Every year we are sent a big stack of books that people want us to read and review on the blog or the podcast. This week at WCI is Continuing Financial Education week and we want to recommend a handful of books that we think would be useful to our readers and listeners. I have talked a lot about the importance of continuing education, and I recommend reading at least one book a year to further your financial knowledge. Hopefully one of these books will prove to be a great resource for you.
In This Show:
- Financial Freedom Rx — Chirag Shah and Jayanth Sridhar
- The Family Board Meeting — Jim Sheils
- The Hands‑Off Investor — Brian Burke
- Beating the New Death Tax — Jim Lange
- Retire Secure for Professors — Jim Lange
- Building an Elite Organization — Don Wenner
- Stay in Medicine: How Physicians Can Move Past Burnout and Regain Control — Janet Cruz MD and Lee M.J. Elias
- The EXITPreneur's Playbook — Joe Valley
- 2 Funds for Life: A Quest for Simple & Effective Investing Strategies — Chris Pederson
- Own Your Freedom: Sustainable Wealth for a Volatile World — David Phelps, DDS and Dan S. Kennedy
- Pharm.D. to M.D. — Nathan Gartland
- You What?!: Humorous Stories, Cautionary Tales, and Unexpected Insights About a Career in Medicine — John Chase, M.D.
- Your Encore: A Planning Guide – How to Balance Time, Money and Joy — Glenn Frank
- Your Total Wealth: The Heart and Soul of Financial Literacy — Lyle Sussman PhD and David A. Dubofsky PhD, CFA
- Post-Tax Investment in Regular IRA vs. Brokerage Account
- Vetting Professionals for Lectures
- Investment Losses and Offsetting Taxable Income
- Dr. Brian Foley of Wealthy Doc
Financial Freedom Rx — Chirag Shah and Jayanth Sridhar
Shah and Sridhar call it “The Physician’s Guide to Achieving Financial Independence.” They got Mel Lindauer of the Bogleheads to write the forward. It’s a very Boglehead-centric book but directed at physicians. It goes into lots of details about asset allocation and tax efficiency and building a portfolio and those sorts of things, but it also touches on lots of physician-specific financial planning topics. If you've enjoyed my books and want to read another book, it covers similar ground but from different points of view. This is a great option.
Financial Freedom Rx – The Physician's Guide to Achieving Financial Independence
The Family Board Meeting — Jim Sheils
Another book that I really enjoyed this year and one that I'm implementing with my kids is called The Family Board Meeting. This is a pretty sweet book, and it is a quick read. It is by Jim Sheils. The concept behind “The Family Board Meeting” is that your family is what's most important. A lot of us are busy entrepreneurs, busy doctors, and we tend to put our families on the backburner.
This is a way to connect with your kids. Basically, the idea is once a quarter, you have a board meeting with each kid. And by board meeting, I'm not talking about sitting down and having a boring meeting. I'm talking about going surfing, right? Something cool that you call a board meeting. The rules are, it has to be at least four hours. Nobody can have their phone on, or there can't be any electronics during the meeting. The kid gets to choose the activity. And there has to be a very short reflection period at the end. The author has seen dramatic changes in himself, as well as other people he's taught this concept to, and has really made a connection with his kids that he didn't have before.
The Hands‑Off Investor — Brian Burke
This is my favorite book of the year, and it is by Brian Burke. He's the CEO of Praxis Capital. A lot of these books tend to be advertisements for a given firm. This one's not. This one's really a step-by-step guide to passive investing.
Whether we're talking about syndications or funds, if you are interested in those, if you are like, “I don't know how to evaluate a syndication, I don't know which ones are good, which ones are bad. I don't know which sponsors to trust,” this is your book. It's great. It's got soup to nuts information about syndications, about funds, how to evaluate the sponsor, how to evaluate the deal, how to evaluate the investment structure, and more.
Beating the New Death Tax — Jim Lange
This one is all about The SECURE Act, how to get around it, etc. It talks about strategies to protect your family from recent changes. Lange's firm is really big on both estate planning, as well as tax reduction, retirement accounts, that sort of thing. And this book gets pretty in-depth into those sorts of subjects. If you're thinking about Roth conversions, it’s a great book to read about that, as well as how to deal with required minimum distributions and similar kinds of problems. I get a lot of flak from people saying you only talk to young docs. There's nothing in there for old docs thinking about retiring or already retired. Well, this is good for those kinds of docs.
Retire Secure for Professors — Jim Lange
My next book is actually another book from James Lange that his folks sent me. It’s called “Retire Secure for Professors.” This one is obviously aimed at professors. If you're a professor and we have a few of you that follow The White Coat Investor, this is information that is very specific to you. Retire Secure is a great book series for various different professions.
Building an Elite Organization — Don Wenner
Our next book is called “Building an Elite Organization” by Don Wenner. Don is the founder and CEO of DLP Capital. This book talks about how he scaled DLP Capital. If you're an entrepreneur, this book is for you, especially if you're at the stage where The White Coat Investor is at where you're trying to scale your business, you're hiring more people, you're trying to put systems in place, and you're trying to decide what your company culture is going to be. This is really a very practical step-by-step guide to doing that.
Building an Elite Organization
Stay in Medicine: How Physicians Can Move Past Burnout and Regain Control — Janet Cruz MD and Lee M.J. Elias
This book talks about how we can save more lives if we save each other. Burnout is seriously your biggest financial risk. Just like being disabled, you can no longer turn your time into money at a high rate as doctors can do. If you become burnt out, you can't do that either. In fact, even if you're only a little burnt out and have to cut back on your hours, that has financial implications on your life.
I think it's important for anybody to do some burnout prevention kind of reading, or if you're already at that stage, like up to 50% of doctors, to get started as soon as possible on treatment. There are lots of great practical tips in here. There's a whole chapter on reducing time killers, things like huddling daily with your team, making sure you take time for training, using your leadership training, making a contingency plan for unexpected events. There are lots of really practical things here, both for running your practice as well as dealing with your own personal burnout to help you to stay in medicine.
It seems like the trend a lot of times on these physician financial blogs and podcasts is to get out of medicine as soon as you can. Well, that's not my goal. I want some doctors to be there to take care of me. And the truth is, despite everything you hear about FIRE and early retirement among docs, half the docs are working after age 65 and not all because they have to. Medicine is still a great profession and this can help you stay in medicine.
The EXITPreneur's Playbook — Joe Valley
If you're an entrepreneur and have a business and if you're thinking about selling it and you're not sure how much it's worth, this is a great read for you. It basically teaches how to get out of your business. It is particularly useful for online entrepreneurs. And don't worry, I'm not reading it because I'm closing up WCI this year or something like that. But if you are in that situation and interested in more information about how to sell your business, how to value your business, what it's worth, etc., check this one out.
2 Funds for Life: A Quest for Simple & Effective Investing Strategies — Chris Pederson
Chris Pedersen talks about creating a two-fund portfolio. You might be surprised by what the two funds are in the book, but basically, it's a target retirement fund plus a small value fund.
Chris is a huge believer in factor investing. We're talking about small tilts, value tilts, etc. But he also likes the simplicity and benefits and automatic rebalancing of a target retirement fund. How do you get both of those? Well, you add a small value fund to a target retirement fund. And this book goes through in incredible detail what that would look like in the past with backtests and all kinds of great graphs.
I really liked that they include a chapter called “Contrarian Views: A Dose of Humility.” It covers what could go wrong with this idea and I think that's useful to have in a book like this.
Own Your Freedom: Sustainable Wealth for a Volatile World — David Phelps, DDS and Dan S. Kennedy
This one was sent to me by Dr. David Phelps, who is a dentist. I don't know if you know him, but he's been around in this space for a long, long time. He's actually pulled himself out of his own practice twice, once before divorce and once after a divorce with pretty unique methods to do it. He basically hires associates to work in the practice, and then he takes the cash flow from the practice and buys real estate.
This is more of what do you want out of life? How can you get yourself free of your practice, of your life, and be able to live your life like you want? But with kind of a real estate tilt. If you're a fan of real estate and you want to learn more about real estate and you want to use real estate to get your freedom, this is a pretty great book to do that.
Pharm.D. to M.D. — Nathan Gartland
This is a niche book for people who want to move from Pharm.D to medical school. It's called “A Complete Guide to Getting into Medical School,” and it's written from the perspective of a pharmacist now going back to medical school. If you fall into this category, this is an incredibly helpful guide for you.
You What?!: Humorous Stories, Cautionary Tales, and Unexpected Insights About a Career in Medicine — John Chase, M.D.
This one is a little bit of a lighter book. Dr. Chase is a retired orthopedic surgeon. It's really a great book about life as a doctor, your practice, and just pulling all the goodness out of a career in medicine that you possibly can.
It's just really a fun book to read. This isn't maybe for the brand-new grad. It’s probably somebody in mid-career or late career wanting to reflect a little bit more on their career and how to really get all the juice out of it that you're interested in. Maybe not a completely financial book, but again, you might as well enjoy your career. It's not just the way to pay for your retirement. It's also what you're doing with your life.
Your Encore: A Planning Guide – How to Balance Time, Money and Joy — Glenn Frank
All right, I got another one sent in by an advisor who has been following me for a long time, Glenn Frank. This is a book that also has a website called Time, Money and Joy.
This is not for young docs. This one is for docs on the verge of retirement or who are already retired. It's all about your encore. And retirement is your encore. This helps you to find the time, the money, and the joy to do whatever it is that you most want to do in retirement. This is a difficult transition for a lot of docs. For a lot of docs, it is very difficult to walk away from a practice into something else. We all have colleagues that we know of, that really didn't have much of a life after they left medicine.
Part of retirement planning is more than just financial, it's planning what you're going to be doing and how you're going to take joy from that and how all of us type A people that ended up in medicine can get just as much fulfillment after our careers, as we did during our careers. That's called your encore.
Your Total Wealth: The Heart and Soul of Financial Literacy — Lyle Sussman PhD and David A. Dubofsky PhD, CFA
David sent me a note with this book when he sent it here, and it says, “We've had many medical students in our classes. We know they need this, and will love this book.” And I think that's true. This is more of the basics of a personal finance book. This is not the book you read after you've read 35 other financial books. It is a great book, though, if you are just kind of getting into finance and wanting to learn the basics from a great perspective. It goes through a lot of important information and even covered things like options, calls, puts derivatives, asset allocation, and more.
It takes it all from a relatively basic perspective and explains it from the very beginning. They don't assume you know anything when you pick up this book and explain it all.
Your Total Wealth: The Heart and Soul of Financial Literacy
That covers our book reviews for today! I hope you can find something useful from the books we covered. Now let's move on to some listener questions.
Post-Tax Investment in Regular IRA vs. Brokerage Account
“Since we are likely losing the Backdoor Roth, do you see a benefit in investing in a traditional IRA with post-tax money over a regular brokerage account? No crystal ball regarding where we'll be with marginal taxes vs. long-term capital gains in 20 years when I'll likely be retiring, but why invest post-tax money in traditional IRA and pay marginal rates in the future? I'm a long-term index fund investor. There's no plan to trade the invested money with any frequency, added benefit of avoiding RMDs and more investment options in a brokerage account. What am I missing?”
Well, first of all, be aware that at least the latest version of the bill that I saw, and we're recording this on November 3 and I don't think this runs until the 25th, they are not eliminating the Backdoor Roth. In fact, they took out all kinds of stuff. The higher tax rates, and the higher capital gains tax rates. There are all kinds of stuff that was originally in the bill that is not in the bill as I record this.
Now pay attention because about the time this podcast comes out, the final bill should be out. You can still do the Backdoor Roth. Really, this question is kind of no longer terribly interesting, but occasionally you'll have a situation where you have to consider the value of a post-tax IRA, or that's basically the way a variable annuity works just with some additional fees vs. a taxable account.
What you're really weighing as far as the taxes go is the benefit of having tax-protected growth against the downside of paying ordinary income taxes instead of long-term capital gains taxes when you sell the asset in the end. The more tax efficiently you invest, the harder it is for that tax-protected growth to overcome the ordinary income tax on withdrawals. If your investment is not very tax-efficient at all, it doesn't take that many years. But if you're an index fund investor and we're talking about putting total stock market and total international stock market index fund kind of investments in there where they're really tax-efficient, it might take decades for that benefit of the tax-protected growth to overcome the difference in tax rates at the end.
From that respect, most are probably better off in a taxable account than a non-deductible IRA or a variable annuity, especially if there are any significant fees associated with a variable annuity. But if the Backdoor Roth IRA actually went away, it's possible that it could come back or your income could drop or whatever such that you might be able to convert that money later. In which case you'd be very glad you put the money into a nondeductible IRA. Of course, in most states, there's also an asset protection benefit and significant estate planning benefit to having that IRA. It can be stretched by your heirs. It may be untouchable in bankruptcy by your creditors, etc.
It can be a difficult decision. The good news is it doesn't sound like anybody's going to have to make it this year because I think the Backdoor Roth IRA is going to live on. But the bottom line is the longer you leave it in there, the less tax-efficient the investment, the more likely a non-deductible IRA can beat a taxable account.
Recommended Reading:
How to Do a Backdoor Roth IRA: [Ultimate Guide and Tutorial]
Vetting Professionals for Lectures
“Hi, Dr. Dahle. This is Alex in Mississippi. I'm a resident working with my program director and chair on starting a lecture series that's going to incorporate some personal finance and business management topics. Thanks to your blog and podcasts, especially the ones about financial priorities for new attendings and for new residents, I know a bunch of the topics that we want to discuss.
However, I need to go about vetting a series of individuals who will be giving these lectures. I would be willing to give them myself, but my faculty mentors would prefer it to be a professional in the community so that they can continue to give these on an ongoing basis as I'll only be here for another one or two years.
How do you go about vetting these people? What questions do you need to ask? How do you make sure that they're going to be good and give good advice to this vulnerable population? I know some of my co-residents have been hocked whole life policies, and I want to avoid that as much as possible. I would rather scrap the whole idea of the lecture series if all I'm going to do is set up my co-residents and future residents here for a world of heartache and pain as their introduction to the financial industry. Thank you.”
First of all, thank you so much for what you're doing. It really does make a huge difference in the lives of your colleagues, your friends, your trainees, even your attendings. It can really help them. And you're right to be concerned. How many of us had somebody from Northwestern Mutual or Edward Jones or Ameriprise come into our residency program and basically sell us stuff that really wasn't that good for us? It happens all the time, and so you're right to be concerned.
How do you vet them? Well, assuming you're financially literate and you kind of understand how the industry works, you're basically looking for people that you would consider hiring, people that you would actually send friends and family to. That's your vetting process. We have the same dilemma at The White Coat Investor as we select advertisers. We have created applications. For insurance professionals and especially for financial advisors, we have an application and we turn down the majority of people who apply.
We have questions in there like, “How much of your practice is selling whole life insurance?” Because I'm not going to put somebody up in front of my audience when 90% of the money they make is from selling whole life insurance, because I know what they're going to do, they're going to sell whole life insurance to my audience. And most of the time, that's not a very good move.
You just have to vet them individually, one by one, and ask them about their practice. Where does their money come from? What's their fee structure? What's their experience? What do the portfolios they put together typically look like? Now, how you ensure that remains good for years after you leave is a little bit harder. If you're not in charge, you're not in charge, but hopefully, if you get good people in place to start with, they'll keep coming back year after year, because obviously there's a benefit for them.
They want the business, and there's nothing wrong with that. They're coming in probably for free in hopes that they get a little bit of business out of it. Sometimes people will do it out of the goodness of their hearts, but for the most part, they're hoping to get business out of it. So, if you're not paying them, they've got to get something from it to be interested to come in and speak as a professional. I don't fly across the country and talk to groups of docs for free, and I don't expect anybody else to do it, either. And so, if you want people to spend the time to really put together a good presentation, that's what it takes. You either have to pay them or you've got to make sure that it helps to build their business.
Good luck walking that fine line. There are lots of financial conflicts of interest there, of course. But if you want to put in something that's lasting, I think you're going to have to deal with those conflicts of interest.
Investment Losses and Offsetting Taxable Income
“I am at the beginning of trying to develop a medical device. And at this point I've only invested $2,000. It seems likely that the ultimate investment will be at least five figures. And the potential for loss on investment seems high. Do you see any pathway to using those losses to offset my taxable income? At this point, the fledgling device company is not incorporated in any way.”
It sounds like you're planning to lose from the very beginning, which doesn't sound good, but I totally get it. At least if, if you lose, it'd be nice if Uncle Sam would share your pain. Well, the good news is he will. Any new business you start can generate a loss and those losses can offset your ordinary income, your earned income, your taxable income for three of the first five years. If you put it on Schedule C and that loss flows through to your 1040, no big deal. However, if you keep losing money, year after year after year, you're at risk for the IRS reclassifying your business to a hobby. And hobby losses are not deductible. Only business losses are deductible.
By year four, you really need to be making a profit with this business. But if you realize it's not working out in year two, you can just drop it. And yes, all those losses will be deductible. Now you don't get all your money back, but if your marginal tax rate is 40%, you have 40% of it back off your taxes. So that's beneficial.
Recommended Reading:
20 Ways to Lower Your Tax Bill
Dr. Brian Foley of Wealthy Doc
Our guest today is actually the only physician financial blogger who has been doing this longer than me. Brian Foley, MD, MBA is a physiatrist who began a blog called Wealthy Doc in 2007. This predated The White Coat Investor by about four years. I didn't know about him when I started The White Coat Investor and found it a couple of years after that.
Brian is going to be one of our speakers at WCICON22. We mentioned at the top of this podcast how you can register for that. Brian is giving two talks there. One will be for the in-person group and one will be virtual.
“In-person, I'm calling it a mini-MBA. And like it or not, medicine is a business. I think the more we learn about the business environment, the more we can flourish in our own way. I'm going to highlight some of the lessons that I got out of my MBA program, and I spent three long, hard years earning this. I can't reproduce all of the content, but I'm hoping to give some of the highlights for your attendees.”
Do you think it's possible to get the information that you found most useful out of an MBA without actually getting an MBA?
“I wouldn't pretend that they're equivalent at all. There are certainly things that I learned from other students and the networks that are really hard to reproduce. And then the depth and time of going through case studies provides extra value. I have no regrets about going through that. But on the other hand, I don't think it's necessarily required for everyone. It isn't overkill even if you are interested in business and want to learn more about it.
In my mind, the attendees who would be interested in this talk would be in four different areas. One, somebody who's considering advanced business training, like an MBA. Two, somebody who's enrolled, but would like to get an overview from a physician’s perspective about what will be useful. Three, somebody who did business training, but it's been a while and they'd like a refresher. Four, somebody who's practicing and just want some of the tips of the business, but they don't have the time or they can't go through the cost or they're not really dedicated enough to spend all the time suffering through a graduate degree, but want to get some of the valuable lessons that they might've missed.”
Tell us about how your business knowledge has affected your career for the good.
“I've always been interested in finance and investing and business, but after seeing a lot of physicians make some pretty egregious business mistakes, I realized that formal education would be helpful. The ways for me it's helped is job opportunities. It's helped the current position I'm in. I would not have gotten it without the MBA, for example. Partly through networking, partly because of the skillset that I brought to the table. It's helped me be a more rigorous investor and it has helped me with business relationships.
And a lot of it for physicians is to learn some of the tools, and how to speak the language of business is really important. Rather than going to my surgery center and saying, ‘I need a new radio frequency machine, and it's $30,000 and oh, by the way, I have another location. I'd like a second one.' I'm going to them with a business proposition. ‘Here's the breakeven, here's the business we're currently losing. Here's the spreadsheets. Let me know if you have questions.'
I’m making that decision with them and showing the benefit to them. So, I'm just able to get things at work and out of work go much more smoothly and to understand the business environment that we work in. Again, like it or not, even if you're not interested in business, you work in the business of medicine.”
It sounds like a great presentation. I'm really looking forward to this. I'm not sure we've had anything like this in any of the prior WCICONs. Obviously, some people are coming to this meeting in person. Some are going to be watching virtually. Of course, if you come in person, you get access to everything, including the virtual talks to watch either during the conference or after the conference. But a fair number of the talks are also being only given virtually. We just don't have enough room in the conference space during the conference to give every talk that we want to include in the conference. Your second talk is going to be given virtually. Tell us about that one.
“That one is a physician's viewpoint of employment contracts. And it sounds like a dry and technical topic, but I'm hoping to give some take-home messages that will be really important for physicians to understand. And that comes from my background. I studied business law and did some courses put on for physicians by attorneys. I'm going to try to save some people some time, learning some of the basic principles.
But what I found through teaching students and residents, and also bringing on new partners in my private practice is that physicians have not signed contracts before. They've never really had an employment written agreement and they're blindsided by it. And sometimes they'll just sign it and they don't even understand what they're signing. I've seen things go really well and things go really poorly.
And so, I want to highlight some of the things to look for in an employment contract. Know when you should get someone to review it and what questions to ask. When to have an attorney or another specialist involved or to help negotiate. I want to cover that to make sure that you get the best contract at the start of the job when your ability to negotiate is the highest. Because over a decade or two decades, $10,000, $50,000 here and there can make a huge difference.”
Well, I'm looking forward to seeing you down there in person, in sunny Phoenix. It's going to be a great time, both from a wellness perspective, as well as from a financial literacy perspective. We appreciate you for participating in the conference and encourage people to learn more about you before they arrive. They can do that at wealthydoc.org.
Continuing Financial Education Week 2021
Everything at the White Coat Investor is on sale this week! From November 22-29, everything sitewide is 10% off. This includes our books and all of our courses. Just put in CFE2021 at checkout! We will also have all of our merchandise at the WCI Store on sale as well. If you have been waiting to grab your WCI gear or courses, this is the week to do it!
Sponsor
This podcast is sponsored by Bob Bhayani at drdisabilityquotes.com. He is an independent provider of disability insurance planning solutions to the medical community in every state and a long-time White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or to get this critical insurance in place, contact Bob at drdisabilityquotes.com today by email [email protected] or by calling (973) 771-9100.
WCICON 2022
Time is almost up to register for The Physician Wellness and Financial Literacy Conference. The conference is in Phoenix on February 9-12, 2022. Register by December 1 to get one of our amazing swag bags! If you cannot attend the in-person event, we are also offering a virtual component. Get your tickets today!
Milestones to Millionaire
#41 – Pediatrician Pays Off $300K in 3 Years
In three years, this pediatrician paid off $300K in loans with a $200K income. Motivated to get their schooling paid off so they could start saving for their children’s college education, they paused their retirement savings to really focus on getting rid of this debt as fast as possible. There are 10 reasons you should pay off your student loans quickly.
Sponsor: Set for Life
Quote of the Day
Our quote today comes from Phil DeMuth, PhD, who said,
“Nearly all CFPs are actually asset managers, and no wonder—it pays more. Many financial planners dispense with a financial plan altogether, which is just a loss leader as far as they are concerned.”
Make sure if you're hiring a financial planner because you need a financial plan that you are actually paying them for the financial plan and not just for asset management or you are likely to get what you pay for.
Full Transcript
Intro:
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.
Dr. Jim Dahle:
This is White Coat Investor podcast number 238 – 2021 Financial Book Reviews.
Dr. Jim Dahle:
This podcast is sponsored by Bob Bhayani at drdisabilityquotes.com. He is an independent provider of disability insurance planning solutions to the medical community in every state and a long-time White Coat Investor sponsor.
Dr. Jim Dahle:
He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or get this critical insurance in place, contact Bob at drdisabilityquotes.com today or by email at [email protected] or by calling (973) 771-9100.
Dr. Jim Dahle:
All right, this podcast is dropping right in the middle of continuing financial education week 2021. We do this basically every Thanksgiving week. Thanksgiving, Black Friday, Cyber Monday. This is our CFE week, and we want you to take advantage of this Thanksgiving break to do your continuing financial education, if you have not yet done it this year.
Dr. Jim Dahle:
Now, I've always told people their initial financial education ought to include reading a few good books, maybe taking an online course, Fire Your Financial Advisor and then that you need some ongoing continuing financial education. I recommend you read one good financial book a year and follow a blog or this podcast or something similar to stay up to date on things that are changing such as the tax laws in Congress right now.
Dr. Jim Dahle:
But in order to promote this during this CFE week, we tell you all about all kinds of new books that are out that week. And we also put everything at the White Coat Investor on sale. All of our online courses right now are on sale. They're all 10% off from November 22nd through the 29th. So you'd have until Monday at midnight mountain time in order to get this discount, 10% off on all of our courses.
Dr. Jim Dahle:
And that includes our CFE 2021 course, that includes our older courses. It includes our Fire Your Financial Advisor course. It also includes the version of Fire Your Financial Advisor that you can buy with your CME funds, because it includes a wellness component.
Dr. Jim Dahle:
If you've been thinking about taking one of these courses, here's some incentive to do it. It's 10% off. The code to put in when you get there is “CFE2021”.
Dr. Jim Dahle:
We are also putting everything else on sale. We have a White Coat Investor store. If you go to whitecoatinvestor.com/store, or just go to the homepage and click on the store, everything there, t-shirts, books, everything's 10% off. That includes if you just buy an individual book, you can buy it from the story, you get a 10% off.
Dr. Jim Dahle:
We are also including a discount on bulk books that are already being sold for far more than 10% off if you buy them in bulk, but we're going to knock another dollar off each book if you want to buy them. The normal prices on those books for the original White Coat Investor is $15.99 a piece, for bootcamp is $16.99 a piece, for the guide for students is $17.99 a piece. We'll knock a dollar off each of those. So, they're $14.99, $15.99 and $16.99 if you buy at least 25 of them.
Dr. Jim Dahle:
If you're thinking about buying them for your students, or you're thinking about buying them for your trainees or just to give away, this is a chance to get a little bit more of a discount on that.
Dr. Jim Dahle:
Don't forget too, we're coming up on crunch time now for WCI con 22. If you want to come to WCI con 22, please, please, please register this week. You have a little longer than the 29th. There's not the same sale. These are two different sales. You have till December 1st, that is what we call the swag bag deadline. Because after that point, we can't get you a swag bag. It takes too long to order the books, print the book, ship the books, et cetera.
Dr. Jim Dahle:
Whether you're coming in person to WCI con 22, or you are coming in virtually, you get the swag bag as long as you're registered before December 1st. We're going to ship them out to those attending virtually. We'll have them there for you in person. If you are coming in person I am looking forward to seeing a bunch of you there.
Dr. Jim Dahle:
As I record this, I'm recording this earlier in November, we still have room in the room block, but I would register as soon as possible in order to make sure you can actually stay at the conference hotel. It's a pretty sweet resort. Pool out back, lazy river, golf course, pickleball courts, a wonderful meeting space, great rooms. It really is a nice place. And it's in Phoenix in February. You can't beat that.
Dr. Jim Dahle:
If you're coming from the Northeast, if you're coming from the mountain west, if you're coming from the Midwest, the weather's going to be nicer in Phoenix in February than wherever you're coming from. We encourage you to come join us, get your wellness back after COVID and learn a little bit about financial literacy.
Dr. Jim Dahle:
We get people that are experts in financial literacy that come down and attend just to meet other White Coat Investors and kind of renew themselves. We get people that have just found the White Coat Investor community, and just really want to get started. Either way, we encourage you to come to the Physician Wellness and Financial Literacy conference, a.k.a. WCI con 22.
Dr. Jim Dahle:
To register, go to whitecoatinvestor.com/wcicon22, and get that sweet swag bag with books from each of our keynote speakers, WCI t-shirt and more.
Dr. Jim Dahle:
All right, today we're going to be talking about books. I've got a whole bunch of books we're going to be reviewing today. And really this week, if you follow the blog as well, you have noticed that I talked about a couple of books on Monday when I announced continuing financial education week.
Dr. Jim Dahle:
I talked about this sweet book from Chirag Shah and Jayanth Sridhar. And I, I hope I'm pronouncing those names right. This is a really great book. You can see Monday’s blog posts for more information. They call it “Financial Freedom Rx”. If you're watching this on YouTube, I'm holding it up here for the camera. They call it “The Physician’s Guide to Achieving Financial Independence”. They got Mel Lindauer of the Bogleheads to write the forward.
Dr. Jim Dahle:
It’s a very Boglehead-centric book, but directed at physicians. It goes into lots of details about asset location and tax efficiency and building a portfolio and those sorts of things, but also touches on lots of physician specific financial planning topics. If you've enjoyed my books and want to read another book, it covers similar ground, but from different points of view, this is a great option.
Dr. Jim Dahle:
Another book that I really enjoyed this year and that I'm implementing with my kids is called “The Family Board Meeting”. And this is a pretty sweet book. This is by Jim Sheils. It's called “The Family Board Meeting” and it's super short. You read this thing in an hour. But the concept behind “The Family Board Meeting” is that your family is what's most important. And a lot of us are busy entrepreneurs, busy doctors, whatever, and tend to put our families on the back burner.
Dr. Jim Dahle:
This is a way to connect with your kids. Basically, the idea is once a quarter, you have a board meeting with each kid. And by board meeting, I'm not talking about sitting down and having a boring meeting. I'm talking about going surfing, right? Something cool that you call a board meeting.
Dr. Jim Dahle:
The rules are, it's got to be at least four hours. Nobody can have their phone on, or there can't be any electronics during the meeting. The kid gets to choose the activity. And there has to be a very short reflection period at the end. And the author has seen dramatic changes in himself, as well as other people he's taught this concept to, and really made a connection with his kids that he didn't have before. I talked about that as well in Monday's blog posts.
Dr. Jim Dahle:
Tuesday's blog post is all about this book. This is my favorite book of the year. It's called “The Hands Off Investor”. It's by Brian Burke. He's the CEO of Praxis Capital. A lot of these books tend to be advertisements for a given firm. This one's not. This one's really a step-by-step guide to passive investing.
Dr. Jim Dahle:
Whether we're talking about syndications or funds, if you are interested in those, if you are like, “I don't know how to evaluate a syndication, I don't know which ones are good, which ones are bad. I don't know which sponsors to trust”, this is your book. It's great. It's called “The Hands Off Investor”. It's got soup to nuts information about syndications, about funds, how to evaluate the sponsor, how to evaluate the deal, how to evaluate the investment structure. Great book. Check that out if you are interested.
Dr. Jim Dahle:
I will of course have links to all these books in the show notes that you can go to. And just with one click go to them on Amazon if you're interested in purchasing them.
Dr. Jim Dahle:
I got a whole stack of books here that people have sent me this year. I mean, look at the stack. It's got to be 15 books. People send me these books, and want me to review them on the blog because we have a big audience or review them on the podcast. And let's be honest. If I started doing more book reviews on the blog or on the podcast, I'd get twice as many as these books. And that's all we'd ever talk about. It'd be a book review podcast. We're not going to do that.
Dr. Jim Dahle:
I wedged them all into today's podcast. We're going to talk briefly about each of these books. If one of them rings a bell for you, it sounds like something you would be interested in then again, the links will be in the show notes. You can buy it. Some of them will be already available in your library and you can borrow them. But for the most part, if you're interested in these books, you're probably going to have to buy them. Thank you for going through our affiliate links in the show notes that do help support the show.
Dr. Jim Dahle:
The first book I want to talk about, I think I mentioned a few months ago when we had Jim Lange on the podcast. He wrote this book. He's coming to speak at WCI con 22. He is one of our keynote speakers. I'm not sure who decided which book we're giving away yet. It may be his “Retire Secure” book, but this book is “Beating the New Death Tax”.
Dr. Jim Dahle:
It's all about the secure act, how to get around it, et cetera. He was actually giving this book away when he was on the podcast. You can buy it at Amazon. It's a great book. It talks about strategies to protect your family from recent changes.
Dr. Jim Dahle:
Lang's firm is really big on both the estate planning, as well as tax reduction, retirement accounts, that sort of thing. And this book gets pretty in depth into those sorts of subjects. Roth conversions. If you're thinking about Roth conversions, it’s a great book to read about that as well as how to deal with required minimum distributions, those kinds of problems.
Dr. Jim Dahle:
I get a lot of flak from people saying you only talk to young docs. There's nothing in there for old docs thinking about retiring or already retired. Well, this is good for those kinds of docs.
Dr. Jim Dahle:
My next book is actually another book from James Lange that his folks sent me. It’s called “Retire Secure for Professors”. And those of you watching this on YouTube, I don't know what happened between the time the first book was published here and the second book was published, but James Lange's hair went from black to gray between these two. I think he just used an updated picture in this one, but I've got the same problem going with my hair. And I thought that was pretty interesting. Two books came out the same year with very different pictures on the cover.
Dr. Jim Dahle:
But this one's obviously aimed at professors. If you're a professor and we have a few of you that follow the White Coat Investor, this is information that is very specific to you if you're interested in that.
Dr. Jim Dahle:
Retire Secure is a great book. That's kind of the general one. And it's kind of a series. He's got them for various different professions. There isn't one for docs, but he does have one for professors. “Retire Secure for Professors” by James Lange.
Dr. Jim Dahle:
Our next book is called “Building an Elite Organization”. And this one is Don Wenner’s book. I think I mentioned this on the podcast when I had Don on. Don is the founder and CEO of DLP Capital. And so, this book talks about how he scaled DLP Capital.
Dr. Jim Dahle:
If you're an entrepreneur, this book is for you, especially if you're at the stage where White Coat Investor is at where you're trying to scale your business, you're hiring more people, you're trying to put systems in place, you're trying to decide what your company culture is going to be, this is really a very practical step-by-step guide to doing that. “Building an Elite Organization” by Don Wenner.
Dr. Jim Dahle:
All right, here is a book called “Stay in Medicine: How Physicians Can Move Past Burnout and Regain Control”. This one is by Janet Cruz MD and Lee MJ Elias. I like this book. It talks about how we can save more lives if we save each other.
Dr. Jim Dahle:
Burnout is seriously your biggest financial risk. Just like being disabled, you can no longer turn your time into money at a high rate as doctors can do. If you become burnt out, you can't do that either. In fact, even if you're only a little burnt out and have to cut back on your hours, that has financial implications on your life.
Dr. Jim Dahle:
I think it's important for anybody to do some burnout prevention kind of reading, or if you're already at that stage, like up to 50% of doctors, to get started as soon as possible on treatment.
Dr. Jim Dahle:
But there's lots of great practical tips in here. There's a whole chapter on reducing time killers, things like huddling daily with your team, making sure you take time for training, using your leadership training, making a contingency plan for unexpected events. There's lots of really practical things here, both for running your practice, as well as dealing with your own personal burnout to help you to stay in medicine.
Dr. Jim Dahle:
It seems like the trend a lot of times on these physician financial blogs and podcasts is get out of medicine as soon as you can. Well, that's not my goal. I want some doctors to be there to take care of me. And the truth is despite everything you hear about FIRE and early retirement among docs, half the docs are working after age 65 and not all because they have to. Medicine is still a great profession and this can help you stay in medicine. So, check out that book, “Stay in Medicine”. Janet Cruz MD is the lead author on that one.
Dr. Jim Dahle:
All right, here's another one, “The EXITPreneur's Playbook”. This is one it was given to me at FinCon by Joe Valley, the author of the book. If you have a business, if you're an entrepreneur, if you're thinking about selling it and you're not sure how much it's worth, this is particularly useful for online entrepreneurs, but it's basically how to get out of your business. And don't worry, I'm not reading it because I'm closing up WCI this year or something like that. But if you are in that situation and interested in more information about how to sell your business, how to value your business, what it's worth, et cetera, it's called “The EXITPreneur's Playbook” by Joe Valley.
Dr. Jim Dahle:
Okay, let's do this one next “2 Funds for Life”. This is a partner of Paul Merriman's, Chris Pedersen, who talks about 2 funds for life, basically creating a two-fund portfolio. And you might be surprised by what the two funds are in the book, but basically, it's a target retirement fund plus a small value fund.
Dr. Jim Dahle:
Paul and Chris are huge believers in factor investing. We're talking about small tilts, value tilts, et cetera. But they also like the simplicity and benefits and automatic rebalancing of a target retirement fund. How do you get both of those? Well, you add a small value fund to a target retirement fund.
Dr. Jim Dahle:
And this book goes through in detail, incredible detail what that would look like in the past with back tests, all kinds of great graphs. And you can see some of these, if you're watching this on YouTube. If you are interested in that concept, this is a great book.
Dr. Jim Dahle:
I really liked that they include a chapter called “Contrarian Views: A Dose of Humility”. Basically, what could go wrong with this idea. And I think that's useful to have in a book. So, check that out. It's Chris Pedersen, 2 Funds for Life.
Dr. Jim Dahle:
All right. This one was sent to me by Dr. David Phelps. He is a dentist. I don't know if you know him, he's been around in this space for a long, long time. He's actually pulled himself out of his own practice twice, once before divorce and once after a divorce with pretty unique methods to do it. He basically hires associates to work in the practice, and then he takes the cash flow from practice and buys real estate. And so, he basically freed himself from his practice. And he talks about that.
Dr. Jim Dahle:
In this book, of course, he's really big on freedom, kind of patriotic themes. He's down in Texas, no surprise. This one's called “Own Your Freedom: Sustainable Wealth for a Volatile World”. He did it with a fellow by the name of Dan S. Kennedy.
Dr. Jim Dahle:
This is more of what do you want out of life? How can you get yourself free of your practice, of your life and be able to live your life like you want? But with kind of a real estate tilt. If you're a fan of real estate, you want to learn more about real estate. You want to use real estate to get your freedom. This is a pretty great book to do that written by a dentist. “Own Your Freedom” by David Phelps DDS.
Dr. Jim Dahle:
Okay. Here is a kind of a niche book that was sent to me. This is by Nathan Gartland Pharm.D, and it's called “Pharm.D. to M.D.” And I don't know how many Pharm.D are going to medical school, but if you are a Pharm.D and thinking about medical school, in medical school, already applying to medical school, this book is for you. It's called “A Complete Guide To Getting Into Medical School” and written from the perspective of a pharmacist now going back to medical school.
Dr. Jim Dahle:
If that's your niche, I'm sure this is the only book in it. Get this book “Pharm.D. to M.D.”, Nathan Gartland. Again, links will be in the show notes.
Dr. Jim Dahle:
All right. I got a few more books to do here that I'll talk about, but first we're going to bring a guest on to the program. This is going to be another one of our speakers from WCI con 22. Let's get him on the show.
Dr. Jim Dahle:
My guest here is actually the only physician financial blogger who has been doing this longer than me. Brian Foley, MD, MBA is a physiatrist who began a blog called wealthydoc.com in 2007. This predated White Coat Investor by about four years. I didn't know about him when I started the White Coat Investor. I found it a couple of years after that, but it's been around for a long time. Brian, welcome to the White Coat Investor podcast.
Dr. Brian Foley:
Yeah, it’s quite an honor to be on the White Coat Investor podcast.
Dr. Jim Dahle:
Brian is going to be one of our speakers at WCI con 22. We mentioned at the top of this podcast how you can register for that. You're going to be giving a couple of talks there. Tell us about the one you're going to be giving in-person.
Dr. Brian Foley:
In-person, I'm calling it a mini-MBA. And like it or not, medicine is a business. I think the more we learn about the business environment, the more we can flourish in our own way. I'm going to highlight some of the lessons that I got out of my MBA program, and I spent three long, hard years earning this. I can't reproduce all of the content, but I'm hoping to give some of the highlights for your attendees.
Dr. Jim Dahle:
Do you think it's possible to get the information that you found most useful out of an MBA without actually getting an MBA?
Dr. Brian Foley:
I wouldn't pretend that they're equivalent at all. There are certainly things that I learned from other students and the networks that are there that are really hard to reproduce. And then the depth and time of going through case studies provides extra value. I have no regrets about going through that. But on the other hand, I don't think it's necessarily required for everyone, it isn't overkill even if you are interested in business and want to learn more about it.
Dr. Brian Foley:
In my mind, the attendees who would be interested in this talk would be in four different areas. One, somebody who's considering advanced business training, like an MBA. Two, somebody who's enrolled, but would like to get an overview from a physician’s perspective about what will be useful.
Dr. Brian Foley:
Three, somebody who did business training, but it's been a while and they'd like a refresher. Four, somebody who's practicing and just want some of the tips of the business, but they don't have the time or they can't go through the cost or they're not really dedicated enough to spend all the time suffering through graduate degree, but want to get some of the valuable lessons that they might've missed.
Dr. Jim Dahle:
Tell us about how your business knowledge has affected your career for the good.
Dr. Brian Foley:
In a lot of ways. I've always been interested in finance and investing and business, but after seeing a lot of physicians make some pretty egregious business mistakes, I realized that formal education would be helpful.
Dr. Brian Foley:
The ways for me it's helped job opportunities. It's helped the current position I'm in. I would not have gotten without the MBA, for example. Partly through networking, partly because of the skillset that I brought to the table. It's helped me be a more rigorous investor and its helped me with business relationships.
Dr. Brian Foley:
And a lot of it for physicians is to learn some of the tools and how to speak the business of language is really important. Rather than going to my surgery center and saying, “I need a new radio frequency machine, and it's $30,000 and oh, by the way, I have another location. I'd like a second one”. I'm going to them with a business proposition. “Here's the breakeven, here's what the business we're currently losing. Here's the spreadsheets. Let me know if you have questions”.
Dr. Brian Foley:
I’m making that decision with them and showing the benefit to them. So, I'm just able to get things at work and out of work go much more smoothly and to understand the business environment that we work in. Again, like it or not, even if you're not interested in business, you work in the business of medicine.
Dr. Jim Dahle:
It sounds like a great presentation. I'm really looking forward to this. I'm not sure we've had anything like this in any of the prior WCI cons. This one's going to be a great presentation.
Dr. Jim Dahle:
Obviously, some people are coming to this meeting in person. Some are going to be watching virtually. Of course, if you come in person, you get access to everything, including the virtual talks to watch either during the conference or after the conference. But a fair number of the talks are also being only given virtually. We just don't have enough room in the conference space during the conference to give every talk that we want to include in the conference. Your second talk is going to be given virtually. Tell us about that one.
Dr. Brian Foley:
That one is a physician's viewpoint of employment contracts. And it sounds like a dry and technical topic, but I'm hoping to give some take home messages that will be really important for physicians to understand.
Dr. Brian Foley:
And that comes from my background. I studied business law and did some courses put on for physicians by attorneys. I'm going to try to save some people some time, learning some of the basic principles.
Dr. Brian Foley:
But what I found through teaching students and residents, and also bringing on new partners in my private practice is that physicians have not signed contracts before. They've never really had an employment written agreement and they're blindsided by it. And sometimes they'll just sign it and they don't even understand what they're signing. I've seen things go really well and things go really poorly.
Dr. Brian Foley:
And so, I want to highlight some of the things to look for in an employment contract. Know when you should get someone to review it and what questions to ask. When to have an attorney or another specialist involved or to help negotiate. I want to cover that to make sure that you get the best contract at the start of the job when your ability to negotiate is the highest. Because over a decade or two decades, $10,000, $50,000 here and there can make a huge difference.
Dr. Jim Dahle:
Yeah, for sure. You'll be going over restricted covenants. You'll be going over the importance of who's paying for the tail insurance, how to negotiate RVU based contracts, those sorts of topics.
Dr. Brian Foley:
Exactly. And again, I have some personal stories and contract examples that I'll share from residents and colleagues. Those two that you mentioned, for example. I have one colleague who wanted to change jobs and then found out there was a restrictive covenant and had to pay several hundred thousand dollars to get out of the restrictive covenant, which if she had crossed this out and talked to their employer at the beginning it would have been fine.
Dr. Brian Foley:
Another was a partner we tried to hire who was practicing in Florida and could not leave the practice because they found out that they had no tail insurance and needed to buy it. And that would cost several hundred thousand dollars to leave that practice in Florida to join our practice. They asked us to pay for it and we didn't. They're still practicing in Florida.
Dr. Brian Foley:
Just knowing what you're signing and perhaps changing some of it beforehand, if you can, be sure to do that. So, yeah, that's a great example.
Dr. Jim Dahle:
Awesome. Well, I'm looking forward to seeing you down there in person, in sunny Phoenix. It's going to be a great time, both from a wellness perspective, as well as from a financial literacy perspective. We appreciate you for participating in the conference and encourage people to learn more about you before they arrive. They can do that at wealthydoc.com.
Dr. Jim Dahle:
I know you're fairly anonymous on the website, but that's becoming less and less so as the years go by, I suspect, especially as you give talks across the country. But thank you so much for coming on the podcast and being willing to participate at the conference.
Dr. Brian Foley:
My pleasure. I'm honored to be asked to be there, and I'm looking forward to attending as many of the conferences and talks there when I'm there as well.
Dr. Jim Dahle:
Cool. Awesome. See you there.
Dr. Jim Dahle:
All right. That was great to have the Wealthy Doc on. Hopefully you get a chance to hear more from him at the conference.
Dr. Jim Dahle:
I got three more books I want to tell you about before we get into your questions. This one is a little bit of a lighter book. You can see this if you're watching this on YouTube. It's called “You What?!: Humorous Stories, Cautionary Tales, and Unexpected Insights About A Career in Medicine”. This is by John Chase MD. He is a retired orthopedic surgeon.
Dr. Jim Dahle:
It's really a great book about life as a doctor, your practice, just pulling all the goodness out of a career in medicine that you possibly can. I like this cartoon. You can see if you're watching this on YouTube, he's got these sprinkled throughout the book. This one's from the chapter “Making decisions with patients”. Should I operate, not operate, scope, do a total knee, is the patient crazy? Et cetera.
Dr. Jim Dahle:
It's just really a fun book to read. This isn't maybe for the brand-new grad. It’s probably somebody in mid-career or late career wanting to reflect a little bit more on their career and how to really get all the juice out of it that you're interested in. Maybe not a completely financial book, but again, you might as well enjoy your career. It's not just the way to pay for your retirement. It's also what you're doing with your life. It's called “You what?!” by John Chase MD.
Dr. Jim Dahle:
All right, I got another one sent in by an advisor that has been following me for a long time, Glenn Frank. This one's called “Your Encore: A Planning Guide – How to Balance Time, Money and Joy”. And this is a book that also has a website timemoneyandjoy.com.
Dr. Jim Dahle:
But this is not for young docs. This one is for docs on the verge of retirement or who are already retired. And it's all about your encore. What's an encore? If you're at a performance, it's what they do after the curtain drops. After you clap for them, then they do something more. Well, that's what retirement is, it's your encore.
Dr. Jim Dahle:
This helps you to find the time, the money and the joy to do whatever it is that you most want to do in retirement. And this is a difficult transition for a lot of docs. For a lot of docs it is very difficult to walk away from a practice into something else. And we all have colleagues that we know of, that really didn't have much of a life after they left medicine. Whether it is measured in terms of years or in joy that they take from it.
Dr. Jim Dahle:
Part of retirement planning is more than just financial, it's planning what you're going to be doing and how you're going to take joy from that and how all of us type A people that ended up in medicine can get just as much fulfillment after our careers, as we did during our careers. That's called your encore. It's by Glenn Frank. The link will be in the show notes.
Dr. Jim Dahle:
And the final book I wanted to review today on the podcast is this one called “Your Total Wealth: The Heart and Soul of Financial Literacy”. And this one is by Lyle Sussman PhD and David A. Dubofsky PhD, CFA. David sent me a note with it when he sent it here. I can barely read it. He has handwriting like a doctor. “We've had many medical students in our classes. We know they need this, and will love this book”. And I think that's true.
Dr. Jim Dahle:
It is more of the basics of a personal finance book. This is not the book you read after you've read 35 other financial books. It is a great book, though, if you are just kind of getting into finance and wanting to learn the basics from a great perspective. It goes through a lot of important information, don't get me wrong. It even covered things like options, calls, puts derivatives, asset allocation, those sorts of things.
Dr. Jim Dahle:
But it takes it all from a relatively basic perspective and explains it from the very beginning. They don't assume you know anything when you pick up this book and explain it all. It's called “Your Total Wealth: The Heart and Soul of Financial Literacy” by Sussman and Dubofsky. Check that out. It's a great book. Hope you enjoy it.
Dr. Jim Dahle:
All right, enough books. That is a stack of books I got this year. 14 books we just reviewed. You only got to read one for your continuing financial education. So, pick the one that is most applicable to you. Read a book this year and make sure you spend a little bit of time on your finances. You can't put it all on medicine or all on whatever your profession is and to expect to be financially successful. You have to do some continuing financial education.
Dr. Jim Dahle:
All right, let's get into some of your questions. The first one comes in via email with the title: “Question regarding post-tax investment in regular IRA versus brokerage account. Since we are likely losing the backdoor Roth, do you see a benefit in investing in a traditional IRA with post-tax money over a regular brokerage account?
Dr. Jim Dahle:
No crystal ball regarding where we'll do with marginal taxes versus long-term capital gains in 20 years when I'll likely be retiring, but why invest post-tax money in traditional IRA and pay marginal rates in the future? I'm a long-term index fund investor. There's no plan to trade the invested money with any frequency added benefit of avoiding RMDs and more investment options in a brokerage account. What am I missing?”
Dr. Jim Dahle:
Well, first of all, be aware that at least the latest version of the bill that I saw, and we're recording this on November 3rd. I don't think it runs until the 25th. But the most recent version of that bill in Congress that I saw is not eliminating the backdoor Roth. In fact, they took out all kinds of stuff. The higher tax rates, the higher capital gains tax rates. There are all kinds of stuff that was originally in the bill that is not in the bill as I record this.
Dr. Jim Dahle:
Now pay attention because about the time this podcast comes out, the final bill should be out. You can still do the backdoor Roth. Really this question is kind of no longer terribly interesting, but occasionally you'll have a situation where you have to consider the value of a post-tax IRA, or that's basically the way a variable annuity works just with some additional fees versus a taxable account.
Dr. Jim Dahle:
And what you're really weighing as far as the taxes go, the benefit of having tax protected growth against the downside of paying ordinary income taxes instead of long-term capital gains taxes when you sell the asset in the end. And the more tax efficiently you invest, the harder it is for that tax protected growth to overcome the ordinary income tax on withdrawals.
Dr. Jim Dahle:
If your investment is not very tax efficient at all, it doesn't take that many years, but if you're an index fund investor, and we're talking about putting total stock market and total international stock market index fund kind of investments in there where they're really tax efficient, it might take decades for that benefit of the tax protected growth to overcome the difference in tax rates at the end.
Dr. Jim Dahle:
From that respect, most are probably better off in a taxable account than a non-deductible IRA or a variable annuity, especially if there's any significant fees associated with a variable annuity.
Dr. Jim Dahle:
But if the backdoor Roth IRA actually went away, it's possible that it could come back or your income could drop or whatever is such that you might be able to convert that money later. In which case you'd be very glad you put the money into a nondeductible IRA.
Dr. Jim Dahle:
Of course, in most states there's also an asset protection benefit and significant estate planning benefits to having that IRA. It can be stretched by your heirs. It may be untouchable in bankruptcy by your creditors, et cetera.
Dr. Jim Dahle:
It can be a difficult decision. The good news is it doesn't sound like anybody's going to have to make it this year, because I think the backdoor Roth IRA is going to live on. But the bottom line is the longer you leave it in there, the less tax efficient the investment, the more likely a non-deductible IRA can beat a taxable account.
Dr. Jim Dahle:
Our next question comes from Alex who's asking about vetting professionals for speaking gigs.
Alex:
Hi, Dr. Dahle. This is Alex in Mississippi. I'm a resident working with my program director and chair on starting a lecture series that's going to incorporate some personal finance and business management topics.
Alex:
Thanks for your blog and podcasts, especially the ones about new financial priorities for new attendings and for new residents, I know a bunch of the topics that we want to discuss.
Alex:
However, I need to go about vetting a series of individuals who will be giving these lectures. I would be willing to give them myself, but my faculty mentors would prefer to be a professional in the community so that they can continue to give these on an ongoing basis as I'll only be here for another one or two years.
Alex:
How do you go about vetting these people? What questions do you need to ask? How do you make sure that they're going to be good and give good advice to this vulnerable population? I know some of my co-residents have been hocked whole life policies, and I want to avoid that as much as possible.
Alex:
I would rather scrap the whole idea of the lecture series if all I'm going to do is set up my co-residents and future residents here for a world of heartache and pain as their introduction to the financial industry. Thank you”.
Dr. Jim Dahle:
Alex, great question. First of all, thank you so much for what you're doing. It really does make a huge difference in the lives of your colleagues, your friends, your trainees, even your attendings. It can really help them.
Dr. Jim Dahle:
And you're right to be concerned. How many of us had somebody from Northwestern Mutual or Edward Jones or Ameriprise come into our residency program and basically sell us stuff that really wasn't that good for us? It happens all the time and so you're right to be concerned.
Dr. Jim Dahle:
How do you vet them? Well, assuming you're financially literate and you kind of understand how the industry works, you're basically looking for people that you would consider hiring, people that you would actually send friends and family to. That's your vetting process.
Dr. Jim Dahle:
If you need help with that, we have the same dilemma at the White Coat Investor as we select advertisers. And so, we have applications. For insurance professionals, we have an application, especially for financial advisors we have an application and we turn down the majority of people who apply.
Dr. Jim Dahle:
We have questions in there like how much of your practice is selling whole life insurance? Because I'm not going to put somebody up in front of my audience when 90% of the money they make is from selling whole life insurance, because I know what they're going to do. They're going to sell whole life insurance to my audience. And most of the time, that's not a very good move.
Dr. Jim Dahle:
And so, you just got to vet them individually, one by one, and ask them about their practice. Where does their money come from? What's their fee structure, what's their experience? What do the portfolios they put together typically look like? And I think that's the process.
Dr. Jim Dahle:
Now, how you ensure that remains good for years after you leave is a little bit harder. If you're not in charge, you're not in charge, but hopefully if you get good people in place to start with, they'll keep coming back year after year, because obviously there's a benefit for them.
Dr. Jim Dahle:
They want the business and there's nothing wrong with that. They're coming in probably for free in hopes that they get a little bit of business out of it. Sometimes people will do it out of the goodness of their hearts, but for the most part, they're hoping to get business out of it. So, if you're not paying them, they've got to get something from it to be interested to come in and speak as a professional.
Dr. Jim Dahle:
I don't fly across the country and talk to groups of docs for free, and I don't expect anybody else to do it either. And so, if you want people to spend the time to really put together a good presentation, that's what it takes. You either got to pay them or you got to make sure that it helps to build their business.
Dr. Jim Dahle:
Good luck walking that fine line. There's lots of financial conflicts of interest there, of course. But if you want to put in something that's lasting, I think you're going to have to deal with those conflicts of interest.
Dr. Jim Dahle:
Our next question comes from email. “I am at the beginning of trying to develop a medical device. And at this point I've only invested $2,000. It seems likely that the ultimate investment will be at least five figures. And the potential for loss on investment seems high. Do you see any pathway to using those losses to offset my taxable income? At this point, the fledgling device company is not incorporated in any way”.
Dr. Jim Dahle:
It sounds like you're planning to lose from the very beginning, which doesn't sound good, but I totally get it. At least if, if you lose, it'd be nice if Uncle Sam would share your pain. Well, the good news is he will.
Dr. Jim Dahle:
Any new business you start can generate a loss and those losses can offset your ordinary income, your earned income, your taxable income for three of the first five years. If you put it on schedule C and that loss flows through to your 1040, no big deal. However, if you keep losing money, year after year after year, you're at risk for the IRS reclassifying your business to a hobby. And hobby losses are not deductible. Only business losses are deductible.
Dr. Jim Dahle:
By year four, you really need to be making a profit with this business. But if you realize it's not working out in year two, you can just drop it. And yes, all those losses will be deductible. Now you don't get all your money back, but if your marginal tax rate is 40%, you have 40% of it back off your taxes. So that's beneficial.
Dr. Jim Dahle:
All right. I want to thank everybody out there for being White Coat Investors. I'm always thanking you guys for what you do in your professional lives, whether it's practicing medicine or dentistry or law or running a business, whatever it might be.
Dr. Jim Dahle:
But today I just want to say thanks for being here. Thank you for being part of our community. It's a wonderful group of people. Whether you participate just by listening to the podcast, whether you read the blog, whether you're in our subreddit or our forums or our Facebook group, whatever, if you come to our in person live events, thanks.
Dr. Jim Dahle:
It not only has changed my life for the better to have interactions with you, but it has made it possible for us to now have, I think we're up to 14 people working either significant part-time hours or full-time hours here at the White Coat Investor. It's pretty awesome what's been created here and without you, that doesn't happen. So, thanks for being here.
Dr. Jim Dahle:
Our next question is about earned income for kids. This one comes from Paul. Let's take a listen.
Paul:
Hi Jim. This is Paul from Nashville. My wife and I are both physicians and we have three young daughters. Our two older daughters aged six and three have both participated in the COVID-19 vaccine clinical trials. They have earned a few hundred dollars from their trial participation.
Paul:
My question is this. Would this count as earned income for a possible Roth IRA contribution? Would you recommend doing that or would you recommend putting the money elsewhere, such as a trust? Or my six-year-old daughter's preference would be to spend it at Dinosaur National Monument in Utah, in your neck of the woods. I would appreciate your thoughts on this. Thank you for what you do.
Dr. Jim Dahle:
I got bad news for you on this one. This probably isn't going to work out the way you want it to. Here's the deal. They're probably going to pay you on a 1099 MISC. If it's under $600 bucks, they may not give you anything at all. But whether they give you something or not, it's taxable income. So, you do have to pay taxes on it.
Dr. Jim Dahle:
Now presumably your kids don't have any other income so it's not enough income that will have to pay taxes on it. But the downside is it's not considered earned income. If this activity is infrequent, like I think it is, it's really not self-employment income. The IRS has actually talked about this. There's a private letter ruling it's numbered 9106004. It's about a participant in a medical study for asthma, but basically, it is taxable income, but it's not earned income.
Dr. Jim Dahle:
The good news is you don't have to pay social security or Medicare taxes on it. The bad news of course, is that it's also not eligible to help you get the earned income tax credit. It's not eligible for retirement account contributions. I don't think you can start a Roth IRA with that income unless you can somehow turn this into a regular business forum where they're getting ongoing income from this because they're in six trials a year or something. And it's probably pretty hard to piece that together. I don't think this is going to work for opening your kids Roth IRA, which it sounds like that's what your goal is.
Dr. Jim Dahle:
Our quote of the day today comes from Phil DeMuth, PhD, who said “Nearly all CFPs are actually asset managers, and no wonder it pays more. Many financial planners dispense with a financial plan altogether, which is just a loss leader as far as they are concerned”.
Dr. Jim Dahle:
Make sure if you're hiring a financial planner because you need a financial plan that you are actually paying them for the financial plan and not just for asset management or you are likely to get what you pay for.
Dr. Jim Dahle:
All right, let's talk for a minute about buffered ETFs. Warren calls in with this question.
Warren:
Hi, Dr. Dahle. I have a question about buffer ETFs. I'm currently saving three years’ worth of expenses in case I choose to do an early retirement at age 57, which is two years from now. I am eligible for a sizable lump sum or pension at age 60, which is why I want the three years.
Warren:
I already have most of the money saved in a high yield online bank and a mixture of short and intermediate term bonds. However, with the yields being so low, I hate the idea of my money sitting there losing steady ground to inflation. What do you think about buffered ETFs as a solution for this specific problem? Thanks for your podcast. It has helped me tremendously.
Dr. Jim Dahle:
All right, buffered, ETFs. What's a buffered ETF? Well, they're generally linked to the S&P 500 index, and then they provide some sort of downside protection. These sorts of products are really common. They're common in the insurance space in particular. We're talking about annuities, index linked annuities, we're talking about index linked universal life policies.
Dr. Jim Dahle:
And the basic theory is the same with all of them. The idea is to have your cake and eat it too. They're really attractive because this is what we all want, right? We want high inflation beating returns, but we don't want to take any more risks than actually putting our money into a savings account. And the truth of the matter is you can't get it. It doesn't exist.
Dr. Jim Dahle:
The higher the returns you want, the more risk you've got to take. You want to beat inflation? You got to have money in things that beat inflation. And for the most part, that means stocks, real estate, those sorts of risky assets. That can go down in value.
Dr. Jim Dahle:
You have to ask yourself for a given goal: what's more important, the return on your principal or the return of your principal? And when we start getting into time periods like 1, 2, 3 years, the return of your principals starts mattering more than the return on your principal. That doesn't mean you can't take any risk at all, but it maybe means you don't want to have it all in risky assets.
Dr. Jim Dahle:
So, you've got to decide how much risk to take. And maybe that's a balanced fund that is mostly bonds. Maybe that is a balanced fund that is mostly stocks. You got to ask yourself, “Well, what are the consequences of loss? And when do I really need the money? How definite is that date?”
Dr. Jim Dahle:
And that's kind of the trick with short-term investing. For example, if I've got to make a tax payment, and I got to make an estimated tax payment in four months, I'm not taking any risk with that. That's going to sit in my high yield savings account until that tax bill is due. It might even sit in my checking account just because I don't care so much about the return on the money as the return of the money.
Dr. Jim Dahle:
But if you're saving for a house down payment in three or four years, maybe five years, you don't really know when it's going to happen. Well, you can probably put some of that into equities, real estate, et cetera, make sure it's liquid enough for your needs, but you can take some risks. Especially if the value of those assets goes down isn't a big deal.
Dr. Jim Dahle:
But the problem is these people are selling products. Whether it's buffered ETFs or annuities or universal life policies, they're trying to cash in on that desire of yours to have a higher return without taking higher risk. And for the most part, you're paying too much for the benefit you're getting. You're taking on more risk and you're not being appropriately rewarded for doing so. Or you're simply just giving up too much of the return to limit your risks.
Dr. Jim Dahle:
So, I’m not a big fan of these sort of structured kinds of investments. I think you're better off with plain vanilla investments where you can see exactly how much risk you're taking. And if you want to take some risks, that's fine. Add a little risk in, but I don't think you need to go to these sorts of products.
Dr. Jim Dahle:
And when you look at the names of the companies that are putting these things out, it's not necessarily companies you would normally go to invest in. So, keep that in mind. I would as a general rule avoid these buffered ETFs. I think they're product is made to be sold, not bought.
Dr. Jim Dahle:
This podcast was sponsored by Bob Bhayani at drdisabilityquotes.com. He has been a longtime sponsor of the White Coat Investor. One listener sent us this review, “Bob and his team were organized, patient, unerringly professional and honest. I was completely disarmed by his time in care. I'm indebted to Bob's advocacy on my behalf and on behalf of other physicians and to you for recommending him.”
Dr. Jim Dahle:
You can contact Bob at drdisabilityquotes.com, by email at [email protected] or by calling (973) 771-9100 to get your disability insurance today.
Dr. Jim Dahle:
Don't forget about our sale. Everything in the White Coat Investor store is 10% off this week through the 29th. Our courses are 10% off. There's a discount on bulk book orders that's good again through the 29th. And don't forget about the swag bag deadline of December 1st for WCI con 22.
Dr. Jim Dahle:
You're going to want the cool t-shirt we're putting together for. You're going to want the books from the keynote speakers. And it's the same price. If you register before December 1st or after December 1st but you have registered before, you get the swag bags. So, make sure you do.
Dr. Jim Dahle:
Thanks to those leaving us a five-star review and telling your friends about the podcast. A recent one came in from SN Chowdary who said “Very informative. Every person who wants to have a decent retirement should follow this podcast. Five stars”. Thanks for that review.
Dr. Jim Dahle:
Keep your head up, shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor podcast.
Disclaimer:
My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He’s not a licensed accountant, attorney or financial advisor. So, this podcast is for your entertainment and information only and should not be considered official personalized financial advice.
