How to Fix the Retirement Account System

“Hi, Jim. It seems like you have to spend a lot of time explaining how IRAs, 401(k)s, 457(b)s, 403(b)s and all the different types of retirement accounts work, how much you can spend to save in each of these accounts, all the rules and exceptions and all that. So, if you were king, how would you reset the whole retirement account system in this country to make more sense for both the government and the citizens?”

This is a great question and an opportunity for me to talk about changing the world. Every now and then, I have somebody encourage me to run for political office. I don't know if they agree with my political views or think I'm reasonable or what it is, but I actually get encouraged to run fairly often. I am not going to do that. Number one, I don't enjoy it. Number two, half the people always end up hating you. So, don't expect me to run for politics at any point. It's not like I'm electable anyway. Can you imagine how much stuff could be mined from this podcast and from the blog and taken out of context and used against me in an election? There's just no way I'm ever going to be electable. You don't have to worry about me becoming president, much less king. But we can still talk about what I'd like to see in the world. It's really hard, however, to talk about retirement—fixing the retirement system—without talking about both politics and about taxes.

The first thing I ought to tell you about is my politics. People can read between the lines and probably have figured out some things about my politics. I consider myself a moderate. I really don't feel comfortable in either political party right now. I don't like feeling like I have to choose between the party that doesn't believe in science and the party that doesn't believe in economics. I probably fall mostly right of center on financial and tax issues, which tends to be my most important issues at the national level. I probably fall a little bit to the left when it comes to social issues, environmental issues, etc. And in local elections, those tend to be my most important issues. I really don't like the extremes of either end of the political spectrum. At any rate, I hope that's not offensive to you if you're on one of the extremes of the political spectrum, but that's just where I sit. That will give you some context into what I'm about to say.

As far as the tax system goes, I'm for simplification. I'd love to see 99% of the deductions go away and just have all of the tax rates lowered to make up for it. Instead of the top bracket being 37%, maybe the top bracket is 30%, but you get no deductions. It works out to be the same revenue in the end, but it's way simpler. The other thing I'd like to see happen with the tax code is for welfare programs to come out of the tax code and have them be separate. I think everybody ought to pay taxes, even if you're only paying $100 a year. Whatever welfare system we decide to put in place—Medicaid and all those programs—I think it ought to be separate from the tax system and run separately. Maybe that won't be as efficient, but I think combining the two was not an awesome idea.

Speaking of retirement systems, you know what else was not an awesome idea? It was mixing retirement with employment. Why should your employer have control over your retirement? It's the same problem we have with healthcare and health insurance being tied to employment. That was a stupid idea. You know where that comes from, right? In the 1940s during World War II, inflation was going gangbusters, and they actually put wage controls in. Employers were not allowed to pay more. So, what did they do? They started offering benefits. One of which was health insurance. As years have gone by, more and more benefits have been added on. When the government intervenes in the economic system, you sometimes get some weird side effects. One of those side effects is our screwed-up healthcare system with all the weird insurance stuff that we deal with. A lot of that comes from the fact that it was tied into employment. You've got an employer choosing your health insurance plan. You've got somebody else paying for your healthcare. It just gets really messy when you do that.

Retirement is the same way. We've added a piece here, added a piece there, and now we've got 401(k)s and 403(b)s and 457(b)s and 401(a)s and Backdoor Roth IRAs and SEP IRAs and 529s and HSAs and ABLE accounts and all these different things to keep track of. If I were going to be king and I were going to totally revamp our retirement system, I would, number one, put some sort of pension plan in place. Now, we've kind of got that with Social Security, but I would actually probably beef that up. Social Security is the most popular program the government has. The reason why you need some sort of pension program out there is there are a whole bunch of people that are either not smart enough to figure it out, not disciplined enough to figure it out, or have had bad luck happen to them or whatever that they're not going to save for their own retirement. You need something to provide for those people. I don't think Social Security is adequate. I would have more of a pension program in place that everybody qualifies for. There may be some sort of work requirement to pay into it for most of it, and maybe something that doesn't have a work requirement.

Then in addition to that, for those who are interested in doing so, I would have a tax advantaged retirement savings program, similar to what we have now. It wouldn't be tied to your employer, though. There would be a tax-deferred option. There would be a tax-free option. Everyone would have the same limit. It wouldn't matter how many employees you have. It wouldn't matter what your employer offers. It'd be the same limit. Maybe it's $50,000 in each of them. You can put $50,000 a year into a tax-deferred account. You can put $50,000 a year into a tax-free account. And that's it. Obviously, most people aren't going to max those out and people making $10 billion a year are still going to be limited to just putting $100,000 a year into that. Then, they have to save in taxable beyond that. That's the sort of program I would put together if I was a king. Very simple. Something for everybody in the form of a pension sort of thing. Then, some tax advantaged savings on top of that. I don't know if that'll ever pass. And I'm certainly never going to be president.

Caps on 401(k) Contributions

“Question about the $58,000 cap on 401(k) contributions. I have a state job with a pension, which is a defined benefit plan, as well as a second W-2 job, which has a 401(k) maxing out at $19,500. Plus, I have a 401(k) solo that I'd like to contribute to, but don't know how much I can. I imagine the total in aggregate is $58,000. My questions are, do these pension-defined benefit plans, which is 6% of my salary at that particular W-2 job, or my Backdoor Roth actually affect the $58,000 number? Thanks for helping me get my financial head out of my rear. I appreciate you.”

First thing to remember is it is $61,000 this year [in 2022], not $58,000. It goes up with inflation each year, and we had a fair amount of inflation last year. The blog post that details all this in extreme detail is called Multiple 401(k) Rules. I go through all of this in excruciating detail. If you want even more detail, get down into the comment section. But here are the two main rules. You get one employee contribution per year. In 2022, that is $20,500 if you are under 50. If you're over 50, you get an additional catch-up contribution on top of that, I think it's $6,000 this year. Double-check it before you make the contribution. That's the employee contribution. No matter how many employers you have, no matter how many 401(k)s you have, that's all you get as an employee contribution. That employee contribution can be tax-deferred, or it can be tax-free, aka Roth, if the account offers a Roth option.

The $61,000 limit is a per plan limit. It is a per unrelated employer limit. So, if you work for yourself as an independent contractor and you have a W-2 job at the hospital, you have two $61,000 limits per year. One for each plan. However, despite having two plans, you only get one $20,500 limit. What typically happens is a doctor will use his or her employee contribution at the hospital, at the W-2 job in that 401(k). They'll put their $20,500 in there. Hopefully, their employer gives them some sort of a match. Maybe they get another $10,000 or $15,000. They get a total of $30,000, $35,000, $40,000 into that account.

Then on their moonlighting side, this side gig, they open up a solo or individual 401(k). Because they've already used their employee contribution, they don't get another one. All contributions have to be employer contributions. The amount you can contribute is about 20% of your net income from that side gig. If you make $100,000 over there, you can put about $20,000 in there. If you make $300,000, you can put $60,000 in there as an employer contribution. Now, you read the rules on how much that is, and it can get confusing sometimes. But if you're a sole proprietorship, just think of it as 20% of your income. Sometimes it'll talk about it being 25%. But when they're talking about 25%, they're not including the contribution. So, it’s 25% if you don't include the contribution, it’s 20% if you do include the contribution but it's the same number.

If you are an S Corp, the amount that you can put in there is 25% of your salary that your S Corp pays you. Even if you make $300,000, if it's only paying you $100,000, then you can only put $25,000 in there as an employer contribution. You've got to bump up how much it's paying you in order to max that account out if you're in an S Corp. Of course, that means you're paying more Social Security and Medicare taxes on that. So, be aware of that. As far as the IRAs go, that limit is totally separate—$6,000 if you're under 50 this year, $7,000 if you're 50-plus. That's a totally separate limit from the 401(k) limit. Likewise, if you have a 457(b) at your job, a totally separate limit. I hope that's helpful and explains those rules.

More information here:

Multiple 401(k) Rules: What to Do with Multiple 401(k) Accounts

Small Business 401(k)s

“Hello, Dr. Dahle. This is Mark in New Jersey. I have a small business 401(k) type of question for you. I am an internal medicine doc with a solo practice in New Jersey with one employee. After wasting a lot of time and money having a small business 401(k) with ADP years ago, as it was not right for my business, I switched to a SEP IRA for the past few years. However, after a more thorough White Coat Investor financial education, I am now considering switching back to a small business 401(k), and then subsequently adding a cash balance plan (CBP) in the next year, as my spouse will be rejoining the workforce. This will allow me to both max out the 401(k) and contribute a significant amount to the cash balance plan. Of course, the numbers for the CBP must make sense. But my question ultimately is how to decide if going with Vanguard small business 401(k) with a census TPA is right for me? I would very much like to keep my finances simple as most of my other retirement and 529s are with Vanguard, aside for my wife's solo 401(k) and our HSA at Fidelity.”

We put a 401(k) plan in place here at The White Coat Investor. Initially, at The White Coat Investor, it was just me. Then it was Katie and me. Remember, I gave her half the business, and we basically both got to use that solo 401(k). Then, we started hiring help. Initially, a lot of our help was independent contractors. They didn't qualify to use our solo 401(k). They went out and opened their own solo 401(k). But eventually, it became clear that we needed to convert those independent contractors to employees. Once you have employees at your practice, setting up a retirement plan is no longer a do-it-yourself project. I'm very much a do-it-yourselfer. This is not a do-it-yourself project. Trust me. You need to get some professional help to do this if you have employees. The downside, it's going to cost you more than if you didn't have any employees and could just do a solo 401(k).

The main thing you will learn as you work with an expert at setting up retirement accounts for a small practice is that the main point of all the rules about retirement plans is that you can't let all the benefits go to the owners and the highly compensated employees. The other employees have to get something. Now, it's not as good as what you can give the highly compensated employees and as good as what you can give the owners, but you have to give them something. If you do not, there is a penalty. You don't pay the penalty to the IRS, though. You pay the penalty to the employees that are being discriminated against by your plan.

A lot of people, including dentists and doctors with a small practice and four or five employees, run the numbers here and realize that if they want to max out their 401(k), they're going to have to pay several thousand extra dollars to each employee. If you have five employees and you're paying $3,000 or $4,000 a piece to them in these penalties, that's like $20,000. Many of them feel it is no longer worth it to have a 401(k) because they have to pay this money to them in order to be able to max it out themselves.

I look at that, and I say, ‘Well, what's the big deal?' I don't mind that penalty at all. I pay bonuses to my employees. I pay them salaries. I teach them about retirement accounts if they don't learn it just from working in the business on their own. I don't view giving them extra money for retirement as some terrible penalty. But if that bothers you, if your employees don't recognize the value of a match, if they don't recognize the value of you putting money into their retirement account, if they don't recognize the value of having a retirement account available at all, you may decide not to put one in place. When it comes to a small practice, the right answer for you might be a 401(k). It might be a SIMPLE IRA. Now, that is not a traditional IRA. That's a SIMPLE IRA. It's a different thing. It might be a SEP IRA. Yes, you can have a SEP IRA with employees. It might be nothing at all and you just save in your Backdoor Roth IRA and in your taxable account.

In order to figure out what the right thing is, you really need to kind of have a study done of your practice and the employees and how many employees do you expect to add in the future and how many hours they're working and how old they are and how much they want to save. When you do that, it's a lot easier to figure out exactly what the right plan to put in place is. Unfortunately, this is not something that lends itself well to a big, huge organization that puts out a cookie-cutter plan, because your practice is totally different from somebody else's practice.

I recommend you actually go to a smaller firm. And yes, no surprise, we keep a list of these firms on the website. If you go to the recommended tab and go down to retirement accounts and HSAs, you will find them right at the top of that page. It's whitecoatinvestor.com/retirementaccounts. You'll see that we've got five on the list right now. Guess who we called when we put The White Coat Investor plan in place? We called these companies. These are the people we used. And we compared them one to another. We went with one of them and put our plan in place. We consider it the best 401(k) in the country. If you want to add a defined benefit plan on top of that, you can also do that. That's what you need to know about putting a retirement plan in place at your practice.

More information here:

The New WCI 401(k)

Social Security

“Hi, Jim. This is Brian from the Northeast. I wanted to ask you a question about Social Security that I never hear much about. It seems like common wisdom is that if I have a normal life expectancy and I don't need the money to live on, then I should delay taking Social Security until age 70 in order to maximize my lifetime benefit. But it seems to me that if I start taking my Social Security benefit at age 62 and invest it, I could easily come out ahead compared to waiting to take Social Security at age 70. By my calculations, if I assume a 5% return, then the break-even point between taking Social Security at age 62 vs. taking it at age 70 is about 90 years old. And if I assume a 7% real return, then the break-even age is well over 100 years old.

Am I missing something here? It seems like if I don't need the money to live on, then I'd be better off taking the money beginning at age 62 and just investing it into something like the Total Stock Market Index fund and let it compound in the next decade or so. What do you think of this frame of thought? Am I missing something here, or should more people be taking those Social Security at age 62 and investing it, assuming that they don't need it to live on? Thanks for your input and for setting me straight.”

You're asking the right question. The common wisdom is to delay until age 70, assuming you're healthy, particularly for the higher earner in a couple. But you're right. It is possible to take the money at 62 and out-invest and outperform Social Security. I think the best study I saw of this was Mike Piper. I can't remember the exact number. I think he came up with 7% or 8% is what you really needed to make. But keep a couple of things in mind. That 7% or 8% is after all your fees, and remember, Social Security also has some tax advantages. You're failing to think about two things. The first is risk. Delaying Social Security provides a guarantee, and that's worth something. With those Social Security benefits, they become more valuable, no matter what markets do, no matter what happens in your life. An investment doesn't provide those sorts of guarantees.

The second thing to keep in mind is Social Security has an insurance component to it. It's helping you ensure against outliving your money. It's really the best-priced and perhaps only inflation-adjusted pension or immediate annuity that you can buy. It's a better deal than going to an insurance company and buying an annuity, and it's adjusted to inflation. It's a particularly valuable form of insurance. If you take that at 62, you have less of that insurance than you would have if you waited until you're 70. When you account for the value of that insurance, when you account for the lack of risk in delaying Social Security, I think it still makes sense for almost everybody to do.

But if you are at age 62 and you're still doing highly leveraged real estate, it's entirely possible you can outperform Social Security. But if you're just kind of going, ‘Eh, I think the stock market's probably going to do better than that over those eight years,' I don't think that's a risk worth taking. I’d just delay Social Security. At that point, especially somebody who's thought so deeply about this question, chances are you have enough money already to go either way and it doesn't matter that much for you what you do. Do whatever you want, but I'm probably waiting until age 70, at least for my benefit. Now, Katie's benefit will be less than mine. We may take that a little bit earlier. We'll have to see what strategies are available at that point.

More information here:

When to Take Social Security – A Pro/Con

Annuities and 401(k)s

“Hello, Dr. Dahle. I have a question about annuity. We had money moved from a 401(k) at my place of business into an annuity about five or six years ago. I'm realizing that this was probably not a good decision and wondering if there's a way to reverse that and move that money back into the 401(k) or into some other account. Thanks for your help.”

The answer is I don't know. You haven't given me enough details. I don't know if you took the money out of a 401(k) and put it in an IRA and bought an annuity inside the IRA, or if you took all the money out of the 401(k) and put it into an annuity. Which one of those two you did is going to affect the decision and what's available to you. The other thing that will affect it is the contract you have with the insurance company and what it allows you to do. Now, most annuities can be surrendered. There's often a pretty hefty surrender fee. You have to look at that, read the contract to see what your options are. I suspect, if somebody didn't do you a real disservice, that this is an annuity inside an IRA at this point. You can probably surrender the annuity and roll the IRA back into the 401(k), if you would like to do that.

You need to get more details about this thing to figure out what your options are. Maybe the easiest way to do that is to sit down with a good hourly fee-only advisor, just to get an hour or two of advice about your situation and get this sorted out. If you want to hire them to help actually do the forms and get that money moved back around to where it's best, you can do that as well. Our recommended list is found under the recommended tab at whitecoatinvestor.com. You can find someone that can help you to get that sorted out and really help you run the numbers and decide what's best for you.

Tax-Deferred vs. Roth Contributions

“Hi, Dr. Dahle. A quick question on tax-deferred vs. Roth. I know that typically your exception to the rule that in your peak earning years you want to do tax-deferred preferentially is if you're a supersaver. I had planned on being a supersaver, because I will hopefully enjoy a very high income. However, I've recently been considering later in my career, doing a lot more pro bono work and having a much lower income. I would think in that circumstance that even though I might be a supersaver, since my income would be so much lower for this portion of my career, it would still make sense to do more tax-deferred than Roth in those peak earning years. Is that accurate? Thank you for all you do. I appreciate it.”

OK, I get this question a lot ever since I started talking about supersavers being an exception. There are other exceptions too, by the way. For example, if you're trying to maximize your public service loan forgiveness, even during residency, you might be doing tax-deferred contributions instead of tax-free contributions.

So, there are other exceptions out there. But the main one for white coat investors to be thinking about is if you're a supersaver. Now, what is the definition of a supersaver? A supersaver is somebody that's still in the same tax bracket in retirement as they were during their peak earnings years.

What does that take to be there? Well, it takes a bunch of rental property, or it takes a spouse that's 15 years younger than you that still has a high-earning career. Or it's a massive, taxable account kicking out all kinds of dividends and capital gains or it's a big, huge IRA that you'll have RMDs from. We're talking $5 million-plus tax-deferred accounts.

That's what I'm talking about when I'm talking about a supersaver. It's enough taxable income that your tax bracket is pretty much just as high later as it is now. And when that's the case or even higher, then you're better off making tax-free contributions now.

The main thing you're comparing is your tax rate now to your tax rate later. And even if the brackets move a little bit, the top bracket becomes 40% instead of 37%, that doesn't matter so much as your personal tax situation of whether you're in that top bracket. But if you expect to be in the top bracket the rest of your life, then you probably ought to be giving some consideration to tax-free contributions during your peak earning years.

Now, in your situation, you're describing like an early retiree or somebody that's going part-time for a significant chunk of their career. That's not maybe somebody that's probably what I would call a supersaver.

Even though you're saving a lot of money now, even though you're doing great, even though you're going to have enough money to retire early, that's not what I'm talking about with the supersaver. Supersaver has a lot of money and a lot of income in retirement. And if that's not you, then do the general rule, which is tax-deferred during your peak earning years.

But here's the truth of the matter. These are both good things. It's not like it's bad to put money in a Roth IRA. It's not like it's bad to put money into a tax-deferred account and get that upfront tax break. They're both great things. But there are situations where one is a little bit better than the other. But don't beat yourself up about it. If you're just not sure which one to do, split the difference. That'll minimize your regret. Yes, one of them will be wrong, but like I said, they're both good things, so it's not really wrong. It's just less right. Good luck with your decision.

More information here:

Super Saving for an Early Retirement

C Shares and A Shares

“Hi, Jim. Thanks so much for doing what you do. I think I've probably been misled by well-known financial and insurance companies often derided by our fellow readers and listeners. My wife and I are both physicians. She's a part-time hospitalist and I'm an early-career attending surgeon. We've both been maxing out our Backdoor Roth IRAs and 403(b)s for several years. I'm in the process of switching our Roth IRAs from different so-called advisors. I came to find out my wife's account is composed of C share mutual funds while mine is A shares. An advisor wants me to convert all of my wife's C shares to A shares.

I read your blog posts on no-load mutual funds, and I'm planning to run away from this advice and transfer these accounts to a different company. My wife's account has about $35,000 and mine has about $58,000 in our Backdoor Roth IRAs. Is there any benefit in converting these to no-load mutual funds or are no-load mutual funds just something we should look to invest in the future? Thanks so much for your help, and I hope you had a merry Christmas.”

This was the straw that broke the camel’s back for me. I realized I had C shares, or C share mutual funds. I realized that my advisor that I was paying a fee to was fee-based, not fee-only. Not only had I paid them a fee to give me advice, but I was paying them commissions to put me into mutual funds. Now, for those who weren't familiar with these terms, these are terms from the commissioned sales industry. Generally for mutual funds, A shares are front-loaded funds, meaning you pay the load upfront. A typical load might be 5.75%. So, if you give them a thousand dollars to invest, they take $57.50 and put it in their pocket, and put the rest into the mutual fund. Then there are B shares. These are back-loaded shares. Meaning when you take the money out, you pay the commission. These are generally more money than A shares because the money has grown over time. It might be the same percentage, but it's the same percentage of more money. The other thing that they do sometimes is what are called C shares. And this is where an additional load is added on top of the expense ratio of the fund to pay the sales agent for selling it to you. Instead of an expense ratio of perhaps 0.4%, you're paying an expense ratio of 0.8%. And that 0.4% is going to the person that sold that to you for as long as you own that investment. These are all loads or commissions that are charged on mutual funds.

What the people who sell these mutual funds don't tell you is that it is possible not to pay an A share, B share, or a C share commission. It's possible to pay no commission at all. And that's called a no-load mutual fund. All of the Vanguard mutual funds are no-load mutual funds. All the ones you should use at Fidelity or Schwab or anywhere else are no-load mutual funds. You don't have to pay the load at all. You don't have to pay it upfront. You don't have to pay it in the back. You don't have to pay it as you go along. It's no load. The less you pay in expenses, the more money stays in your pocket and that you can use for retirement, that you can use for whatever you want to use the money for.

So, should you get out of loaded mutual funds? Probably. Certainly, if it's a C share fund, you should get out of it. Because you're paying ongoing expenses on that every year. The sooner you get out of it and get into a mutual fund with an expense ratio of 0.03% instead of 0.8%, the more of your money is going to be working for you and the less drag there's going to be on your returns from those fees. With an A share, it's technically water under the bridge. You've already paid that commission. The downside, most of the time, when you buy a mutual fund with an A share is it's not a very good mutual fund because the best mutual funds tend to be no-load mutual funds. What do these funds have to do to get people to sell them? Well, they have to pay bigger commissions to the sales agents. And you end up with not as good of a fund. But if you really like the fund and the A share and the A commission, the front load is already paid and you can stay in it.

But in your situation, she has $30,000 and you have $50,000. You're in the beginning like I was when I figured this all out. Just change it over. There are no tax consequences to selling mutual funds and buying what you actually want in your IRA. This isn't a taxable account. It's just IRAs, 401(k)s, etc. It's easy to make that conversion over.

What I would do is get your written investing plan in place. If you don't have that, and you don't feel competent to write it yourself right now, I would consider taking our online course. We have Fire Your Financial Advisor, which is the option without CME. And we have the option with CME that we call Financial Wellness and Burnout Prevention for Medical Professionals. That's Fire Your Financial Advisor plus about eight hours of CME qualifying wellness material. You can buy that with your CME fund or you can write it off as a business expense if you're self-employed and write up your written financial plan. If that's too overwhelming, go hire a financial planner. You can find our list of recommended planners under the recommended tab at White Coat Investor, just scroll down to financial advisors there and get someone to help you put a written financial plan together.

Now, once you have the plan together, then you make the changes in your IRAs with your investments in accordance with that plan. But there's no huge rush. We're only talking about $90,000 together that you've got in there. So what if you're paying an extra 1% for three more months? It's not terrible. It's not that much money. You can take your time, get things really set and move forward with the plan you're confident in. I’m sorry this happened to you. This happened to me. I had whole life insurance. It was a policy that was totally inappropriate for me. I had C share mutual funds in our Roth IRAs. I've made these mistakes, and you can get them fixed. It sounds like you're getting fixed early in your career, and you're going to be off to the races. Thanks for what you do and congratulations on your success so far and figuring this out early in your career. A lot of people never do.

Contributing to Your Spouse's 401(k)

“Hi, Dr. Dahle. This is Michael from Ohio. I really appreciate everything that you do. My question may sound too pedestrian, but I was not able to find the answer when searching online. I'm a physician and a primary income earner in my household. My wife is self-employed and is receiving symbolic salary less than $10,000 per year for her 1099 work as a medical biller. I have a 401(k) plan at work, and I'm maxing it out per your advice. I was wondering if my wife can open a solo 401(k), and if I, or we as a family, can contribute to her solo 401(k) plans since our filing status is married filing jointly. Any insight would be appreciated. Thank you for this opportunity to ask my question.”

Michael, thanks for being a listener. Wouldn't that be awesome if we could just open a 401(k) for a non-working spouse and put $61,000 of money we earned into it? That's actually the way IRAs work. A spousal IRA, that's precisely how it works. However, you cannot do that with a 401(k). 401(k) contributions are completely dependent on the earnings of the person whose name is on the 401(k). 401(k)s are never joint, right? You can have a joint taxable account, but you can't have a joint retirement account. They always just have one person's name on them. Then the other spouse is usually the beneficiary. So no, you can't put your earnings into her 401(k). If she's only making $10,000, $10,000 is all she's going to be able to put in there. As an employee contribution, she could put pretty much the whole thing in there, but you can't put any more in there just because you make a lot of money. I'm sorry. It'd be great if it worked that way, but it does not, unfortunately.

Now, money is fungible. So technically she could spend her $10,000 and you could put your $10,000 in there, but more than $10,000 can't be put in there if that's all she's earned. Technically what's happening is she's putting her $10,000 in there and she's spending your $10,000 from somewhere else. That's basically what happens with my kids. Their money goes in the retirement account, and I give them my money to spend on whatever they want. But the bottom line is it's limited by her earnings. The first $20,500, if you're under 50, can go in there as an employee contribution. After that, it can only go in there as an employer contribution, which is essentially 20% of earnings.

Burnout Proof MD with Dike Drummond

I've got a special guest on the podcast right now. This is something we've been wanting to put in place for quite a while, but have new reasoning to do it. We just got back our annual survey for White Coat Investors. One of the questions on the survey was whether people are feeling burned out or not. Fifty-seven percent of white coat investors said they have burnout right now. I'm not terribly surprised. Surveys in the past have shown that number anywhere from one-third to 50%. And there's no doubt it's gotten worse in the last two years of the pandemic. We have been wanting to put something in place to help doctors with this and have finally put all the pieces together for a really awesome program that will help doctors to overcome burnout and stay in their career.

The issue with burnout is that you can't buy burnout insurance. It's not like a disability where you can just go out and buy insurance, where if you burn out halfway through your career, you can still make the same amount of money. You can't do that. This is the closest thing to burnout insurance that we can put together. I'm bringing somebody back on that's been on our podcast before that we partnered with to put together a program called Burnout Proof MD. That person is Dike Drummond with The Happy MD. Welcome to the podcast, Dike.

“Hey, it’s great to be here again, Jim. I'm excited to be able to share what we've been working on with your people here on the podcast.”

By the time they hear this podcast, it'll be after our conference. We're actually recording it before the conference. It's a pretty busy month for us, as you can imagine. You put together a short little program at the conference that was basically oversubscribed to within just a few minutes. We had twice as many people signed up for it as we could fit in the room. There's clearly a huge need for this. It's a bit of a spectrum with private coaching on one side, and online courses, books, etc., on the other side. We've tried to find something in the middle that works for the majority of doctors and really provides an ongoing support system for them to make changes in their lives and their jobs—and to get over, get through, survive burnout, and come out the other side with a career they love and still being able to work toward their financial goals. Can you tell us about the Burnout Proof MD program?

“Well, let me just take a second to tell the people who are listening who I am. I'm a family doc by training for 10 years in private practice. I actually burned out of my practice way back in the year 2000. The first thing I did was get certified as an executive coach. I've been coaching doctors and entrepreneurs for about 22 years now. Back in 2010, I was one of the very first physician coaches on the internet. I started a website called thehappymd.com. I've coached several hundred doctors to recover. One of the things I tend to do is write about what I see. When I saw patterns and what was burning people out and what was getting them better, I wrote a book and turned it into a training.

It's crazy to understand this, but I've now trained 40,000 doctors for about 180 organizations on four continents to recognize and prevent burnout. The ways that we've done that have been a little bit disjointed. You can get a coach and have a one-on-one coach. That's just you and the coach working on your specific issue. You can do training and try to make the training and the tools that it teaches you fit your specific circumstance. Or you could maybe join a support group like The White Coat Investor support group, but typically that's on Facebook or some other page where there's a lot of other things going on. What we've done has taken all three of those things and put them in a single place. I call what we've created, Burnout Proof MD. I call it a three-layer physician support ecosystem. What we've done is taken our five top online video on-demand training programs that teach the tools that we've tested in the real world of hundreds of doctors' lives.

We know that they work, things that'll help you get home sooner, build life balance in a more ideal practice, even have training on how to manage your boss and have the best physician job search training that I know of. It basically turns the process on its head, because here's a little thing to understand. When you're getting a job, it's not about whether they want you. It's about whether the job you're looking at is something that matches your ideal practice enough to say yes. We have training, we do two hours a week of coaching with me on the line with the people in the community, two hours to tweak the tools so they fit for you. The whole thing takes place in a website that you can look at with your desktop computer or your cell phone that allows you to be with a tribe of like-minded physicians.

Everybody's working on the same thing. That's why this is important in the post-COVID window here. COVID is going to be gone here in a couple of months. I think Omicron is going to give us herd immunity. There's going to be a place where everybody's taking a big breath and nobody really knows what comes next in terms of what your practice is going to look like after COVID. There's going to be a window when you can negotiate with your employer to make a more ideal practice, to basically take your practice back. But only if you know what you want and only if you know how to negotiate with them. There's a window approaching where this is going to be really important. What we've made available is you can step into these three layers of support inside the Burnout Proof MD ecosystem, and in six months there's even 82 hours of CME. There's a whole bunch to talk about inside the program. That's why we have an introductory webinar that we want to show you that'll go over all the details and answer all your questions.”

You can get more information about that at whitecoatinvestor.com/coaching. Just click on Burnout Proof MD there. It's right at the top. That'll take you to the webinar and you can sign up for that. But it is more than just a course. It's an ecosystem. It's a six-month support system. Now, talk to people about why we chose to make it six months.

“Well, my experience is when somebody comes in to see me and they want to hire me as a coach, typically they've been smashing their face against the same wall for a while, doing the same thing over and over again and expecting a different result. When we tease it all apart, it's what's happening to them now and what is the ideal situation they'd like to create? We start to test some tools to see what's going to work to develop some new habits, to get new results. It typically takes 3-6 months to see significant changes.

But the really interesting thing is that 70% of our coaching clients, since the beginning of my coaching practice 12 years ago, can recover from burnout without changing jobs. They're always amazed at how small the tweaks are that make a huge difference. Little changes can make a huge difference. Thirty percent of doctors need to change jobs to get a more ideal practice and to get over their burnout. That's why we develop the ideal physician job search formula training. But that timeframe is in order to help you do what I call the heavy lifting of taking our training and our tools and starting to implement it in your practice. Now, we're not done with you for six months. What happens is you graduate from the first six months into alumni status and there's special alumni rates to continue with the full three layers of support from that point going forward.”

Let's talk about each of those layers. You get very personal layers. You get three one-on-one personal coaching calls during the program. You also get the weekly two-hour group coaching meetings, and then you've got the community behind you. This isn't a Facebook group. This is a private community. You don't have to be on Facebook to use it. It's only people that are curated.

“You don't have to create a fake Facebook ID because you don't want to be there, but you do want some of what the support can offer. Yeah, it's curated. We're going to choose who's in there. We're going to choose what you see. There are no ads, there's no weirdness like Facebook.”

Plus you get the 29-plus hours of burnout-proof training materials, and the best part, well, maybe not the best part, but another great, awesome thing about it is there's 82 hours of CME. So, if you've got a CME fund, you can use that to purchase this. If you are self-employed, this is now a business expense. This is a tax deduction, because you know what? This is an investment in your career. Just like medical school was. If you can't keep working because you're too burned out, how many hundreds of thousands and millions of dollars are you going to leave on the table? Any sort of six-month intensive coaching experience like this isn't going to be cheap. But neither was medical school. Neither are a lot of the other things that you invest in for your career. I think it's important to understand that this is really an investment in having a full-length career rather than burning out in 10 or 15 years after you start.

“I've been dialed into the world of people wanting to help physician burnout, both at the institutional and at the personal level. I don't know of another system like this. I don't know of another system that combines a private community with proven training, with proven tools and the coaching that you can get. You're never more than a week away from a coaching session where you can ask a question and get things adjusted to meet your exact circumstances. I don't know of anything like this. When I went out on the internet and I tried to price what it would take to put something like this together, what we're doing is charging about one-third of what it would take you to put this together on your own, one piece at a time.

One of the interesting things is this is the numer one threat to your practice, to your family, to your wealth, and even to your life. Just imagine how old are you, how much longer do you want to practice and what's your annual income. That's a total number where it'll be shocking how little it takes to burnout proof for yourself going forward because we're going to show you some tools. It's like working out; you're going to be fit. You're going to be ready to brawl with the overwhelm of your practice and have some new moves in your hands.”

Well, if it's time for you to end the struggle and remember why you wanted to be a doctor, just go to whitecoatinvestor.com/coaching and check out Burnout Proof MD. Dike, thanks so much for coming on the podcast today to tell us more about it.

“My pleasure. Thanks for having me.”

Sponsor

Bob Bhayani 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 get this critical insurance in place, contact Bob at drdisabilityquotes.com today by emailing [email protected] or by calling (973) 771-9100.

Quote of the Day

Robert Duval said,

“Never use money to measure your wealth.”

Money matters, but it doesn't matter most.

CFE 2022

If you did not get to attend WCICON22 but you want all of the awesome content, it will be available as an online course. Each year, we call this course Continuing Financial Education. This year's course is CFE 2022. The early bird price on this CFE course is $699. That is 10% and the sale will run from March 2-14. So be sure to get it on sale at whitecoatinvestor.com/cfe2022.

Milestones to Millionaire

#54 – WCI Ambassador Reaches Millionaire Status

Our new ambassador, Dr. Disha Spath, joins us in this episode to celebrate her new status as a millionaire! Two years out of training, after inflating their lifestyle, they started paying attention to their finances and cut back significantly. They cut every line item in their budget. Now five years later, they’ve paid off $250,000 in student loans and are millionaires! Working together with your family, you can make the changes necessary to take control of your finances.

Sponsor: CrowdStreet

Listen to WCI Ambassador Reaches Millionaire Status here.

Full Transcript

Transcription – WCI – 251

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 251 – How to fix the retirement account system.

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 by emailing [email protected] or by calling (973) 771-9100.

Dr. Jim Dahle:
All right, welcome back to the podcast. I hope you're enjoying the podcast. We are combing through the responses to the survey we got. We had over 3,000 responses to that survey I asked you guys to fill out and we're going to try to incorporate as many changes as we can to make what we're producing for you more helpful for you. So, thanks to those of you who filled that out. We really appreciate it.

Dr. Jim Dahle:
I'm recording this before the conference. It's now after the conference, I'm hoping we had an awesome time there. I'll bet we did since we have at every other conference. But if you are interested, you can buy the content from that conference. It's now packaged up into an online course. You can get information for that at whitecoatinvestor.com/cfe2022.

Dr. Jim Dahle:
I think by the time you hear this podcast on the 24th, that should be ready to go. But it's got all the content. It's over 50 hours. It qualifies for CME. You can use your CME fund to buy it. We call it Continuing Financial Education.

Dr. Jim Dahle:
If you've had your initial financial education, however you got that, whether it's from a financial advisor, or from reading books and participating on forums, or from taking our Fire Your Financial Advisor course, every year you should still do some learning about finances, investing, etc. And the product we provide each year is CFE, Continuing Financial Education. This year's CFE 2022, and that's the link, whitecoatinvestor.com/cfe2022. So be sure to check that out.

Dr. Jim Dahle:
The early bird price on this CFE course for the early bird sale, which is February 23rd through March 7th is $80 off, 10% off. It's going for $699 and the regular price is going to be $779. So, if you buy that before March 7th, you get an early bird price and you get to experience all the awesome content we enjoyed at the conference.

Dr. Jim Dahle:
All right. Let's get into one of the questions here that we've titled the podcast after, and then I'm going to rant for a while. Let's take a listen to this question.

Speaker:
Hi, Jim. It seems like you have to spend a lot of time explaining how IRAs, 401(k)s, 457(b)s, 403(b)s and all the different types of retirement accounts work, how much you can spend to save in each of these accounts, all the rules and exceptions and all that. So, if you were king, how would you reset the whole retirement account system in this country to make more sense for both the government and the citizens?

Dr. Jim Dahle:
All right. This is a great question and an opportunity for me to talk about changing the world. Every now and then I have somebody encourage me to write for political office. I don't know if they agree with my political views or think I'm reasonable or what it is, but I actually get encouraged fairly often to run for political office.

Dr. Jim Dahle:
I am not going to do that. Number one, I don't enjoy it. The last political office I held was a student body president back in medical school. I really don't like being in politics. It's not that fun for me, number one. Number two, half people always end up hating you. So don't expect me to run for politics at any point. It's not like I'm electable anyway. Can you imagine how much stuff could be mined from this podcast and from the blog and taken out of context and used against me in an election? There's just no way I'm ever going to be electable. So, you don't have to worry about me becoming president, much less king.

Dr. Jim Dahle:
But we can still talk about what I'd like to see in the world. It's really hard, however, to talk about retirement, fixing the retirement system, without talking about both politics and about taxes.

Dr. Jim Dahle:
And so, the first thing I ought to tell you about is my politics. People can read between the lines and probably have figured out some things about my politics. They know I'm a doctor, they know I'm a businessman, so it's not terribly surprising when you find out what my politics are like. But let's start with that.

Dr. Jim Dahle:
I consider myself a moderate. I really don't feel comfortable in either political party right now. I don't like feeling like I have to choose between the party that doesn't believe in science and the party that doesn't believe in economics.

Dr. Jim Dahle:
I probably fall mostly right of center on financial and tax issues, which tends to be my most important issue at the national level. I probably fall a little bit to the left when it comes to social issues, environmental issues, etc. And in local elections, that tends to be my most important issue, tends to be environmental issues. So just so you know a little bit about my politics. I really don't like the extremes of either end of the political spectrum. I think they're both pretty nutty out there.

Dr. Jim Dahle:
At any rate, I hope that's not offensive to you if you're on one of the extremes of the political spectrum, but that's just where I sit. So, that'll give you some context into what I'm about to say.

Dr. Jim Dahle:
As far as the tax system goes, I'm for simplification. I'd love to see 99% of the deductions go away and just have all of the tax rates lowered to make up for it. Instead of the top bracket being 37%, maybe the top bracket is 30%, but you get no deductions. It works out to be the same revenue in the end, but it's way simpler.

Dr. Jim Dahle:
And the other thing I'd like to see happen with the tax code is I'd like to see the welfare programs come out of the tax code and have them be separate. I think everybody ought to pay taxes, even if you're only paying $100 a year. I think everybody ought to pay taxes.

Dr. Jim Dahle:
And whatever welfare system we decide to put in place, Medicaid and all those programs, I think it ought to be separate from the tax system and run separately. Maybe that won't be as efficient, but I think combining the two was not an awesome idea.

Dr. Jim Dahle:
Speaking of retirement systems, you know what else was not an awesome idea? It was mixing retirement with employment. Why should your employer have control over your retirement? It's the same problem we have with healthcare and health insurance being tied to employment. That was a stupid idea.

Dr. Jim Dahle:
You know where that comes from, right? In the 1940s during World War II, inflation was going gangbusters and they actually put wage controls in. Employers were not allowed to pay more. They weren't allowed to pay more because they were trying to fight inflation by putting these controls on wages.

Dr. Jim Dahle:
So, what did they do? They started offering benefits. One of which was health insurance. And as years have gone by, more and more benefits have been added on. It's a little bit like in the 1970s. Banks wanted to pay more interest, but they weren't allowed to by regulations. So, what did they do? They gave you a free toaster.

Dr. Jim Dahle:
It's the same thing. The government intervenes in the economic system. Sometimes you get some weird side effects. One of those side effects is our screwed-up healthcare system with all the weird insurance stuff that we deal with. And a lot of that comes from the fact that it was tied into employment. You've got an employer choosing your health insurance plan. You've got somebody else paying for your healthcare. It just gets really messy when you do that.

Dr. Jim Dahle:
And retirement is the same way. We've added a piece here, added a piece there, and now we've got 401(k)s and 403(b)s and 457(b)s and 401(a)s and backdoor Roth IRAs and SEP IRAs and 529s and HSAs and able accounts and all these different things to keep track of.

Dr. Jim Dahle:
So, if I were going to be king and I were going to totally revamp our retirement system, I would number one, put some sort of pension plan in place. Now, we've kind of got that with social security, but I would actually probably beef that up. I would beef it up. Social security is the most popular program the government has.

Dr. Jim Dahle:
Everybody loves social security. Okay, not everybody, but seriously, 90% or 95% of people think social security is a good program. It's very rare to find more than 5 or 10 senators at any given time that are against social security. Now, everybody wants to change it and tweak it and little things, but the general idea behind it is good.

Dr. Jim Dahle:
And the reason why you need some sort of pension program out there is there are a whole bunch of people that are either not smart enough to figure it out, not disciplined enough to figure it out, or have had bad luck happen to them or whatever that they're not going to save for their own retirement.

Dr. Jim Dahle:
And that's probably the majority, are not going to figure this out. And so, you need something to provide for those people. I don't think social security is adequate. I would have more of a pension program in place. Pension that everybody qualifies for, some sort of work requirement to pay into it for most of it, and maybe something that doesn't have a work requirement. So, we don't have people starving on the streets, etc, but that's again, more on the welfare side.

Dr. Jim Dahle:
Then in addition to that, for those who are interested in doing so, I would have a tax advantage retirement savings program, similar to what we have now. It wouldn't be tied to your employer though. And there would be a tax-deferred option. There would be a tax-free option. Everyone would have the same limit.

Dr. Jim Dahle:
It wouldn't matter how many employers you have. It wouldn't matter what your employer offers. It'd be the same limit. Maybe it's $50,000 in each of them. You can put $50,000 a year into a tax-deferred account. You can put $50,000 a year into a tax-free account. And that's it. Obviously, most people aren't going to max those out and people making $10 billion a year are still going to be limited to just putting $100,000 a year into that. And they got to save in taxable beyond that.

Dr. Jim Dahle:
But that's the sort of program I would put together if I was a king. Very simple. Something for everybody, in the form of a pension sort of thing. And then some tax advantage savings on top of that. I don't know if that'll ever pass. And I'm certainly never going to be president.

Dr. Jim Dahle:
All right, let's take a listen to our next question here. This one is about the $58,000 cap, which in 2022 is actually the $61,000 cap.

Speaker 2:
Question about the $58,000 cap on 401(k) contributions. I have a state job with a pension, which is a defined benefit plan as well as a second W2 job, which has a 401(k) maxing out at $19,500, plus a 401(k) solo that I'd like to contribute to, but don't know how much I can. I imagine the total in aggregate is $58,000.

Speaker 2:
My questions are, do these pension-defined benefit plans, which is 6% of my salary at that particular W2 job, or my backdoor Roth actually affect the $58,000 number? Thanks for helping me get my financial head out of my rear. I appreciate you.

Dr. Jim Dahle:
Okay. Great question. First thing to remember it’s $61,000 this year, not $58,000. It goes up with inflation each year and we had a fair amount of inflation last year. So, it's gone up quite a bit.

Dr. Jim Dahle:
The blog post that details all this in extreme detail is called Multiple 401(k) Rules. Whitecoatinvestor.com/multiple-401(k)-rules. And I go through all of this in excruciating detail. And if you want even more detail, get down into the comment section.

Dr. Jim Dahle:
But here's the two main rules. You get one employee contribution per year. In 2022, that is $20,500 if you are under 50. If you're over 50, you get an additional catch-up contribution on top of that, I think it's $6,000 this year. Double-check it before you make the contribution.

Dr. Jim Dahle:
That's the employee contribution. And no matter how many employers you have, no matter how many 401(k)s you have, that's all you get as an employee contribution. That employee contribution can be tax-deferred, or it can be tax-free, a.k.a. Roth, if the account offers a Roth option.

Dr. Jim Dahle:
The $61,000 limit is a per plan limit. It is a per unrelated employer limit. So, if you work for yourself as an independent contractor, and you have a W2 job at the hospital, you have two $61,000 limits per year. One for each plan. However, despite having two plans, you only get one $20,500 limit.

Dr. Jim Dahle:
What typically happens is a doctor will use his or her employee contribution at the hospital, at the W2 job in that 401(k). They'll put their $20,500 in there. Hopefully, their employer gives them some sort of a match. Maybe they get another $10,000 or $15,000. And so, they get a total of $30,000, $35,000, $40,000 into that account.

Dr. Jim Dahle:
And then on their moonlighting side, this side gig, they open up a solo or individual 401(k). And because they've already used their employee contribution, they don't get another one. All contributions have to be employer contributions. And the amount you can contribute is about 20% of your net income from that side gig. If you make $100,000 over there, you can put about $20,000 in there. If you $300,000, you can put $60,000 in there as an employer contribution.

Dr. Jim Dahle:
Now, you read the rules on how much that is, and it can get confusing sometimes. But if you're a sole proprietorship, just think of it as 20% of your income. Now, if you read the rules, sometimes it'll talk about it being 25%. But when they're talking about 25%, they're not including the contribution. So, it’s 25% if you don't include the contribution, it’s 20% if you do include the contribution but it's the same number.

Dr. Jim Dahle:
If you are an S Corp, the amount that you can put in there is 25% of your salary that your S Corp pays you. Even if you make $300,000, if it's only paying you $100,000, then you can only put $25,000 in there as an employer contribution. You've got to bump up how much it's paying you in order to max that account out if you're in an S Corp. And of course, that means you're paying more social security and Medicare taxes on that. So be aware of that. I hope that's helpful.

Dr. Jim Dahle:
As far as the IRAs go, that limit is totally separate. $6,000 if you're under 50 this year, $7,000 if you're 50 plus. That's a totally separate limit from the 401(k) limit. Likewise, if you have a 457(b) at your job, a totally separate limit. I hope that's helpful and explains those rules.

Dr. Jim Dahle:
All right. Let's take another question. This one again is on a 401(k) about a small business, 401(k).

Mark:
Hello, Dr. Dahle. This is Mark in New Jersey. I have a small business 401(k) type of question for you. I am an internal medicine doc with a solo practice in New Jersey with one employee.

Mark:
After wasting a lot of time and money having a small business 401(k) with ADP years ago as it was not right for my business, I switched to a sep-IRA for the past few years. However, after a more thorough White Coat Investor financial education, I am now considering switching back to a small business 401(k), and then subsequently adding a cash balance plan in the next year, as my spouse will be rejoining the workforce and this will allow me to both max out the 401(k) and contribute a significant amount to the cash balance plan.

Mark:
Of course, the numbers for the CBP must make sense. But my question ultimately is how to decide if going with Vanguard small business 401(k) with a census TPA is right for me? I would very like to keep my finances simple as most of my other retirement and 529s are with Vanguard aside for my wife's solo 401(k) and our HSA at Fidelity.

Mark:
Are there other companies that may be ideal for my scenario? And is it as simple as contacting a census to find out if they would be able to add on the CBP? Am I thinking about this correctly? Thank you very much for your time and all that you do.

Dr. Jim Dahle:
All right. Great question. We put a 401(k) plan in place here at the White Coat Investor. Initially, at the White Coat Investor, it was just me. Then it was Katie and I. Remember I gave her half the business and we basically both got to use that solo 401(k). We started hiring help. Initially, a lot of our help were independent contractors. And so, they didn't qualify to use our solo 401(k). They went out and opened their own solo 401(k).

Dr. Jim Dahle:
But eventually, it became clear that we needed to convert those independent contractors to employees. And once you have employees at your practice, setting up a retirement plan is no longer a do-it-yourself project. I'm very much a do-it-yourselfer. I still mow my own lawn when I can't get the kids to do it. I've paid my own taxes, prepared my own tax returns, even corporate tax returns for many years.

Dr. Jim Dahle:
I do my own investments. I'm very much a do-it-yourselfer. This is not a do-it-yourself project. Trust me. You need to get some professional help to do this if you have employees. In your case, you have one employee, you need professional help. The downside, it's going to cost you more than if you didn't have any employees and could just do a solo 401(k). But it's just complex enough that you have to do that.

Dr. Jim Dahle:
The main thing you will learn as you work with an expert at setting up retirement accounts for a small practice, is that the main point of all the rules about retirement plans is that you can't let all the benefits go to the owners and the highly compensated employees.

Dr. Jim Dahle:
The other employees have to get something. Now, it's not as good as what you can give the highly compensated employees and as good as what you can give the owners, but you have to give them something. And if you do not, there is a penalty. You don't pay the penalty to the IRS though. You pay the penalty to the employees that are being discriminated against by your plan.

Dr. Jim Dahle:
And so, a lot of people, dentists, doctors with a small practice and four or five employees, run the numbers here and realize that if they want to max out their 401(k), they're going to have to pay several thousand extra dollars to each employee. And if you got five employees and you're paying $3,000 or $4,000 a piece to them in these penalties, that's like $20,000. And they go, it's no longer worth it to me to have a 401(k) because I have to pay this money to them in order to be able to max it out myself.

Dr. Jim Dahle:
I look at that, and I say, well, what's the big deal? I don't mind that penalty at all. I pay bonuses to my employees. I pay them salaries. I teach them about retirement accounts. If they don't learn it just from working in the business on their own. I don't view giving them extra money for retirement as some terrible penalty. So, I'm okay with that if I have to pay them that. That's fine with me. And so that doesn't bother me.

Dr. Jim Dahle:
But if that bothers you, if your employees don't recognize the value of a match, if they don't recognize the value of you putting money into their retirement account, if they don't recognize the value of having a retirement account available at all, you may decide not to put one in place.

Dr. Jim Dahle:
But when it comes to a small practice, the right answer for you might be a 401(k). It might be a simple IRA. Now, that is not a traditional IRA. That's a simple IRA. It's a different thing. It might be a SEP IRA. Yes, you can have a SEP IRA with employees. It might be nothing at all. And you just save in your backdoor Roth IRA in your taxable account.

Dr. Jim Dahle:
But in order to figure out what the right thing is, you really need to kind of have a study done of your practice and the employees and how many employees do you expect to add in the future and how many hours they're working and how old they are and how much they want to save. And when you do that, it's a lot easier to figure out exactly what the right plan to put in place is.

Dr. Jim Dahle:
Unfortunately, this is not something that lends itself well to a big, huge organization that puts out a cookie-cutter plan, because your practice is totally different from somebody else's practice. Maybe your employees are in their 50s, and they're really interested in saving for retirement. They really value a 401(k). And somebody else's practice has a bunch of 22-year-olds that really would rather have the cash now. And so, those two practices may have a totally different retirement plan put in place.

Dr. Jim Dahle:
I recommend you actually go to a smaller firm. And yes, no surprise, we keep a list of these firms on the website. If you go to the recommended tab and go down to retirement accounts and HSAs, you will find them right at the top of that page. It's whitecoatinvestor.com/retirementaccounts. And you'll see that we've got five on the list right now.

Dr. Jim Dahle:
And guess who we called when we put the White Coat Investor plan in place? We called these companies. These are the people we used. And we compared them one to another. We went with one of them and put our plan in place. We consider the best 401(k) in the country. It's a great 401(k). We've got all the bells and whistles that we could put in there. The employees pay no fees. The company picks them all up. Why wouldn't you want to pay those out of the employer’s dollars? Of course, that's what you want to do.

Dr. Jim Dahle:
But that's who we recommend you go to. If you've got an employee and if you need some help, go to that list, call up one or two or three of those companies, get quotes from them, have your practice studied, it should be pretty easy with only one employee and figure out exactly what you want to do.

Dr. Jim Dahle:
If you want to add a defined benefit plan on top of that, you can also do that. We actually ended up deciding not to put a defined benefit plan on top of ours at the White Coat Investor. Not that I have anything against them. I have one in my physician practice. I like it. It's fine.

Dr. Jim Dahle:
But for us in our situation, it turned out most of the employees weren't going to use the defined benefit plan. And for us, it reduced our 199(a) deduction that will be in place from now through 2025. And so, it didn't make sense for us to use it either because we were really only getting a 29% deduction instead of a 37% deduction on it. And so, you may make a totally different decision on that though, and decide to put a defined benefit plan in place in your practice. But that's what you need to know about putting a retirement plan in place at your practice. I hope that's helpful.

Dr. Jim Dahle:
All right. We got another question here. This one comes from Brian. I think it's about social security. Let's take a listen.

Brian:
Hi, Jim. This is Brian from the Northeast. I wanted to ask you a question about social security that I never hear much about. It seems like common wisdom is that I have a normal life expectancy and I don't need the money to live on, then I should delay taking social security until age 70 in order to maximize my lifetime benefit.

Brian:
But it seems to me that if I start taking my social security benefit at age 62 and invest it, I could easily come out ahead compared to waiting to take social security at age 70. By my calculations, if I assume a 5% return, then the break-even point between taking social security at age 62 versus taking it at age 70 is about 90 years old. And if I assume a 7% real return, then the break-even age is well over 100 years old.

Brian:
Am I missing something here? It seems like if I don't need the money to live on, then I'd be better off taking the money beginning at age 62 and just investing it into something like the total stock market index fund and let it compound in the next decade or so. What do you think of this frame of thought? Am I missing something here or should more people be taking those social security at age 62 and investing it, assuming that they don't need it to live on? Thanks for your input and for setting me straight.

Dr. Jim Dahle:
Great question, Brian. You're asking the right question, by the way. The common wisdom is to delay until age 70, assuming you're healthy, particularly for the higher earner in a couple. But you're right. It is possible to take the money at 62 and out invest and outperform social security.

Dr. Jim Dahle:
The number I've seen thrown around, I think the best study I saw of this was Mike Piper. I can't remember the exact number. I think he came up with 7% or 8% is what you really needed to make. But keep a couple of things in mind. That 7% or 8% after all your fees, and remember social security also has some tax advantages.

Dr. Jim Dahle:
But what you're failing to think about are two things. The first is risk. Delaying social security provides a guarantee and that's worth something. With those social security benefits, they become more valuable, no matter what markets do, no matter what happens in your life. An investment doesn't provide those sorts of guarantees.

Dr. Jim Dahle:
The second thing to keep in mind is social security has an insurance component to it. It's helping you ensure against outliving your money. And it's really the best priced and perhaps only inflation-adjusted pension or immediate annuity that you can buy. It's a better deal than going to an insurance company and buying an annuity, and it's adjusted to inflation.

Dr. Jim Dahle:
So, it's a particularly valuable form of insurance. And if you take that at 62, you have less of that insurance than you would have if you waited until you're 70. When you account for the value of that insurance, when you account for the lack of risk in delaying social security, I think it still makes sense for almost everybody to do.

Dr. Jim Dahle:
But if you are at age 62 and you're still doing highly leveraged real estate, yeah, it's entirely possible you can outperform social security. But if you're just kind of going, “Eh, I think the stock market's probably going to do better than that over those eight years, I don't think that's a risk worth taking. I’d just delay social security.”

Dr. Jim Dahle:
At that point, especially somebody who's thought so deeply about this question, chances are you have enough money already to go either way and it doesn't matter that much for you what you do. So do whatever you want, but I'm probably waiting until age 70, at least for my benefit. Now, Katie's benefit will be less than mine. We may take that a little bit earlier. We'll have to see what strategies are available at that point. I hope that's helpful.

Dr. Jim Dahle:
All right, I've got a special guest on the podcast right now. This is something we've been wanting to put in place for quite a while, but have new reasoning to do it. We just got back our annual survey for White Coat Investors. And one of the questions on the survey was whether people are feeling burned out or not. And 57% of White Coat Investors said they have burnout right now.

Dr. Jim Dahle:
Now, I'm not terribly surprised. Surveys in the past have shown that number anywhere from a third to 50%. And there's no doubt it's gotten worse in the last two years of the pandemic. But we've been wanting to put something in place to help doctors with this and have finally put all the pieces together for a really awesome program that will help doctors to overcome this and be able to stay in their career.

Dr. Jim Dahle:
The issue with burnout is that you can't buy burnout insurance. It's not like a disability where you can just go out and buy insurance. That if you burn out halfway through your career, you can still make the same amount of money. You can't do that. So, this is the closest thing to burnout insurance that we can put together.

Dr. Jim Dahle:
I'm bringing somebody back on that's been on our podcast before that we partnered with to put together a program called Burnout Proof MD. That person is Dike Drummond with The Happy MD. Welcome to the podcast, Dike.

Dr. Dike Drummond:
Hey, it’s great to be here again, Jim. I'm excited to be able to share what we've been working on with your people here on the podcast.

Dr. Jim Dahle:
Yeah, by the time they hear this podcast, it'll be after our conference. We're actually recording it before the conference. It's a pretty busy month for us, as you can imagine. But you also put together a short little program at the conference that was basically over subscribed within just a few minutes. We had twice as many people signed up for it as we could fit in the room.

Dr. Jim Dahle:
So, there's clearly a huge need for this. And it's a bit of a spectrum with private coaching on one side, and online courses, books, etc, on the other side. And we've tried to find something in the middle that works for the majority of doctors and really provides an ongoing support system for them to make changes in their lives and their jobs, get over, get through, survive burnout, and come out the other side with a career they love and still being able to work toward their financial goals. Can you tell us about the Burnout Proof MD program?

Dr. Dike Drummond:
Well, let me just take a second to tell the people who are listening, if you're listening, who I am. I'm a family doc by training for 10 years in private practice. I actually burned out of my practice way back in the year 2000. And the first thing I did was get certified as an executive coach. I've been coaching doctors and entrepreneurs for about 22 years now.

Dr. Dike Drummond:
Back in 2010, I was one of the very first physician coaches on the internet. I started a website called thehappymd.com. I've coached several hundred doctors to recover. And one of the things I tend to do is write about what I see. When I saw patterns and what was burning people out and what was getting them better, I wrote a book, turned it into a training.

Dr. Dike Drummond:
And it's crazy to understand this, but I've now trained 40,000 doctors for about 180 organizations on four continents to recognize and prevent burnout. And the ways that we've done that have been a little bit disjointed. You can get a coach and have a one-on-one coach. That's just you and the coach working on your specific issue. You can do training and try to make the training and the tools that it teaches you fit your specific circumstance. Or you could maybe join a support group like the White Coat Investor support group, but typically that's on Facebook or some other page where there's a lot of other things going on.

Dr. Dike Drummond:
What we've done has taken all three of those things and put them in a single place. I call what we've created, Burnout Proof MD. I call it a three-layer physician support ecosystem. Because what we've done is taken our five top online video on-demand training programs that teach the tools that we've tested in the real world of hundreds of doctors' lives.

Dr. Dike Drummond:
We know that they work, things that'll help you get home sooner, build life balance in a more ideal practice, even have training on how to manage your boss and have the best physician job search training that I know of. It basically turns the process on its head because here's a little thing to understand. When you're getting a job, it's not about whether they want you. It's about whether the job you're looking at is something that matches your ideal practice enough to say yes.

Dr. Dike Drummond:
We got training, we do two hours a week of coaching me on the line with the people in the community, two hours to tweak the tools so they fit for you. And the whole thing takes place in a website that you can look at with your desktop computer or your cell phone that allows you to be with a tribe of like-minded physicians.

Dr. Dike Drummond:
And everybody's working on the same thing. That's why this is important in the post COVID window here. COVID is going to be gone here in a couple of months. I think Omicron is going to give us herd immunity. There's going to be a place where everybody's taking a big breath and nobody really knows what comes next in terms of what your practice is going to look like after COVID.

Dr. Dike Drummond:
There's going to be a window when you can negotiate with your employer to make a more ideal practice, to basically take your practice back. But only if you know what you want and only if you know how to negotiate with them. There's a window approaching where this is going to be really important.

Dr. Dike Drummond:
And what we've made available is as you can step into these three layers of support inside the Burnout Proof MD ecosystem, six months, hey, there's even 82 hours of CME. There's a whole bunch to talk about inside the program. And that's why we have an introductory webinar that we want to show you that'll go over all the details and answer all your questions.

Dr. Jim Dahle:
Yeah. And you can get more information about that at whitecoatinvestor.com/coaching, just click on Burnout Proof MD there. It's right at the top. That'll take you to the webinar and you can sign up for that. But it is more than just a course. It's an ecosystem. It's a six-month support system. Now, talk to people about why we chose to make it six months.

Dr. Dike Drummond:
Well, my experience is when somebody comes in to see me and they want to hire me as a coach, typically they've been smashing their face against the same wall for a while, doing the same thing over and over again and expecting a different result. And when we tease it all apart, what's happening to them now and what is the ideal situation they'd like to create? And we start to test some tools to see what's going to work to develop some new habits, to get new results. It typically takes three to six months to see significant changes.

Dr. Dike Drummond:
But the really interesting thing is that 70% of our coaching clients, since the beginning of my coaching practice, 12 years ago, 70% of folks can recover from burnout without changing jobs. And they're always amazed at how small the tweaks are that make a huge difference. Little changes can make a huge difference.

Dr. Dike Drummond:
30% of doctors need to change jobs to get a more ideal practice and to get over their burnout. That's why we develop the ideal physician job search formula training. But that timeframe is in order to help you do what I call the heavy lifting of taking our training and our tools and starting to implement it in your practice.

Dr. Dike Drummond:
Now, we're not done with you for six months. What happens is you graduate from the first six months into alumni status and there's special alumni rates to continue with the full three layers of support from that point going forward.

Dr. Jim Dahle:
Yeah, let's talk about each of those layers. You get very personal layers. You get three one on one personal coaching calls during the program. You also get the weekly two-hour group coaching meetings, and then you've got the community behind you. And this isn't a Facebook group. This is a private community. You don't have to be on Facebook to use it. It's only people that are curated.

Dr. Dike Drummond:
You don't have to create a fake Facebook ID because you don't want to be there, but you do want some of what the support can offer. Yeah, it's curated. We're going to choose who's in there. We're going to choose what you see. There are no ads, there's no weirdness like Facebook.

Dr. Jim Dahle:
Yeah, plus you get the 29 plus hours of burnout-proof training materials, and the best part, well, maybe not the best part, but another great, awesome thing about it is there's 82 hours of CME. So, if you've got a CME fund, you can use that to purchase this. If you are self-employed, this is now a business expense. This is a tax deduction because you know what? This is an investment in your career. Just like medical school was.

Dr. Jim Dahle:
If you can't keep working because you're too burned out, how many hundreds of thousands and millions of dollars are you going to leave on the table? Any sort of six-month intensive coaching experience like this isn't going to be cheap. But neither was medical school. Neither are a lot of the other things that you invest in for your career. I think it's important to understand that this is really an investment in having a full-length career rather than burning out in 10 or 15 years after you start.

Dr. Dike Drummond:
And I've been dialed into the world of people wanting to help physician burnout, both at the institutional and at the personal level. And I don't know of another system like this. I don't know of another system that combines a private community with proven training, with proven tools and the coaching that you can get. You're never more than a week away from a coaching session where you can ask a question and get things adjusted to meet your exact circumstances. I don't know of anything like this.

Dr. Dike Drummond:
And when I went out on the internet and I tried to price what it would take to put something like this together, it's actually what we're doing is charging about one-third of what it would take you to put this together on your own one piece at a time.

Dr. Dike Drummond:
And one of the interesting things is this is the number one threat to your practice, to your family, to your wealth, and even to your life. Just imagine how old are you, how much longer do you want to practice and what's your annual income. That's a total number where it'll be shocking how little it takes to burnout proof for yourself going forward because we're going to show you some tools. It's like working out, you're going to be fit. You're going to be ready to brawl with the overwhelm of your practice and have some new moves in your hands.

Dr. Jim Dahle:
Awesome. Well, if it's time for you to end the struggle and remember why you wanted to be a doctor, just go to whitecoatinvestor.com/coaching and check out Burnout Proof MD. Dike, thanks so much for coming on the podcast today to tell us more about it.

Dr. Dike Drummond:
My pleasure. Thanks for having me.

Dr. Jim Dahle:
All right. I’m glad you were able to hear about that program. I hope you don't need that program, but it sounds like about 57% of White Coat Investors do. So be sure to take a close look at Burnout Proof MD, and we'll be talking about that more on the podcast. I'm sure over the months and years. This is a long-time partnership. We put a lot of time and effort into this selection and putting this program together. I hope it'll be really helpful to you.

Dr. Jim Dahle:
All right. Let's talk about annuities and 401(k)s with this question from Lee.

Lee:
Hello, Dr. Dahle. I have a question about annuity. We had money moved from a 401(k) at my place of business into an annuity about five or six years ago. I'm realizing that this was probably not a good decision and wondering if there's a way to reverse that and move that money back into the 401(k) or into some other account. Thanks for your help.

Dr. Jim Dahle:
The answer is I don't know. You haven't given me enough details. I don't know if you took the money out of a 401(k) and put it in an IRA and bought an annuity inside the IRA, or if you took all the money out of the 401(k) and put it into an annuity. Which one of those two you did is going to affect the decision, and what's available to you.

Dr. Jim Dahle:
The other thing that will affect it is the contract you have with the insurance company and what it allows you to do. Now, most annuities can be surrendered. There's often a pretty hefty surrender fee. So, you have to look at that, read the contract to see what your options are.

Dr. Jim Dahle:
I suspect, if somebody didn't do you a real disservice, I suspect that this is an annuity inside an IRA at this point, which you can probably surrender the annuity and roll the IRA back into the 401(k), if you would like to do that.

Dr. Jim Dahle:
But you got to get more details about this thing to figure out what your options are. And maybe the easiest way to do that is to sit down with a good hourly fee-only advisor, just to get an hour or two of advice about your situation and get this sorted out. And if you want to hire them to help actually do the forms and get that money moved back around to where it's best you can do that as well.

Dr. Jim Dahle:
Our recommended list is found under the recommended tab at whitecoatinvestor.com. Just go down to financial advisors there. The direct link is whitecoatinvestor.com/financial-advisors. And you can find someone that can help you to get that sorted out and really help you run the numbers and decide what's best for you.

Dr. Jim Dahle:
All right, let's do our quote of the day. This one's from Robert Duval who said, “Never use money to measure your wealth.” Yeah, money matters, but it doesn't matter most.

Dr. Jim Dahle:
All right, our next question from Randall is also about retirement accounts. It's about tax-deferred versus Roth contributions. Let's take a listen.

Randall:
Hi, Dr. Dahle. A quick question on tax-deferred versus Roth. I know that typically your exception to the rule that in your peak earning years, you want to do tax-deferred preferentially is if you're a super saver.

Randall:
I had planned on being a super saver, because I will hopefully enjoy a very high income. However, I've recently been considering later in my career, doing a lot more pro bono work and having a much lower income. I would think in that circumstance that even though I might be a super saver, since my income would be so much lower for this portion of my career, it would still make sense to do more tax-deferred than Roth in those peak earning years. Is that accurate? Thank you for all you do. I appreciate it.

Dr. Jim Dahle:
Okay. I get this question a lot ever since I started talking about super savers being an exception. There are other exceptions too, by the way. For example, if you're trying to maximize your public service loan forgiveness, even during residency, you might be doing tax-deferred contributions instead of tax-free contributions.

Dr. Jim Dahle:
So, there's other exceptions out there. But the main one for White Coat Investors to be thinking about is if you're a super saver. Now, what is the definition of a super saver? A super saver is somebody that's still in the same tax bracket in retirement as they were during their peak earnings years.

Dr. Jim Dahle:
What does that take to be there? Well, it takes a bunch of rental property, or it takes a spouse that's 15 years younger than you that still has a high-earning career. Or it's a massive, taxable account kicking out all kinds of dividends and capital gains or it's a big, huge IRA that you'll have RMDs from. We're talking $5 million-plus tax-deferred accounts.

Dr. Jim Dahle:
That's what I'm talking about when I'm talking about a supersaver. It's enough taxable income that your tax bracket is pretty much just as high later as it is now. And when that's the case or even higher possible, it could be higher, but when that is the case, then you're better off making tax-free contributions now.

Dr. Jim Dahle:
The main thing you're comparing is your tax rate now to your tax rate later. And even if the brackets move a little bit, the top bracket becomes 40% instead of 37%, that doesn't matter so much as your personal tax situation of whether you're in that top bracket. But if you expect to be in the top bracket the rest of your life, then you probably ought to be giving some consideration to tax-free contributions during your peak earnings years.

Dr. Jim Dahle:
Now, in your situation, you're describing like an early retiree or somebody that's going part-time for a significant chunk of their career. That's not maybe somebody that's probably what I would call a super saver.

Dr. Jim Dahle:
Even though you're saving a lot of money now, even though you're doing great, even though you're going to have enough money to retire early, that's not what I'm talking about with the supersaver. Supersaver has a lot of money and a lot of income in retirement. And if that's not you, then do the general rule, which is tax-deferred during your peak earning years.

Dr. Jim Dahle:
But here's the truth of the matter. These are both good things. It's not like it's bad to put money in a Roth IRA. It's not like it's bad to put money into a tax-deferred account and get that upfront tax rule break. They're both great things. But there are situations where one is a little bit better than the other. But don't beat yourself up about it. If you're just not sure which one to do, split the difference. That'll minimize your regret. Yes, one of them will be wrong, but like I said, they're both good things, so it's not really wrong. It's just less right. Good luck with your decision.

Dr. Jim Dahle:
All right. Our next question has to do with C shares and A shares. I’m looking forward to this one.

Speaker 3:
Hi, Jim. Thanks so much for doing what you do. I think I've probably been misled by well-known financial and insurance companies often derided by our fellow readers and listeners. My wife and I are both physicians. She's a part-time hospitalist and I'm an early career attending surgeon. We've both been maxing out our backdoor Roth IRAs and 403(b)s for several years.

Speaker 3:
I'm in the process of switching our Roth IRAs from different so-called advisors. I came to find out my wife's account is composed of C share mutual funds while mine is A shares. An advisor wants me to convert all of my wife's C shares to A shares.

Speaker 3:
I read your blog posts on no-load mutual funds, and I'm planning to run away from this advice and transfer these accounts to a different company. My wife's account has about $35,000 and mine has about $58,000 in our backdoor Roth IRAs.

Speaker 3:
Is there any benefit in converting these to no-load mutual funds or are no-load mutual funds just something we should look to invest in the future? Thanks so much for your help, and I hope you had a Merry Christmas.

Dr. Jim Dahle:
That's a great question, Dr. B. It brings back a lot of bad memories. This is kind of what got me started. This was the camel that broke the straws back. The straw that broke the camel’s back. I realized I had C shares, C share mutual funds. I realized that my advisor that I was paying a fee to was fee-based, not fee-only. Not only had I paid them a fee to give me advice, but I was paying them commissions to put me into mutual funds. And I had class C or C shares mutual funds.

Dr. Jim Dahle:
Now, for those who weren't familiar with these terms, these are terms from the commissioned sales industry. Generally mutual funds. A shares are front-loaded funds, meaning you pay the load upfront. Typical load might be 5.75%. So, if you give them a thousand dollars to invest, they take $57.50 and put it in their pocket, put the rest into the mutual fund.

Dr. Jim Dahle:
There are B shares. These are back loaded shares. Meaning when you take the money out, you pay the commission. Can generally be more money than A shares because the money's grown over time, might be the same percentage, but it's the same percentage of more money.

Dr. Jim Dahle:
The other thing that they do sometimes is what are called C shares. And this is where an additional load is added on top of the expense ratio of the fund to pay the sales agent for selling it to you. Instead of an expense ratio of perhaps 0.4%, you're paying an expense ratio of 0.8%. And that 0.4% is going to the person that sold that to you for as long as you own that investment. These are all loads or commissions that are charged on mutual funds.

Dr. Jim Dahle:
But what the people who sell these mutual funds don't tell you is that it is possible not to pay an A share, B share or a C share commission. It's possible to pay no commission at all. And that's called a no-load mutual fund. All of the Vanguard mutual funds are no-load mutual funds. All the ones you should use at Fidelity or Schwab or anywhere else are no-load mutual funds.

Dr. Jim Dahle:
You don't have to pay the load at all. You don't have to pay it upfront. You don't have to pay it in the back. You don't have to pay it as you go along. It's no load. The less you pay in expenses, the more money stays in your pocket and that you can use for retirement, that you can use for whatever you want to use the money for.

Dr. Jim Dahle:
So, should you get out of loaded mutual funds? Probably. Certainly, if it's a C share fund, you should get out of it. Because you're paying ongoing expenses on that every year. And the sooner you get out of it and get into a mutual fund with an expense ratio of 0.03%, instead of 0.8%, the more of your money is going to be working for you and the less drag there's going to be on your returns from those fees.

Dr. Jim Dahle:
Now, with an A share, it's technically water under the bridge. You've already paid that commission. The downside, most of the time, when you buy a mutual fund with an A share, it's not a very good mutual fund because the best mutual funds tend to be no-load mutual funds.

Dr. Jim Dahle:
And so, what do these funds have to do to get people to sell them? Well, they have to pay bigger commissions to the sales agents. And you end up with not as good of a fund. But if you really like the fund and the A share, and the A commission, the front load is already paid, then you can stay in it. That's okay.

Dr. Jim Dahle:
But in your situation, she's got $30,000, you got $50,000. You're in the beginning like I was, when I figured this all out. Just change over it, to do the right thing. There are no tax consequences to selling mutual funds and buying what you actually want in your IRA. This isn't a taxable account. It's just IRAs, 401(k)s, etc. And so, it's easy to make that conversion over.

Dr. Jim Dahle:
What I would do is I would get your written investing plan in place. If you don't have that, and you don't feel competent to write it yourself right now, I would consider taking our online course. We have Fire Your Financial Advisor, which is the option without CME. And we have the option with CME that we call Financial Wellness and Burnout Prevention for Medical Professionals. That's Fire Your Financial Advisor plus about eight hours of CME qualifying wellness material.

Dr. Jim Dahle:
So, you can buy that with your CME fund or you can write it off as a business expense if you're self-employed and write up your written financial plan. If that's too overwhelming, go hire a financial planner. You can find our list of recommended planners under the recommended tab at White Coat Investor, just scroll down to financial advisors there and get someone to help you put a written financial plan together.

Dr. Jim Dahle:
Now, once you have the plan together, then you make the changes in your IRAs with your investments, etc, in accordance with that plan. But there's no huge rush. We're only talking about $90,000 together that you've got in there. So, what if you're paying an extra 1% for three more months? It's not terrible. It's not that much money. You can take your time, get things really set and move forward with the plan you're confident in.

Dr. Jim Dahle:
I’m sorry this happened to you. This happened to me. I had a whole life insurance. It was a policy that was totally inappropriate for me. I had C share mutual funds and our Roth IRAs. I've made these mistakes, but that doesn't mean they're not mistakes. And you can get them fixed. It sounds like you're getting fixed early in your career and you're going to be off to the races. So, thanks for what you do. And congratulations on your success so far and figuring this out early in your career. A lot of people never do.

Dr. Jim Dahle:
Speaking of thanks for what you do, thanks to everybody out there for what you do. I know there's often not a lot of thank you’s at work and we tend to be people-pleasers, especially the physicians in the audience. In a lot of ways we're working for thank you’s. We want to help people. Yes. But we particularly like being shown a little bit of gratitude sometimes for that.

Dr. Jim Dahle:
If nobody's thanked you today, let me be the first. Thanks for what you do. It's not easy. That's why they pay you so much to do it. They call it work because they have to pay you to do it.

Dr. Jim Dahle:
All right. Let's take one more question. This one's about contributing to your spouse’s 401(k).

Michael:
Hi, Dr. Dahle. This is Michael from Ohio. I really appreciate everything that you do. My question may sound too pedestrian, but I was not able to find the answer when searching online.

Michael:
I'm a physician and a primary income earner in my household. My wife is self-employed and is receiving symbolic salary less than $10,000 per year for her 1099 work as a medical biller. I have a 401(k) plan at work and I'm maxing it out per your advice.

Michael:
I was wondering if my wife can open a solo 401(k), and if I, or we as a family can contribute to her solo 401(k) plans since our filing status is married filing jointly. Any insight would be appreciated. Thank you for this opportunity to ask my question.

Dr. Jim Dahle:
Michael, thanks for being a listener. Wouldn't that be awesome if we could just open a 401(k) for a non-working spouse and put $61,000 of money we earned into it? That's actually the way IRAs work. A spousal IRA, that's precisely how it works. However, you cannot do that with a 401(k).

Dr. Jim Dahle:
401(k) contributions are completely dependent on the earnings of the person whose name is on the 401(k). 401(k)s are never joint, right? You can have a joint taxable account, but you can't have a joint retirement account. They always just have one person's name on them. And then the other spouse is usually the beneficiary.

Dr. Jim Dahle:
So no, you can't put your earnings into her 401(k). If she's only making $10,000, $10,000 is all she's going to be able to put in there. As an employee contribution, she could put pretty much the whole thing in there, but you can't put any more in there just because you make a lot of money. I'm sorry. It'd be great if it worked that way, but it does not work that way, unfortunately.

Dr. Jim Dahle:
Now, money is fungible. So technically she could spend her $10,000 and you could put your $10,000 in there, but more than $10,000 can't be put in there if that's all she's earned. Technically what's happening is she's putting her $10,000 in there and she's spending your $10,000 from somewhere else.

Dr. Jim Dahle:
That's basically what happens with my kids, is their money goes in the retirement account and I give them my money to spend on whatever they want. But the bottom line is it's limited by her earnings. And so, the first $20,500, if you're under 50, basically can go in there as an employee contribution. After that, it can only go in there as an employer contribution, which is essentially 20% of earnings. I hope that's helpful to you.

Dr. Jim Dahle:
This podcast was sponsored by Bob Bhayani at drdisabilityquotes.com. He's been a long-time sponsor at 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 and 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:
Contact Bob at drdisabilityquotes.com today, by emailing [email protected] or by calling (973) 771-9100 to get at disability insurance in place today.

Dr. Jim Dahle:
We've talked about a lot of things today on the podcast. We talked about our new CFE online course that sells for 10% off through March 7th. The link for that is whitecoatinvestor.com/cfe2022. We've talked about Burnout Proof MD, our new coaching program. That's whitecoatinvestor.com/coaching.

Dr. Jim Dahle:
Also, if you are looking for a low commitment side gig, consider taking some physician online surveys. We've rounded up a few partners to help with that whitecoatinvestor.com/mdsurveys. It will give you all the information you need to sort that out if you're interested in earning a few hundred or a few thousand dollars a month as a side gig that takes very little commitment. Check that out as well.

Dr. Jim Dahle:
Thanks to those who are leaving us five-star reviews, telling their friends, colleagues, trainees about the podcast, etc. Most recent review says, “Awesome podcast, Dr. James hosted the podcast, highlights all investing and more in this can't miss podcast. The host and expert guests offer insightful advice and information that's helpful to anyone that listens.” That one actually came in from the Philippines. But thanks for that five-star review.

Dr. Jim Dahle:
Keep your head up, your 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.

24 comments

1 Greg | February 24, 2022 at 10:13 am MST

Everyone thinks they are moderate. If you asked Ted Cruz or Bernie Sanders they would say they were moderate people who didnt agree with the extremes of either party. The proof comes in the actions. Saying one party doesn’t believe in economics is the obvious giveaway. Does Janet Yellen not believe in economics? Paul Krugman? They have opinions which are different from yours on issues with no absolute answers. This is very different from believing that vaccines contain aborted fetal tissue or that parents of trans children should be thrown in jail. When one party is willing to violently overthrow the government if they dont get what they want and you are willing to support them because of some savings on your taxes, I believe you should rethink your priorities.

The White Coat Investor | February 24, 2022 at 11:19 am MST

Your comment says more about you than me. Try not to look at everything through a partisan lens and realize there are at least a few of us out here who don’t really fit well into either of the two parties.

MaKr | February 24, 2022 at 3:09 pm MST

Doesn’t seem like he is. He gave you specific examples and all you did was swiftly accuse him of being a partisan

The White Coat Investor | February 24, 2022 at 5:29 pm MST

Do either of you have a question I can help answer?

FP | February 24, 2022 at 6:16 pm MST

They don’t. Maybe best to pick your pearls up…much love and appreciation for all you’ve done and continue to do for our financial education, WCI.

Scott | February 25, 2022 at 8:49 am MST

Regarding WCI’s statement above: “I don’t like feeling like I have to choose between the party that doesn’t believe in science and the party that doesn’t believe in economics”

I would say that I hear you, I get it and I agree!

Unfortunately, the extremists on both sides of the aisle never stop shouting because they don’t want to discuss real solutions to real problems. They want everything their way or no progress at all. The extremists will find something wrong with this borrowed concept, but there is “nothing wrong with America that can’t be fixed by what is right about America”. The extremists on the right will say there was nothing wrong about America back in “the good old days”. The extremists on the left will say that we have to” throw the baby out with the bath water”.

Last and most importantly, thanks for all of the great tax and financial information in this post. It is very much appreciated.

Greg | February 27, 2022 at 3:27 pm MST

Unfortunately (and I truly mean that) there is no other way to look at things. I would love a true moderate 3rd party but see how poorly any of them have done. I do enjoy your site and agree with around 90% of what you say. However ‘both siderism’ is a major problem with the country today and almost never correct.
As far as a question perhaps you could run a post on the difficulties of refinancing your student loans from jail after the party of limited government and regulations has had you arrested for performing legitimate medical procedures?

Mike | February 27, 2022 at 3:39 pm MST

Fortunately (and I truly mean that) most high functioning, logical and reasonable people know that there is more than one way to look at things. Thinking “there is no other way at looking at things” in regards to US politics would mean thinking at least 47% of voters are completely unacceptable and you can not empathize with how they are thinking. Greg, I truly hope you try to better yourself and try to look at things from more than one perspective. It would do our society a lot of good if less people thought like you.

The White Coat Investor | February 28, 2022 at 9:21 am MST

A suggestion is not a question even if you put a question mark at the end of it. If you think readers would enjoy a post on that topic, consider submitting a guest post here:

https://www.whitecoatinvestor.com/contact/guest-post-policy/

Mike | February 26, 2022 at 8:43 am MST

Wow. Greg’s comment absolutely says more about him than it does about WCI. WCI’s comments equally pointed out imperfections on both sides and Greg’s comment pounced on his criticism of the left as unfounded and then went on to show the right in the worst possible light. Every single Republican governor and living former Republican president (including Trump) is vaccinated against COVID, you can’t claim the entire party doesn’t believe in science. Plenty to pick at on both sides but when you refuse to see any fault on your preferred side and only see the other side in the most cartoonish caricature version you lack nuance and are part of the partisan strife that is harming our country. We gotta be better than that.

Thanks for all you do Jim. I would vote for you in a heartbeat however on the other hand I wouldn’t wish public office on you. You deserve better than that.

The White Coat Investor | February 26, 2022 at 8:51 am MST

I’m amazed that any good people run for office given the way they are treated.

Our governor put up a warming shack on his farm for his guards and was criticized for it. He had offered to pay for it himself. Still criticized for it. You can’t win. At least 40% of people will hate you no matter what you do.

2 Mid50sdoc | February 25, 2022 at 4:10 pm MST

I would vote for WCI in a heartbeat. Many thanks for all you do!

The White Coat Investor | February 25, 2022 at 4:19 pm MST

I don’t think you’ll ever have that chance, but I appreciate the love.

3 Greg | February 27, 2022 at 3:11 pm MST

‘Both sidesism’ is one of the biggest problems with the country today. It is easy and absolves people from taking responsibility or truly thinking about issues.

The White Coat Investor | February 28, 2022 at 9:22 am MST

I’m amazed that anyone could possibly line up with a single political party on every issue. What are the odds?

Bill | February 28, 2022 at 9:38 am MST

The odds improve if you let the political party you tribally associate with do the thinking for you

4 Afan | March 1, 2022 at 2:59 pm MST

Or you truly care about only one issue. Find the party closest to your liking on that and go with them on everything else, no matter what they do on anything else.

This is the approach of fringe parties. They do get some intense supporters. But their extreme positions prevent them from winning elections.

If you want to have some influence in who gets elected, then you have to pick among the two choices.

The White Coat Investor | March 2, 2022 at 7:09 am MST

That’s not true. One can vote for a third party that your conscience allows you to vote for and still have influence. The party that you probably would have voted for had they not run a terrible candidate lost your vote. The other party didn’t gain it, so it’s only half the effect but the full effect of someone changing parties, but it still has some influence.

5 Jeremiah Stone | November 15, 2022 at 3:05 pm MST

Hello

I was wondering if anyone has any experience filling out and signing a sf3106. If you worked for federal government such as the VA or IHS and do not want your pension because you did not work the min 5 years for the annuity (really don’t want to)does the amount they refund really gain a lot of interest? Anyone done this before?

Thanks

The White Coat Investor | November 15, 2022 at 4:13 pm MST

I don’t knows the answers to your questions. I would suggest asking on the WCI Forum, Subreddit, or FB group and get more eyeballs on it than you will get here.

Jeremiah Stone | November 20, 2022 at 9:12 am MST

Ok I may ask my employer that question

I was wondering I may ask you about the simple IRA 6K that you can put in every year with your 401k if you have the money. Do you have to put that money in by the end of year 2022 (for tax year 2022) or can I put that amount in before I pay taxes in April 2023. I want to put the money into the IRA in March 2023 and roll it over to a roth IRA in March 2023. Is there any pro-rata consideration if I do that (nothing purchase just cash). I will then put in more money in for the tax year 2023 in November in another IRA and doe the conversion again this time all in 2023?

The White Coat Investor | November 20, 2022 at 9:21 am MST

Are you aware that a “SIMPLE IRA” is a separate retirement account from the traditional IRA into which you can contribute $6K per year into? It sounds like you are not.

https://www.whitecoatinvestor.com/simple-ira/

https://www.whitecoatinvestor.com/sep-vs-simple-ira/

A SIMPLE IRA is provided by an employer (including if you are self-employed). Anyone with income can have a traditional IRA.

I also can’t tell if you’re asking about the Age 50+ catch-up contribution into a 401(k) or an IRA contribution. Because an IRA contribution has nothing to do with a 401(k).

You also seem to be asking about the Backdoor Roth IRA process. More info on that here:

https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/

If you can clarify your question, I’ll try to give a better answer.

6 Jeremiah Stone | November 20, 2022 at 10:03 am MST

Hello

Thank you. I apologize for confusion between the two types. I should indicate traditional ira not simple ira. I am under age 50. Again my apologies.

Thank you again.

The White Coat Investor | November 20, 2022 at 10:16 am MST

No need to apologize, these are all just very specific terms with specific meanings so it’s hard to help you unless we’re both speaking the same language.

You have until October 15th 2023 to make a 2022 IRA contribution (assuming you delay tax filing until October 15th, otherwise it’s April 15th). There is no deadline on a Roth conversion. The pro-rata calculation takes place on December 31st of the year you do the conversion step. However, best practice is to make your contribution and conversion steps in the calendar year. If I were you, I’d contribute now and convert it immediately to a Roth IRA. More details in that Backdoor Roth IRA tutorial post.