In this episode, we tackle some of the most common and most confusing retirement planning questions physicians and high-income professionals face. We dig into the pros and cons of traditional vs. Roth contributions, how TSP and deferred compensation plans really work, and what to know about 401(k) match true-ups. We also walk through real-life scenarios, like merging finances when a spouse has no income but owns an IRA and how to maximize annual contributions to a solo 401(k).


 

Traditional vs. Roth

“Hi, Jim. I was hoping you could clarify something about the traditional vs. Roth contribution argument. I commonly hear a lot of advisors and tax experts argue that you should be comparing your marginal tax rate today against your effective tax rate at retirement in order to decide whether you're better off contributing to your traditional vs. Roth account.

This argument has never really made any sense to me. It seems that the relevant comparison should be your marginal rate today vs. your marginal rate at retirement. I'm hoping you can chime in on what the appropriate comparison is. Is there something to this marginal rate today vs. effective rate in retirement argument, or is that just nonsense spewed by folks who don't understand math?”

The correct comparison when deciding between traditional and Roth contributions is your marginal tax rate at contribution vs. your marginal tax rate at withdrawal. Each dollar contributed or converted should be analyzed this way because it’s the marginal rate—the rate applied to your next dollar of income—that determines the true tax impact. Comparing marginal to effective rates isn’t mathematically accurate, but it’s sometimes used to illustrate that retirees often withdraw money at lower average rates due to the progressive nature of tax brackets.

In retirement, your withdrawals typically fill up lower tax brackets first. For example, a married couple can withdraw roughly $30,000 tax-free, thanks to the standard deduction, followed by income taxed at 10%, 12%, and then 22%. If those contributions were deducted at a 35% marginal rate and later withdrawn across these lower brackets, that creates a clear tax advantage. The concept of comparing marginal to effective rates arises from this scenario. It helps visualize how filling lower brackets during retirement can make traditional contributions particularly efficient.

The academically correct approach remains marginal to marginal. If you contribute and later withdraw all funds at the same marginal rate, the outcome is neutral. But since many retirees have fewer income sources and smaller taxable amounts, much of their retirement income comes out at relatively low rates, making traditional contributions generally favorable during high-earning years. Still, factors like future tax law changes, investment returns, and spending levels can alter this balance.

At the end of the day, both traditional and Roth contributions are excellent vehicles for building wealth. They each provide tax advantages and creditor protection, and either is superior to saving in a taxable account. Because the “right” choice depends on factors that are often unknown or unknowable, it’s best not to stress over past decisions. A thoughtful balance between the two approaches can serve most investors well over time.

More information here:

Should You Make Roth or Traditional 401(k) Contributions?

Roth vs. Tax-Deferred: The Critical Concept of Filling the Tax Brackets

 

Merging Finances 

“Hi, Dr. Dahle. Thank you for everything that you do. You made a massive difference in my financial life. I'm a general surgeon working in Pennsylvania, and I make about $450,000 a year. The great news is I just got married, and my wife and I are merging our finances. She will have had virtually no income for 2025. She's a career changer and in school, except for a couple of very small jobs.

We're wondering what to do with her IRA. She has about $80,000 in an IRA. I see the two options as rolling it into a solo 401(k) or converting it into a Roth. We're trying to get it out of the IRA so that we can do a Backdoor Roth for her next year. I'm wondering which the better option is, given that we want to obviously file taxes together and given that she's not making any income. So, that'll make our tax brackets much more advantageous. Any help you can offer would be really much appreciated.”

When deciding what to do with an $80,000 IRA balance, both available options, a Roth conversion or rolling it into a solo 401(k), are solid choices. The key consideration is the couple’s tax situation now vs. in the future. Since they plan to file jointly and the wife has little income this year, their current tax bracket will be favorable, which could make a Roth conversion appealing. Converting the entire IRA would likely cost around $25,000-$30,000 in taxes, but once converted, the funds would grow tax-free forever. Having $80,000 compounding in a Roth can be an excellent long-term move, especially if the couple’s income and tax rate are expected to rise in the coming years.

On the other hand, rolling the IRA into a solo 401(k) is also a strong and practical choice. It would eliminate the pro rata rule issue, allowing her to make Backdoor Roth IRA contributions each year without complications. If she already has or plans to continue a side income, opening a solo 401(k) would also create a vehicle for her to make future tax-deferred contributions from that work. This strategy avoids a large upfront tax bill while still offering retirement savings growth and flexibility.

Ultimately, there isn’t a single “right” answer. It depends on the couple’s current cash availability, future earning potential, and long-term goals. If they can comfortably pay the conversion tax now and expect higher income later, the Roth conversion is favorable. If they prefer to preserve cash and still solve the Backdoor Roth problem, the solo 401(k) route is equally smart. In either case, both decisions are financially sound, and the couple is clearly approaching this with the right mindset and strategy.

More information here:

Communicating with Your Spouse About Finances When You Don’t See Eye to Eye

How Happy Couples Manage Finances

 

Solo 401(k) Contributions 

“Hi Jim, it's Craig calling from the Midwest. Hoping you could clarify something really quick. When we are calculating our annual solo 401(k) contribution, we always say it's 20% of net business profits or the amount of line 31 Schedule C. I saw something online that also mentioned something about factoring in self-employment taxes. Basically it's 20% of net business profits minus one half of your self-employment tax, which I guess is the value of line four in part two of Schedule 2 on our 1040. It's kind of like splitting hairs, but if we wanted to make an exact contribution, do you know which one it is?”

When calculating a solo 401(k) contribution, the correct formula is 20% of net business income after subtracting one-half of the self-employment tax. This half represents the employer portion of Social Security and Medicare taxes, which reduces the amount of true business profit available for retirement contributions. Many people see the 25% figure in tax documents, but that applies when the contribution itself is included in the calculation; both yield the same effective result. For simplicity, self-employed individuals should remember that their employer contribution is 20% of adjusted net income after deducting the employer half of self-employment taxes.

There are three types of contributions that can be made to a 401(k): employee, employer, and after-tax contributions. The employee contribution can be either traditional or Roth, and for 2025, the limit is $23,500 [2025 — visit our annual numbers page to get the most up-to-date figures]. The employer contribution—the 20% portion—is in addition to that and is based on net business profits as described.

If the plan allows, there’s also an opportunity to make after-tax contributions, which can be converted immediately to Roth funds through what’s known as the Mega Backdoor Roth IRA strategy. For example, after maxing out employee and employer contributions, someone could still add another $30,000-$35,000 in after-tax contributions, depending on plan limits. Setting up a solo 401(k) with this flexibility may cost a few hundred dollars a year, but it can significantly expand tax-advantaged retirement savings opportunities.

To learn more about the following topics, read the WCI podcast transcript below.

  • Rolling TSP to Roth IRA
  • Deferred Compensation Plans
  • 401(k) match true-up

 

Milestones to Millionaire

#246 — Neonatologist's Hobby Turns into Lucrative Side Gig

We have a milestone on the podcast today that we have never heard before. We are chatting with a neonatologist who has become financially stable enough to start investing in comic books. He has acquired a $500,000 collection. He said he was on his way to FIRE and realized he really enjoys his job and wanted to spend more along the way. So, he went back to his high school passion of collecting comic books. The cool thing is that this hobby has become lucrative as an alternative investment. He has made six figures in buying and trading comic books. It just goes to show that there is real joy in spending and enjoying your money alongside saving for retirement.

 

Finance 101: Alternative Investments

Alternative investments sit outside the traditional trio of stocks, bonds, and real estate. These tend to be speculative in nature—assets that don’t produce regular income through dividends, rent, or interest. Examples include collectibles like comic books, precious metals, cryptocurrencies, and even empty land. The potential for profit in these areas comes solely from price appreciation, meaning you buy with the hope of selling for more later. Because they often lack intrinsic cash flow, they carry higher volatility and risk.

For most investors, speculative assets should represent only a small portion of their total portfolio, ideally less than 10%. Owning a little Bitcoin, gold, or another alternative investment can add interest and diversification, but overexposure can lead to serious losses. These assets can swing wildly in value, and while they can produce impressive short-term gains, they can also collapse quickly. The key is to avoid chasing performance. That means buying something simply because it has recently gone up in price. Instead, focus on maintaining balance through traditional investments that provide stability and predictable returns.

Venturing into alternative or private investments also requires heightened caution. Scams and misleading claims are more common in these less-regulated markets, so it’s essential to evaluate costs, tax implications, and actual returns carefully. Diversification, transparency, and skepticism remain vital principles. If approached thoughtfully, alternatives can add variety and personal interest, or they can even evolve into a side business. But their role should remain secondary to the core portfolio designed to build long-term financial security.

To learn more about alternative investments, read the Milestones to Millionaire transcript below.


Sponsor: Bob Bhayani at Protuity

 

Today’s episode is brought to us by SoFi, the folks who help you get your money right. Paying off student debt quickly and getting your finances back on track isn't easy, but that’s where SoFi can help. It has exclusive, low rates designed to help medical residents refinance student loans—and that could end up saving you thousands of dollars, helping you get out of student debt sooner. SoFi also offers the ability to lower your payments to just $100 a month* while you’re still in residency. And if you’re already out of residency, SoFi’s got you covered there, too.

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WCI Podcast Transcript

Transcription – WCI – 443

INTRODUCTION

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.

Dr. Jim Dahle:
This is White Coat Investor podcast number 443.

Today's episode is brought to us by SoFi, the folks who help you get your money right. Paying off student debt quickly and getting your finances back on track isn't easy. That's where SoFi can help. They have exclusive low rates designed to help medical residents refinance student loans. That could end up saving you thousands of dollars, helping you get out of student debt sooner.

SoFi also offers the ability to lower your payments to just $100 a month while you're still in residency. And if you're already out of residency, SoFi's got you covered there too. For more information, go to sofi.com/whitecoatinvestor.

SoFi student loans are originated by SoFi Bank, N.A. Member FDIC. Additional terms and conditions apply. NMLS 696891.

All right, welcome back to the podcast. We're grateful you're here. Without you, it's not much of a podcast. It's Megan and me and that's it, just talking to ourselves in a room. We're grateful to have you out there. Tens of thousands of you listening to this podcast. I'm honored. I'm a little bit embarrassed that that many people listen to a podcast I put together. I feel like I ought to put more preparation into them knowing that there's that many of you out there, but alas, my life is busy. I've got to coach a hockey team. There's important stuff going on here.

All right, let's start with your questions. First one is an active duty person. Thank you for your service. Let's take a listen to your question.

 

ROLLING TSP TO ROTH IRA

Speaker:
Hi, Dr. Dahle, I'm leaving active duty soon and I was thinking about rolling over my all Roth TSP into my Roth IRA. I'm looking to take advantage of some benefits provided by my broker for hitting certain investment balance. I know you've talked about all the benefits of the G Fund before, but I'm sure there are civilian alternatives that are highly similar. Is there any other benefit to staying in the TSP? Thank you for all that you do.

Dr. Jim Dahle:
All right. Yeah, thanks for your service. Exciting to be getting out. I can remember the day I got off active duty and drove. We were moving out of Virginia. We were driving out to Utah. I had a job here and I was whooping and hollering. I was pretty excited to get out. Not that everything was bad in the military, but there were plenty of things I didn't enjoy about being in the military and I was pretty excited to get out that day, I remember.

Okay. The TSP. I stayed in the TSP in 2010 when I got out of the military. In fact, I've still got money there. Although just for simplification purposes, we may stop that soon and roll that money over into another retirement account just to have one fewer account.

It used to be that the TSP was the very best 401(k) in the country. It had the lowest costs. The expense ratios on the funds were like 0.02%, 0.025%. Even now, I think they're only like 0.04% or something. Super low cost index funds. And you just couldn't get that in most 401(k)s. The TSP was way ahead of its time. It also had these L funds, the lifecycle funds. So if you just wanted a “set it and forget it” solution, that was available to you.

And then of course it has, as you mentioned, a really cool special fund called the G fund. And I love that you think the G fund is available somewhere else. I have news for you. It's not. The G fund is unique to the TSP. There really is nothing that compares to it out there.

Now there are some types of funds that are basically cash funds that might pay a little more than a money market fund, but it's not the same. The TSP basically gives you treasury bond yield for money market risk. So you never lose principal in the G fund. And sometimes as rates go up, it can pay you a lot, but you don't lose any money when rates go up, like you would at the bond fund. A lot of people think that's pretty cool. And it's a big reason why some people leave money in the TSP.

But if you don't want to invest in the G fund in your Roth account, then it's probably fine to roll the money over to go to Vanguard or Fidelity or Schwab or whatever. I'd be a little hesitant to go to a random brokerage that's just offering you some benefit. I'm not a huge fan of some of these brokerages that you put in a trade and confetti sprays onto the screen. This is serious business. You're investing your life's savings. I'd rather have a name I trust, like a Vanguard or Fidelity or a Schwab than one of these fly-by-night brokerages. I'm not sure they're going to be there in five-year brokerages. So I'd encourage you to kind of stick with those three when you roll the money away.

Now, they will also give you transfer bonuses, sign-up bonuses, etc. You move a bunch of money over there. You might already be talking about one of these companies, but I'm not a huge fan of these other brokerages that are gamifying investing. Investing isn't a game. It's pretty serious stuff.

But it's fine to move your money out. Just recognize what you're giving up. There's not a lot else there with the TSP. In fact, it's getting better. But for a lot of years, it was kind of a pain to get your money out of the TSP. They only allowed like one partial distribution. I'm not sure where that's at right now. But it's a great 401(k) still for the federal workers and for active duty folks. It's not quite as head and shoulders above everything else as it used to be. Not because it's gotten worse in any significant way, but because the other ones have gotten better.

And so, that's a good thing, not a bad thing. But I wouldn't feel bad about rolling your TSP over to a Roth IRA. I think that's fine. If nothing else, it helps you simplify accounts. And the main thing you're giving up is really just the G fund. And if you're okay with that, which is not unreasonable, then I think it's fine to roll your money over.

By the way, these sorts of questions that you guys send into the podcast, you don't have to wait for us to get to them and run them on the podcast in six or eight weeks later. We'd love having your questions. They're great because now we got something to talk about on the podcast. You can leave your questions at whitecoatinvestor.com/speakpipe.

But if you want to get an answer to your question faster, especially if you want to get multiple answers to your questions, kind of crowdsource the question, I would recommend that you go someplace else. One of our White Coat Investor communities. And we've got one of these on Reddit. It's r/whitecoatinvestors.

We've got one of these on the Facebook group. The Facebook group is also called White Coat Investors. We've got a forum, forum.whitecoatinvestor.com. We've got the Financially Empowered Women's group. You can go to whitecoatinvestor.com/few, and you can get connected with that. It also has a Facebook group associated with it. And then of course, we've got growing social media communities as well. One of the fastest growing ones is our Instagram community, Instagram/whitecoatinvestor.

So, check these places out. If you've got questions, ask your questions. Instead of one response from me, you might get 30 responses. And maybe if I get a chance, I'll pop in there and give you my own response as well. Don't forget about our communities. Since we've been founded, we've been bringing together this community of like-minded physicians and other high earners who are committed to financial success.

Whether you're celebrating a money win or navigating a financial setback, or just looking for some guidance, you'll find a wealth of knowledge in the subreddit, Facebook group, or forum. Ask questions, pay it forward, answer other people's questions. Lots of these questions don't have a right answer. People are just looking for multiple opinions and perspectives, and you can provide that no matter how much or how little you know, how far along you are on your financial literacy journey.

Okay. Oh, great. I see the next question coming. Someone has asked the hardest question in personal finance and investing. Let's take a listen to this version of it.

 

TRADITIONAL VS. ROTH IRA

Speaker 2:
Hi, Jim. I was hoping you could clarify something about the traditional versus Roth contribution argument. I commonly hear a lot of advisors and tax experts argue that you should be comparing your marginal tax rate today against your effective tax rate at retirement in order to decide whether you're better off contributing to your traditional versus Roth account.

This argument has never really made any sense to me. It seems that the relevant comparison should be your marginal rate today versus your marginal rate at retirement. I'm hoping you can chime in on what the appropriate comparison is. Is there something to this marginal rate today versus effective rate in retirement argument, or is that just nonsense skewed by folks who don't understand math? Thanks a lot.

Dr. Jim Dahle:
Great question. Like I said, this borders on the most difficult subject in personal finances and investing, which is should you do Roth contributions and conversions, or should you do tax deferred or traditional contributions and not do Roth conversions? It's super complicated. Anybody that tells you this is simple or that the right answer is always the same thing, they don't understand the issue. It's complicated.

But here's the good news. They're both good things. Making tax deferred contributions is a good thing. Making Roth contributions is a good thing. You're better off having your money invested in these accounts than you are in a taxable account. The money grows faster, it's more protected from creditors, so they're both good things.

The main factor that matters when you're deciding on whether to do Roth or not is comparing your tax rate at contribution versus your tax rate at withdrawal. And the truth is, to answer your question directly, the truth is you got to look at that for every dollar. Every dollar you contribute, every dollar you convert, you got to look at the marginal tax rate of contribution against the marginal tax rate at distribution. It's marginal to marginal for every dollar. That's the academically correct answer.

I think when we, and I've done this as well in the past, talk about comparing your marginal rate to your effective tax rate at withdrawal, we're just trying to point out that at withdrawal you get the benefit of filling the brackets.

So, if you're a married couple in retirement this year, your first $30,000 of taxable income comes out at the 0% rate. That's the standard deduction, $30,000. And then you get another 20-ish or so out at 10%, and another 50-ish, I think, out at 12%, another $75,000 out at 22%.

If you can contribute at your marginal tax rate of 35%, and then you later take some of that money out at 0%, and some of that money out at 10%, and some of that money out at 12%, and some of that money out at 22%, well, you're winning with every single dollar. But you're winning much bigger. You're bigly winning, in the words of our great president, with the ones that are coming out at 0% after you save 35% when you put them in.

In that respect, when you look at all the dollars together, maybe comparing marginal, because you almost always get the whole deduction at your marginal rate, because those brackets tend to be really wide, and effective at the back end, that does make some sense to think of it that way.

But the academically correct answer is it's marginal to marginal. And if you can take all of those contributions out at one tax rate, well, that makes it real easy to do marginal versus marginal. But for a lot of people, one of their main sources of taxable income, maybe their only source of taxable income for a number of years of retirement, is withdrawals from tax-deferred accounts. And some of those are going to come out at very low rates if that's your only source of taxable income.

I hope that's helpful. If you want to learn more about this most complicated of subjects, the most recent post I wrote about it was published March 7th of 2025. It's called, Should You Do Roth Contributions and Conversions? And if you just put into the search bar at whitecoatinvestor.com Roth Contributions, it'll be the first thing that pops up. And it'll walk through all the factors that go into this decision, and likely make you feel a lot better about however you're making the decision currently. If you've made the wrong decision in the past, as I have, you might be surprised it may turn into the right decision later.

So, don't beat yourself up too much about it. They're both good things to do. But the further I go in this personal finance and investing stuff, the less I worry about this issue, because I think a lot of the time it depends on factors that are not only unknown, but unknowable. I quit beating myself up about getting the wrong decision for stuff I wasn't even possibly able to know years and years ago when I had to make the decision.

 

QUOTE OF THE DAY

Dr. Jim Dahle:
Okay, our quote of the day today comes from Peter Lynch, who said, “Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.”

Okay, next question is from Steve. Let's take a listen on the Speak Pipe.

 

DEFERRED COMPENSATION PLANS

Steve:
Hi, Dr. Dahle. I just wanted to say thank you for all that you do. I think the WCI podcast and all the resources you have, have been very helpful to me in improving my financial literacy. I had a question specifically on deferred compensation plans, and I wanted to get your general thoughts on them as to whether or not they should be utilized and particularly maximized, such as 457(b) plans.

I had a very generous deferred compensation plan in my first job out of fellowship. I was able to utilize that for about 10 years, where essentially you could put an unlimited amount of your salary into that. And my current employer only allows for the maximum in a 457(b), which I think is $22,500.

Unfortunately, I have accrued quite a bit into the deferred compensation plans, and they are going to be distributed now. And I don't think there's a particular opportunity for me to do anything special when it comes to tax savings, as they will be taxed as ordinary income at a very high level.

I was wondering if you had any thoughts on what you could do with deferred comp once it gets distributed, if you're still working in a high income tax bracket, and what your thoughts are in general about deferred compensation plans. Thanks so much. I appreciate all that you have done and your insights on this.

Dr. Jim Dahle:
Okay, great question. There are a lot of different types of deferred compensation plans. The classic, typically available to physicians, is a 457(b) plan. And the amount you can contribute to these is usually $23,500. They do have some catch up aspects. As you get older, get closer to retirement, you might be able to contribute more than that. That's typically the limit. Now, under some of the other plans, it's possible to have more, but we're going to focus my comments mostly today on 457(b) plans.

There are two different types of these plans. And it's really important that you understand the differences. The first type is a governmental 457(b) plan, typically offered by a government employer. And the real benefit of these is that the money is held in trust, like your 401(k). It's your money. It's not going to be lost to your employer's creditors.

And the other big, huge benefit is one of the distribution options is to just roll it into your 401(k) or IRA, which is pretty awesome to be able to do. It's just like having an extra 401(k). It's great. Kind of like a cash balance plan, for instance.

But the other type, sometimes called tax-exempt, because they're offered by tax-exempt employers, or non-governmental 457(b)s are a totally different ball of wax for a couple of reasons. One, the money is not held in trust. It's available to your employer's creditors. So if that employer goes bankrupt, you could theoretically lose your 457(b) money.

Now, for years, I've told people I'd never heard of a doctor that ever lost any of their 457(b) money. It seems there is a case right now where there's a good chance doctors are going to. It hasn't run its course yet. This is involving the Steward bankruptcy for any of you involved with that. They owned my hospital for a while, so I know quite a bit about Steward. But it's possible docs that were in a 457(b) plan associated with Steward are not going to get their money. They're actually going to lose it to Steward's creditors. More on that when it finally works its way through the courts over the years. So we'll talk about it on the podcast, I'm sure.

But it is possible to lose the money. So that's one thing to keep in mind. And you ought to consider that as you contribute to a non-governmental 457(b) or other types of deferred compensation plans that might be available to your employer's creditors is the potential of losing it. That might mean you only want to contribute for a year or two, or you might only want to contribute a few dollars to it or whatever.

But you definitely want to look at the employer's financial stability when you're contributing to these things. If they're not fixing the CT scanner in the hospital, like Steward wasn't by the time they left our hospital, maybe that's not the place you want to be storing your retirement money. You know what I'm saying?

Okay. The other problem with these non-governmental 457(b)s is the withdrawal options, the distribution options at the end. You've got to make sure before you contribute a dollar to these things, that those distribution options are acceptable to you.

A lot of times they're fine. They allow you to take the money out and spread over 10 years or to defer it until you're 60 or whatever. You just have to make sure whatever options they're offering are acceptable to you.

Here's an example of an unacceptable one. It sounds like this is what you're dealing with. That you have to take it all out in five years while you're still in the middle of your career. And so now you're deferring taxes at who knows, 32, 35%. And now you have to take it all out at once. You have to pay 37% on everything you take out of that. That's not a good deal for you. You want to be able to spread those out for a while.

Now, what most people like to do with their 457(b) money is there's no age 55 rule. There's no age 59 and a half rule with this money. So this is often the first money spent in retirement, especially if it's a non-governmental 457(b). And you're worried that the employer's creditors could get it. That's often the first money you spend.

This is the money you're spending if you retire early at 50. This is maybe what you spend from 50 to 59 and a half is your 457(b) money. But just make sure that the withdrawal options, the investing options, the fees, and maybe most importantly, the financial stability of the employer are all acceptable to you before you make any contributions to these plans. I hope that helps you to think generally about them if you have one available to you.

As a general rule, most people are at a university employer and they have a 403B and they have a governmental 457(b), and maybe they have a 401(a). Those are all fine to use, max them all out. If you want to save more, put it in a taxable account, in your Roth IRAs, et cetera.

But you have to be a little bit careful if you're being offered a non-governmental 457(b) in deciding exactly how much of that you want to use. I've had at least one White Coat Investor come back to me in the past and say he wished he'd never put a dollar into it. He got all his money back out, but he says the hassle of worrying about whether he'd get his money back was enough that he wished he'd just invested in taxable the whole time, and maybe that's what you'd like to do as well.

INVESTING AT MULTIPLE BROKERAGES

Okay, my next question is by email. This listener says, “I have my retirement account with Schwab, Fidelity, and Vanguard because of work. My 401(k) is with Schwab, my wife's is with Fidelity, and our IRAs are with Vanguard. They each have their own mutual funds, which you can purchase without fees, or you can buy ETFs without fees.

To keep all my accounts on the same page, i.e. buying VBR across multiple brokerages, I've been including some ETFs in my portfolio. But I hate ETFs. I want all my money invested when I invest, and it irks me that I invest at market price, I end up with upwards of $200 just sitting in cash. Due to my OCD-ness, I've left thousands sitting in cash with limit orders, hoping to keep my after-purchase remaining balance to a minimum. I looked back at a prior order for VBR, which did not transact for $170, and now just placed another limit order for $200.

I mathematically understand I'm chasing pennies and losing dollars or hundreds of dollars, but I find it hard to get over the mental barrier. What should I do? Just leave Vanguard and consolidate to Fidelity and Schwab and stick to mutual funds? What do you do about remaining balances when purchasing ETFs? I understand this is a silly and relatively insignificant question, but would love to hear your thoughts.”

It's actually a pretty good insight there. There are therapists out there that specialize in OCD, and maybe you and I ought to go together to see one. I've dealt with this issue over the years where it bugs me to have money that's not invested, especially like Schwab, where you're not actually earning anything on that $200 or whatever that's sitting in cash until next month.

But as the years have gone by, I've gotten better at not worrying about the small stuff like this listener is. So, get over it. Get over it. It reminds me of that Phil DeMuth quote. I've probably mentioned this on the podcast before, but it's probably been a while. And this is on a different subject, but it's the tone that I want you all to take from.

Phil said, “Even if risk tolerance existed and could be measured accurately, why would it be an important factor to consult when considering how to invest? You should invest in the way that has the greatest prospect to fulfill your investment goals. That might mean taking more or less risk than you would prefer. If you are a sensitive soul who can brook no paper losses, the solution is to get a grip, not to invest safely if that locks in running out of money when you're old.”

What I'd tell this listener is get a grip on your OCD-ness. I'd probably also quit using limit orders. These are very liquid ETFs you're talking about buying. They transact instantaneously. The bid-ask spread is very narrow, especially on any normal market day where the market's not up and down 5% in the day or something. A market order is fine. I used to put in limit orders. I don't bother anymore. I just put in market orders, okay? I'm buying VTI. I'm buying VXUS. I'm buying ITOT. I'm buying AVOV. They all transact instantaneously. These are very liquid ETFs.

I used to chase my tail with these limit orders. It wasn't worth it. And if I was still doing that, I'd be driving my OCD-ness even more badly. It'd be worse though. It'd be worse if I was trying to use three different sets of mutual funds, some from Schwab, some Fidelity, some from Vanguard.

This is the benefit of using ETFs. You can just stick with one set of ETFs. I also have an account at Schwab. My partnership 401(k) is at Schwab. The WCI 401(k) and our HSA is at Fidelity. Our Roth IRAs and our taxable account are at Vanguard. So I get it. I've got money spread across these three brokerages. But by using VTI and VXUS and ITOT and IXUS. These ETFs are available for free at all three of these brokerages. Then I can have the same investment, even if it's held at Fidelity versus Vanguard versus Schwab.

I think it's probably worth the hassle. You have to learn to put in a few trades when you're using ETFs. They're slightly more tax efficient than just a regular index mutual fund. The Vanguard ones, they've got the multiple share classes. The difference is very minimal with Vanguard, but it's probably worth, if you're investing in a taxable account, especially, it's probably worth dealing with the hassles of ETFs. It's not that bad to do. Once you do it for a little while, you'll probably stick with it.

I think it's better than dealing with the hassle of owning multiple mutual funds across multiple brokerages though. So I'd encourage you if you're feeling a little OCD about not having every dollar you have invested, get used to it and this too shall pass. It's okay to have a little bit of money sitting in cash in every account. It's not going to break the bank or anything. And just adjust whatever method you use to track your money for that cash.

Okay. The next question is about a 401(k) match true-up.

 

401(K) MATCH TRUE-UP

Shwetha:
Hi, Jim. This is Shwetha from California. Long time listener. Thank you for what you do. I wanted to bring up the idea of the 401(k) match true-up. For 22 years, I've been a W-2 employee and always had the option to put a certain percentage dollar amount, or just to check the maximum IRS contribution for my 401(k).

Back in 2023, my husband changed employers from one W-2 to another. And in an effort not to over-contribute, we actually reduced the amount of percentage of his per pay period we would contribute to the 401(k). So we didn't go over the IRS limit.

However, unbeknownst to us, that stopped the match when he reached the income limit for that year of $345,000, which then shorted us by almost $6,000 on the employer match, which we noticed at the end of the year. We did contact HR and while reluctantly, they did true us up several months later, we were not aware of this. Just thought maybe it would be interesting for your listeners to know as after 22 years of being a W-2 employee, this is the first time I've actually encountered this type of situation. Thanks again for what you do.

Dr. Jim Dahle:
Okay, this is a great question because I don't know that we've ever talked about a true-up on this podcast. It's hard to keep track of 450 podcast episodes done over I don't know how many years, but I can't remember ever talking about this. So let's talk about it.

I've never actually had a 401(k) that offered me a match. I've never received a dollar of a match in my entire career. So those of you who have a match of some kind, thank your lucky stars. It's great. I've never gotten an employer match.

But if you get an employer match, you should be aware of an issue. Some employers' 401(k)s, the way they're set up is if you put the maximum in the 401(k) early in the year, they will not give you the whole match you can get if you spread your contributions out throughout the year.

And it sounds like this issue you had in the 401(k) was slightly different than that. But you have to understand how the 401(k) plan works. Go into HR, get the 401(k) document, read the stupid thing. It's your retirement we're talking about. Read the document, you'll be amazed what you learn. And if it's not clear what happens with this true-up issue with the match, go to HR and ask them exactly how the true-up issue works.

Ask them what you have to do to get the maximum amount of match. Ask them if you just write a check for the whole 401(k) contribution in January, do you still get the entire match? Ask them if you drag it out over 12 months, do you still get the full match available to you?

Make sure you understand exactly how the match and any true-up of that match works. The true-up is basically your employer fixing it so they don't screw you at the end of the year. Because a lot of them won't do a true-up, and you're just out of luck. They're only going to match you $1,000 a month. If you put it all in in the first month, well, you just miss out on that $1,000 a month for every month for the rest of the year. And obviously, if that's the case, if that's the way your 401(k) match works, you want to spread your contributions out throughout the year.

But you have to understand how the plan works. If there's a true-up, how does it work? If there's a match, how does the match work? And what are the possible ways you could not get the full match? Have that conversation. It's part of your compensation. Not getting your full match is like leaving part of your salary on the table. So understand it, understand how it works, do what it takes to get it.

Thanks out there for what you're doing. By the way, it's not easy work. You might be walking the dog, you might be jogging after work. Maybe you're going into work coming back from a hard shift or something. I know it's hard work, something bad happened to a significant number of you today. And I'm sorry for that. But I'm thankful for what you're doing.

It's important work that you do. We forget that sometimes until we or one of our family members or friends is dealing with a serious medical problem. And we realize, “Oh, yeah, there's all these people who dedicated their entire 20s and significant hours of the rest of their life to being there for us when we need them at those times.” So thanks for being one of those people.

All right, the next question comes from Ben. Let's talk about merging finances.

 

MERGING FINANCES

Ben:
Hi, Dr. Dahle. Thank you for everything that you do. You made a massive difference in my financial life. I'm a general surgeon working in Pennsylvania and make about $450,000 a year. The great news is I just got married and my wife and I are merging our finances. She will have had virtually no income for 2025. She's a career changer and in school, except for a couple of very small jobs.

We're wondering what to do with her IRA. She has about $80,000 in IRA. I see the two options as rolling it into a solo 401(k) or converting it into a Roth. We're trying to get it out of the IRA so that we can do a backdoor Roth for her next year.

I'm wondering which the better option is given that we want to obviously file taxes together given that she's not making any income. So, that'll make our tax brackets much more advantageous. Any help you can offer would be really much appreciated. Thank you.

Dr. Jim Dahle:
Okay, Ben, this is a great question. And you're super financially literate. Because you're asking the right question. You're asking the hard question that has a very difficult answer if there's a right one at all. And you're doing everything else right. You recognize that you got to do something about this IRA if you want to do a backdoor Roth IRA every year for her. You've recognized she's got some side income so she could get an EIN for this business of hers and she could open a solo 401(k) and roll the money in there.

This is the classic, “Do I do a Roth conversion or not?” question. It's the hardest question in personal finance and investing. And in order to answer it, you have to know who's going to spend this money, when, and what's their tax bracket going to be in the future. It's super hard to know that.

That's what you have to know in order to get this right. They're both reasonable things to do. If you've got the cash, and it's going to be a lot of cash to convert this $80,000, it's going to cost you what? Something like, I don't know, $25,000 or $30,000 in taxes to convert this to a Roth IRA. If you've got it, that's not a terrible move. And then you've got that $80,000 in Roth money going forward, compounding, and it's awesome. That's a great thing to have.

But the solo 401(k) is not a bad thing to have, especially if she's going to make future contributions to it anyway, from some of these side gigs and stuff she's doing, then that might be great to have that open anyway. And if it helps you not have to pay that $25,000 or $30,000 in taxes and just keep this as tax deferred money, but still eliminate that pro rata issue for your backdoor Roth IRA, that's also a great option.

I don't know that I can tell you which one to do. I don't know enough about your finances and your future to define an answer to whether you should do this Roth conversion or not. But either one of them is a good option. I wouldn't beat yourself up too much about it.

The fact that she's in school suggests to me that she may have higher income later, which might suggest you two are not yet at your peak earnings, which suggests that maybe that Roth conversion is actually a pretty good idea if you can afford it. But you've got to have an extra $25,000 or $30,000 sitting around to do it with. And that's a problem for lots of docs to come up with that kind of cash.

So, either one's fine. I don't know enough to tell you which one to do. But again, I think I mentioned earlier in the podcast, if you go to the website, you search Roth Contributions, you'll come up with my latest blog post that talks about all the factors that go into making this decision that might help you make a little bit better decision, but it's probably impossible to know for sure whether you should do this Roth conversion or not.

Okay, the next question is about solo 401(k) contributions.

 

SOLO 401(k) CONTRIBUTIONS

Craig:
Hi Jim, it's Craig calling from Midwest. Hoping you could clarify something really quick. When we are calculating our annual solo 401(k) contribution, we always say it's 20% of net business profits or the amount of line 31 Schedule C. Saw something online that also mentioned something about factoring in self-employment taxes. Basically it's 20% of net business profits minus one half of your self-employment tax, which I guess is the value of line four in part two of Schedule 2 on our 1040. It's kind of like splitting hairs, but if we wanted to make an exact contribution, do you know which one it is? Thank you.

Dr. Jim Dahle:
Yes, I do know which one it is, it's the latter. I'm glad you found out about that. It's 20% of your net income. Now, a lot of times you see this figure 25% in the tax documents. Basically the 25% is when you include the contribution, 20% is when you don't include the contribution. It's the same number, but it's 20% of your net income. And that includes being net of the employer portion of the self-employment taxes.

That's what that half of the self-employment taxes are. That's the employer half, it's an employer expense. So, you didn't make as much money as they thought you made, you made less. And so, the amount you can contribute as an employer contribution to that solo 401(k) is less because of that.

Keep in mind though, there're three types of contributions to 401(k)s. There is the employee contribution. That can be Roth or that can be tax deferred. In 2025, it was $23,500.

There's the employer contribution. This is the 20% of net business income. And if your 401(k) allows it, and if it's just a solo 401(k), you're the only one, you can get one that allows it, it might cost you a few hundred dollars a year, is after tax contributions. This is the mega backdoor Roth IRA contribution. So even if you're only able to put in your $23,500 plus $10,000 as an employer contribution, you could put in another, whatever that works out to be another $35,000 or so as an after tax contribution.

If the plan allows it, do an immediate Roth conversion of that money. The limit is not necessarily just 20%. You've also got this possibility of making other types of contributions, assuming you've put a plan in place that allows those to happen. So, keep that in mind. I hope that's helpful for you.

 

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Dr. Jim Dahle:
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It's been pretty amazing. Student loan refinancing is back in to vogue. People are refinancing their student loans. We're out of that three and a half year student loan holiday where nobody had to make payments and interest rates were 0%. Those are gone. A lot of the income driven repayment programs are not quite as favorable to you as they were prior to the One Big Beautiful Bill act passing last summer. And a lot of people are coming to the end of their training and going, “I want a private practice job. I'm not going for PSLF. I'm going to be refinancing my loans and paying them off.”

But we're seeing lots and lots more people refinancing their student loans. So be aware, you can go to one of our partners like SoFi and get great deals on refinancing your student loans, knock off 1, 2, 3, 4% interest so more of your payments are going to principal instead of interest. You get them paid off months, maybe even years sooner. It's a good thing to do. If you know you're paying back your student loans, even federal student loans, and you're not going for PSLF, you can refinance them, pay less in interest, pay them off sooner.

Don't forget about our communities. The subreddit, White Coat Investor Forum, the Facebook group, Instagram, the Financially Empowered Women, all these communities are out there for you to help you, give you support, walk along with you as you go down your financial journey, answer your questions, and you can make a contribution as well. You know more about this stuff than somebody, I promise you. And you can help them.

Thanks for leaving us five-star reviews and telling your friends about this podcast. A recent one came in that said, “Excellent and thorough. This podcast is an example of a motivated physician gaining substantial knowledge on a non-medical topic and sharing it with everyone.

He's altruistic and thoroughly engaged in this material. I find when he lacks information on a topic, which is not uncommon, he is not afraid to admit it and research it thoroughly to provide an accurate and actionable answer. His staff should be given significant credit for the success of this podcast, as it clearly must take more effort than just one man can muster.” That is certainly true. Thank you for recognizing Megan and the rest of the team. “A great combination for a podcast, knowledgeable, altruistic host who surrounds himself with intelligent guests and hardworking staff. Keep up the good work.” Five stars.

Wow, that was a really nice one. I don't know how motivated I am though. These days, it seems like sometimes I'm more motivated to go hiking or play a hockey game than I am to do more White Coat Investor work, but I do still share a deep passion for this work and I love helping people, including you, whether it's with their medical problems or with their financial problems. It brings me great joy and satisfaction and I do still need some purpose in my life, even beyond financial independence. I need something where I'm making a difference in the world and this is one of the ways I'm doing that.

Thanks for what you're doing out there. Thanks for supporting us. Thanks for leaving five star reviews. Thanks for educating your peers and your colleagues, even if it's just, “No, you ought to search for that on White Coat Investor. I bet he's got an article on that.”

Those little comments you make change people's lives. And when you can change a physician's life early in their career, it might be worth a couple million bucks to them. And that really adds up over time when there's a million doctors in the country. You multiply a million by a couple million bucks. It's a lot of value we're trying to create here in the White Coat Investor community.

So keep your head up, your shoulders back. You've got this. We're all here to help you be successful. See you next time on the podcast.

 

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.

 

Milestones to Millionaire Transcript

Transcription – MtoM – 246

INTRODUCTION

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 246 – Neonatologist acquires a side gig, an alternative investment, and a wonderful consumption item.

This podcast is sponsored by Bob Bhayani of Protuity. He is an independent provider of disability insurance and 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 www.whitecoatinvestor.com/protuity. You can also email [email protected] or you can just call (973) 771-9100.

We're up and running with our champions program this year. This is only going to run through February 15th this year. You can go to whitecoatinvestor.com/champion and sign up. This is for first year professional students, medical, dental, et cetera.

You sign up to be the champion, it costs nothing. It really doesn't require much. All you got to do is give us your mailing address and basically prove you're in your med school class or whatever. And we send you a book, the White Coat Investor's Guide for Students for everybody in your class, and all you got to do is pass them out. That's it. That's the champions program. We're trying to get this book to every first year medical, dental, et cetera, student in the country.

Last year, we got it to about 70% of the medical students. We're hoping to do even better this year, but we need your help. We cannot send these out one at a time. Number one, we won't get it to everybody. Number two, it's cost prohibitive. We got to send them out in bulk. So we need somebody to pass them out when they get there. That's your job as a champion. Please sign up, whitecoatinvestor.com/champion. If nobody's handed you one of these books yet this year, that's probably because your class doesn't yet have a champion. They need you to do it.

All right. We got a great interview today. This is the most fun one I've recorded in a while. But we're going to talk a little bit afterward about alternative investments. So, stick around.

 

INTERVIEW

Dr. Jim Dahle:
Our guest today on the Milestones Millionaire podcast is Sumi. Thank you for being here. Thanks for being on the podcast.

Samip:
Yeah, thanks for having me.

Dr. Jim Dahle:
Tell us a little bit about yourself, how far you are out of training, and what you do for a living, and what part of the country you're in.

Samip:
Yeah, I'm a neonatologist practicing in the Midwest, and I am 14 years out of my fellowship training.

Dr. Jim Dahle:
And we just discovered before we hit record that we actually overlapped in training in Tucson for about a year, which is pretty cool. I don't know that we ever met each other, but it's fun to have that connection. Tell us what milestone we're celebrating today.

Samip:
Yeah, the one I applied for was, I thought, a fun one. It's $500,000 and a comic book collection. I've collected comics for a while before college and medical school. And obviously, once you get into that world, it's hard to do those sort of fun things. And I got back into it about five years ago and realized we were in a position that I could afford to spend on these books that I loved as a kid. And it's been fun to do that.

Dr. Jim Dahle:
Very cool. Well, tell us a little bit about how you've lived your financial life to put yourself into a position that you could afford what's essentially a splurge, a rather expensive splurge. At least it doesn't have the ongoing expenses of a boat or anything, but it's an expensive splurge without it affecting your financial goals. So, tell us how you've lived your financial life.

Samip:
Yeah. I found your material pretty early, in 2014. And I was searching the Internet, I knew saving is good and putting it into investments is good. But that's the base I had. And then as I learned more and we have a private group. And so implementing things that allowed us to just be able to save 30 to 40 percent of our income in pre-tax ways or even after tax ways that just made sense. And so, when you start to see that growing, you realize you have the freedom to do other things. And that's how that developed for me.

Dr. Jim Dahle:
Now, you mentioned that you were on a fire track for a while. You were financially independent, retire early. I'm going to save 30 or 40% and I'm punching out early. What happened? What happened that you got off that track and decided to get on the comment collection track?

Samip:
Yeah. I was going through it and I was looking at the numbers and all of a sudden I'm like sitting there and I'm like, “Well, I'm going to have 20 to 30 hours a week to do what? Sit here and read more.” I don't know. It seemed like there was not a good answer to what I was going to do, which is what my wife's like “What are you going to do if you retire early?” And I'm like, that's a great question.

Dr. Jim Dahle:
It sounds familiar. I get this question all the time.

Samip:
Yeah. And of course, I don't think she's loved the thing I've transitioned to, but it still works out well. But it was right before COVID. I started looking at my stuff again because I collected as a high school kid and I started realizing I could afford some of this stuff. And I started buying things and then I've always been entrepreneurial. So buying collections, selling collections, improving the comic books, that was always fun. That part has been really entertaining and fun for me. And it allows me a balance from the neonatology world and vice versa. So it's been nice.

Dr. Jim Dahle:
Are you actually making money collecting comics?

Samip:
I am.

Dr. Jim Dahle:
So this isn't just a consumptive splurge. This is like an alternative investment asset class.

Samip:
Correct. Correct. It's both things. I never thought I would make money off of it truly. And then I started realizing I could. And it's been fun because I get to have these things that I enjoy, like little toys that I personally like, but also that part of my mind that likes to be able to have money grow. It works in that way.

Now, look, it's an illiquid asset. It could go to zero at any moment. I'm completely aware of that. But it's just fun that there is some money making going on these last two to three years on it.

Dr. Jim Dahle:
Where do you store the comics?

Samip:
In my basement currently. And if I could show you my video, you would see my basement is like comics all around. It's crazy.

Dr. Jim Dahle:
Okay. So do you have a special insurance policy on this collection?

Samip:
I do. You have to have it separate from your homeowners because the homeowners won't cover it. It's a company called Collectors Insurance something. But yeah, I insure it for the full amount. It's a separate amount that I pay for.

Dr. Jim Dahle:
How much does that insurance policy cost? Do you remember?

Samip:
I'm a little under insured on the comics right now. I'm only insured for $300,000 because that's actually the amount of money I have into it. So it's insured for $300,000 and that's about $900.

Dr. Jim Dahle:
Okay. Very cool. And you're still making money after paying that expense of, I don't know, who knows what the storage expense is, it's your basement, and the insurance expense, you're still coming on ahead. So, give us a sense of what you're not necessarily net worth, but your investment portfolio looks like that you're comfortable having $500,000 in an asset class like this.

Samip:
Yes. We have a $1.5 million in pre-tax. That's our 401(k) and cash balance at work. Then I have about $400,000 in after-tax, whether it be Roth or taxable accounts. And then we have about $2 to $2.5 million in real estate, our own home. I don't like to count that as an investment in that, but it comes out to about $5 million in assets with about $1 million of liabilities.

Dr. Jim Dahle:
Very cool. If you look at it as part of your portfolio, it's a big chunk of it. This is not a small percentage of your portfolio.

Samip:
No, it’s about 10 to 15%. When I started it, it was that whole, I think you've said it a couple of times, but when you've gotten to a point where it's good enough, or you feel comfortable enough in your assets. You can play around with 5 to 10% of your money in things that maybe aren't as Bitcoin or whatever, not that that's what this is, but it's like that. Because it's not an asset that I can go out on the market and be like, “This is worth $100,000, pay me $100,000. I have to show that and find the right person to do that.

Dr. Jim Dahle:
And I wouldn't necessarily have a problem with this as a boat. I wouldn't have a problem with you owning a $500,000 boat. It might be expensive to operate and run and insure, et cetera, on your income with your level of assets. But I wouldn't have a problem with that.

So, I don't have a problem with it as a comic collection. I just think it's interesting to look at it from both perspectives, both from a consumption perspective, as well as from an investment perspective. It's interesting because it does have some aspects of both of course, but it's pretty fun to look at. Very cool. You told me when you started, so you're what? 17 years out of training or so?

Samip:
Yeah. 17 out of pediatrics.

Dr. Jim Dahle:
Okay. You have a substantial amount of assets, not looking at the comics. Tell us how the two of you got on the same page to decide to be saving 30 or 40% of your income and investing it away to the point where you're now multimillionaires.

Samip:
Yeah. Backstory to me, my dad passed away in his early 50s. For me, finances were always important because I understood what it looked like when things weren't taken care of. Not that we were in any bad situation, but all of a sudden, as starting med school, I had to take care of my family's financial life when I had no idea what I was doing at all, and made mistakes throughout for that.

And then as I started medical school and all that, I realized like, look, it's really important for us to have a base that, that you as my wife can feel confident that it can be taken care of if I wasn't around.

For me, it was really important to get that going early. And that meant saving a ton. And that meant putting into things that would grow at a 7 to 8 to 9 to 10% rate. And I started with the 401(k) stuff and that stuff, but then realized that real estate also was a very good matter to do that. My goal now financial plan wise is to have 50% in equities and 50% in real estate, other than the comics, which I really don't think of as something that's going to support our family, but it's been there now and it's fun.

Dr. Jim Dahle:
But it could. You could go out and sell it and probably provide multiple years of living expenses for your family just from the value of the comics.

Samip:
Yeah. When this year is done, I'll have made six figures of profit from the comics for the year of 2025.

Dr. Jim Dahle:
Wow. That's something. This is a lot of things. It's a consumption item because you love it. Although I'm sure you're not reading these things all the time. They just sit in some sort of plastic or case or something.

Samip:
That's part of it. I like reading them, but yes, a lot of them sit in plastic. 100%.

Dr. Jim Dahle:
It's a little bit of an investment and it's a little bit of a side gig. It's a lot of things in your life.

Samip:
It's a lot of things.

Dr. Jim Dahle:
Which is pretty fun. Well, give us a sense what your incomes look like over the last 14 years or so. Typical neonatologist employee job, or what are we talking about?

Samip:
Oh no, we own the group. It is a private group, which has been nice. It fluctuates. But my income has been anywhere from $250,000 to $400,000. So it can range quite a bit depending on.

Dr. Jim Dahle:
Pretty typical physician income though. That's a typical physician income. And your spouse is working or no?

Samip:
No, she was an optometrist, but then decided to stay at home with the kids. She's been a stay at home mom for probably the last 12 years.

Dr. Jim Dahle:
Yeah. You basically did all this on, on a normal physician income. Well done. You should be very proud of yourselves. You guys have done awesome.

Samip:
I am. Yeah. I do feel a little proud about it.

Dr. Jim Dahle:
So let's go to the conversation you had. Because I assume you told her about this. You had a conversation at some point going, “Hey honey, I'm going to do this comic book thing seriously. We're going to put hundreds of thousands of dollars into this. And I'm going to spend a bunch of time doing it and it's going to be all over the basement.” Tell us about that conversation.

Samip:
Yeah, it was one of those things where I had made the decision and I came to her and presented it. And if I got a lot of pushback, I would have nifted in the bud, but she was like, “Look, if it makes you happy, do it.” I think in retrospect, she might take back that conversation with what has occurred in our basement, but we have plans to deal with that and store them somewhere where it's not taking up the whole house.

Dr. Jim Dahle:
But yeah, it's the basement issue though. It's not a financial issue.

Samip:
No, it's the basement. It's storage. She wants her house back.

Dr. Jim Dahle:
This is great. Well, it sounds like a problem that can be solved with the storage unit, which is not dramatically more expensive than the insurance policy you're paying for. So that's pretty awesome.

All right. Well, we don't talk a lot about intermediate financial goals in this podcast. We're always talking about retirement. We talk maybe college, but we don't talk about this other stuff. People that want to take a year off and do a sabbatical or people that want to have a comic book collection, or they want to buy a boat or these sort of intermediate things. What advice do you have for somebody that wants to do something intermediate like this? How should they plan for it financially?

Samip:
Yeah. It's almost like the dessert at the end of dinner. It's like, if I do these things right, I can do this other thing. That's going to be a lot of fun. So whatever that intermediate goal is, if it's the year off or it's buying the boat or whatever, it's like, man, if I just save that 20 to 30%, and if I don't live lavishly beginning, you can creep it up a little bit, whatever, and have my other assets protected. I feel like it's almost like that. “Oh, I get this treat at the end of doing the things right that I should have done to get me in that place.”

Dr. Jim Dahle:
Yeah. Pretty awesome. Well done, number one. Number two, thanks for being willing to come on the podcast and share this with others. This is clearly not a milestone we've had yet, and it's fun to get unique.

Samip:
We love talking about the other things, but I think this stuff is important too, because I think it gets lost in the side talk of what we do and why I like saving money. I like the investments. I like the boring investments, but I also like this too. And I think that I think there are other people that like other things and it's not just all this.

Dr. Jim Dahle:
Well, there's probably somebody out there listening that's into comic collecting. So, tell us what your most valuable comic is.

Samip:
Actually, I put it next to me here so that I could show it off, but this is my most valuable comic. This is the first appearance of the X-Men. There's a glare on the screen, obviously, but this is probably a $30,000 to $50,000 comic depending on, this is my most expensive comic.

Dr. Jim Dahle:
Wow. Well, make sure that one's listed specifically in the insurance policy.

Samip:
It is, it is 100%.

Dr. Jim Dahle:
Very cool. Well, thank you so much for being willing to come on the podcast. We'll let you go, and move on. Thank you.

Samip:
I appreciate it.

 

FINANCE 101: ALTERNATIVE INVESTMENTS

Dr. Jim Dahle:
Okay. That was fun. I love the aspects of a side gig and an investment and a consumption item, and this would be fine as any of that. And as all of it is especially fine. I promised you at the top of the podcast that we're going to talk about alternative investments. I generally don't consider everything that some people consider alternatives to be alternatives. For example, some people consider real estate investing to be an alternative investment. I really don't. I consider stocks, bonds, real estate to be standard investments.

An alternative is to be something above and beyond that. Typically they're a speculative investment, something that doesn't generate cash. It doesn't generate dividends or earnings or interest or rents or anything like that is speculative. Like a comic book, you pay somebody something for it and you hope to be able to sell it for more down the road.

Classic speculative investments are things like empty land, precious metals, crypto assets like Bitcoin. These sorts of more speculative things. My favorite one of course is Beanie Babies from the 1990s, but it's getting to the point where young people don't understand this example anymore. So I try not to use it too much, but it is my favorite alternative speculative investment.

My general recommendation when it comes to these speculative investments is limited to a single digit percentage of your portfolio. Under 10%. You want to own some Bitcoin or something? Own Bitcoin, I don't care, but don't put 50% of your portfolio in Bitcoin. Not only is it very volatile, but there's real long-term risk there. Could it go to zero? It could.

Now, if you're a true Bitcoin believer, you think there's no way it could possibly go to zero, but it's not impossible. There are risks there. And so, limit those risks by limiting how much of your portfolio you put into it and put the rest of your portfolio into more traditional stuff like stocks, bonds, real estate, et cetera.

But if you want to have some of your portfolio in these sorts of things, one or two of them, I think that's fine. Gold's been really popular the last couple of years because it skyrocketed in price. So I get more questions about gold now than I did for decades before the last couple of years when it skyrocketed in price.

Be careful you're not just chasing performance. It becomes very common when we're talking about speculative investments. People buy something because it's going up. Well, oftentimes they bought it because it went up, and now it goes down. So, be very careful with that.

But limit it in your portfolio. You don't have to invest in any of it. It's all totally optional. In fact, real estate's optional. You don't have to have real estate in your portfolio. Stocks and bonds will do it. In fact, there's lots of people out there, especially younger people that are like, “I'm not even going to do bonds, at least for a while.”

I think some of that's probably performance chasing. They just don't have any experience of living through 2008. The bear markets in 2020 and 2022 were so brief, and maybe you didn't have very much invested that you didn't really feel the emotional, visceral pain that comes from losing money you used to own.

But it's not crazy for a young person to be in 100% stock. So, I don't have a problem with that either. But be a little bit careful as you get into the alternative investment space, particularly in the private investment space. Scams can be run in public companies as well. See Enron for details. But it's much less common. It's much more common when you're in private investments, whether that be private real estate or some sort of private equity or VC or some sort of speculative asset. You're much more likely to get scammed. So, you've got to be very careful when you go into that space.

All the investment principles apply. You've got to diversify. You've got to watch your cost. You've got to watch your tax efficiency and those sorts of things. Calculate your return accurately, including the value of your time. But it's fine to put a little bit of your money into that sort of stuff. It might add a little bit of variety to your life.

And who knows? It might even really boost your investment return. It might turn into a side gig. Look at our example from our interview today. Not only does he have comic books that are appreciating, but he's turned it into a side gig that he made six figures out last year.

Who knows? Maybe 15 years from now, he's got a dozen people working for him in his comic book business that he built while he was working as a neonatologist. That sort of stuff happens all the time. So, don't be afraid to add some variety to your life if it's something you're particularly interested in. If you're really interested in it, you're probably going to get really good at it. So, go for it.

 

SPONSOR

This podcast was sponsored by Bob Bhayani at Protuity. One listener sent us this review. “Bob has been absolutely terrific to work with. He has quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications underwriting process in a clear and professional manner.”

You can contact Bob at www.whitecoatinvestor.com/protuity. You can email [email protected] or you can call (973) 771-9100 to get disability insurance in place today before you actually need it.

If you want to come on the podcast, you can apply. You go to whitecoatinvestor.com/milestones and you'll be able to apply there. And the more interesting your milestone, the more likely you are to come on. So, don't be afraid to use something different from just becoming a millionaire or just becoming financially independent or just paying off your student loans or getting back to broke or these more common milestones we have in our lives as physicians and other high-income professionals. Sometimes it's fun to do the more interesting ones too. See you next time on the podcast.

 

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.