from REPAYE to PAYE at the time of residency graduation in order to maximize the amount forgiven.
Finally, private loans (i.e. those not eligible for REPAYE or PSLF) can be refinanced even as a resident while still keeping payments low. Deferment of student loans during residency is usually a mistake.
Recommended Reading:
Ultimate Guide To Student Loan Debt Management
What Should I Do With My Student Loans?
How To Enroll in RePaye Early
Who Should Go For PSLF as an Attending Physician
Why You Should Not Give Up on PSLF
What do I need to do in order to qualify for PSLF?
Public Service Loan Forgiveness requires you to make 120 qualifying monthly payments while directly employed by a 501(c)3 (non-profit). Qualifying payment programs include ICR, IBR, PAYE, REPAYE, and the “standard” 10 year payment plan. You also need to have your employer certify you each year (can be done retroactively, but I recommend you do it as you go along.) The best way to maximize the amount forgiven is to enroll as quickly as possible in either PAYE or REPAYE, minimize your taxable income during your training years, and do as many residencies or fellowships as possible. The amount forgiven is generally the difference between sum total of the “standard” 10 year plan payments and the sum total of your actual 120 payments, many of which will be tiny due to the income drive repayment program provisions.
How long should I take to pay off my student loans?
How long do you want to be in debt for? I generally recommend that physicians have their student loans paid off within 2-5 years of residency graduation. If you live like a resident while earning like an attending, you can do that. Think of it this way- if you had gone into the military your medical school would be paid for within 4 years of residency graduation. So if you still have student loans four years after residency, maybe you made the wrong decision about how to pay for school.
#4 Insurance Questions
Should I Buy Disability Insurance?
Almost surely. If you rely on your own earned income to live, you need disability insurance. You can cancel it when you are financially independent.
Do I need life insurance?
If someone else besides you depends on your earned income, then you need life insurance. Here's how to buy it.
Should I buy term or whole life insurance?
Term. Everything you need to know about whole life insurance can be found here. There are a few niche reasons to buy it, but neither being a doctor nor a high earner is one of them.
Who should I buy insurance from?
Life and disability insurance is best purchased from an independent insurance agent who can sell you the best policy for you no matter which insurance company it may be from. Here is the list of insurance agents vetted by The White Coat Investor community. Literally thousands of readers before you have used these agents and had excellent experiences. Don't gamble on someone in your local area when this can be easily accomplished by phone and email.
Should I dump my whole life insurance?
Unfortunately, because the crummy returns of whole life insurance are heavily front-loaded, the decision of whether or not to keep a policy is a much different than decision than whether you should have bought it in the first place. First evaluate the policy either on your own or with professional help, then if it doesn't make sense to keep, dump it in the most tax-efficient manner possible.
What do I need to know about disability insurance?
Life insurance is pretty straightforward because life is fairly black and white–you're either alive or dead. Disability, however, is more like fifty shades of gray. So disability insurance policies are far more complicated than life insurance policies. You'll need to spend a little bit of time learning about disability insurance once or twice in your life.
Recommended:
What You Need to Know About Disability Insurance
WCI Recommended Disability Insurance Agents
#5 Investing Questions
What are the best accounts to invest in?
The best accounts to invest in are generally those with the lowest fees and taxes as those are an investor's greatest enemies. A typical doctor may have access to some or all of the following tax-protected accounts:
- Retirement
- 401(k), 403(b), 457(b), 401(a), Profit-sharing plan, Defined Benefit/Cash Balance Plan,
- Individual 401(k), SEP-IRA, SIMPLE-IRA, traditional IRA
- Roth 401(k), Roth 403(b), Roth 457(b), Roth IRA
- Taxable (i.e. non-qualified) account
- Education
- 529
- Coverdell Education Savings Account
- Taxable account
- Healthcare
- Health Savings Account
- Taxable account
- General Investing
- Taxable investing account
An employee ought to become an expert in the accounts his employer offers. The self-employed physician will generally want to use an individual 401(k). Most doctors will want to use a Backdoor Roth IRA. Those who are using a High Deductible Health Plan should take advantage of a Health Savings Account, a triple tax-free Stealth IRA. 529s are generally superior to an ESA due to their higher contribution limits and potential state tax breaks. If you have maxed out your available accounts and wish to invest more, you can invest an unlimited amount in a taxable account, which despite its name generally offers superior risk/return characteristics to many financial products such as cash value life insurance and annuities.
Recommended Reading:
Comparing 14 Types of Retirement Accounts
Best Retirement Accounts for Independent Contractors
What order should I fund my investing accounts in?
While it is difficult to dictate an exact order that will be appropriate for everyone, there are some general guidelines that most agree on.
- Obtain any available employer match. Missing out on this is leaving part of your salary on the table.
- Eliminate high-interest rate (8%+) debt. This risk-free “investment” provides a guaranteed return that you will need to take significant risk to beat.
- Fund a Health Savings Account (HSA) if a High Deductible Health Plan is right for you.
- Fund all available retirement accounts. This includes 401(k)s, 403(b)s, Individual 401(k)s, profit-sharing plans, SEP-IRAs, SIMPLE IRAs, Backdoor Roth IRAs etc. Remember you may be able to have multiple 401(k)s. Fund the tax-free (Roth) ones first unless you are in your peak earnings years and don't expect to be able to max out both tax-deferred and tax-free accounts for the year.
- Consider 457b and other deferred compensation plans, if available.
- Consider a defined benefit/cash balance plan.
- Pay off moderate interest rate debt (4-8%).
- Invest in a taxable account in high expected return investments.
- Pay off low interest rate debt (<4%).
- Invest in a taxable account in low expected return investments.
What is the best way to invest?
Invest like they vote in Chicago- early and often. Any reasonable investing plan is likely to reach your reasonable financial goals if it is adequately funded. Remember when investing that you are not competing against other investors or against benchmarks such as the S&P 500. You are competing against your goals and reaching them while taking the least possible amount of risk should be your goal. That said, unless you are willing to save more than 50% of your gross income, you will need to take on significant risk with your investments. That means most of your portfolio needs to be invested in riskier assets with a higher expected return such as stocks and real estate. You need your portfolio to not only keep up with inflation (historically about 3% a year) but to beat it. Reducing the tax drag on your investments is also important and can be best done by maximizing the use of tax-protected retirement accounts. Fees also cause a significant drag on your investment return, so minimize them whenever possible. The best place to begin investing is with broadly diversified, low-cost index funds inside of tax-protected accounts such as 401(k)s and Roth IRAs. Most physicians who do nothing more than max out their available retirement accounts and invest the assets in index funds will retire as multi-millionaires.
Am I ready to invest?
The sooner you start investing, the longer the period of time for compound interest to work, but make sure there isn't a better use for your money before investing. Some great uses for your money that you probably ought to consider before investing include paying off credit card debt, building an emergency fund large enough to keep you from going into debt due to typical financial emergencies, and getting the entire 401(k) match offered by your employer (not getting that is leaving part of your salary on the table.) Most investors do not wait until they are completely debt-free prior to investing, but if you have any debt other than a low-interest rate mortgage or low-interest rate student loans, realize that your best investment may be paying off your debt.
Can I have more than one 401(k)?
Yes. But be sure you know the rules before you use more than one 401(k). Very few people including those who work in HR and accountants actually understand them.
Can I still use a Roth IRA as a high-earner?
Yes, but you must do it through the backdoor.
What is the best way to invest in real estate?
Investing in real estate is not as simple as investing in publicly traded stocks, where the best solution is to buy them through a broadly-diversified, low-cost index fund. There are many good ways to invest in real estate and these range from publicly traded REITs such as the Vanguard REIT Index Fund (least hassle but highest correlation with the stock market) to owning and managing the property down the street yourself (most potential to add value and save on taxes but the greatest hassle.) There are other ways to invest in real estate that fall in between these options, including private real estate funds and crowdfunded/syndicated investments.
Should I invest in stocks or real estate?
Many investors mistakenly assume that one must choose between stocks and real estate. Since they both have high returns and relatively low correlation with each other, I recommend you do both. But whether you feel more comfortable with a larger percentage of your money in real estate or stocks is a personal decision. Stocks offer less hassle and greater diversification. Real estate offers more opportunities to add value and use leverage safely.
What about bonds?
A portion of almost every investor's portfolio should be dedicated to the far less volatile but lower returning asset class of bonds. A bond is a loan to a company or a government and has low correlation with both stocks and real estate. Benjamin Graham, the mentor of Warren Buffett, recommended an investor never have less than half of his portfolio in bonds. Use extreme caution disregarding that advice, especially before you've passed through your first bear market.
#6 Financial Advisor Questions
#7 Home Buying Questions
Should I buy a home during residency?
No. That doesn't mean you'll lose money if you do, but you probably will. It generally takes about 5 years for the appreciation on a home to make up for the heavy transaction costs, and since most residencies are 5 years or less, most residents lose money on a home.
Further Reading:
The Case Against Resident Homeowners
Should I Purchase My Residence During Residency?
10 Reasons Residents Shouldn't Buy a House
When should I buy a home after residency?
Buy a home when you are in a stable job and social situation. It generally takes 6-12 months to know if you like your job and your job likes you. Remember that 50% of doctors change jobs within 2 years of residency graduation. Almost all of them lose money on that home. Renting a home during your first year as an attending allows you to get your financial foundation built before making the largest purchase of your life. It also allows you to get a much better deal on that purchase.
Further Reading:
Recommended Physician Mortgage Lenders
Physician Mortgage Loans
10 Ways to Pay Off a Mortgage Quickly
How much can I spend on a home?
Do not borrow as much as the lender will lend you. Just because you can make the payments doesn't mean you should.
A good rule of thumb is to keep your mortgage amount to no more than 2 times your gross income. In very expensive areas of the country, you may have to stretch that a bit (perhaps to 3-4X but not 10X) but realize that comes with very real financial consequences including working longer, having less in retirement or for college, and having less to spend on lifestyle stuff like vacations, automobiles, and toys. It is a very rare physician who cannot dramatically improve her financial situation by moving inland from the West or East Coast. Another good rule of thumb is to keep your total housing costs (mortgage, taxes, insurance, utilities, maintenance etc) to less than 20% of your gross income. Since doctors need to save 20% of gross for retirement, and may pay 30% of gross in taxes, they cannot spend the 30-40% of gross on housing that a bank will lend them and expect to live “the good life.”
#8 Mortgage Questions
What is the least expensive way to buy a house?
Paying cash for a house is the least expensive way, by far. Not only do you not pay interest nor a large chunk of your closing costs, but you also may be able to get an even better deal on the purchase. That said, even a physician usually cannot do that with her first house. The next cheapest way to buy a house is to put 20% down on a 15 year mortgage and then pay that off over 5-10 years.
Should I use a physician mortgage loan?
A physician mortgage loan allows a doctor to buy a house without paying private mortgage insurance or putting down a standard 20% down payment. Although rates and fees are a little higher than a conventional mortgage, this can be a good option if you have a better use for your money such as maxing out retirement accounts or paying off student loans.
Where can I get a physician mortgage loan?
The most comprehensive list of physician mortgage lenders in the world can be found here under our recommendations page. These lenders do thousands of mortgages a year for WCI readers.
What do I need to know before refinancing a mortgage?
Getting a good deal on a refinance can be surprisingly complicated. Avoid these ten mistakes.
#9 Tax Questions
Should I do my own taxes?
There are three great reasons to do your own taxes. The first is you save money. The second is that it really doesn't take a lot more time to do it yourself since tax software can pull most of your information in from last year's return and download many of the accounts you would have to type in. But the most important is that doing your own taxes teaches you the tax code, at least the parts relevant to you, which causes you to make better tax decisions in the future. That said, any year your financial situation changes dramatically is a great year to have a high-quality tax accountant look things over to see what else you could do.
How can I pay less in taxes?
Lowering your tax burden is more a function of changing how you live your financial life than preparing your taxes properly. The IRS smiles upon some activities (like marrying a stay at home parent, having children, getting a mortgage, giving to charity, earning a little bit of money, and saving for retirement) while frowning upon other activities (like marrying a high earner, investing in hard money loans in a taxable account, earning a lot of money, and buying expensive toys.) The largest tax break available to most attending physicians in their peak earnings years is maxing out their available tax-deferred retirement accounts.
What is the best tax deduction?
The best tax deduction is a business expense that you would have purchased with or without the deduction. Business expenses don't even show up on the total income line of your taxes. The next best deductions are above the line deductions such as self-employed health insurance, HSA contributions, and self-employed retirement account contributions. The “line” is Line 38 on Form 1040, or the bottom of the first page. You can still take the standard deduction in addition to these and they aren't phased out as you income climbs. Finally, below the line deductions such as state income taxes, charitable contributions, health care expenses, mortgage interest, and property taxes are the worst types of deductions. Not only must you spend more than you get back as a deduction, but you don't get the full value of the deductions due to the standard deduction on the low end of the income range and the Pease phaseouts on the upper end.
Which is better, a credit or a deduction?
A credit is better than a deduction because it reduces your tax bill dollar for dollar. If you get a $200 credit, you pay $200 less in taxes. A deduction, however, only reduces the amount of money you pay taxes on. So a $200 deduction may only reduce your taxes by $67 if you have a marginal tax rate of 33%.
How does the amount of tax I owe relate to my withholding?
Employers are required to pull a certain amount of money out of your paycheck each pay period and send it to the IRS. If you are self-employed, you required to send in a “quarterly estimated tax payment” on April 15th, June 15th, September 15th, and January 15th each year which does the same thing. However, the amount of money withheld by your employer or sent in as your tax payment is not necessarily related to the tax you actually owe. Every April 15th, these two amounts are reconciled. While a “big tax refund” is nice, it means you have really been loaning money to Uncle Sam interest free all year. While nobody likes an April tax bill, savvy tax planners ensure they pay the IRS as little as possible until as late as possible without paying any penalties or interest. That does require a reasonable ability to forecast your tax bill along with discipline not to spend it on something else. Be sure you understand the Safe Harbor rules to ensure you don't owe any penalties or interest come April.
Why do tax-deferred retirement accounts make sense?
Many people worry they will pay more in tax by deferring taxes for decades in a retirement account. These worry is misguided for the vast majority of physician investors. The real question is not whether you will pay a larger dollar amount in tax now or later, but which approach will leave you with more money after-tax. Contributions to your retirement account are made at your marginal tax rate, so you may save 40% or more upfront. When you withdraw money from your retirement account, assuming no other taxable income in retirement, you get to “fill the brackets” from the bottom up. For a married couple taking the standard deduction, the first $20K out of your retirement account comes out at 0%. The next $18K comes out at 10%. The next $50K comes out at 15%. The next $75K comes out at 25%. So you may be saving 40% when you put money in, and only paying an average of 15% when you pull the money out. That's a winning combination.
What is the difference between marginal and effective tax rate?
Your marginal tax rate is the rate at which you will pay tax on the last dollar you earn. It is often as high as 30-50% for a physician. Your effective tax rate is the total you pay in taxes divided by your total income. A typical physician may have an effective rate as low as 15% but rarely has a rate higher than 40%. The difference between these two tax rates illustrates an important concept in the tax code. Although the code is progressive (meaning the more you make the higher your tax rate), even high earners only have low tax rates applied to the first few dollars they make. When you get “bumped into the next bracket” you only pay at the higher rate on the money you made above that bracket's lower threshold.
Should I use a tax-deferred or Roth 401(k)?
This question can be very complicated and there are a lot of factors that go into it. However, a good general rule of thumb is to use the Roth option in any year when your income is significantly lower than your peak earnings years (think residency, fellowship, working part-time, sabbatical etc) and use a tax-deferred account preferentially during the peak earnings years.
#10 Asset Protection Questions
What is the best way to protect my assets against lawsuits?
Your first line of defense when it comes to asset protection is liability insurance. For a typical doctor that means both professional malpractice insurance and a personal liability (umbrella) policy, both with limits of at least $1 Million. You want the insurance company to be on the hook for enough money that they will produce a robust defense.
How likely is it for me to be sued above my policy limits?
Doctors win the vast majority of lawsuits against them. Of those they lose, the vast majority are settled. Even if the doctor goes to court and loses, the award amount is still usually well below policy limits. Approximately 1/10,000 doctors per year are successfully sued above policy limits. Even in these cases, the majority are reduced to policy limits on appeal. As a general rule, it is very rare for a doctor to lose personal assets in a professional lawsuit. Keep that in mind as you weigh how much time and effort you wish to spend on asset protection plans designed against that remote possibility.
Recommended Reading:
Which assets are protected from lawsuits?
Asset protection law is state-specific. It is important that you understand the asset protection laws in your state. You can look up your state laws here and here. As a general rule, retirement plans are almost always protected (with 401(k)s occasionally getting better protection than IRAs), life insurance cash value is usually protected, and annuities might be protected. Your home equity may be completely protected, or may receive little protection at all. You may wish to make different financial decisions in your life depending on your state laws. For example, if you are in a state where your home equity is well-protected, you may wish to pay off your mortgage sooner than you otherwise would. If your home equity is not well-protected, you may wish to max out your retirement accounts instead.
How should I title my home?
If you are married, and your state allows it, you should title your home as “tenants by the entirety.” What this means is that you own your entire house and your spouse owns your entire house. So if a lawsuit is just against you (like most malpractice lawsuits), and a judgement above policy limits is rendered, the creditor cannot take your house because your spouse owns the whole thing.
What about LLCs, trusts, and family limited partnership?
An entity such as trust, limited liability company, or limited partnership cannot be formed just for asset protection. It must have a valid business or estate planning purpose. The “C” in LLC stands for company. The purpose of the company cannot be just to protect your assets from creditors. It must actually be a viable business. As a general rule, putting toxic assets such as an individual rental property into its own LLC is a good idea. That way if the LLC is sued, the most you can lose is the value of what is in the LLC. In some states, creditors may be limited to a “charging order” against an LLC, which allows you to hold income in the LLC while forcing the creditor to pay the taxes on that income without ever receiving it!
Can I just give my money or assets away if I'm sued?
No. That is a fraudulent transfer and will be reversed by the court. They may even look back a year prior to the lawsuit being filed. Asset protection plans must be in place prior to being sued. On a related note, putting everything in your spouse's name may not be a great idea either. You are far more likely to lose assets to your spouse than you are to your patient.
Can a trust protect my assets?
The type of trust that protects your assets is an irrevocable trust. An irrevocable trust does not allow you to pull money back out of a trust to use on whatever you want. You have essentially already given it away. Because you gave it away, it isn't yours, and your creditors can't take it from you. On the other hand, you can pull assets out of a revocable trust any time you like, and the court will expect you to do so if you are successfully sued for more than your policy limits and the award is not reduced on appeal.
#11 Estate Planning Questions
What is the purpose of estate planning?
The purpose of estate planning is three-fold:
- Make sure your minor children and your assets go where you want when you die
- Avoid the expensive, time-consuming public process of probate
- Minimize or eliminate estate and/or inheritance taxes
What is a revocable trust good for?
You can avoid assets going through probate in two ways. The first is to designate a beneficiary for the account. This works well for retirement accounts, insurance policies, and many other types of accounts. That money is available to the beneficiary without them having to do anything more than provide your death certificate. The second method is to use a trust. Anything inside a trust is distributed in private according to the rules of the trust, rather than through the public process of probate. While a trust is more expensive than a will, the total cost of using a trust to pass on assets is often much less once you consider the costs of probate.
Recommended Reading:
Do I need a will?
If you have any significant assets and you want them to go to a particular person, you need a will. You especially need a will if you have minor children. If your will is a simple “I love you will” that leave everything to your spouse with your children as secondary beneficiaries, you can probably use an online legal service to produce your will. As your situation becomes more complex, the value of a good estate planning attorney can be significant.
Should I buy whole life insurance for estate planning purposes?
Probably not. This is a sales technique used by whole life salesmen to vaguely refer to some estate planning benefits of whole life insurance. While a whole life policy placed inside an irrevocable trust can help reduce the size of your estate (and associated estate taxes) and life insurance proceeds can help provide liquidity in the event you need some time to liquidate a farm or valuable business, the truth is that the vast majority of doctors will not owe estate taxes nor have a significant liquidity need at death. Current federal estate tax exemption limits are $11.4M ($22.8M married) and that figure is indexed to inflation. Most doctors simply don't make enough or save enough to have an estate tax problem. Most states don't have an estate tax, but a few not only have a tax, but have a much lower exemption limit than the federal limit. These include CT, DC, RI, NJ, IL, MN, MA, MN, NY, OR, VT, or WA.
#12 Business Structure Questions
Now that I moonlight, should I incorporate?
Many physicians are under the misunderstanding that they can reduce their liability and lower their taxes by incorporating. What they do not understand is that malpractice liability is always personal, and incorporating doesn't protect against it. In addition, there are very few business deductions that a corporation can take that a sole proprietor cannot. It doesn't take anything to be a sole proprietor other than receiving earned income on a 1099 form. A sole proprietor can even open an individual 401(k), although he will need to spend 2 minutes obtaining a free Employer Identification Number (EIN) from the IRS before doing so.
How is an LLC taxed?
A limited liability company (LLC) can choose to be taxed as a partnership (sole proprietorship if only one partner) or a corporation. The benefit of choosing to be taxed as a sole proprietor is you do not have to complete a partnership or a corporation return. The benefit of being taxed as a corporation is you can subsequently choose to be taxed as an S corporation and potentially save a few thousand in Medicare tax.
What do you think? What FAQs should I include on this list? Comment below!
What is the best way to finance second home in retirement?
Mortgage 15yr
Borrow from your regular rollover IRA
Use whole life policy amt
Pay cash with possibility property may depreciate
Thanks
Jim
Financing a second home in retirement sounds like a terrible idea to me. So yes, use your resources- cash, liquidating investments, borrowing against a whole life policy etc. You can’t borrow from IRAs, only 401(k)s.
I totally agree that whole life and it’s variations typically don’t make financial sense. Is anyone familiar with the Custom Whole Life product, particularly as offered by New York Life? It’s a term/whole life blend. The cost of the permanent insurance is largely reduced by the use of term while the Whole Life portion allows for overfunding. The death benefit is kept relatively low so the cost of the insurance is less. The goal is cash accumulation. Commissions and fees are considerably lower and by overfunding early you take care of those fees and get to a net positive return much earlier than with a traditional whole life plan. The policies are designed to be paid for a specific period of time such as 20 years. Dividends are averaging 3-4% per year tax free
I would consider this type of “investment “ kinda like an bond fund that couldn’t go down but whose returns were a bit lower due to higher fees to offset that guarantee.
I know that money invested on my own would generate a better return. My thoughts are that one doesn’talways know if they’ll have a need for permanent insurance until they’re too old to get it (affordably). An example could be asset protection, divorce, bankruptcy, a desire to be able to leave money to a disabled grandchild, legacy giving, or even to use as a bridge with loans if there is a major market downtown right at the time of retirement and so that you don’t have to sell equities when they’re down and thus have a cushion to let them recover, relying a bit on a loan from the guaranteed cash value.
I want to add that this policy for say $500,000 of permanent death benefit would supplement my current laddered 20 year term policies which I purchased after the birth of each of my children.
Also, I invest primarily in Vanguard ETFs and index funds, I contribute fully to all of my other buckets including back door Roth, 401k/ PSP, solo 401k for my side hustle consulting income, cash balance plan, triple tax advantaged HSA, fully funded 529 accounts, no debt except a 4% mortgage, have a healthy emergency fund and all of the other stuff WCI recommends.
Another thought as to one’s potentially unforeseen need for some permanent insurance, I can think of a scenario where a doc gets disabled and, despite maxing out disability coverage which is payable to 65, is less likely to have accumulated a large enoug nest egg to support his spouse after he dies and his term policies have expired. A hybrid custom whole/term life policy seems to help address such a scenario as well as give other options for ways to utilize either the cash value or death benefit later depending on how circumstances develop.
So, when used in this way, is such a policy is a bad idea? I keep wanting to dismiss the merits of this strategy and wonder if I am missing something.
Am I missing something?
Are there ways to make whole life insurance policies better and worse? Yes. For example, if you want to use it as an investment, you will break even sooner and have higher overall returns by lowering commissions. A great way to do that is with paid-up additions.
If you need term insurance and want permanent insurance, blending the two may provide an advantage over buying the two separately, but run the numbers. Chances are good the term insurance offered by the company you want to buy permanent insurance from isn’t as cheap as you could get elsewhere.
Certainly blending stuff makes it more complex to evaluate and thus more likely for you to be taken advantage of.
I don’t find permanent life insurance to be an attractive alternative to bonds for various reasons discussed here:
https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance-part-2/
If you really understand how your whole life policy works and still want it, go for it. But don’t come back to me in 2 or 3 years and say, “I didn’t really know what I was buying and now that I understand it I don’t want it. How do I get out of this?” like so many of your colleagues. Personally, I’ve found that very few really want it once they really get how it works. So if you really think it’s right for you, get a second opinion from another agent and then a third opinion from an advisor who doesn’t sell the policies. Like marriage, this isn’t something you should do lightly because either you’re stuck with it for life or it is going to cost you a lot of money to get out.
Thanks for all that you do. You provide a great service.
Would you recommend holding crowdfunded or syndicated real estate holdings in an LLC, Roth or IRA, or in a regular taxable account?
Also, if real estate income ends up taxed in a higher bracket, let’s say 32% rather than 24% either due to IRA to Roth conversions or RMDs filling in the lower brackets, are these types of real estate investments as worthwhile relative to investing that money in equities and paying long term capital gains taxes assuming today’s average and typical returns.
For minimal hassle, I generally just hold it all in taxable. That said, debt investments in particular aren’t very tax efficient, so they would be good things to have in a retirement account. You can put equity investments in there too, but then you lose some tax benefits and introduce some complications. I think there are better things to put into limited tax protected space.
Of course they should also be in LLCs as they pretty much always are. You don’t need your own additional LLC of course.
I just responded to your Facebook posting but thought this might make for an interesting topic for your readers and listeners.
I saw this market correction as an opportunity to rebalance and tax loss harvest, offsetting those losses with my gains from my oldest lowest cost basis S&P index holdings from many years ago, then used those proceeds to purchase Total Stock Market Index ETF. I figure that I effectively raised my cost basis on sufficiently similar shares, avoided taxes on the gains today and will reduce taxes on (reduced) future gains on those new shares (or even be able to tax loss harvest then in the future if desired).
Does this strategy seem reasonable or am I just moving money around?
It’s fine, but I wouldn’t go to much effort to swap from 500 index to TSM. The correlation is what, 0.98 or 0.99?
Hi guys. Very new to this retirement/investing thing. The things I’ve read are conflicting and I was hoping to get some clarity. Newly out of residency with 8 k check from 403 b. I have both w2 (80% of my income) and 1099 job (20% of income). I’m trying to figure out what to do with the 8 k. My w2 401 k doesn’t kick in till next year, and I’m considering becoming full 1099 next year. Should I create a solo 401 k with a backdoor Roth IRA (I understand this gets me 55,000 plus another 5,500 to put away) or just a sep ira?
Why isn’t that 401(k) being either rolled into another one (i.e. your individual 401(k) for your 1099 income) or converted to a Roth IRA? I’d do the conversion. But don’t sit on that check. At day 60 you owe taxes and penalties on it.
No, don’t do a SEP unless you’re in a time crunch or something, but it’ll just create more work down the road. Just convert it. It’s $8K.
Thanks for the response. My accountant was recommending putting the money in a sep. I got the check about a week ago so I have time to act. I’ll just call the company and cancel the sep and make a Roth account. Thanks !
You need a new accountant if she’s recommending a SEP over a solo 401(k) for you. Or at least you need to educate this one. At which point you’ve got to wonder why you’re paying to teach your accountant.
You are right. Now that boards are done I will need to educate myself and find myself a proper cpa
Question:what are your suggestions for obtaining reasonable health Insurance after retirement but before eligibility for medicare? TY
How do you buy groceries or rent or vacations or auto insurance? You just buy it on the open market. Google “Health Insurance Broker [Your Town].” Call the guy/gal. Meet for 30 minutes. Buy policy.
You can also look into PPACA exchange plans if your income is low enough for a subsidy or even a Christian Health Sharing ministry (not insurance when you read the fine print, but works similarly. Be sure to read the fine print.)
Question regarding HSA: my fiance and I are both dentists working for the same DSO. The company contributes $50/month to our HSA accounts and there is an option to contribute up to an additional $2900 annually. In addition, we have enrolled in the base BCBS health insurance through the company. Furthermore, the HSA account does rollover and stay with you regardless of if we change jobs. My question is – should we maximize our contributions to the HSA account, even if we are both young and healthy (27 years old) without children? More importantly, if the answer to that is “yes,” how far can we really push the use of that HSA account? For example, can we use the account to purchase skin care products, shampoo/conditioner, surgical loupes?
http://www.hsacenter.com/what-is-an-hsa/qualified-medical-expenses/
According to this link, trips and telephone are included…this can’t be true, can it? Thanks for your help!
Yes. Your HSA is your best investing account because it is triple tax free. If you can’t invest in yours, then roll it over once a year to one where you can invest. Stop thinking about how to spend it and start thinking about how to invest it.
https://www.whitecoatinvestor.com/retirement-accounts/the-stealth-ira/
But no, I wouldn’t use it for lotions, shampoos, or work equipment.
I have recently been offered an Non-Qualified Deferred Compensation Plan (NQDCP) through my employer as a director level employee. It seems almost like a fund your own pension plan, but seems too good to be true. There is a part of the sign up that involves accepting or declining the permission for the company to take out a life insurance policy on me that they hold. It is optional, but makes me feel uneasy in understanding why. I have not found any comments or topics on NQDCP on the blog (which I love to read), and wondered if I missed it or if it was to niche’ a topic?
– Brian
I’m not a big fan of retirement plans based on life insurance policies which is what it sounds like this is. That said, if someone else is going to pay all the premiums, I’d certainly take it. If they ever stop or I leave the job, I’d just cash it out and walk away. If you have to pay part of the premium, well, you’ll need to run the numbers. If you’re paying all of the premium, I’d probably skip it because I don’t think mixing insurance and investing is a good idea.
The devil is in the details here. You need to get all the details.
They pay all the premiums but also are the holder/beneficiary of the policy. Seems awkward for someone to be holding a policy on some unrelated persons life. The policy is for between 1-2M depending on the person enrolling…
Is this typical on a non qualified plan? Does it somehow offset the cost of the plan to the company as the insurance policy builds in value it is growing tax deferred? (The policy would be on my life if I agree, but it is not required to participate). My spouse nor myself would have access to the policy as it would be wholey owned by the company and the benificiary would be the company as well. I would not pay anything for it, and would gain nothing from it.
Do you have a lost or thoughts on Non qualified Deferred compensation plans like this where you can put up to 100% of your current earnings into it pre tax and then elect to be paid out at retirement over 1-15 years… OR to be paid out 5-20 after contribution (but have to elect at time of putting funds in?
I’m sorry if I’m confusing a simple question.
Thank you.
So…..what do you get if you pay nothing and get nothing? There are some details missing here. How is this a retirement plan if you get nothing?
Then you start talking about putting up to 100% of your current earnings into it pre-tax and then elect to be paid out over 1-15 years. How is that putting nothing in and getting nothing out?
Devil is in the details. We need details to tell you anything about it because it doesn’t even sounds like you understand exactly what is going on with it. Got a link or a PDF or something?
Yes, I have seen plans like this. I think all of them are a great deal for the agent, they’re almost always a bad deal for the employer, and some of them are good and some bad for the employee.
So the plan is a Non-Qualified Deferred Compensation Plan.
We can put up to 80% of our annual income into the plan but must elect prior to the year start (so Dec 2018 for the Calendar year 2019).
Only the top 15% earners in the company are eligible.
The money would go in “Pre-tax” (less the Medicare and Social security taxes).
The distribution portion also has to be selected at the time of election (so Dec 2018 for the calendar year 2019).
The money would come out at the distribution and only be subject to State and Federal income tax that would apply at the time of distribution. (Hopefully while working part time or none-time, and at a lower bracket)
The distribution options are: (and must be selected at the time of election)
Fixed date in the future minimum of 5 years out and max of 25 years out
At separation (retire/leave the company/company is purchased by another company/etc)
Dispersal of the distribution is then selected *(at the time of election Dec 2018 for calendar year 2019)
Payout of amounts can be over 1 to 15 years
When you complete all of this you are given what i consider to be the most interesting and perplexing option… (it is optional, but they said in the discussion and Q& A session that it helps the company if we agree, but are not required to agree)
“I consent to allow my employer to purchase life insurance on me”. I’m paraphrasing, but it’s weird to have my company own a policy on my for 1.5 to 2 million dollars.
If we select “no”, that’s it.
If we select “yes”. It was made clear that we do not pay for the policy personally, and we do not hold the policy personally, and we are not the beneficiaries of the policy nor are our spouses/dependents.
I don’t understand if this is usual practice, and if so, is this a vehicle to allow the company to write off the growth of funds in such a way as to defer tax burden or am I way off base.
I understand this plan to be advantageous in the following ways:
– Taxes on income (state and federal) are likely at my peak during my peak years of working as a physician
– Taxes on income when i am retired would be at a lower bracket when i am debt free, FI, and working less or not working at all
Is this similar to the concept of a 401k, without the match and without the protection… and how common do plans like this go belly up (*Enron) in current times. I understand the biggest risk is if the company files bankruptcy, as then it would be subject the the creditors…
I understand this to be a relatively low and possibly tolerable risk, as it is my money not the company’s money in the account and as an employee i am also a creditor.
Just for a curveball… I am currently an employed physician… but if I were to change to be a contract physician (W2 vs 1099) would this change anything?
Perplexed, and hope this helps rather than muddies the water.
Sounds like there are acceptable distribution options. Obviously you don’t want to have to take any distributions while you are still working and even in retirement want to spread them out over at least a few years. This is the money you’ll want to spend first in retirement, just like a 457. The investing option isn’t going to be so hot, it’s a life insurance policy with the typically low returns.
I don’t know, I might put a small portion of my retirement savings into it. If I were saving $100K a year, maybe I’d put $20K in here. Maybe consider it part of my bond portion of my portfolio. Then choose a distribution option beginning when I think I would retire and maybe take the money out over 5 years. Something like that. You’d really have to look at your overall financial plan and see how this fits into it. I don’t think it’s an automatic no though, especially if the employer is eating most or all of the costs of the insurance. To be clear, I don’t think this is a good deal for your employer and they would have been better off giving a bigger 401(k) match or providing a more traditional defined benefit/cash balance plan. Also, make sure your needed life insurance is all in place first as I suppose having a policy on you already might affect how much you can get.
Becoming an independent contractor would have the same effect of going to work somewhere else. You would not longer be able to contribute but whatever distribution option you selected would still be in effect.
Long term care insurance. Heads-up comments????
thanks
Not sure what you’re asking for. Can you be more specific? These links may help:
https://www.whitecoatinvestor.com/long-term-care-insurance/
https://www.whitecoatinvestor.com/forums/topic/long-term-care-insurance/
https://www.whitecoatinvestor.com/long-term-care-insurance-podcast-66/
Question regarding Loan repayment/liquid savings/retirement planning. I am six months out of fellowship. I currently have $180,000 in student loan debt(anticipated to pay off in 5 years). I have recently refinanced due to your advice lowering my interest rates about 4%. I have a strict budget and am paying 3800 into my loans, 3000 into a high interest savings account monthly. I am currently maxing out my 401(k) and have plans to do a backdoor Roth IRA this year. I have three questions: 1. Am I able to execute a back door Roth IRA on my own through a website such as fidelity? 2. A family member recently reached out to me regarding a index universal life insurance policy. Their claim was that it would give me financial freedom to have pre taxed Dollars available in retirement. The current set up was for retirement age of 65 starting up at a payment of about 315 a month which gradually increases by about 2% per year until it reaches a max of around $700 with the end result being about $2.3 million available upon age 65 if I “max” this out, and 1.5 on the more conservative side.
Is the universal index something that is ever a good idea?
3. Should retirement planning be something that waits until I’m debt free? Would you do anything differently?
Just trying to put myself in the best position for my long term goals which is financial wealth and independence.
Thank you for all of your advice and the many hours of podcast listening 🙂
Why are you putting $3K a month into an account paying 2.4% before tax when you have a 4% loan that paying off pays you 4% aftertax?
1. Yes
2. Don’t buy it, especially while you have student loans. https://www.whitecoatinvestor.com/an-index-universal-life-insurance-illustration/
3. No, you can do both at the same time by living like a resident. https://www.whitecoatinvestor.com/pay-off-debt-or-invest/
Thank you for your response.
The heavy push for liquid savings was as a result of a conversation with my father.
-His advice was that as a young physician I should have enough in savings to float myself in the unfortunate incident of lost job security. I don’t foresee this being an issue, as my job situation is great, but I understand the logic.
-I can certainly back down a bit, and put more money into my loans.
1. Great.
2. Thank you for the read! I will absolutely forgo this.
3. Will do. My budget is set for me to continue living like a resident.
-Do you support the 15% of income towards retirement? If so, what avenues do you recommend other than 401K, Backdoor Roth to achieve this.
Again,
Thank you for your guidance!
3-6 months of expenses is reasonable. Beyond that, you probably are adding a drag on your returns.
In your book, “The White Coat Investor,” you listed ways in which one could decrease their taxes. One of those was to own a small business. As a wife of a doctor, I decided I would start a small business last year and see how it went when tax season came around. In talking with our accountant, she informed me that all my earnings would be taxed at the rate of mine and my husband’s earnings combined- pretty steep for a less than 10k earning business. One friend told me it would be most beneficial to us financially if my business didn’t earn very much, if any, money and I simply used it for deductions off our taxes. I’m having a hard time finding motivation to run a business with the goal to not earn money. Could you explain where the balance lies between having a small business that earns more and then we pay more taxes vs. earning very little but trying to be in the positive and getting greater deductions on taxes?
No, you shouldn’t start a business JUST to lower your taxes. Yes, if you make more money, your taxes are going to go up. But they’re not going to go up as much as your income. Perhaps your little business makes $50K and you end up paying $20K of that in taxes. You come out $30K ahead.
That comment in the book merely points out the fact that it is easier to deduct expenses from a business than from your personal life. Lots more deductions for an independent contractor than for a W-2 employee for example.
Thanks for your reply!
Question abt PLSF, that I haven’t been able to find anywhere. Husband is active duty, but moonlights occasionally for a for profit. How does this affect our ability to have the loan forgiven? We imagine we are 6-7 years in (waiting for myfed to officially tell us) but aren’t sure if moonlighting is costing us more by doing it. We generally make abt 15-20k a year moonlighting and have 160k in student loan debt.
Thanks!
I have a side gig, but unfortunately I am treated as an employee and enrolled in a second 401K. (That means I have to balance my maximum contribution between both plans.)
Based on the explanation below, can you explain how I can contribute UP TO $19,000, yet NOT EXCEED $56,000.
Thank you!
You can contribute up to $19,000 to your 401(k) plan account in 2019
The contribution limit for regular pre-tax contributions is $19,000 for 2019. Please keep this annual tax law limit in mind when you choose your contribution rate. (Your contributions are also subject to your plan’s contribution limit, if any.)
Total contributions to your 401(k) plan account, including pre-tax, after-tax and Roth 401(k) (if available in your plan) contributions, and any employer contributions, cannot exceed $56,000 in 2019.
In your situation you only get a total of $19K employee contribution plus whatever the employers will contribute. There’s a good chance you won’t be able to get to $56K in either of your plans much less both.
What are your thoughts on this site? https://www.betterment.com/how-it-works/
https://www.whitecoatinvestor.com/simple-investing-solutions-including-betterment/
Hi
For the discussions about doing the backdoor Roth, it seems the guidance has been to make the investment then immediately convert in order to avoid paying taxes on any earnings that might accrue between contribution and the conversion. My employer has a plan B retirement account option (in addition to a 403b plan) where I can contribute with post-tax dollars. I am told I can do the following: after maxing out the 403B, I can also contribute to the plan B. Any money in a plan B can be converted to a backdoor Roth. I can convert as much as I want at any given time. I can also convert just the post-tax dollars into the ROTH IRA and the earnings portion into a Traditional IRA. Is that accurate? It seems the immediate conversion reason is to maximize the tax free growth time frame since there is another way to “shelter” the earnings and avoid taxes on them at the time of conversion. Thanks for all you do on educating us!
Sounds like a Mega Backdoor Roth IRA.
https://www.whitecoatinvestor.com/new-mega-backdoor-roth-ira/
Yes, I’d convert immediately.
Hi there-
Thanks for all the awesome content. I was wondering if you happen to do a medical student discount for your “Fire your financial advisor” course?? I’m a veteran and using my GI bill to pay for school, so I have a few extra bucks I’d like to start investing. Thanks so much!
Dave
Hi, I’m a medical student who has been immensely enjoying all of your contents, including the books and your daily emails. I just saw that you are promoting the Continuing Financial Education 2020 course for $549. I was wondering if there are any complementary discounts or free access to your courses for medical students like me? Since we have all been pulled out of our clinical rotations due to coronavirus, it would be great to use this time to build my financial knowledge and I would love to use a more structured course like CFE 2020. Thanks!
Yes, the medical student price is $549. We just give that price to everyone because we don’t think it is fair to gouge attending physicians with higher prices.
If that’s too much, the 2018 course is about half that price, the books are about $25, and the blog and podcast are free.
Question on rebalancing in severe drawdown for retirees
Do SWR computations assume SOME rebalancing in the hole (either in time or as percentage back to policy)? This is not a question about frequency of rebalancing. It’s a question about doing no rebalancing all. Said differently, is 3% safe even with zero rebalancing? Or does the promised safety of 3% depend critically on staring oblivion in the face and fearlessly rebalancing even down 70%?
# 1 Don’t follow some blind 4% SWR plan to actually spend your money in retirement. Use a variable plan- spend more in good times and less in bad.
# 2 Yes, I believe the classic SWR studies did rebalance periodically. Once a year I think.
There is no promised safety unless you buy a SPIA, but 3% is a pretty conservative number.
Thanks so much for sharing your thoughts. Personally, I believe there is more safety in 3% than in any SPIA given insurance company counterparty risk.
It’s your money, do what you want.
Certainly nobody recommends you put a majority into SPIAs. The idea is to cover your mandatory expenses with guaranteed income–SS, pensions, SPIAs and use your portfolio for variable expenses.
But if you have enough money that you’ll be spending less than 3.5-4% anyway, you’re so unlikely to run out of money that it doesn’t matter much what you do, especially if you have the capacity to decrease spending in the event sequence of returns risk rears its ugly head.
Thank you for your blog. It is incredibly helpful and inspiring.
In a bear market, how do you decide for a certain fund whether to buy more of it versus TLH?
In this particular case, I’ve bought 7k of VSIAX over the past two months, but reconsidering whether I should be TLH for the 10k loss it’s incurred. I believe that if I sell the lots I’ve bought in the past 30 days as well as all the losing lots, it would not be a wash.
What are your thoughts?
Thank you.
Hey there!
My husband and I recently read your response and post regarding car buying. We are currently in my husband’s first year of residency and we are expecting our first child. We loved your advice on getting a “beater,” so to speak, and paying cash for it – my question is do you have any insight into the type of vehicle one should buy? For example, a 2006 Land Rover LR4 for $7k no work needed , 150k miles. However, knowing that high end cars cost more to fix/maintain, is it actually worth buying even if you can pay for it in cash?
I am currently a resident and will be starting my real job next year. I have been making some investments as well as contributing to my retirement accounts for sake of liquidity. Should I sell off all my personal investments and then repurchase this calendar year so I can pay lower to no capital gains on my realized interest before I jump to higher tax brackets? Thank you!
In a taxable account? Sure. That’s called Tax Gain Harvesting. No point to doing it in a retirement though. Also look into any possible Roth conversions this year and next.
Please consider a FAQ category for high wealth ($3-5M) & ultra high wealth (>$5M+) topics & recommendations.
I expect the vast majority of my readers to reach those levels of wealth eventually. Not sure a separate FAQ for that makes sense.
Newbie here!
Want to do take CME day from work – which course should I start with?
– the Financial wellness and burnout prevention OR the 2021 CFE course ?
Please advise 🙂
FYFA (or its CME providing version Financial Wellness and Burnout Prevention) is the starter course. The CFE course is for continuing education.