If you inherited retirement accounts or anticipate leaving retirement accounts to your heirs, it is important to understand the rules and options for managing those retirement accounts. This will help you use that inherited money wisely but also make good decisions in your estate planning. We discuss what the rules and options are plus which accounts are the best to inherit and which are the worst.

We also dive into the listener questions that came in while we were rafting the Grand Canyon. Student loans are on more people's minds lately. Should you refinance your student loans now? Can you invest student loan money in retirement accounts? We discuss some physician specific topics like how to choose a specialty and some non-physician-specific questions like the difference between being compensated by SARs vs RSUs. Lastly, we answer important questions like what percentage of your income you should be saving towards retirement and how to deal with inflation and your investing portfolio.

 


 

Inheriting a 401(k), IRA or HSA

“Could you go over all the rules and options for managing a sum of money that is inherited from a parent after their passing? For example, if I inherited a 401(k), a Roth IRA, and a taxable account, what are the tax consequences for inheriting these accounts?

Should one account be liquidated first, if you want to, say, use the money for a vacation home? Is there a benefit of saving one account for the next generation? Is there a way to roll the Roth dollars into my Roth account or 401(k) dollars into my 401(k) account? It'd be great to get a summary of each of these accounts in the same place.”

Let's talk about inherited counts. Remember this is based on current law. If you don't inherit something for 50 years, laws might be different.

In general, if you inherit stuff from someone that is not your spouse, you will only have a few options for it. If you inherit from your spouse, you can roll those retirement accounts into your own retirement accounts and have even more options, or you can leave them as your spouse's retirement accounts and have various options. So, in that situation, depending on how old you are, it might make sense to not actually roll it into your own account. But most of the time that's what people do.

But for a non-spouse, if you're the beneficiary of a non-spouse inherited IRA, there are not too many options. If you get an IRA, a traditional IRA, you can stretch that for 10 years. You don't have to take any money out for 10 years, but by the end of 10 years, all the money has to be taken out and you pay taxes on it. It's pretax dollars.

Inheriting a Roth IRA

Same thing if you inherit a Roth IRA, you have to have all the money out within 10 years, but no taxes are due on it. Whereas when you take the money out of that inherited traditional IRA, you have to pay taxes on it.

Inheriting a 401(k)

Prior to 2007, 401(k)s were actually treated differently. Now you're allowed to treat your 401(k) just like you would an IRA, but bear in mind that 401(k) may offer other options like annuitizing the money and leaving it in the plan for another five years; you may have some of those options. So, look into the 401(k) if you're actually inheriting a 401(k).

A taxable account, you get the step up in basis. So, it's as though you bought it on the day that the person died. In a few situations, that date can be extended by six months, particularly if that person owes estate taxes. But for the most part, you get a step up in basis to the date of their death, which is great. If they bought it at $10 a share, and now it's $100 a share, no one has to pay taxes on that $90 increase per share. You can sell it after they die and you get all the money tax free.

As a general rule, if you inherited retirement accounts, the best thing to do is probably to get as much of that stretch out of it as you can. I would try to leave that Roth IRA money in there for 10 full years and take it all out at once and reinvest it in a taxable account or use it to pay for your retirement.

Inheriting a Traditional IRA

With a traditional IRA, it's a little trickier. You have to look at your current income. Maybe if you're going to retire in five years, you take nothing out in the next five years, and then you take out equal amounts in the five years after that. It just depends on your situation. Maybe you want to spread the withdrawals out over a full 10 years. So, you are kind of balancing the effect of having to pay taxes on it earlier versus having to pay taxes on it all at once. That just depends on your own personal tax and financial situation.

So, which one is better to inherit? A Roth IRA is the very best thing to inherit. After that, I'd probably take the taxable money, but I'm not going to look an inherited traditional IRA in the mouth either. That's great, wonderful, that you get an inheritance, although unfortunate, of course, because of the reason you got the inheritance.

You're really probably not leaving this money to heirs. Essentially this is going to be your money until you die. Then it gets combined with your estate, and you can leave whatever you want to heirs if you wish.

Inheriting an HSA

Those are the three ways to really inherit money and how you ought to think about it. Now, the worst thing to inherit is actually an HSA. An HSA is not only fully taxable to you as the heir but you can't leave the money in there. So, it all comes out right when you inherit it and it is taxable income to you. So, it's better than a kick in the teeth, but it's really a lame thing to inherit compared to the other three types of accounts there. Don't leave your HSA to your heirs. Try to spend it during your lifetime.

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The New Stretch IRA

 

Reader and Listener Q&As

Understanding the Difference Between SARs and RSUs

“The biotech that I'm working at now has a long-term incentive program, where they award employees with some combo of RSUs and SARs, which vest over a period of four years. They give us the option to go 50/50 SARs to RSUs or 80/20 in either direction with these awards. The company gave us an info packet, and mostly what I took away from it was that SARs are riskier and more tied to the company stock price while RSUs are more conservative and will always have value. I still don't really understand how these work and I would appreciate your advice.”

This is a great question. It is one that applies to lots of people, but not very many doctors. This just isn't something doctors deal with all the time. An RSU is a restricted stock unit. It is shares of stock that you were given by the employer. What do they mean by restricted? It is restricted because you have to vest into the shares. You have to stay there so long. That's the usual requirement. You have to stay there five years in order to be vested, or sometimes they're tied to performance. Like you have to have good performance in order for them to be vested.

But in general, this is just a method of compensating employees for the success of the company and their hard work. Instead of giving them a salary, you give them equity, shares of stock in the company. They are restricted stock units, but they're shares of stock that, once they vest, they're yours. Whether the stock value goes up or the stock value goes down, you get the same number of shares.

Obviously, if the company is doing really well, that's worth a lot to you. If the company is not doing really well, well, it's not worth as much. So, your fate is now tied with the fate of the company, which is a great thing.

Now, when you are vested, whatever the value is on those shares, you're taxed on that. And so, usually some of those shares are sold and used to pay the taxes due on those gifted shares. But once they're vested, you can do whatever you want with them. You can sell them, you can keep them, you can collect the dividends from them, whatever you want to do. That's a restricted stock unit. It's not a stock option. It’s not a warrant. You actually get shares of stock.

SARs are a type of employee compensation that is linked to the company's stock price during a predetermined period. So, if the company stock does not go up, these are worthless. If the price goes down, they're worthless. So that's the difference.

If your company performs poorly, you still get something with the RSUs because you own shares of the company. With a SAR, stock appreciation rights, if the value of the company doesn't go up, you don't get anything, it's not worth anything. That is the the main difference. You don't actually own the stock. You just get additional compensation based on stock price increase. It’s generally paid in cash. It doesn't require the employee to own any sort of asset or contract. When it's paid to you, you have to pay taxes on it.

They're beneficial to the employers because they don't have to dilute the share price by issuing additional shares. Certainly, the second type, the SARs, incentivize them maybe a little bit more because you might get nothing for it.

So, what should you take if you're offered the ability to take any combination of these that you want? What do you think the company is going to do? If you think the company is going to knock it out of the park, you may want to go with the SAR. If you're a little skeptical about how the company's going to do, you may want to go with the RSUs.

This is a hard decision. When you're unsure what to do on a hard decision, why not split the difference? Go 50/50, take both. Maybe that'll minimize the regret that you feel from having to make this decision. Obviously, the devil is in the details and you have to look at the details of the contracts, how they're pricing them, and how much they're giving you of each one.

But if they are truly priced equally, then it shouldn't matter too much. You're really just making a bet on how well the company does. I think I'd probably just end up, unless one of them looks like a really bad deal when you get into the details, I'd probably just split the difference.

 

How to Choose a Medical Specialty

“I'm interested in your thoughts on whether you think it's a good idea to avoid certain specialties because of predicted changes in the future job market. Recently, there's been a lot of discussion about EM, in particular, due to the job market report put out by ACEP that estimates a 9,000 surplus of EM physicians by 2030, with an increase in offices and providers and vast expansion of residencies. Do you think these predictions should be a sufficient reason to rule out certain specialties like EM? Or do you think that's unreasonable?”

We have been hearing a lot about this lately. That report by ACEP certainly got a lot of people in emergency medicine worried. It's interesting. I signed on to emergency medicine because I liked emergency medicine. I wasn't financially adept enough to even ask questions like this when I was in medical school. I think I knew about what emergency docs got paid, but that was about it.

When I ran my numbers coming out of residency for our financial plan, I think my assumption was that I would make $225,000 a year every year for the rest of my career. That's what emergency docs were getting paid then. By the time I came on as a partner in a private group I was making significantly more than that. Emergency medicine turned out to have a better outcome than I expected it would have when I chose it in medical school or even when I was coming out of residency. So that was a nice surprise.

It's always had a pretty good hourly rate, but, due to the hours you work and so on and so forth, it stacks up about midway through the specialties as far as pay goes. But the opposite could have happened as well. It could have turned out to be not as good and not as lucrative as maybe I expected when I chose it.

That has happened from time to time in various specialties. Radiology and cardiology, perhaps in particular, have had significant changes in reimbursement schemes over the years that have substantially decreased their income from what was perhaps expected by somebody coming out of training. There's going to be some ebbs and flows in any specialty in medicine in general throughout your career. However, the likelihood, I think, of you having a terrible income in any specialty in medicine is pretty low, number one.

Number two, the intra specialty pay differences dwarf inter specialty pay differences. I got an email this week from a pediatrician talking about how he makes over a million dollars and he's not working any crazy number of hours either. He's just running a really efficient practice and has built that practice and has done a number of other things in order to do that.

The point is, I know pediatricians making less than a hundred thousand dollars, and I know pediatricians making more than a million dollars. And so, your specialty choice is not nearly as much of a determinant on your income as you might think.

Another point is that the most important financial aspect of choosing a specialty is doing something that you will want to do for a long time. You are far better off being a pediatrician for 30 years than you are being an anesthesiologist for 10. If you burn out on whatever you choose in 10 years, not only will you have paid a whole bunch of taxes over those 10 years, but you will not have the benefit of compound interest working on your savings for that time period.

You're just better off spreading your income out over longer years. Financially speaking, it works out better. And so, as a general rule, you want to pick what you love and will love to do for a long time. Now, if you love two specialties equally, and I think there's a few medical students in this scenario, but not nearly as many as second year medical students worry there are, then sure, choose the one with the better life and the better pay and the better outlook in the future.

But the truth is most of us get through our third year or at the beginning of our fourth year and there's really only one specialty we love. I would not tell you to avoid that specialty because you're worried that the job market is becoming more saturated or because there are fewer jobs in that particular specialty at any given time. I would not let that impact my specialty choice almost at all, quite honestly.

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Intra Specialty Salary Differences

 

How to Do Backdoor Roth IRAs with a SEP IRA

“My question is about SEP IRAs. To make it brief, I'm separating from the Air Force and joining a private group. I love everything about the job and the area. Unfortunately, a few years ago, the partners changed from a 401(k) plan to a SEP IRA for more investment choices. However, I'd like to continue to take advantage of a backdoor Roth IRA. In order to avoid the pro-rata rule, could I open a solo 401(k) and roll my SEP IRA contributions into that solo 401(k) on an annual basis? Theoretically, I would zero out my SEP IRA account before my backdoor Roth contributions and conversions. Is this a thing? Do people do this or is this just a pipe dream?”

It is kind of a dumb move. I'm disappointed to see doctor groups doing that. Certainly, SEP IRAs are a little bit easier to administer, but you can max out a 401(k) on less income than you can SEP IRA. Also, you have a Roth option in a 401(k). There are a lot of good things about a 401(k) over SEP IRAs.

So, in general, this is not a move that you see groups doing, but occasionally there is a business where it makes more sense to use a SEP IRA or even a SIMPLE IRA than to have a 401(k). It's usually related, however, to the employers trying to avoid putting as much money into the plan for their employees, or maybe just trying to trim expenses on the plan.

However, you're kind of in this situation. Chances are you're not going to talk your partners out of making this change back. So, what do you do now? Well, if you qualify to use a solo 401(k), meaning you have some sort of other self-employment income outside of this partnership, then yes, you can open a solo 401(k) for that income.

That is, of course, assuming the plan allows it, and most do now, including Vanguard's, which is a new change this year. You can roll your SEP IRA, assuming the SEP IRA allows it, and most do, into that 401(k) as often as you like. Now, for SIMPLE, you have to wait two years before you can do a rollover, but with a SEP IRA you can roll over any time.

So, you could still put your money in the SEP IRA each year, roll it over before December 31st into your solo 401(k), and do a backdoor Roth each year. Otherwise, you are kind of just getting it prorated on your backdoor Roth, and maybe you don't want to do that. Maybe you just want to invest in a taxable account instead.

But assuming you can open a solo 401(k), yeah, you could do this. Just remember that your K-1 income, your partnership income, you cannot go out and open a solo 401(k) for that. Even though you're self-employed as a partner, you have to use the partnership retirement plan.

Recommended Reading

Backdoor Roth IRA Ultimate Guide and Tutorial

 

How Much Should I Save for Retirement?

“My question is regarding retirement allocation. I know the magic number is 20%, but I'm a little bit confused about how this relates to pre- and post- tax money. So just for example, my wife and I make about $450,000 a year. We pay about $5,000 post tax for our debt. And then we maximize pre-tax retirement funds, including for my 403(b) and my 457, which amounts to about $60,000 pre-tax. And then we each contribute to a Roth IRA, which is about $6,000 post-tax each, amounting to $12,000. So, my first question is, is this the 20%? And then if it is not, the follow-up question would be, where should we be allocating further funds? Or where do you recommend allocating further funds to reach that 20% and see long-term growth?”

First of all, 20% is not a magic number. It is a ballpark figure. It's a rule of thumb. Maybe your number is 18%. Maybe it's 23%. I don't know. The point of throwing that 20% out is so people understand you have to save a bunch of money. 5% is not enough. It's not going to cut it.

So, a typical American that starts saving right out of college, maybe 15% is fine. For a doctor who's going to have less of their income replaced by social security and who generally gets a later start, 20% is more appropriate if you want to have a full career and retire on about the same lifestyle as you had during your career. It's just a rule of thumb, though. So, it's not like it's set in stone.

But in general, when I use that number, I am talking about your gross income, your pre-tax gross income. So, you said you made $450,000. 10% of that is $45,000, 20% of that's $90,000. So, $90,000 a year toward retirement, if you want to have the same lifestyle you have now in retirement, and you work more or less a full career, 30 years or so.

If you want to retire earlier, you need to save more than that for retirement. Additional savings for college, for a Tesla, for vacations, whatever, that's in addition. Paying off debt, paying off student loans, that's in addition to that 20%.

Now you mentioned something like $60,000 into employer accounts, another $12,000 into Roth IRAs. Well, that's $72,000. That's not quite $90,000. You're still $18,000 short. So where should you invest that $18,000 while you invest it? Once all your retirement accounts are maxed out, you invest them in a taxable account. That usually means buying stock index funds, municipal bond funds, or perhaps buying real estate. Buy something like that outside of a retirement account.

Now, some people have so much retirement space that they can put 20% of their earnings into retirement accounts and not even max them out. But your case is much more common among docs, that you hit the cap on your retirement accounts before you hit your 20%. And so, some of your savings just has to go into a taxable account.

The nice thing about that, you can use it for anything. It's very flexible. You can invest in anything and you can get to it before age 59 without having to comply with those rules. It is a pretty convenient place to save money. There are lots of tax benefits for it, as well. Long-term capital gains rates, qualified dividends rates, tax loss harvesting, the step-up in basis at death. You can donate appreciated shares to charities once you've had them at least a year, instead of donating cash. There's lots of benefits of a taxable account. But that is where you need to invest the rest of your retirement savings.

 

Can I Invest Student Loan Money in Retirement Accounts

“I wanted to ask you what your opinions were on current federal loan interest rates for medical school. Through my non-traditional background, I'm currently in a position with some flexibility to turn down a chunk of my student loan offer. However, federal and subsidized loans for the last two years have been set at 4.3%, a little lower after tax. When I look at your personal recommendations, you actually prioritize investing over loans with low interest rates in this 3% to 5% range. Given these current rates, does it make more sense for students like me to take the entire loan offer at 4.3% and leave the rest of their money invested in savings and retirement, or for them to stay as close to debt free as possible by paying as much as they can out of pocket?”

When you signed your promissory note, you promised that the money is going to be used for education. So, borrowing extra money in order to invest it is kind of a “no-no”. Not only is it illegal, it's probably unethical, and maybe not that smart. I'm not a big fan of borrowing a lot of money in order to invest, anyway.

But at those low interest rates it’s not like borrowing 2% fixed or 3% fixed, or even 4.3% fixed in order to try and invest that is a stupid thing to do. It's not a stupid thing to do; it's probably going to work out for you. No guarantees, of course. You have to factor risk into the equation. Avoiding a 4.3% expense. And maybe it's more than that once you tack on loan fees and the hassle of dealing with loans.

There is no guaranteed investment out there right now paying better than 4.3%. You can put it in real estate and hope to do better, or you can put it in stocks and hope to do better. You're almost surely not going to do better in CDs and bonds and those sorts of fixed income investments. They're paying like 1% to 2% right now. You can't just take a loan at 4.3%, stick in a savings account and expect to come out ahead. You're not; you're going to come up behind. You're better off using that money to pay for school.

And in general, that's kind of how I feel about money you have as a non-traditional student coming into medical school. The best investment is in yourself and your future earnings ability. So, you use your money to pay for medical school and your future earning ability. Very few people regret keeping their debt as low as they can. And coming out with less debt, you have more options, more freedom, less weight hanging over your head. In general, I think that's the way you should do it.

Now, if you had money in retirement accounts, I'm not sure I would pull those out in order to pay for med school. I would make sure during those no income years during med school, that I did Roth conversions of that money, but I probably wouldn't pull money out of retirement accounts in order to pay for medical school. But a taxable investment account or your savings account,  I'd probably use that before I borrowed more money.  

 

Can I Open a 529 for Myself? 

“I was wondering if it would be possible to make a 529 account for myself. I don't have a child, but I'm planning on having a child in the future. And so, I could be able to contribute money to this fund, let it grow until the day I have a child and then just transfer it to them. What do you think?”

Yes, you can open a 529 for yourself. Yes, you can change the beneficiary to your child. You probably will not get any sort of state tax break for contributing money to a 529 for an adult like yourself. So, keep that in mind.

But more philosophically let's step back for a minute and try to figure out what you're trying to accomplish. Is the goal here really to get as much money into 529s as you can? Because if it is, you can put every dollar you ever earned into a 529. Truthfully, think about it. There are limits on how much you can put into a 529, but those limits are state specific, and there are 50 states. You can open a 529 in every state and you can open one for all your nieces and nephews and siblings and you and your spouse and your kids and your grandkids. You can put all your money into 529s.

So, I don't know what you're worried about. Are you worried that you're not going to be able to get enough money into there during the 18 years of the kid's life in order to pay for college? That kid is born. You get the social security number. You open the 529 account. If you're married, you can put in $15,000 for you and you put in another $15,000 into your spouse's 529 for each year. And you can front load that for five years when you first open the account. So, $75,000 a piece, $150,000 that you can put in there when your child is born. They're still breastfeeding and you got $150,000 in their 529. Five years later, you can put in another $150,000.

What do you suppose that grows to over 18 years if you're putting in $30,000 a year into 529? It's a lot of money. It's going to pay for every educational need they have.

If I were you, I would use that money for other financial goals for now. I would put that money toward your own retirement accounts if you're not maxing those out, paying off your student loans, paying off your mortgage, beefing up your emergency fund, saving up for a Tesla, going on a great vacation, saving for your own retirement, some additional money for going out and buying some rental properties, whatever you want.

And then when the kid comes, then start putting some money into a 529, but start with the end in mind. Think about how much you want to have in there when they turn 18 and work your way backwards to see how much you have to put in there and when. It may be a lot less than you think.

 

Inflation and Your Investment Portfolio

“I did have some questions regarding different asset classes as hedges, or if they're good in times of inflation, as we're all worried about currently. First of all, I was wondering where did this rumor that gold was a good inflation hedge came from? Is it because it's still “one ounce of gold can buy a men's suit” as it did 300 years ago today, as well as maybe it did well and kept up with the hyperinflation in the 70s?

Also, I was thinking of how REITs actually could probably keep up with inflation given you can always raise rents now in response to rising inflation. Also, how about if I have international in my portfolio? I doubt that inflation happening in the United States will be the same as every other country internationally. So, it would seem to me that investing internationally in the international index fund would be a good way to also hedge against the inflation that's currently happening here in the US.

Also, finally, I heard small cap value is actually a good asset class to have in terms of inflation. If you could also delve deeply into why that would be, maybe it's because small companies have fewer operating costs and maybe value companies have lower expected earnings. Any insight into discussing these different asset classes in terms of inflation would be great.”

I think I'm going to be talking about inflation a lot this year. It's really on people's minds, which I'm not necessarily asking why people are thinking about inflation. My question is why weren't you thinking about inflation a year or two ago or three or five or ten? Inflation's a big deal. It is a big issue with your portfolio and a good part of your portfolio needs to be designed to combat inflation. That's not new, though.

When I set my portfolio back 15 plus years ago, inflation was a big deal. It's a big fear. When you talk about the “deep risks”, that's the phrase that William Bernstein uses. The “deep risks” to your portfolio are inflation, deflation, confiscation, and devastation. These are the risks.

We're talking about the real risk of losing real wealth in after-inflation terms. If you look historically across different places in the world, inflation is the risk most likely to devastate your portfolio. So, this is not something you should be worried about this year. This is something you should be worrying about all the time. Inflation is a big deal.

Imagine that you had hyperinflation, not just 5% or 10% a year, but you had an inflation of a hundred percent a year or a thousand percent a year. That's absolutely going to totally wipe out the value of your cash and the value of any of your nominal fixed investments. And so, that's a real risk to your portfolio. If your whole portfolio is CDs and treasury bonds, this is a big risk to your portfolio.

So how do you hedge against that? How do you protect yourself against inflation? Well, the main thing is you need assets in your portfolio that are going to outperform inflation. If it's earning 10% and inflation is 3%, you're making 7% a year, you're still making gains here.

The first thing is you want to have a portfolio that actually makes money. You want your portfolio to do some of the heavy lifting for you. See, it's not just brute force savings for everything you'll need in retirement. We're talking about risky asset classes, stocks, ownership, equity in companies, real estate. You're taking significant risk there when you're investing in real estate. And so, you get paid more in general over the long-term. You outpace inflation.

There are some fixed investments that can help with inflation. Two primary ones are TIPS, treasury inflation protected securities, and I-bonds, a special type of savings bonds that are indexed to inflation and they can help offset inflation.

Now that's so important to me in my portfolio design that not only do I have 60% of my portfolio in stocks and 20% in real estate, that's 80% in stuff I expect to dramatically outperform inflation, but half of my bonds are in inflation index bonds, TIPS. And so, they help combat inflation.

Now the downside of TIPS and I-bonds is if you don't believe the government's measure of inflation. I need to get into this in a blog post in-depth but the bottom line is the only inflation that matters is your personal inflation and the stuff you buy and how fast that's going up in price. If you're buying stuff that's going down in price, then, inflation doesn't matter so much to you. But if you're consuming things that are rising faster than the general rate of inflation, education, healthcare, housing right now has been going crazy, both rents and buying houses.

If that's the stuff you need to buy in the future, then the CPI, the consumer price index that the government's measuring, maybe doesn't have enough of that in it in order to really describe your personal rate of inflation. And so, people come up with some other measures of inflation and when they use them, they say “Inflation is 10% and something terrible”.

Now it's not 10%. When I go to the store and when I go to buy gas, 10% inflation a year is huge. I mean, it is a massive devaluation in your money and its value and what it can buy. And we're clearly not seeing that. It's a very different experience than people had in the 70s when they were really in an inflationary environment.

But is it possible that general inflation is higher than the government has stated? It sure is. And if that's a big fear of yours, then I-bonds and TIPS are probably not your thing. Because yes, they compensate you for unexpected inflation, but they measure that based on the CPI.

Some of these other things that are not dollars, they're not fixed income. We've had things like other currencies, if you think they're going to do well in relationship to the dollar. We have precious metals like gold and silver.

Why do people use precious metals? Well, because traditionally over the long run, they've kept up with inflation. They haven't outpaced inflation like stocks and real estate and even bonds have, but they've kept up with inflation. And in really bad times, people tend to put their money into that stuff, further jacking up the price. And so, in the 1970s, gold did very well. And part of that was fear of this flight to safety to a non-devaluing asset. And part of it was simply gold, keeping up with inflation.

Cryptocurrencies. People think those might play a role in combating inflation as well. They're so new I don't think we really know that yet. There's a good chance they could. If you want to put a couple of percent of your portfolio in there, knock yourself out. But there is a lot of volatility just to hedge against inflation. You better like it for more reasons than that if you want to put a little bit of your money into cryptocurrency.

You asked about small value stocks. I don't know that they're any better about inflation than any other stocks. The idea, however, is that higher performance has a higher return, higher risk. And so, you expect to outperform inflation by more over the long run.

Real estate, however, probably has a special place when it comes to inflation for a couple of reasons. One, you can raise rents with inflation and, of course, the value of the property goes up with inflation. So that's good. But on the other side, it's generally leveraged and it's often leveraged with fixed debt, which is awesome. It's a great hedge in inflation.

I'm not a big fan of debt. I'm not going to tell you to keep your mortgage around forever or your student loans around forever, but fixed low-interest rate loans and inflation, they're a pretty good inflation hedge. If inflation is 10% and your debt is at 3%, you're basically making 7% a year on your debt.

But real estate is leveraged often with fixed debt. And so, you're winning on both sides. You're raising rents and your debt costs you less in after-inflation terms each year. That is why real estate is maybe particularly good in inflation. Inflation is a big deal.  You should have been paying attention to it a long time ago.

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Are Real Estate Investments Resistant to Inflation

 

Should I Refinance My Student Loans Now?

“I have a significant amount of student loan debt at 6.8%. It's federal and $270,000 in total. I also have some non-medical school debt that I'm trying to pay off as fast as possible right now while my federal loan debt is at 0% and no payments are required each month, at least until that situation expires. I'm not eligible for PSLF and will want to refinance my student loans. But my question is about timing. It's a little bit of a crystal ball question. I'm concerned that once all of our federal loans go back up to what they were, in my case 6.8%, that the demand for refinancing student loans will increase. And perhaps the rates will increase.

I don't know whether I am overblowing this, but I'm wondering whether I should try and refinance earlier to lock in a lower rate or whether I should try to take advantage of this 0% as long as possible, and try to pay off as much of my nonmedical school loan debt, hopefully all of it, and then as much medical school debt as I can, while all of it goes to principal before it goes back up to 6.8% and I want to refinance.”

We have tens of thousands maybe, certainly thousands of readers, who have been holding off refinancing for the last 18 months in order to refinance the last couple of weeks of September before their interest starts accumulating again, and their federal loan payments become due. So yes, we're expecting a massive rush in student loan refinancing come this fall.

So not only might rates go up, but your service might go down because they're going to get really, really busy. There may be some downsides of everyone trying to get through the door at once. You're wise in considering refinancing a little bit earlier.

Now people are waiting because right now their loans are 0%, but there is one company right now, CommonBond, that will give you a 0% for six months. But in general, yes, it is probably worth refinancing a few weeks or a month early in order to not be rushed and avoid that hassle. But there're risks there. Maybe the Biden administration comes out and extends it again. Maybe Elizabeth Warren takes over the Senate and somehow convinces all of her colleagues to pass complete student loan forgiveness for everybody.

There are some risks there. There are a few people who refinanced last February, February 2020 rather, who then saw their federal student loans go to 0% and no payments due. Obviously, they felt kind of burned by that, and it's always possible something like that will happen in the future. My crystal ball is cloudy.

But that's what I would do. I would plan to be refinanced before October 1st this fall.

 

This podcast is sponsored by Bob Bhayani at drdisabilityquotes.com. He is an independent provider of disability insurance planning solutions to the medical community in every state and a long-time White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or to get this critical insurance in place, contact Bob at drdisabilityquotes.com today by email [email protected] or by calling (973) 771-9100.

 

Quote of the Day

Our quote of the day comes from Phil DeMuth. He said,

“If you're looking for an investment advisor, make sure you find them. Don't let them find you. The people who find you will be the wrong people.”

There is a lot of truth to that.

 

Masterclass Opportunity

For anyone who wants to practice medicine because they want to and not because they have to, Jimmy Turner over at The Physician Philosopher is holding a masterclass less than a week from now called The 3 Pillars to Physician Freedom. If you want to speed up your journey to financial freedom through a physician side gig or you feel trapped in medicine and want to make medicine optional… this is the masterclass for you. It will be held on June 8th, 10th, and 12th. In this masterclass you will learn how to master your money (including how to create side gig income) and how to master your mindset, too, in order to practice medicine however you want. To claim your spot go here. The three masterclasses are the same, so you can choose which date works best for you. 

 

Milestones to Millionaire Episode

#16 – Paid Off $260K in 2 Years

Sponsored by Physicians Executive MBA at Auburn University’s Harbert College of Business

A urologist paid off $260K in 2 years. Making a plan ahead of time to pay off your loans helps you make decisions about where to live and what job to take, to meet your goals. When he came out of residency his head was in the sand, but he figured it out. You can’t put a price tag on the feeling of having your debts off your back. Read our Ultimate Guide to Student Loan Debt Management.

 

Full Transcription

Transcription – WCI – 213

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 213 – Rules and options for managing inherited retirement accounts.

Dr. Jim Dahle:
Well, I'm back. This is the first podcast I'm recording since I got back from my long trip. I've been gone for about five weeks. I spent three and a half weeks in the Grand Canyon. I was home for four days, basically enough time to unpack and repack and work a couple of shifts. And then I was off again to Lake Powell on a canyoneering trip for another week.

Dr. Jim Dahle:
All in, I basically didn't do any White Coat Investor stuff for five weeks and did minimal clinical work in that time period. This is the first time in my life I have basically taken five weeks in a row off. I didn't do that when I came out of residency, I didn't do that when I came out of the military. At no point in my clinical career have I had time like that.

Dr. Jim Dahle:
It was really cool. I highly recommend it. One of the interesting things about it is I didn't miss work at all. Now, don't get me wrong. I enjoy work. When I came back, I really enjoyed sitting down and talking to patients and helping patients. And I'm enjoying recording this podcast and writing blog posts, but I didn't miss it at all, which I thought was interesting. Because that's the first time that's happened to me in my life.

Dr. Jim Dahle:
Usually if I'm gone longer than about a week, I start kind of itching to get back and do some work. And so, maybe I will eventually be able to retire at some point in the future. That's kind of the message that I got from it. I don't have any plans right now.

Dr. Jim Dahle:
A lot of people wonder “You've been FI for a while, a few years now. Why don't you retire?” And the truth is I've been able to do what I want to do despite working. And so, I haven't felt a need to retire in order to travel or in order to spend time doing activities I love or spending time with my family. I've been able to somehow manage to do it all.

Dr. Jim Dahle:
And part of that is because I have awesome staff. We have great people here that really took care of the White Coat Investor while I was gone. And in fact, Katie was gone for two of those weeks. She joined me for the last 200 miles of the Grand Canyon. And so, we were both basically incommunicado for weeks. I suppose we had our In-Reach satellite text device, but at 160 characters, we weren't exactly trying to do much with that other than let people know we were alive each evening.

Dr. Jim Dahle:
But it was a great trip. If you've never been to the Grand Canyon, it's really a special place. It's magnificent. I think 99% of the people that go there, do nothing more than go to the rim and look over. And let's be honest when people say we're going to do the Grand Canyon, they're talking about going to the south rim. Maybe they do some little short hike on the south rim, et cetera.

Dr. Jim Dahle:
And most of the other 1% get on one trail, which goes from rim to rim down from the south rim and up the north rim, right in the middle of the park, or they float the river. The whole rest of this huge national park is basically untouched wilderness that people don't go to. So, if you go to it, it's all yours and it's pretty awesome. And so, our Grand Canyon trip, because we launched before a certain date, gave us a few extra days in the Grand Canyon rather than having to get through in 16 or 18 days like a lot of rowing trips do, or even less if you have a motor on your boat.

Dr. Jim Dahle:
We were able to spend a full 21 days between Lees Ferry and Diamond Creek. And what that allowed us to do is to take layover days and have short days that allowed us to go hiking. Go hiking and explore slot canyons, et cetera. And so, it was really a raft supported hiking trip, which was pretty awesome.

Dr. Jim Dahle:
Now, of course, we still had to do all 280 miles of rafting, going through all the major rapids of the Grand Canyon. You've heard of lava falls perhaps, a Sockdolager, a Horn Rapid, Upset Rapid, and of course the famous Hermit Rapid with its 10 waves looking to flip your boat. But we had a great time. We had no flips. People fell out of inflatable kayaks all the time, but that's not nearly as big a deal as flipping a raft. But really it was a pretty awesome, pretty special trip in a special place. and I was glad to be able to do it.

Dr. Jim Dahle:
But I'm glad to be back here with you. I hope you have been having a wonderful spring and that it's interesting. I went away to the Grand Canyon when COVID was the thing. I came back and it was like COVID is not a thing. Nobody's wearing a mask. I went to a show the other night, nobody had a mask on. It's pretty bizarre. We still have cases of course, but the numbers are quite low and still declining here in Utah. I hope that's the case wherever you are as well.

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. You can email him at [email protected] or you can call him at (973) 771-9100.

Dr. Jim Dahle:
All right, thanks for what you're doing out there. You are a high-income professional or you are training to become one. That means your job is difficult. Maybe you're a doc working all night, working on nights, weekends, holidays, whatever. Maybe you do something else, but chances are, if you're getting paid well enough that you find this podcast interesting, you're doing something hard. So, thanks for what you're doing and contributing to our society.

Dr. Jim Dahle:
Our quote of the day today comes from Phil DeMuth. He said, “If you're looking for an investment advisor, make sure you find them. Don't let them find you. The people who find you will be the wrong people”. I think there's a lot of truth to that.

Dr. Jim Dahle:
All right. We got something cool coming up. We are having a flash sale of our course. We are selling our Fire Your Financial Advisor course, and as well as the version of it that offers CME. Remember that is new this year, you can get CME for Fire Your Financial Advisor. It's a separate course. It costs a little bit more, but the cool news is you can use your CME funds to pay for it.

Dr. Jim Dahle:
But this flash sale starts on the 3rd of June and it ends on the 7th of June. The coupon code is “5,000 SALE”. And the reason why we're using that code is because we've sold 5,000 courses. So, we're celebrating that by giving a discount on the course, it's a $50 discount. That's 5000 cents off the course if you buy it between the 3rd and the 7th of this month.

Dr. Jim Dahle:
So, go ahead and sign up for that at whitecoatinvestor.com. And if you've been waiting for a discount for that, I occasionally get emails going, ‘Hey, when is the course going on discount again?” It's kind of silly to announce your sales in advance, but we're going to do it this time, 3rd to the 7th is a discount for those courses.

Dr. Jim Dahle:
In addition to that $50 discount, you're also getting a free t-shirt. We have this WCI store, we've got swag. In fact, if you just want to buy one, you can go to a shop at whitecoatinvestor.com and buy a WCI t-shirt. They're pretty cool. I'm wearing one now, if you're watching this on YouTube, you can see that. But if you buy a course between the 3rd and the 7th, you also get a free t-shirt of your choice. So a cool little promotion we have going there.

Dr. Jim Dahle:
All right. Let's get into some content here. This is a funny question because this one was supposed to be answered a few weeks ago. This was supposed to be answered by Leif Dahleen, The Physician on FIRE when he was guest hosting a few weeks ago, but he punted on this question and left it for me to do when I get back.

Dr. Jim Dahle:
So, Jessica, sorry about the delay in getting your question answered, but I think regular listeners will forgive Leif when they hear this question. It is not the easiest question to answer. And I had to do a fair amount of research on it in order to answer. Let's listen to Jessica's question.

Jessica:
Hi, Dr. Dahle. This is Jessica from the Bay Area. I'm not a physician, but I've appreciated your advice ever since I finished my PhD and started a career in bioinformatics. I even appreciated it when I went ahead and bought that Tesla anyways.

Jessica:
The biotech that I'm working at now has a long-term incentive program, where they award employees with some combo of RSUs and SARs, which vest over a period of four years. They give us the option to go 50/50 SARs to RSUs or 80/20 in either direction with these awards.

Jessica:
The company gave us an info packet. And mostly what I took away from it was that SARs are riskier and more tied to the company stock price while RSUs are more conservative and will always have value. I still don't really understand how these work and I would appreciate your advice. Thanks so much.

Dr. Jim Dahle:
All right. At first, we haven't talked about this Tesla thing. People think I'm anti-Tesla. I'm not actually anti-Tesla. If you can afford a Tesla, go buy a Tesla and drive it and enjoy it. And I actually really like Tesla. I wired the garage when we did the home renovation for electric cars. We actually have three plugins down there for electric cars.

Dr. Jim Dahle:
And at some point, in the future, I'm sure we'll have one. I've actually been debating buying a Tesla myself. So, I'm not anti-Tesla. I just don't think people who roll out of residency and take out a $100,000 loan to buy a Tesla. When you can afford it, go ahead and buy a Tesla and enjoy it. They're great cars.

Dr. Jim Dahle:
I think I may end up buying a pickup before I buy a Tesla though. Unfortunately, that Sequoia mine just won't die, man. Those things go forever. I think I've got 259,000 miles on it. It had a little bit of a glitch coming back from the Grand Canyon with it though. It was like it had overheated or something. It didn't actually overheat. But it was like I got bad fuel or something. Let it rest for a half hour after I'd been driven hard in the sun and all of a sudden it was fine. So, I guess I don't trust it as much anymore. Maybe I'll replace it sooner rather than later because of that.

Dr. Jim Dahle:
At any rate, let's talk about your question. This is a great question. And it's one that applies to lots of people, particularly lots of people in the Bay Area like you, but not very many doctors. This just isn't something doctors deal with all the time. So, it's interesting though. So, let's talk about it.

Dr. Jim Dahle:
An RSU is a restricted stock unit. It is shares of stock that you were given by the employer. What do they mean by restricted? Well, it's restricted because you have to vest into the shares. You have to stay there so long. That's the usual requirement. You've got to stay there five years in order to be vested or sometimes they're tied to performance. Like you have to have good performance in order for them to be vested.

Dr. Jim Dahle:
But in general, this is just a method of compensating employees for the success of the company and their hard work. Instead of giving them a salary, you give them equity, shares of stock in the company. They are restricted stock units, but they're shares of stock that once they vest it, they're yours, okay? Whether the stock value goes up or the stock value goes down, you get the same number of shares.

Dr. Jim Dahle:
Obviously, if the company is doing really well, that's worth a lot to you. If the company is not doing really well, well, it's not worth as much. So, your fate is now tied with the fate of the company, which is a great thing, right? I mean, we do something similar here at the White Coat Investor for some key executive employees. But that's the idea behind it. It’s to get everybody to have skin in the game so they work hard and try to make the company successful.

Dr. Jim Dahle:
Now, when you are vested, whatever the value is on those shares, you're taxed on that. And so, usually some of those shares are sold and used to pay the taxes due on those gifted shares. But once they're vested, you can do whatever you want with them. You can sell them, you can keep them, you can collect the dividends from them, whatever you want to do. That's a restricted stock unit. It's not a stock option, it’s not a warrant. You actually get shares of stock.

Dr. Jim Dahle:
And the other thing you asked about SARs, right? These are stock appreciation rights. This is a type of employee compensation that's linked to the company's stock price during a predetermined period. So, if the company stock does not go up, these are worthless. If the price goes down, they're worthless. So that's the difference.

Dr. Jim Dahle:
If your company performs poorly, you still get something with the RSUs because you own shares of the company. With an SAR, stock appreciation rights, if the value of the company doesn't go up, you don't get anything, it's not worth anything. And so that's the main difference. You don't actually own the stock. You just get additional compensation based on stock price increase. It’s generally paid in cash. It doesn't require the employee to own any sort of asset or contract. When it's paid to you, you got to pay taxes on it.

Dr. Jim Dahle:
They're beneficial to the employers because they don't have to dilute the share price by issuing additional shares. This is not all that different from the setup we have here at the White Coat Investor. It's a slightly different setup just because of our company structure.

Dr. Jim Dahle:
But basically, if the value of the company doesn't go up, those key executives don't get that additional compensation benefit. And so, they're really incentivized to make the company more valuable. So, both of these incentivize employees to make the company successful. Certainly, the second type, the SARs, incentivize them maybe a little bit more because you might get nothing for it.

Dr. Jim Dahle:
So, what should you take if you're offered the ability to take any combination of these that you want? Well, what do you think the company is going to do? If you think the company is going to knock it out of the park and really the share price is going to go crazy, you may want to go with the SAR. If you're a little skeptical about how the company's going to do, you may want to go with the RSUs.

Dr. Jim Dahle:
I don’t know, this is a hard decision. When you're unsure what to do on a hard decision, why not split the difference? Go 50/50, take both. And maybe that'll minimize the regret that you feel from having to make this decision. Obviously, the devil is in the details and you have to look at the details of the contracts and how they're pricing them and how much they're giving you of each one.

Dr. Jim Dahle:
But if they are truly priced equally, then it shouldn't matter too much. You're really just making a bet on how well the company does. I don't know that I'd make that bet. I think I'd probably just end up, unless one of them looks like a really bad deal when you get into the details, I'd probably just split the difference.

Dr. Jim Dahle:
All right, let's take our next question. This one's about choosing a specialty.

Speaker:
Hey, Dr. Dahle. I'm interested in your thoughts on whether you think it's a good idea to avoid certain specialties because of predicted changes in the future job market. Recently, there's been a lot of discussion about EM in particular, due to the job market report, put out by ACEP that estimates the 9,000 surplus of EM physicians by 2030, with an increase in offices and providers and vast expansion of residencies. Do you think these predictions should be a sufficient reason to rule out certain specialties like EM? Or do you think that's unreasonable?

Dr. Jim Dahle:
All right. Great question. I've been hearing a lot about this lately. That report by ACEP certainly got a lot of people in emergency medicine worried. It's interesting. I signed on to emergency medicine because I liked emergency medicine. I wasn't financially adept enough to even ask questions like this when I was in medical school. I think I knew about what emergency docs got paid, but that was about it.

Dr. Jim Dahle:
When I ran my numbers coming out of residency for our financial plan, I think my assumption was that I would make $225,000 a year every year for the rest of my career. That's what emergency docs were getting paid then. By the time I came on as a partner in a private group I was making significantly more than that. And emergency medicine turned out to have a better outcome than I expected it would have when I chose it in medical school or even when I was coming out of residency. So that was a nice surprise.

Dr. Jim Dahle:
It's always had a pretty good hourly rate, but due to the hours you work and so on and so forth, it stacks up about midway through the specialties as far as pay goes. But the opposite could have happened as well. It could have turned out to be not as good, and not as lucrative as maybe I expected when I chose it.

Dr. Jim Dahle:
That has happened from time to time in various specialties. Radiology and cardiology, perhaps in particular, have had significant changes in reimbursement schemes over the years that have substantially decreased their income from what was perhaps expected by somebody coming out of training.

Dr. Jim Dahle:
There's going to be some ebbs and flows in any specialty in medicine in general throughout your career. However, the likelihood I think of you having a terrible income in any specialty in medicine is pretty low, number one.

Dr. Jim Dahle:
Number two, the intra specialty pay differences dwarf inter specialty pay differences. I got an email this week from a pediatrician talking about how he makes over a million dollars and he's not working any crazy number of hours either. He's just running a really efficient practice and has built that practice and has done a number of other things in order to do that.

Dr. Jim Dahle:
And the point is, I know pediatricians making less than a hundred thousand dollars, and I know pediatricians making more than a million dollars. And so, your specialty choice is not nearly as much of a determinant on your income, as you might think.

Dr. Jim Dahle:
Another point is that the most important financial aspect of choosing a specialty is doing something that you will want to do for a long time. You are far better off being a pediatrician for 30 years than you are being an anesthesiologist for 10, right? If you burn out on whatever you choose in 10 years, not only will you have paid a whole bunch of taxes over those 10 years, but you will not have the benefit of compound interest working on your savings for that time period.

Dr. Jim Dahle:
You're just better off spreading your income out over longer years. Financially speaking, it works out better. And so, as a general rule, you want to pick what you love and will love to do for a long time. Now, if you love two specialties equally, and I think there's a few medical students in this scenario, but not nearly as many as second year medical students worry there are, then sure, choose the one with a better and the better pay and the better outlook in the future.

Dr. Jim Dahle:
But the truth is most of us get through our third year or at the beginning of our fourth year and there's really only one specialty we love. And I would not tell you to avoid that specialty because you're worried that PAs or NPs are going to have a larger role in that field in the future, or because the job market is becoming more saturated or because there are fewer jobs in that particular specialty at any given time. I would not let that impact my specialty choice almost at all, quite honestly.

Dr. Jim Dahle:
And if that scares a bunch of people out of EM, what happens? Well, fewer people apply to EM and there's fewer emergency doctors. There are more jobs for physicians, et cetera. And things are okay.

Dr. Jim Dahle:
I think the fact that this article came out at a time when doctors took a big income hit last year, kind of made people worry a lot. A lot of the residents coming out this year in emergency medicine are having trouble finding jobs. And the reason why is because groups aren't hiring. You know why? Because our volumes went down 40% last year, and maybe they're just now recovering. People were scared to come to the ER because for their strokes or heart attacks or their traumas or whatever, because they were worried they're going to get COVID.

Dr. Jim Dahle:
It was not entirely logical, but it was amazing. We sat around most ERs in the country last April and May twiddling our thumbs because people weren't coming into the ER. Now most of that's recovered in my area and I think in most areas as well, but it certainly affected a lot of places. They may cut the number of doctors on shift, and so they didn't need to hire. And so, new residents are having a little bit of trouble finding spots this year. Places that are competitive like Colorado's and Utah's and places like that, are even more competitive than usual.

Dr. Jim Dahle:
But you know what? We hired two docs this year. It's not like there are no jobs at all. Two of my partners retired because they got sick of dealing with COVID related crap as well. And so, there are two new spots for docs that we hired. It's not like those jobs are going away completely.

Dr. Jim Dahle:
In emergency medicine, there's also this reservoir of jobs out there that are filled by non-emergency medicine residency trained physicians. And as they retire, those spots become open and most hospitals are trying to fill those spots with an emergency medicine residency trained doc. Those jobs don't tend to be in Salt Lake City and Denver and Portland and places like that. They tend to be more rural. They tend to be in perhaps less attractive climates, but those jobs provide a reservoir that I think will allow emergency physicians to continue to get jobs there.

Dr. Jim Dahle:
Now there's another pressure on emergency medicine and its workforce and that's contract management groups starting their own residencies. And so, the number of emergency medicine residents coming out has substantially increased over what it was just 10 years ago. And that put some additional pressure on it as well.

Dr. Jim Dahle:
But I wouldn't let that keep me from choosing emergency medicine. If that's your love, it's a great specialty, it's a great life, it still pays very well. It's one of the best pay by hour work of any specialty out there. And I choose it again. Even in today's environment, I choose it again. And so, I would not let this fear of what might happen in the future or what is currently happening to especially keep you from choosing it. I would focus more on what type of medicine you love to practice.

Dr. Jim Dahle:
But sure, if you are choosing between emergency medicine and neurosurgery or whatever that pays a whole bunch of money, plastic surgery, spine surgery, whatever, then sure. Go choose that and enjoy that. But chances are, if you're like most of us, there's only one specialty that's really for you and you'll figure out what it is in your third or fourth year of medical school and enjoy it. So, I'll hope that helps.

Dr. Jim Dahle:
All right, let's take our next question. This one is about SEP IRAs.

Speaker 2:
Dr. Dahle, first, thank you for all you do. You're a great resource and I rely on all your publications heavily for my financial education. My question is about SEP IRAs. To make a brief, I'm separating from the Air Force and joining a private group.

Speaker 2:
I love everything about the job and the area. Unfortunately, a few years ago, the partners changed from a 401(k) plan to a SEP IRA for more investment choices. However, I like to continue to take advantage of a backdoor Roth IRA.

Speaker 2:
In order to avoid the pro-rata rule could I open a solo 401(k) and roll my SEP IRA contributions into that solo 401(k) on an annual basis? Theoretically, I would zero out my SEP IRA account before my backdoor Roth contributions and conversions. Is this a thing? Do people do this or is this just a pipe dream? Thank you.

Dr. Jim Dahle:
Well, thanks for your service, number one. Number two, it's kind of a dumb move. I'm disappointed to see doctor groups doing that. I'm not sure why. Certainly, SEP IRAs are a little bit easier to administer but you can max out a 401(k) on less income than you can SEP IRA. Also, you've got a Roth option in a 401(k). There's a lot of good things about a 401(k) over SEP IRAs.

Dr. Jim Dahle:
So, in general, this is not a move that you see groups doing, but occasionally there is a business where it makes more sense to use a SEP IRA or even a simple IRA than to have a 401(k). It's usually related however to the employers trying to avoid putting as much money into the plan for their employees, or maybe just trying to trim expenses on the plan.

Dr. Jim Dahle:
More investment options. I mean, maybe they have some sort of self-directed option there, but for the most part, you can put anything you want and do a 401(k), including a brokerage window and certainly get great investment options. That's a silly reason not to use a 401(k).

Dr. Jim Dahle:
However, you're kind of in this situation. Chances are you're not going to talk your partners out of making this change back. So, what do you do now? Well, if you qualify to use a solo 401(k), meaning you have some sort of other self-employment income outside of this partnership, then yes, you can open a solo 401(k) for that income.

Dr. Jim Dahle:
That of course, assuming the plan allows it and most do now, including Vanguards, which is a new change this year, you can roll your SEP IRA assuming the SEP IRA allows it, and most do, into that 401(k) as often as you like. Now, for Simple, you have to wait two years before you can do a rollover, but with a SEP IRA you can roll over any time.

Dr. Jim Dahle:
So, you could still put your money in the SEP IRA each year, roll it over before December 31st in your solo 401(k), and do a backdoor Roth each year. Otherwise, you are kind of just getting it prorated on your backdoor Roth, and maybe you don't want to do that. Maybe you just want to invest in a taxable account instead.

Dr. Jim Dahle:
But assuming you can open a solo 401(k), yeah, you could do this. Just remember that your K-1 income, your partnership income, you cannot go out and open a solo 401(k) for that. Even though you're self-employed as a partner, you have to use the partnership retirement plan. I’m really sorry about that, but that's the way it is.

Dr. Jim Dahle:
Okay. Let's take this question about retirement allocations.

Speaker 3:
Hi, Dr. Dahle. First off, thank you so much for what you do. I'm a long-time reader of the blog. I've read the book and also listen to your podcast regularly. My question is regarding retirement allocation. I know the magic number is 20%, but I'm a little bit confused about how this relates to pre- and post- tax money.

Speaker 3:
So just for example, my wife and I make about $450,000 a year. We pay about $5,000 post tax for our debt. And then we maximize pre-tax retirement funds, including perf for my 403(b) and my 457, which amounts to about $60,000 pre-tax. And then we each contribute to a Roth IRA, which is about $6,000 post-tax each amounting to $12,000.

Speaker 3:
So, my first question is, is this the 20%? And then if it is not, the follow-up question would be, where should we be allocating further funds? Or where do you recommend allocating further funds to reach that 20% and see long-term growth? I appreciate your answers and obviously, I’m very appreciative of everything you do. Thank you.

Dr. Jim Dahle:
Okay. First of all, 20% is not a magic number. It is a ballpark figure. It's a rule of thumb. It's a guideline, okay? Maybe your number is 18%. Maybe it's 23%. I don't know. The point of throwing that 20% out is so people understand you have to save a bunch of money. 5% is not enough. It's not going to cut.

Dr. Jim Dahle:
So, a typical American that starts saving right out of college, maybe 15% is fine. For a doctor who's going to have less of their income replaced by social security and who generally gets a later start, 20% is more appropriate. If you want to have a full career and retire on about the same lifestyle as you had during your career. Just a rule of thumb though. So, it's not like it's set in stone.

Dr. Jim Dahle:
But in general, when I use that number, I am talking about your gross income, your pre-tax gross income. So, you said you made $450,000. 10% of that $45,000, 20% of that's $90,000. So, $90,000 a year toward retirement. If you want to have the same lifestyle you have now in retirement, and you work more or less a full career, 30 years or so.

Dr. Jim Dahle:
If you want to retire earlier, you need to save more than that for retirement. Additional savings for college, for a Tesla, for vacations, whatever that's in addition. Paying off debt, paying off student loans, that's in addition to that 20%.

Dr. Jim Dahle:
Now you mentioned something like $60,000 into employer accounts, another $12,000 into Roth IRAs. Well, that's $72,000. That's not quite $90,000. You're still $18,000 short. So where should you invest that $18,000 while you invest it? Once all your retirement accounts are maxed out, you invest them in a taxable account. That usually means buying stock index funds, municipal bond funds, or perhaps buying real estate. Buy something like that outside of a retirement account.

Dr. Jim Dahle:
Now, some people have so much retirement space that they can put 20% of their earnings into retirement accounts and not even max them out. But your case is much more common among docs that you hit the cap on your retirement accounts before you hit your 20%. And so, some of your savings just has to go into a taxable account.

Dr. Jim Dahle:
The nice thing about that, you can use it for anything. It's very flexible. You can invest in anything and you can get to it before age 59 without having to comply with those rules. And it's a pretty, pretty convenient place to save money. And there's lots of tax benefits for it as well. Long-term capital gains rates, qualified dividends rates, tax loss harvesting, the step-up in basis at death. You can donate appreciated shares to charities once you've had them at least a year, instead of donating cash. There's lots of benefits of a taxable account. But yeah, that's where you need to invest the rest of your retirement savings.

Dr. Jim Dahle:
All right, we've got a guest on the podcast. Let's bring him on. This is Dr. Jimmy Turner. You know him as The Physician Philosopher. He is a practicing anesthesiologist out in North Carolina. Welcome back to the white coat investor podcast, Jimmy.

Dr. Jimmy Turner:
Thanks for having me, Jim. I’m super excited to be here as always.

Dr. Jim Dahle:
You've had all this time awesome stuff going on over at your site lately. You've got a whole new redesign. Tell us about that and why you did that and how it's helping people.

Dr. Jimmy Turner:
Yeah, we really took a crack at it on that one. So, we redesigned the site. I guess it ended up coming out just in the last couple of months and we're still piecing some of that together. But yeah, it's a new site with a new design and hopefully a clear call to what our purpose, our mission is over there at The Physician Philosopher. And so, yeah, we're excited about the new site coming up. And I had a good experience building that, although it’s a lot more work involved than I anticipated at the beginning.

Dr. Jim Dahle:
Now, the big font here on the front page is “Teaching doctors how to live life on their terms”. Why'd you choose that?

Dr. Jimmy Turner:
Yeah. So, I think that at the end of the day, the deeper purpose of The Physician Philosopher is changing the culture of medicine by empowering physicians through their money and their mindset that will allow them to practice medicine as much, or as little as they want, practice because they want to not because they have to.

Dr. Jimmy Turner:
And so, I'm all about letting doctors’ practice on their terms and then choosing to practice medicine because they want to. And I think that doctors in that situation are going to be in the best possible situation and take the best care of patients. So, that's kind of the name of what we do.

Dr. Jim Dahle:
You made a pretty good transition over the last year, over at The Physician Philosopher. It’s much less of a blog now and much more of a podcast. Tell us why you went that direction.

Dr. Jimmy Turner:
Yeah. It’s a funny journey that we've taken. I used to write three blog posts a week, for probably a year, year and a half. And then I found out that I actually liked getting behind a microphone and it turns out that other people like listening to my crazy ramblings and send me emails saying as such. And so, I really started diving into this medium more and more and really started enjoying it a ton. And hearing and sharing people's stories and the experiences that I've had and what I'm learning and the things that we talk about in our alpha coaching experience, our alpha clients and sharing that on the podcast was huge.

Dr. Jimmy Turner:
And then Ryan and I have run Money Meets Medicine for probably 70 episodes at this point. And that's been a wildly popular podcast that has been a ton of fun to produce because I get to make fun of Ryan all the time. So, it's great.

Dr. Jim Dahle:
So, what's the difference between the two podcasts? You have The Physician Philosopher podcast. Those episodes drop when? Mondays?

Dr. Jimmy Turner:
Yes. Those are on Mondays.

Dr. Jim Dahle:
And then you have Money Meets Medicine, those drop on Wednesdays. What can people expect from those two podcasts?

Dr. Jimmy Turner:
Yeah. So, if the idea behind The Physician Philosopher is teaching doctors how to master their money and their mindset to live life on their terms, practice medicine however they want. Then The Physician Philosopher podcast is certainly more about mindset and the principles that are taught there and that we teach our clients through our coaching experience. It's kind of a free content way of diving into coaching concepts and mindset work and thought work and the importance of defeating burnout and imposter syndrome. And even some mindset stuff in terms of entrepreneurship and building businesses.

Dr. Jimmy Turner:
Money Meets Medicine on the other hand is more of a traditional personal finance podcast. We're talking about the money aspect of things. And so, the two differences you can expect are one's on mindset and one's on money. And those are the two things that we're all about at The Physician Philosopher.

Dr. Jim Dahle:
Awesome. Now you've mentioned a couple of times the alpha coaching experience. This is the other big thing you've been doing opening up this, I wouldn't call it a course. I wouldn't call it a class. I think experience is probably the right word. But it opens up several times a year. The last time was a few months ago. Tell us what feedback you got from participants in that experience and what it's like, what they liked about it, what you're changing about it, what's going on with it?

Dr. Jimmy Turner:
Yeah. That's actually a good description of it because there is course content, video content inside of the alpha coaching experience. And it's where we teach people about the three pillars that we'll discuss here in a little bit, but about money mindset and designing their ideal life and helping people get to that goal of having freedom.

Dr. Jimmy Turner:
And really the main purpose there is to help doctors that feel trapped in medicine find freedom. And ultimately, what I would call a trap physician is someone who feels undervalued, overworked, unheard, unappreciated. Maybe they've thought about going part-time or leaving medicine altogether. They're thought about building non-clinical income to get to financial freedom faster, or potentially they've tried to change the status quo in medicine and been told that's just the way it is.

Dr. Jimmy Turner:
If anyone is in that situation, that is the sort of person that really comes into the alpha experience and has really life altering experience. People, the words they use “game-changing”, “life-changing”, I'll give you an example, a story of a couple of our clients that have come into the program that come from the personal finance community. They come in knowing about money but they haven't really thought through and talked about where they are on their journey, how close they are, or they're not to financial independence.

Dr. Jimmy Turner:
And they come in and we've had a couple of docs, several docs at this point, changed jobs out of a malignant or pretty terrible situation that wasn't ideal for them or their family. After they realized that they had some choice, that they had some options that they didn't previously know they had and wound up in really great situations that were better for them and their family once they realized they weren't stuck, they weren't trapped anymore after they mastered those three things.

Dr. Jimmy Turner:
And so, we've had a ton of awesome experiences from clients who have started side gigs to realizing that they're closer to financial dependence than they realize. We have people that have stayed in the same job that they currently exist in, but because they've done the mindset work, they now don't any longer suffer from the imposter syndrome or the burnout or feeling trapped.

Dr. Jimmy Turner:
And so, we've had a lot of clients have a variety of different kinds of successes because whatever you come in wanting is what it's going to end up being something you can work on. Because coaching in a lot of ways fills in the gaps to whatever process you're working on because all of our clients are super smart. They're intelligent, educated doctors. So, they probably don't need me telling them what the answer is, really what they need is to have somebody help them figure out where they are and what they want and then how to go about getting that.

Dr. Jimmy Turner:
So, yeah, it's been an awesome experience. We've had two or three cohorts at this point go through the alpha coaching experience. It has been really good. We've got great feedback, tons of awesome testimonials from clients in terms of how it's impacted their life. And it couldn't be more fun or rewarding to help doctors find that freedom they're looking for.

Dr. Jim Dahle:
You keep mentioning imposter syndrome. And there may be some listeners out there that don't know what you're referring to with that. Can you explain what imposter syndrome is and why it's so common among docs?

Dr. Jimmy Turner:
Yeah. So, imposter syndrome is this idea that you are not good at something. You are not worthy of something, you're not enough in whatever topic you might be talking about. So, for physicians, sometimes they feel like there are bad doctors. Sometimes they feel like maybe they had a bad outcome and they blame it on what they did and they have a hard time dealing with that.

Dr. Jimmy Turner:
And a lot of this really stems from the fact that doctors, we tend to be really hardworking. We tend to have a perfectionist nature about ourselves. And so when we go into something and something doesn't go the way that we want, or we're not having as much success as we think, or we feel like we're getting Monday morning quarterback by someone else who says something about our medical care, you could have imposter syndrome about being a mom or a dad.

Dr. Jimmy Turner:
I mean, it really can be anywhere in your life where you don't feel like you're good enough to do whatever that thing is that we're talking about. And so, that's the basic idea behind it. It’s feeling like an imposter. Like someone's going to catch you that you're a fraud that they're finally going to figure out you're a big fake and that you shouldn't be a doctor or that you're not good at whatever the discussion is that we are having.

Dr. Jim Dahle:
Now we hear that phrase, “Fake it till you make it”. So, these people with imposter syndrome are feeling like they never make it, they're always faking it.

Dr. Jimmy Turner:
Yeah, exactly.

Dr. Jim Dahle:
All right. So, a few weeks ago you had an event you called Financial Freedom Bootcamp. What was that? And can it still be accessed?

Dr. Jimmy Turner:
Yeah. The Financial Freedom Bootcamp was a ton of fun. We put it on an hour or two, both days, two days in a row. And yeah, the replay still exists for this in The Physician Philosopher's Facebook group. So, people can go and check it out there. There's a link to click and it will bring you right to the replay for both of them.

Dr. Jimmy Turner:
We touched on the money pillar and the three pillars that we teach and really dove into the hybrid financial independence model. The first day we talked about creating cash flow and the personal finance side of things. And the second day we talked about creating non-clinical income and how to figure out what side gig might be best for you, if that's something that you're interested in.

Dr. Jimmy Turner:
So those are the two topics we talked about and it was a ton of fun. We had over a thousand people sign up and hundreds of doctors show up. We talked and got coached and did Q&A at the end as well after we did some teaching. So, it was a ton of fun.

Dr. Jim Dahle:
Cool. Now, lately, you've been talking about a concept you're calling “Hybrid FI”. Explain what you mean by that and why it's relevant.

Dr. Jimmy Turner:
Yeah. So, in my own experience I've run into this, where this situation where we have two different kinds of groups in the financial blogosphere podcast. I don't know if that's even a word now. But in this world where we exist, personal finance for doctors. And one is the traditional personal finance teaching, the 25X to get to your financial independence number, low-cost diversified index funds, or a variety of other savings and paying down debt and cash flow to create.

Dr. Jimmy Turner:
Basically, to get to that number where you can then claim you are financially independent. And some people just stop there and say that's the name of the game. Like you just save as much as you can to try and get there as quickly as you can. Which by the way, is one of the most common things that we coach people on is they feel like they have to just save every penny they can to get to financial independence as fast as they can, and they burn themselves out doing that.

Dr. Jimmy Turner:
And so, that's one aspect, one side of things is getting to that journey fast. FIRE, if you will. And the other side is cash flow. And so, like our buddy Peter Kim at Passive Income MD. He's all about creating nonclinical cash flow through passive income and typically in real estate. And so, that's the other crowd that we hear a lot about. It’s how to create nonclinical cashflow. And once you have enough cash flow every month to pay for your family's needs, then you're financially independent by that definition.

Dr. Jimmy Turner:
So, the hybrid financial independence model is a combination of those two things, because I'm a big believer in personal finance and cash flow and paying down debt and investing. But for most of us, and I was this way, I realized that I was going to keep saving and there's going to be another 15 or 20 years before I was going to be financially independent and have any legitimate financial freedom to change my family's life. And my kids are 10, 7, and 4, and I wasn't willing to wait that long.

Dr. Jimmy Turner:
So, I still want to do those things. I still want to save enough money to be financially independent someday, but I also wanted to create some cashflow right now in order to have some freedom to live the life that I want and to coach my kid’s soccer games and to be at gymnastics or to go to swim practice like I did last night with my little girl.

Dr. Jimmy Turner:
And so, I didn't want to have to wait 15 years to have that freedom and to live a life that I wanted to be living. And so, the Hybrid FI model is the two parts. The first part being personal finance saving for tomorrow, and then the second part being creating cash flow for today so that you have some freedom, some flexibility right now. That's the basic premise.

Dr. Jim Dahle:
It sounds a lot like just boosting income. And if you have more income, not only can you still save the same amount, but you have more money to spend, or you can work less at whatever you are doing. In a lot of ways that's what it sounds like. How's this different?

Dr. Jimmy Turner:
Yeah. So, the difference is that a lot of the reason why, if you ask any physician, and Jim, I'd be interested to know what your thoughts are on this. But anyone that I've ever asked in this space, why would you ever go and get a side gig if you're a doctor who earns really good money? And if you ask them, they'll have different kinds and varieties of answers, but ultimately what it comes down to is freedom. They want autonomy and freedom. But that often means going and working an extra shift at the hospital, which gets away from the exact thing that a lot of doctors want to do, which is find balance.

Dr. Jimmy Turner:
And so, yeah, you can work harder, you can create more income and then squirrel it away and save it in your passively managed index funds, but you could also create nonclinical income through a different source. And that will actually free you and provide some empowerment to those physicians that were trying to practice medicine on their terms. And so, it's different in that. It's not necessarily clinically related and actually most of the time, it's not.

Dr. Jim Dahle:
I think it's kind of a sign of the fact that doctors have so much less control over their jobs these days than they used to that they feel like they have to go outside of medicine in order to get that autonomy that they've lost in medicine. It's a little bit sad that way, but there's certainly lots of reasons why people do that. Sometimes it's just an outside interest. They're interested in something. Sometimes it’s “I want more income”.

Dr. Jim Dahle:
Sometimes, they run into this, it's not really an issue, but an issue I ran into where I sat down in the first few years out of residency and ran the numbers and realized there's a cap. There's a cap on how much money I'm ever going to have. And don't get me wrong. It was enough money, but just the idea that there is a cap on it I didn't like.

Dr. Jim Dahle:
And the fun thing about starting a side gig, some sort of entrepreneurial effort is there is no cap. Who knows where it'll go to? And so, it's kind of fun that way. And so, I think everyone's got a different reason why they may pursue or not pursue a side gig for sure.

Dr. Jim Dahle:
I've written a little bit about what I call the income approach to financial independence, and there are pros and cons. And there certainly are pros and cons. For example, one of the cons is it usually involves additional work. Traditional financial independence doesn't involve additional work. And some of the pros of course, which are that it can be reached much faster which is a huge pro. And you can use that additional work in order to improve your returns if you will.

Dr. Jim Dahle:
All right, so you got something new coming up here. You've got some masterclasses. So, let's do an announcement here for this. These masterclasses are for anyone who wants to practice medicine because they want to, and not because they have to.

Dr. Jim Dahle:
So, you are going to be holding a masterclass less than a week from the time this podcast drops. You're calling it “The Three Pillars to Physician Freedom”. So, if you want to speed up your journey to financial freedom through a physician side gig, or you feel trapped in medicine and want to make medicine optional, this is the masterclass for you. It's going to be held on June 8th, June 10th and June 12th.

Dr. Jim Dahle:
In the masterclass you learn how to master your money, including how to create side gig income, but also how to master your mindset in order to practice medicine however you want. So, in order to claim your spot, simply go to whitecoatinvestor.com/coaching. Spots are limited for this masterclass, make sure you sign up soon.

Dr. Jim Dahle:
The link is in the descriptions of the podcast episode. Wherever you're listening to the show, it's in the podcast show notes on the White Coat Investor. It’s not that hard to remember whitecoatinvestor.com/coaching. Check it out. The masterclass is free, correct, Jimmy?

Dr. Jimmy Turner:
It's completely free.

Dr. Jim Dahle:
Now I'm sure there's always opportunities to sign up for Jimmy's coaching in any opportunity. So, if you want more, if you like it, if you want a more intensive experience, you can always sign up for the alpha coaching experience, but this masterclass is free. Come check it out, get an introduction to the coaching and mindset change, get some information on how to start and succeed in a physician side gig, learn more about managing your money. You can do all that at whitecoatinvestor.com/coaching.

Dr. Jim Dahle:
What else can you tell us about that experience, Jimmy? What should people expect from going to one of these masterclasses? Should they go to all of them? Are they all the same? Is it just a convenient thing or how does it work?

Dr. Jimmy Turner:
Yeah, there are three dates for convenience. Each masterclass is the same. So, to sign up for whatever date works for you. And the additional thing that I'll throw out there is The Financial Freedom Bootcamp that we talked about earlier. I actually gave that free for those two hours, two days in a row. And there's nothing pitched at the end of that. So, in the meantime, if you want to check that out, it'll be a bit of a primer for this masterclass, and sets you up for understanding a little bit more about it.

Dr. Jimmy Turner:
But yeah, that's the idea behind it is to teach people about their, their money, their mindset, and their ideal life. Because as it turns out, we've talked a lot about money, and that was part of my journey coming through bankruptcy as a kid, which I know we've talked about before on this podcast.

Dr. Jimmy Turner:
But when that happened, I ended up mastering my money and setting up my family on a very good journey for that. But then I ended up despite the income I was making on the side and despite the mastery of that ended up being pretty miserable. And so, I talk about my journey through burnout and feeling trapped in medicine myself and what it took to overcome that.

Dr. Jimmy Turner:
And so, you can expect to learn about a variety of things in that masterclass, whether it's the personal finance side of things or the mindset side of things and how to take a deeper dive, if you want to. And so, I'm super excited to meet people there. There's going to be a Q&A and some discussion at the end. So, if you want to interact with me and have some conversation about any of that stuff, I'd be happy to have it. I love talking to people about their money and their mindset. It's my two passions.

Dr. Jim Dahle:
Awesome. So, it's a live event. It's what? About an hour or two hours? How long is it?

Dr. Jimmy Turner:
Yeah, that'd be an hour. So, probably it’d be 45 minutes to 60 minutes of content, and then I'll open it up to questions and I typically stay for however long we have questions. Sometimes it turns into two hours, but you can head out whenever you want and I'm there just to help people. So that's what the purpose is.

Dr. Jim Dahle:
Awesome. June 8th, 10th and 12th. It's free. There's no obligation, whitecoatinvestor.com/coaching. Thank you, Jimmy Turner of thephysicianphilosopher.com for being on the podcast.

Dr. Jimmy Turner:
Yeah. Thanks for having me, Jim, it's been a ton of fun.

Dr. Jim Dahle:
I got a few more questions from listeners here. Let's take this one about med students and federal loans. This one's coming in from Tyler.

Tyler:
Hello, Dr. Dahle. My name is Tyler and I'm preparing to start medical school in the coming fall. I wanted to ask you what your opinions were on current federal loan interest rates for medical school. Through my non-traditional background, I'm currently in a position with some flexibility to turn down a chunk of my student loan offer.

Tyler:
However, federal and subsidized loans for the last two years have been set at 4.3%, a little lower after tax. When I look at your personal recommendations from a 2011 blog post entitled “The student loans versus investing”, you actually prioritize investing over loans with low interest rates in this 3% to 5% range.

Tyler:
Given these current rates, does it make more sense for students like me to take the entire loan offer at 4.3% and leave the rest of their money invested in savings and retirement, or for them to stay as close to debt free as possible by paying as much as they can out of pocket? Thanks for all you do. Your advice and content show a light at the end of the tunnel for students like me, who are just now embarking on their training.

Dr. Jim Dahle:
All right, so federal student loans right now, if you're an undergraduate, you can get them at 2.75%. If you are in med school, dental school, whatever graduate school, it's 4.3%. If you get a plus loan, it's 5.3%. That's for loans disbursed between July 1st, 2020 and July 1st, 2021. I wouldn't be surprised to see that go up a little bit this year, but I agree those rates are pretty low historically. Not as low as they've ever been. A lot of my classmates refinanced at 0.9% when we came out in 2003. But I remember a mortgage I got in 1999 was 8%. My first mortgage.

Dr. Jim Dahle:
So, rates have been lower, rates have been higher, but here's the deal. When you signed your promissory note, you were promising that the money is going to be used for education. So, borrowing extra money in order to invest it is kind of a “no-no”. Not only is it illegal, probably unethical and maybe not that smart. I'm not a big fan of borrowing a lot of money in order to invest anyway.

Dr. Jim Dahle:
But at those low interest rates it’s not like borrowing 2% fixed or 3% fixed, or even 4.3% fixed in order to try out and invest that is a stupid thing to do. It's not a stupid thing to do, it's probably going to work out for you. No guarantees of course. You got of course the factor risk into the equation, right? Avoiding a 4.3% expense. And maybe it's more than that once you tack on loan fees and the hassle of dealing with loans.

Dr. Jim Dahle:
There is no guaranteed investment out there right now paying better than 4.3%, right? And you can put it in real estate and hope to do better, or you can put it in stocks and hope to do better. You're almost surely not going to do better in CDs and bonds and those sorts of fixed income investments. They're paying like 1% to 2% right now. And so, you can't just take a loan at 4.3%, stick in a savings account and expect to come out ahead. You're not, you're going to come up behind. You're better off using that money to pay for school.

Dr. Jim Dahle:
And in general, that's kind of how I feel about money you have as a non-traditional student coming into medical school. The best investment is in yourself and your future earnings ability. So, you use your money to pay for medical school and your future earning ability. Very few people regret keeping their debt as low as they can. And coming out with less debt, you have more options, more freedom, less weight hanging over your head. In general, I think that's the way you should do it.

Dr. Jim Dahle:
Now, if you had money in retirement accounts, I'm not sure I would pull those out in order to pay for med school. I would make sure during those no income years during med school, that I did Roth conversions of that money, but I probably wouldn't pull money out of retirement accounts in order to pay for medical school.

Dr. Jim Dahle:
But a taxable investment account or your savings account, yeah, I'd probably use that before I borrowed more money. But there's no right answer there. That's a little bit of a gray area. And I try not to be too dogmatic about stuff like that when I can be dogmatic about Tesla’s instead.

Dr. Jim Dahle:
So, good luck with your decision. 4.3% is a little high for my taste in this low interest rate environment to be borrowing in order to try to out invest it. I'd probably just use that money to pay for medical school and keep your debt down. But you wouldn't be stupid necessarily to maybe borrow a little more and invest it.

Dr. Jim Dahle:
The problem is people really behave, mathematically that makes sense. Behaviorally what happens is you end up spending more, and then you end up borrowing more and spending more rather than borrowing more and investing more. And obviously that's a losing proposition.

Dr. Jim Dahle:
All right, let's take another question from Marcus here.

Marcus:
Hello, Dr. Dahle. I was wondering if it would be possible to make a 529 account for myself. I don't have a child, but I'm planning on having a child in the future. And so, I could be able to contribute money to this fund, let it grow until the day I have a child and then just transfer it to them. What do you think?

Dr. Jim Dahle:
Good question Marcus. Yes, you can open a 529 for yourself. Yes, you can change the beneficiary to your child. You probably will not get any sort of state tax break for contributing money to a 529 for an adult like yourself. So, keep that in mind.

Dr. Jim Dahle:
But more philosophically let's step back for a minute and try to figure out what you're trying to accomplish. Is the goal here really to get as much money into 529s as you can? Because if it is, you can put every dollar you ever earned into a 529. Truthfully, think about it. There are limits on how much you can put into a 529 but those limits are state specific and there's 50 states, right? You can open a 529 in every state and you can open one for all your nieces and nephews and siblings and you and your spouse and your kids and your grandkids. You can put all your money into 529s. You really can.

Dr. Jim Dahle:
So, I don't know what you're worried about. Are you worried that you're not going to be able to get enough money into there during the 18 years of the kid's life in order to pay for college? I mean, think about that. Year one, right? That kid is born, you get the social security number. You open the 529 account. If you're married, you can put in $15,000 for you and you put in another $15,000 into your spouse's 529 for each year. And you can front load that for five years when you first opened the account. So, $75,000 a piece, $150,000 that you can put in there when your child is born. They're still breastfeeding and you got $150,000 in their 529. Five years later, you can put in another $150,000.

Dr. Jim Dahle:
What do you suppose that grows to over 18 years if you're putting in $30,000 a year into 529? It's a lot of money. It's a million dollars or more. It's going to pay for every educational need they have. And you're going to have a ton left over for your grandkids that you can change the beneficiary to.

Dr. Jim Dahle:
And now you're asking why that's not enough. I got to get more in there. I got to put some in there before the kid is even born. Really? You really have to do that in order to meet your educational goals for this kid? I kind of doubt it.

Dr. Jim Dahle:
So, if I were you, I would use that money for other financial goals for now. I would put that money toward your own retirement accounts if you're not maxing those out, paying off your student loans, paying off your mortgage, beefing up your emergency fund, saving up for a Tesla, going on a great vacation, saving for your own retirement, some additional money for going out and buying some rental properties, whatever you want.

Dr. Jim Dahle:
And then when the kid comes, then start putting some money into a 529, but start with the end in mind. Think about how much you want to have in there when they turn 18 and work your way backwards to see how much you got to put in there and when. It may be a lot less than you think.

Dr. Jim Dahle:
My kids, we originally thought they were probably only going to have enough in there for, enough to pay undergraduate tuition here in Utah, which is not that much money. It's somewhere between $5,000 and $10,000, depending on the institution for four years. So that was kind of the amount we were thinking initially for having in 529s, $40,000 or $50,000 a kid. We ended up putting more money than that in there.

Dr. Jim Dahle:
But I keep running into these people with $450,000 – $600,000 going into 529s. And I'm just trying to figure out where they're trying to send their kids to school, the very most expensive undergraduate school in the country and the very most expensive medical school in the country. Is that really the plan? You just don't need that much money in 529. It’s probably not a great place to put money that's not for education. And so, I wouldn't go crazy trying to get extra money in there.

Dr. Jim Dahle:
All right. Let's take a question from Ricky.

Ricky:
Hi, Jim. I hope you enjoyed your vacation. Hopefully it was restful. Actually, your vacation is usually more exciting rather than restful, but anyway, hope you enjoyed it.

Ricky:
I did have some questions regarding different asset classes as hedges, or if they're good in times of inflation, as we're all worried about currently. First of all, I was wondering where did this rumor that gold was a good inflation hedge came from? Is it because it's still “one ounce of gold can buy a men suit” as it did 300 years ago today, as well as maybe it did well and kept up with the hyperinflation in the 70s?

Ricky:
Also, I was thinking of how REITs actually could probably keep up with inflation given you can always raise rents now in response to rising inflation. Also, how about if I have international in my portfolio? I doubt that inflation happening in the United States will be the same as every other country internationally. So, it would seem to me that investing internationally in the international index fund would be a good way to also hedge against the inflation that's currently happening here in the US.

Ricky:
Also, finally, I heard small cap value is actually a good asset class to have in terms of inflation. If you could also delve deeply into why that would be, maybe it's because small companies have fewer operating costs and maybe value companies have lower expected earnings. Any insight into discussing these different asset classes in terms of inflation would be great. Thanks.

Dr. Jim Dahle:
Great question. Yeah, I had a great time. You're right. My vacations are not particularly restful, but they are very relaxing for me. I slept better in the Grand Canyon than I do at home. So, it was wonderful to just sleep on a cot underneath the stars for a week straight. And it was really, really great.

Dr. Jim Dahle:
I think I'm going to be talking about inflation a lot this year. It's really on people's minds, which I'm not necessarily asking why people are thinking about inflation. I think I get that. My question is why weren't you thinking about inflation a year or two ago or three or five or ten? Inflation's a big deal. It is a big issue with your portfolio and a good part of your portfolio needs to be designed to combat inflation. That's not new though.

Dr. Jim Dahle:
When I set my portfolio back 15 plus years ago, inflation was a big deal. It's a big fear. When you talk about the deep risks, that's the phrase that William Bernstein uses. The deep risks to your portfolio are inflation, deflation, confiscation, and devastation. These are the risks. And we're not talking about volatility, the price of your stocks goes up and comes down, whatever. And you hold on to the long-term that basically disappears.

Dr. Jim Dahle:
We're talking about the real risk of losing real wealth in after inflation terms. And inflation is the chief among those. It's the most common. If you look historically across different places in the world, it is the one most likely to devastate your portfolio. So, this is not something you should be worried about this year. This is something you should be worrying about all the time. Inflation is a big deal.

Dr. Jim Dahle:
And when you think about what inflation most affects, we're talking about cash. We're talking about nominal bonds, fixed income for the most part. Imagine that you have a scenario you're going into the 1970s and you put all this money into 30-year bonds, right? So, you get this bond that's paying 4% and then inflation goes to 10%. So, you are losing 6% a year, every year on that 30-year bond.

Dr. Jim Dahle:
So, when you get your principal back, you're getting a whole lot less money after inflation terms, then you took out. It reminds me of the student loan. I took out one student loan. It was an Alaska state student loan. It was an 8% loan. I took it out in 1993 from my freshman year and paid for room and board with it. It's a $5,000 loan. I paid it back in 2010.

Dr. Jim Dahle:
I was allowed to defer the interest through undergraduate, medical school, residency, and military service. So, when I got out of the military in 2010, I paid it back. Essentially, I paid back a $5,000 loan with $3,200 worth of money in 1993 dollars. So, that helped me.

Dr. Jim Dahle:
Well, if you're on the opposite end of that, that was not a good deal for Alaska. They didn't get any interest and they got paid back a whole lot less money than they loan me in the first place. And so, inflation was not good to the state of Alaska for that purpose. And that is when you are making investments like that, that's why inflation is bad.

Dr. Jim Dahle:
Now imagine that you had hyperinflation, not just 5% or 10% a year, but you had an inflation of a hundred percent a year or a thousand percent a year. That's absolutely going to totally wipe out the value of your cash and the value of any of your nominal fixed investments. And so, that's a real risk to your portfolio. If your whole portfolio is CDs and treasury bonds, this is a big risk to your portfolio.

Dr. Jim Dahle:
So how do you hedge against that? How do you protect yourself against inflation? Well, the main thing is you need assets in your portfolio that are going to outperform inflation. If it's earning 10% and inflation is 3%, you're making 7% a year, you're still making gains here.

Dr. Jim Dahle:
The first thing is you want to have a portfolio that actually makes money. You want your portfolio to do some of the heavy lifting for you. See, it's not just brute force savings for everything you'll need in retirement. So, what are we talking about? We're talking about risky asset classes, stocks, ownership, equity in companies, real estate. You're taking significant risk there when you're investing in real estate. And so, you get paid more in general over the long-term. And so, you outpace inflation.

Dr. Jim Dahle:
There are some fixed investments that can help with inflation. Two primary ones are TIPS, treasury inflation protected securities, and I-bonds, a special type of savings bonds that are indexed to inflation and they can help offset inflation.

Dr. Jim Dahle:
Now that's so important to me in my portfolio design that not only do I have 60% of my portfolio in stocks and 20% in real estate, that's 80% in stuff I expect to dramatically outperform inflation, but half of my bonds are in inflation index bonds, TIPS. And so, they help combat inflation.

Dr. Jim Dahle:
Now the downside of TIPS and I-bonds is if you don't believe the government's measure of inflation. I need to get into this in a blog post in depth but the bottom line is the only inflation that matters is your personal inflation and the stuff you buy and how fast that's going up in price. If you're buying stuff that's going down in price, then, inflation doesn't matter so much to you. But if you're consuming things that are rising faster than the general rate of inflation, education, healthcare, housing right now has been going crazy, both rents and buying houses.

Dr. Jim Dahle:
If that's the stuff you need to buy in the future then the CPI, the consumer price index that the government's measuring, maybe doesn't have enough of that in it in order to really describe your personal rate of inflation. And so, people come up with some other measures of inflation and when they use them, they say “Inflation is 10% and something terrible”.

Dr. Jim Dahle:
Now it's not 10%. When I go to the store and when I go to buy gas, 10% inflation a year is huge. I mean, it is a massive devaluation in your money and its value and what it can buy. And we're clearly not seeing that. It's a very different experience than people had in the 70s when they were really in an inflationary environment.

Dr. Jim Dahle:
But is it possible that general inflation is higher than the government has stated? It sure is. And if that's a big fear of yours, then I-bonds and TIPS are probably not your thing. Because yes, they compensate you for unexpected inflation, but they measure that based on the CPI.

Dr. Jim Dahle:
Some of these other things that are not dollars, they're not fixed income. We've got things like other currencies, if you think they're going to do well in relationship to the dollar. We got things like gold and silver, right? Precious metals.

Dr. Jim Dahle:
And why do people use precious metals? Well, because traditionally over the long run, they've kept up with inflation. They haven't outpaced inflation like stocks and real estate and even bonds have, but they've kept up with inflation. And in really bad times, people tend to put their money into that stuff, further jacking up the price. And so, in the 1970s, gold did very well. And part of that was fear of this flight to safety flight to a non-devaluing asset. And part of it was simply gold, keeping up with inflation.

Dr. Jim Dahle:
Cryptocurrencies. People think those might play a role in combating inflation as well. They're so new I don't think we really know that yet. There's a good chance they could. If you want to put a couple of percent of your portfolio in there, knock yourself out. But you know what I said that a few months ago, then I went to the Grand Canyon, bitcoin was $60,000. I came back, it was $30,000. So that's a lot of volatility just to hedge against inflation. You better like it for more reasons than that if you want to put a little bit of your money into cryptocurrency.

Dr. Jim Dahle:
So, what else did you ask about? You asked about small value stocks. I don't know that they're any better about inflation than any other stocks. The idea, however, is that higher performance has a higher return, higher risk. And so, you expect to outperform inflation by more over the long run.

Dr. Jim Dahle:
Real estate, however, probably has a special place when it comes to inflation for a couple of reasons. One, you can raise rents with inflation and of course, the value of the property goes up with inflation. So that's good. But on the other side, it's generally leveraged and it's often leveraged with fixed debt, which is awesome. It's a great hedge in inflation, right?

Dr. Jim Dahle:
I'm not a big fan of debt. I'm not going to tell you to keep your mortgage around forever or your student loans around forever, but fixed low interest rate loans and inflation, they're pretty good inflation hedge, right? If inflation is 10% and your debt is at 3%, you're basically making 7% a year on your debt. That's pretty cool that way.

Dr. Jim Dahle:
But real estate is leveraged often with fixed debt. And so, you're winning on both sides. You're raising rents and your debt costs you less in after inflation terms each year. And so, that's why real estate is maybe particularly good in inflation. I hope that answers your question. We'll try to get into that more on the blog. But yeah, inflation is a big deal. I don't know why people are just now starting to pay attention to it just because CPI went from 2% to 4%. You should have been paying attention to it a long time ago.

Dr. Jim Dahle:
All right, the next question is from Ryan.

Ryan:
Hi Jim. My name is Ryan Stevenson and I'm an ear nose and throat physician working in Lehi in Provo, Utah. I started this position last summer after completing training. I have a significant amount of student loan debt at 6.8% and is federal and $270,000 in total. I also have some non-medical school debt that I'm trying to pay off as fast as possible right now while my federal loan debt is at 0% and no payments are required each month, at least until that situation expires.

Ryan:
I'm not eligible for PSLF and will want to refinance my student loans. But my question is about timing. It's a little bit of a crystal ball question. I'm concerned that once all of our federal loans go back up to what they were in my case, 6.8% that the demand for refinancing student loans will increase. And perhaps the rates will increase.

Ryan:
I don't know whether I am overblowing this, but I'm wondering whether I should try and refinance earlier to lock in a lower rate or whether I should try to take advantage of this 0% as long as possible, and try to pay off as much as my nonmedical school loan debt, hopefully all of it, and then as much medical school debt as I can, while all of it goes to principal before it goes back up to 6.8% and I want to refinance. Thanks. Bye.

Dr. Jim Dahle:
Ryan. Thanks for what you do. I also practice from time to time in Lehi. So, if you really want to pay off your student loans quickly, I will just send you more patients. How's that sound? But seriously, this is a big deal. It's a big deal for the student loan refinancing companies. It's a big deal for the White Coat Investor as a business. It’s a big deal for all of our readers and listeners.

Dr. Jim Dahle:
We have tens of thousands maybe, certainly thousands of readers who have been holding off refinancing for the last 18 months in order to refinance the last couple of weeks of September in order to go live hopefully the first week of October, when their interest rate interest starts accumulating again, and their federal loan payments become due. So yes, we're expecting a massive rush in student loan refinancing come this fall.

Dr. Jim Dahle:
So not only might rates go up, but your service might go down because they're going to get really, really busy. That's good for us. It's good for listeners like you. It's also good for the companies, but there may be some downsides of everyone trying to get through the door at once. So, I think you're wise in considering refinancing a little bit earlier.

Dr. Jim Dahle:
Obviously, we'd love you when you refinance if you would go through our links, you can find those at whitecoatinvestor.com/student-loan-refinancing. You cash back. Right now, we have a deal going that we will give you our Fire Your Financial Advisor course, if you refinance your loans through those links. So, that's a pretty cool deal as well. You get cash back, you get the free course and you get a lower rate on your student loans.

Dr. Jim Dahle:
Now people are waiting because right now their loans are 0%, but there's one company right now, CommonBond. If you go through our links to CommonBond, they'll give you a 0% for six months. But wait, six months takes you past October 1st. So, you can actually refinance now or in a month or two months or whatever, and get even more 0% interest than you're getting from the federal government. And so, that's something to keep in mind, right? That's a deal you may not have known about.

Dr. Jim Dahle:
But in general, yeah, I think, this is probably maybe even worth refinancing a few weeks or a month early in order to be not rushed and avoid that hassle. But there's risks there, right? Maybe the Biden administration comes out and extends it again, right? Maybe Elizabeth Warren takes over the Senate and somehow convinces all of her colleagues to pass complete student loan forgiveness for everybody.

Dr. Jim Dahle:
There are some risks there. There are a few people who refinanced last February, February 2020 rather, who then saw their federal student loans go to 0% and no payments due, right? Obviously, they felt kind of burned by that and there's always possible something like that will happen in the future. My crystal ball is cloudy. Just like my shirt says here, as you can see if you're watching this on YouTube.

Dr. Jim Dahle:
But that's what I would do. I would plan to be refinanced before October 1st this fall. And I would use a White Coat Investor link because I think it's a great deal. If you want to look into that CommonBond deal, you may go even earlier, just recognize that it's possible that the federal government could give an additional benefit and you might miss out on it.

Dr. Jim Dahle:
I don't know what to do about that risk other than tell you about it and tell you about all your options. but personally, I don't think they're going to extend it again. I think we're kind of done with this and people are actually going to be paying on their student loans, come this fall.

Dr. Jim Dahle:
All right, the next question comes from Kevin. And this is the one we named the podcast episode for. Let's talk about inherited retirement accounts.

Kevin:
Hey Jim, this is Kevin from South Carolina. Could you go over all the rules and options for managing a sum of money that is inherited from a parent after their passing? For example, if I inherited a 401(k), a Roth IRA and a taxable account, what are the tax consequences for inheriting these accounts?

Kevin:
Should one account be liquidated first, if you want to say, use the money for a vacation home? Is there a benefit of saving one account for the next generation? Is there a way to roll the Roth dollars into my Roth account or 401(k) dollars into my 401(k) account? It'd be great to get a summary of each of these accounts in the same place. I appreciate your help. Have a great day and thanks for all you do.

Dr. Jim Dahle:
Okay. Let's talk about inherited counts. Remember this is based on current law. If you don't inherit something for 50 years, laws might be different. Things might change. For example, in Washington, there's some talk about change on the step-up in basis that people get right now, then maybe that goes away. But all I can talk about is what current law is.

Dr. Jim Dahle:
In general, if you inherit stuff from someone that is not your spouse, you will only have a few options for it. If you inherit from your spouse, you can roll those retirement accounts into your own retirement accounts and have even more options, or you can leave them as your spouse's retirement account and have various options. So, in that situation, depending on how old you are, it might make sense to not actually roll it into your own account. But most of the time that's what people do.

Dr. Jim Dahle:
But for a non-spouse, if you're the beneficiary of a non-spouse inherited IRA, there are not too many options. If you get an IRA, a traditional IRA, you can stretch that for 10 years. You don't have to take any money out for 10 years, but by the end of 10 years, all the money has to be taken out and yet pay taxes on it, right? It's pretax dollars.

Dr. Jim Dahle:
Same thing if you inherit a Roth IRA, you got to have all the money out within 10 years, but no taxes due on it, right? Whereas when you take the money out of that inherited traditional IRA, you got to pay taxes on it.

Dr. Jim Dahle:
Prior to 2007, 401(k)s were actually treated differently. Now you're allowed to just treat your 401(k) just like you would an IRA, but bear in mind that 401(k) may offer other options like annuitizing the money and leaving it in the plan for another five years, you may have some of those options. So, look into the 401(k) if you're actually inheriting a 401(k).

Dr. Jim Dahle:
A taxable account, you get the step up in basis. So, it's as though you bought it on the day that the person died. In a few situations, that date can be extended by six months, particularly if that person owes estate taxes. But for the most part, you get a step up in basis to the date of their death, which is great, right? If they bought it at $10 a share, and now it's $100 a share, no one has to pay taxes on that $90 increase of share. You can sell it after they die and you get all the money tax free.

Dr. Jim Dahle:
So that's a great inherited taxable account. If you want to spend some money now, and you just inherited a bunch of taxable assets, sell them, no taxes do, and buy your Tesla or whatever it is you want to buy.

Dr. Jim Dahle:
As a general rule, if you inherited retirement accounts, the best thing to do is probably to get as much of that stretch out of it as you can. I would try to leave that Roth IRA money in there for 10 full years and take it all out at once and reinvest it in a taxable account, or use it to pay for your retirement or whatever.

Dr. Jim Dahle:
With traditional IRA, it's a little trickier. You got to look at your current income. Maybe if you're going to retire in five years, you take nothing out in the next five years, and then you take out equal amounts in the five years after that. It just depends on your situation. Maybe you want to spread the withdrawals out over a full 10 years. So, you are kind of balancing there, the effect of having to pay taxes on it earlier versus having to pay taxes on it all at once. And that just depends on your own personal tax and financial situation.

Dr. Jim Dahle:
So, which one's better to inherit? Well, I guess a Roth IRA is the very best thing to inherit. After that, I'd probably take the taxable money, but I'm not going to look an inherited traditional IRA in the mouth either. That's great, wonderful that you get an inheritance, although unfortunate, of course, because the reason you got the inheritance.

Dr. Jim Dahle:
As far as leaving money to the next generation, that particular stretch IRA idea never really worked in the first place. And essentially is gone now, if it ever was there. You could never give another IRA and get another stretch out of it. You were allowed to stretch it out over your whole life. So, if a four-year-old inherited IRA, they could take distributions from it over their entire life but now that's limited to 10 years except for certain beneficiaries, which you probably aren't.

Dr. Jim Dahle:
So, you're really probably not leaving this money to heirs. So now you can manage it with the thought that this is eventually going to your heirs. In that case, maybe you want to invest in a taxable account so they get the step up in basis at death, but essentially this is going to be your money until you die. And then it gets combined with your estate and you can leave whatever you want to heirs if you will.

Dr. Jim Dahle:
But those are the three ways to really inherit money and how you ought to think about it. Now, the worst thing to inherit is actually an HSA. And HSA is not only fully taxable to you as the heir but you can't leave the money in there. So, it all comes out right when you inherit it and it is taxable income to you. So, it's better than a kick in the teeth, but it's really a lame thing to inherit compared to the other three types of accounts there. And so, in general, don't leave your HSA to your heirs, try to spend it during your lifetime.

Dr. Jim Dahle:
All right. This podcast is getting long, I hope you enjoyed it. It's great to be back with you. I hope you are all teed up for a wonderful summer. We've got a lot of fun stuff going on this summer as well. Although I'll be around quite a bit more than I was this spring.

Dr. Jim Dahle:
This podcast is sponsored by Bob Bhayani, at drdisabilityquotes.com. He's a longtime sponsor of the White Coat Investor. One listener sent a this review, “Bob and his team were organized, patient, unerringly professional and honest. I was completely disarmed by his time in care. I'm indebted to Bob's advocacy on my behalf and on behalf of other physicians and to you for recommending him.

Dr. Jim Dahle:
You can contact Bob at drdisabilityquotes.com today or you can email him at [email protected] or you can just call (973) 771-9100 to get your disability insurance in place today.

Dr. Jim Dahle:
I mentioned a couple other promotions today. If you were interested in the masterclass that Jimmy Turner is putting on, that is whitecoatinvestor.com/coaching. If you are interested in the flash sale of the Fire Your Financial Advisor course, the coupon code for that is “5,000 SALE”.

Dr. Jim Dahle:
Thanks to those of you who've been leaving us five-star reviews. We've got a whole bunch of them as part of our ten-year anniversary promotion. Here's one we got recently. This one is from GUMD. “Five stars for WCI. WCI has had an unmeasurable impact on my family's financial picture. And Jim's straightforward approach is logical and simple. It is exactly what doctors need to hear and do. We are easy targets for get rich quick schemes and WCI has educated me on how to avoid these, save way more than I ever thought I was going to and follow the plan to true wealth building.

Dr. Jim Dahle:
I started with the blog, I've read the books and then purchased them for others. And now I enjoy and often share the podcasts. Jim, the strength in what you do is constantly repeating the basic tenants. It reminds us all to stick to the plan and keep it simple”.

Dr. Jim Dahle:
Amen to that. Thanks for the five-star review. That does help us to spread the word about the podcast.

Dr. Jim Dahle:
All right, this is the end, head up, shoulders back. You've got this and we can help. We'll see you next week 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.