Today, Dr. Jim Dahle sits down with Christine Benz for a wide-ranging and insightful conversation. She is an author, WCICON speaker, and Morningstar's Director of Mutual Fund Analysis. We dive into her annual retirement income research, the realities of spending in retirement, and the challenge many retirees face in giving themselves permission to spend. Christine also reflects on the stark gender imbalance in the finance world and highlights the women she believes every investor should be following, whether they invest on their own or work with an advisor.


Retirement Spending Psychology and Safe Withdrawal Rates at WCICON

Christine will be one of our keynote speakers this year at WCICON. We are excited to have her talk about her forward-looking research that her team has been conducting for five years on safe withdrawal rates. Unlike the traditional Bill Bengen research, which relies on historical data, her team incorporates forward-looking assumptions about equity returns, fixed income returns, and inflation to help retirees think more realistically about future spending.

Christine emphasized the psychological challenges of retirement spending. She explains that many retirees struggle to start spending after years of focusing on saving and watching their portfolios grow. She noted that people often anchor to a portfolio’s high-water mark and feel uncomfortable seeing balances decline, even when spending is sustainable. This psychological hurdle is especially common among affluent retirees, and even the word “spending” can feel negative, as if it implies recklessness rather than thoughtfully using money earned over a lifetime of work.

Jim then shifted the conversation to Christine’s involvement with the Bogle Center and asked why she dedicates so much time to it as a volunteer. Christine shared that her interest traces back to early experiences of hearing John C. Bogle speak at Morningstar, which shaped her career values and commitment to investor-first financial education. She explained that the Bogle Center’s mission aligns closely with her work at Morningstar, where education plays a central role.

More information here:

Here’s How Much the Man Who Invented the 4% Rule Actually Spends in Retirement (Spoiler: It’s More Than 4%)

Fear of the Decumulation Phase in Retirement

Real Life Examples of How WCIers Live, Worry, and Withdraw Money in Retirement

Morningstar Tools and Women to Watch in Personal Finance

Christine shared that Morningstar originally focused on mutual fund analysis and ratings, but it has expanded into a much broader research and education platform. For most individual investors, the primary entry point is Morningstar.com—where a large portion of the content is free, including articles, videos, data, analytics, and basic portfolio tools. The paid, or premium, portion of the site centers on analyst research, including in-depth reports on individual stocks, mutual funds, ETFs, and index funds—which can be especially useful for investors who want to dig deeper or do ongoing due diligence on their holdings.

They discuss how Morningstar is commonly used in practice—particularly as a consistent, centralized place to look up fund details like holdings, fees, and structure without navigating multiple fund company websites. One premium feature is the Morningstar X-Ray tool, which allows investors to analyze a saved portfolio and see the true underlying asset allocation, sector exposure, style box positioning, and asset class mix. She said it is especially helpful for understanding what a portfolio actually owns beneath the surface and for identifying unintended concentrations or biases.

Jim asked about gender diversity in investing and wealth management, a field that has historically been heavily male-dominated. Christine noted her appreciation for more diverse conferences and communities and highlighted several women doing influential work across investing, retirement, and personal finance. She mentioned Laura Carstensen, who leads the Stanford Center on Longevity and focuses on aging and aging well, and Carolyn McClanahan, an MD and financial planner known for being outspoken and willing to challenge entrenched interests. She also highlighted Mary Beth Franklin as a long-time thought leader on Social Security benefits and claiming strategies.

Christine also pointed to several up-and-coming and actively practicing voices she admires. These include Jackie Cummings Koski, a prominent figure in the FIRE movement and author of FIRE for Dummies who openly shares her journey to financial independence. She mentioned S.C. Gutierrez—a financial planner focused on hourly, index-based planning—and Valerie Rivera, a Chicago-based planner who works with first-generation investors navigating the emotional and financial complexities of being the first in their families to build wealth. Christine emphasized that these women combine technical expertise with a deep understanding of the behavioral and emotional side of money, making their work especially impactful.

More information here:

You Should Invest Like a 50-Year-Old Woman

State of Retirement Income 2025

Christine shared that she and her team have been working on a paper, and they are excited to finally share it. It is called the “State of Retirement Income 2025.” They then dig into the paper’s “base case” safe withdrawal rate, which changes year to year and is 3.9% in the current edition. Christine explained that this figure is designed as a forward-looking guide for someone retiring around the start of 2026, using capital market assumptions for expected stock returns, bond returns, and inflation. The base case assumes a very conservative spending style, taking a fixed, inflation-adjusted paycheck every year for 30 years without reacting to market changes. It also assumes a 90% probability of success, meaning the portfolio has at least something left at the end of 30 years. Christine emphasized that the number changes because the forecasts and inflation outlook change, not because they are adding new historical data each year. She pointed to late 2021 as a low point when bond yields were low, equity valuations were high, and inflation was rising. She also clarified that the intent is not for retirees to change their withdrawal rate every year based on Morningstar’s updated estimate but rather to give a best-guess starting point for people retiring in that specific year.

Jim then called out one of the paper’s more controversial findings: the highest starting safe withdrawal rates for a 30-year horizon come from portfolios with only about 30%-50% equities, with the rest in bonds and cash, because more equity-heavy portfolios increase volatility and Sequence of Returns Risk. He noted this runs counter to modern messaging that retirees should hold more equities to combat inflation and longevity risk. Christine said they were also surprised by the result at first, but it makes sense under the paper’s rigid base-case assumption. Because the model assumes retirees will not adjust spending at all, the simulations favor an allocation that can better support a stable, inflation-adjusted paycheck. With yields around 4% or higher, bonds can cover a meaningful portion of return needs, so a lower-equity mix can produce a higher “safe” starting number under that strict framework. Christine added that she wouldn’t recommend retirees use such a robotic approach in real life, and she believes flexible spending strategies are generally superior because they allow higher lifetime spending while still managing risk.

From there, they walked through four key risks that can cause retirees to run out of money. Those risks are poor market returns early in retirement, high inflation early in retirement, a longer-than-standard retirement horizon, and high long-term care costs late in life. Christine explained that early sequence risk matters most because withdrawals during a market downturn permanently shrink the portfolio’s ability to recover, whereas a bad market later in retirement tends to be less damaging if you’ve already made it through the first decade or two. She noted a practical challenge that the early “go-go years” are often when retirees most want to spend, but those are exactly the years when cutting back can make the biggest difference if markets are weak. She also described “sequence of inflation risk,” where higher inflation early on raises the baseline cost of living, and even if inflation cools later, prices usually don’t return to prior levels. For longer retirements, she said the best practice is taking less than the base-case rate and adjusting assumptions for a 40-year horizon. For long-term care, she suggested that it’s better to plan separately, either through insurance or by setting aside a dedicated pool, rather than forcing all retirement spending to be constrained by a potential end-of-life “balloon payment.”

They shifted to “flexible” withdrawal strategies—which Morningstar tested and which, in some cases, raised starting withdrawal rates as high as about 5.7%. Christine explained these approaches recalibrate spending based on portfolio performance and sometimes allow spending to increase with age as the time horizon shortens. She mentioned the guardrails approach developed by Guyton and Klinger as a favorite, and she described two higher-starting methods. First is taking a fixed percentage of the portfolio each year (which causes income to rise and fall with portfolio value), and the second is an “endowment” method that uses a multi-year average (like a 10-year average) of portfolio value to smooth spending. Jim noted the major criticism is that these methods require real flexibility, including the willingness to cut spending substantially during downturns. Christine agreed that it’s easier for wealthier retirees because more of their budget is discretionary, and she added that most retirees also have non-portfolio income such as Social Security, pensions, rental income, or part-time work. She said those stable cash flows make it easier to be flexible with portfolio withdrawals, and Morningstar’s research finds that combining flexible portfolio spending with non-portfolio income creates more stable household cash flow.

The conversation then covered several “income tools” and behavioral realities in retirement. On Social Security, they noted the usual recommendation to delay until 70, at least for the higher earner. But Jim raised a behavioral counterargument he heard that some people may spend more comfortably if they claim earlier because Social Security feels like a paycheck. Christine agreed that the math generally favors waiting, but she said the behavioral point is real because people mentally label different income streams differently and feel more permission to spend “paycheck-like” income. She cited similar patterns with annuities and dividends, where people often find it easier to spend those cash flows than to sell assets. Still, she advised that those with tighter plans should usually delay because Social Security provides inflation-adjusted income that can be especially valuable in difficult environments like 2022, when stocks and bonds fell while inflation rose.

They also discussed TIPS ladders and SPIAs as ways to cover essential expenses. Christine explained that a TIPS ladder involves buying Treasury Inflation-Protected Securities that mature each year of retirement, creating inflation-protected cash flows that help manage inflation risk—which she calls a major wildcard for retirees. She noted that with current yields, a TIPS ladder could support a starting withdrawal rate around 4.5%, higher than the paper’s 3.9% base-case. The drawbacks, she said, are rigidity and limited growth. Once you commit, it’s hard to unwind, and when the ladder is spent down, it’s gone, which is a problem if you live longer than expected. Jim added the practical hassle of holding many individual bonds, and Christine argued that for many DIY investors, the complexity isn’t worth it—especially considering cognitive decline and the value of simplifying portfolios with index funds or all-in-one solutions.

On SPIAs, Christine said their best use is to fill a gap in fixed spending after optimizing Social Security, by buying a relatively small, simple annuity from a highly rated insurer. She likes SPIAs because they’re relatively transparent and less prone to fee-heavy complexity, but she warned that sales incentives can still be an issue and recommended getting objective advice, ideally from an hourly planner.

They closed with a discussion of real-world spending patterns. Christine said data generally shows inflation-adjusted spending tends to decline with age, even among affluent households (though long-term care can create a late-life spending spike). She encouraged retirees to feel more comfortable spending in early retirement when health and enjoyment are highest, while acknowledging the debate about whether higher-income households reduce spending by choice or necessity. She also suggested that better health may simply delay the “slow-go” years for wealthier retirees.

To learn more from this conversation, read the WCI podcast transcript below.

Laurel Road is committed to serving the financial needs of doctors, including helping you get the home of your dreams. Laurel Road’s Physician Mortgage is a home loan exclusively for physicians and dentists featuring up to 100% financing on loans of $1 million or less.1 These loans have fewer restrictions than conventional mortgages and recognize the lender’s trust in medical professionals’ creditworthiness and earning potential. For terms and conditions, please visit www.laurelroad.com/wci.

Disclosures:

NOTICE: This is not a commitment to lend or extend credit. Conditions and restrictions may apply. All mortgage products are subject to credit and collateral approval. Mortgage products are available in all 50 US states and Washington, DC. Hazard insurance and, if applicable, flood insurance are required on collateral property. Actual rates, fees, and terms are based on those offered as of the date of application and are subject to change without notice.

1. 100% financing is only available to interns, residents, fellows, doctors, dentists, clinical professors, researchers, or managing physicians with a current license and a degree of Doctor of Medicine (MD), Doctor of Osteopathic Medicine (DO), Doctor of Podiatric Medicine (DPM), Doctor of Dental Surgery (DDS), or Doctor of Dental Medicine (DMD). Only available when purchasing or refinancing with no cash out on a primary residence and loan amount does not exceed $1,000,000. Retired doctors are not eligible. Additional conditions and restrictions may apply.

Milestones to Millionaire

#257 — Emergency Medicine Doc Reaches Financial Independence, Cuts Back to Half Time, and Bike Rides Over 2,000 Miles Across Europe

Today, we are talking to an ER doc who fulfilled her dream of doing an epic bike ride across Europe. She rode 2,500 miles from Italy to Norway with over 500 people from all over the world. She knows that health is never guaranteed, and she wanted to accomplish this goal while she is still physically strong enough. She has taken care of her financial life and has reached financial independence, so she had the freedom to make some changes to achieve her goal. She was willing to quit her job if necessary but ended up going part-time, and with the help of great colleagues, she was able to take seven weeks off. She shows us what the point of financial freedom really is—getting to do what you value with your life.

Financial Boot Camp: How Does PSLF Work?

Public Service Loan Forgiveness, often called PSLF, has been one of the most effective ways for doctors and other professionals to manage federal student loans. The program is available to anyone working full-time, defined as at least 30 hours per week, for a qualifying nonprofit or government employer. This includes places like nonprofit hospitals, academic medical centers, the VA, and the military. After making 120 qualifying monthly payments, which is essentially 10 years, any remaining loan balance is forgiven. One of the biggest benefits is that this forgiveness is completely tax-free at both the federal and state levels, which can feel like an instant and significant boost to your net worth.

A key feature of PSLF is that many payments made during training usually count. Residency, internship, and fellowship are typically run by nonprofit or government employers, so those years often qualify. Payments are usually made through income driven repayment plans, which base your monthly payment on your income from your most recent tax return. Because of this, many doctors have very low or even zero dollar payments early on, such as right after medical school or during residency, and those payments still count toward the 120 required. Even after training, payments can stay relatively low for a year or two while income gradually increases, meaning many physicians only make large payments for a limited number of years.

The amount forgiven through PSLF can be substantial, and six-figure forgiveness is common, with no official upper limit under current law. While rules can change, people already in the program are usually grandfathered in. It is also smart to plan for flexibility in case your career path changes or the program does. One strategy is to save extra money in a separate investment account instead of sending large payments directly to your loan servicer. That way, if you leave public service or PSLF changes, you still have funds available to pay off the loans yourself. PSLF does not mean you must take a lower-paying or less enjoyable job, but if two jobs are otherwise equal, choosing one that qualifies can make a big financial difference.

To learn more about how PSLF works, read the Milestones to Millionaire transcript below.


Financial Boot Camp Podcast

Financial Boot Camp is our new 101 podcast. Whether you need to learn about disability insurance, the best way to negotiate a physician contract, or how to do a Backdoor Roth IRA, the Financial Boot Camp Podcast will cover all the basics. Every Tuesday, we publish an episode of this series that’s designed to get you comfortable with financial terms and concepts that you need to know as you begin your journey to financial freedom. You can also find an episode at the end of every Milestones to Millionaire podcast. This podcast will help get you up to speed and on your way in no time.

What Is a Stock?

A stock represents ownership in a company. When you buy a stock, you are buying a small piece of that business and sharing in its success or failure. If the company grows and performs well, the value of your stock can increase. If the company struggles, the value can decline. Owning stock means your investment is directly tied to how the business does over time.

Investors typically benefit from stocks in two main ways. One is price growth, which happens when the company becomes more valuable and other investors are willing to pay more for its shares. The other is dividends, which are payments some companies make to shareholders from their profits. Not every company pays dividends, especially those that are focused on growing and reinvesting earnings instead. Stock prices change throughout the day on public exchanges based on supply and demand, along with factors like company news, the economy, interest rates, and investor behavior.

Stocks can feel risky because their prices can move up and down a lot in the short term. Even so, stocks have historically provided higher returns over long periods compared to cash or bonds, which is why they are commonly used for long-term goals like retirement. You also do not need to pick individual stocks to invest. Many people use mutual funds or index funds, which own many stocks at once and help spread out risk. When used as part of a diversified plan, stocks can be a powerful tool for building long-term wealth.

To learn more about stocks, read the Financial Boot Camp transcript below.


WCI Podcast Transcript

Transcription – WCI – 454

INTRODUCTION

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high-income professionals stop doing dumb things with their money since 2011.

Dr. Jim Dahle:
This is White Coat Investor podcast number 454 – The state of retirement income with Christine Benz.

Brought to you by Laurel Road for doctors, Laurel Road is committed to serving the financial needs of doctors, including helping you get the home of your dreams. Laurel Road's physician mortgage is a home loan exclusively for physicians and dentists featuring up to 100% financing on loans of a million dollars or less.

These loans have fewer restrictions than conventional mortgages and recognize the lender's trust in medical professionals' creditworthiness and earning potential. For terms and conditions, please visit www.laurelroad.com/wci.

For terms and conditions, please visit www.laurelroad.com/wci. Laurel Road is a brand of KeyBank N.A. Equal Housing Lender. NMLS number 399797.

Welcome back to the podcast. I hope you're having a great new year. We're recording this actually in December, the very beginning of December, so it's going to be like six weeks between the time I record it and when you hear this, but there's nothing that's super timely we're discussing here, I hope, unless the entire stock market just crashes this month or something. But if it seems like we haven't addressed something that's in the current news, that might be why.

 

QUOTE OF THE DAY

Dr. Jim Dahle:
Our quote of the day today comes from Warren Buffett who said, “Chains of habit are too light to be felt until they are too heavy to be broken.” A lot of truth to that.

All right, everybody out there, it's a new year, new you. I hope you're working toward your financial goals this year as well as accomplishing those other important things in life that we all have to do.

Thank you for the difficult work you do. I did a presentation this morning to a bunch of emergency medicine residents and I think back to the beginning of my career and how exciting everything was and realized how many people I have sat with and been with on the worst days of their lives and many of you have had that opportunity as well and it's a noble work. Thank you for doing it out there.

All right, we've got Christine Benz today. It's a long interview. I think we chatted for close to an hour, so I'm not going to spend a lot of time talking before we bring her on. If you don't know and love Christine, hopefully after today you will. She's wonderful and let's get her on the line here.

 

INTERVIEW WITH CHRISTINE BENZ

Dr. Jim Dahle:
Our guest today on the White Coat Investor Podcast is Christine Benz. Christine, welcome back to the podcast.

Christine Benz:
Jim, it's always great to talk to you. Thanks for having me on.

Dr. Jim Dahle:
It is great to talk to you. For those of you who do not know Christine, she's the Director of Personal Finance and Retirement Planning for Morningstar. She's a senior columnist there. She hosts a podcast for Morningstar called The Long View. She has published a number of books. She's been in the New York Times, Wall Street Journal, Barron, CNBC, PBS, you name it.

She's been named on the inaugural list of the 100 Most Influential Women in Finance. She's on that list in 2020 and 2021. She's been named by Barron as one of the 10 Most Influential Women in Wealth Management. She's a good friend and also does a lot of, I don't know if charity is the right word to call it, but a lot of volunteer work with the Bogleheads organization where you're also the president essentially of the Bogle Center. Thanks for all you do, Christine, and thanks for making time to be with us on the podcast.

Christine Benz:
Thanks for all you do, Jim. You make a wonderful contribution to the community of financial educators. Thanks for all that you and the team do.

 

RETIREMENT SPENDING PSYCHOLOGY AND FORWARD-LOOKING SAFE WITHDRAWAL RATES

Dr. Jim Dahle:
For those who are not aware, Christine is also going to be one of our speakers at WCICON, the Physician Wellness and Financial Literacy Conference in Las Vegas in March. Now, I think we titled your contribution there, “A Number in Psychology of Retirement Spending.” That's mostly what we're going to talk about today, but what should people look forward to? What's the elevator pitch for coming and hearing that talk?

Christine Benz:
Sure. I will share some research that our team has been working on. We're now in our fifth year of doing research on safe withdrawal rates, and the research we do is a little bit different than the famous Bill Bengen research that relied on historical data to help people determine how much they can reasonably take out of their portfolios in retirement.

We take a forward-looking view. We embed some views around equity returns, fixed income returns, inflation on a forward-looking basis and an effort to help people look forward as they think about their retirement spending.

Another topic I'll be discussing in the presentation is how difficult it can be to turn on retirement spending once you are actually retired. This is not something I know personally. I've been employed and I'm still employed, but I know that this is something I'm going to struggle with when I do retire, when my husband and I retire, because seeing your portfolio grow is something that you can kind of get hooked on, and you never want to see that number go down. You anchor on your high-water mark, whatever it is.

And so, the psychology around retirement spending is real. It's a problem for some older adults and especially more affluent older adults to actually spend in line with what they could spend.

I think part of the problem might just be the term spending. People maybe associate it with profligacy that we're telling them they need to spend when they don't feel like spending. So, there's a lot to unpack there in the realm of giving yourself permission to spend after your lifetime of working really hard.

 

WORKING WITH THE BOGLE CENTER

Dr. Jim Dahle:
Yeah, I find my work transitioning more and more toward that, so we're going to talk a little bit more about that today as well. Christine, you have dedicated an extensive amount of time, and I'm not sure most people involved in this even recognize how much time it is, having run conferences ourselves, Katie and I definitely recognize how much work it is, to the Bogle Center. Tell us a little bit about your motivation to do that. Why are you dedicating so much time and effort essentially as a volunteer to the Bogleheads?

Christine Benz:
Right. The Bogle Center is named after John C. Bogle, who was the founder of the Vanguard Group of Funds, and I date my interest in the Bogle Center and Bogleheads back to Jack's appearances in our Morningstar offices when I was an analyst just coming up. And I remember sitting in a room listening to his booming baritone and thinking, “Whatever side this guy is on, that's what I want to do with my career. That's how I want to move my career. I want to be on that side of things.”

Dr. Jim Dahle:
And the Bogle Center is focused on providing financial education. We do these conferences. We put all the conference sessions on video so that people can consume them on YouTube. We have chapters throughout the U.S. that people can join to hear speakers, to share information about their own financial plans, and we support the bogleheads.org forum as well.

The Bogle Center is involved in a lot of different aspects of financial education, but for me, it's just super aligned with the work that I do at Morningstar where we, in a lot of ways, are financial educators at Morningstar. And so, I find that there are a lot of synergies.

Christine Benz:
One thing I love about planning the conference, Jim, is that, A, I get to work with you and Katie on it, and you are wonderful contributors to the conference, but also being able to leverage some of the contacts that I've made through the podcast that I work on. I feel like we've really upped our game with the Bogleheads conference because of some of the great speakers that we've brought on board, and there's sort of just a benevolent effect where once someone comes to this conference as a speaker, I think they're sort of an ambassador for the Bogleheads, so it's been a really nice way to build our Bogle Center network.

 

MORNINGSTAR TOOLS AND WOMEN INTO WATCH IN PERSONAL FINANCE

Dr. Jim Dahle:
Yeah, pretty awesome. Now your paid work is at Morningstar. Morningstar has been around for a long time. It actually precedes the Bogleheads forum. The initial Bogleheads forum was at Morningstar. Some resources at Morningstar, a lot of resources at Morningstar are totally free. Some of them are paid. Can you give a brief overview of what Morningstar does and how investors should be using those resources and what paid ones they might want to consider?

Christine Benz:
Sure. There are a lot of different tentacles of Morningstar today. When I joined, we were largely an organization focusing on rating mutual funds, analyzing mutual funds. That was the group that I grew up in within Morningstar.

For individual investors, and I'm guessing most of your audience would be individual investor types, the main product we have for them is Morningstar.com, where there is a free part of the site. Most of the information on Morningstar.com is free. All of my articles and videos, all of really anyone's articles and videos would be part of the free site. There are some portfolio management tools that are also part of the free site. Lots of data and analytics.

The line in the sand in terms of what is paywalled would be any of our analyst content. We have a terrific group of individual equity researchers, as well as fund and ETF, exchange traded fund, researchers. Any of their written analyst reports, whether on actively managed funds or the big total market index funds, any of their written reports would be part of the paid part of Morningstar.com, the premium part of the site.

For people who want to do their due diligence on their holdings, maybe on a one-time basis or on an ongoing basis, the premium part of the site can be money well spent for them.

Dr. Jim Dahle:
When I use Morningstar, most frequently what I do is I Google a ticker and Morningstar is what I'm doing. And it just gives me the information about the fund, what it holds and what the fees on it are and those sorts of things. That's about where I go to look up funds because it's a little bit of a pain to go to every individual fund company's website and dig through the different formats. I know how the information is going to be laid out at Morningstar for every fund. And so that's how I ended up using it most frequently.

One of the tools I think a lot of people used in the past was the Morningstar X-ray tool. That's now behind the paywall, right?

Christine Benz:
I believe it is, Jim. For people who have portfolios saved on Morningstar, the virtue of that X-ray tool is that it peers into your portfolio and takes whatever holdings are in the portfolio and gives you an asset allocation for the underlying holding. So you can see a view of what's actually in your portfolio.

It's a super helpful tool. It's always been one of my favorite tools for looking at my own portfolio or if I'm helping anyone with their portfolio to really understand, “Well, what are the sector biases that might be built into the portfolio? What does the style box positioning look like? What does the asset class positioning look like?” It's a super helpful tool in that context.

Dr. Jim Dahle:
Now, Christine, Barron's has named you as one of the 10 most influential women in wealth management. And when I go to or look at pictures from or whatever typical financial conferences, it's like going to the men's locker room. There are not very many women in this field. And I'm sure it's improving, but it looks like the most male heavy field in medicine is orthopedics. And financial services makes that look downright egalitarian by comparison.

Tell us about some of the women we should be paying attention to in investing, wealth management, personal finance, et cetera, that maybe aren't on our radar now.

Christine Benz:
Yeah, I will say that's one thing I love about your conference, Jim, is that it is more gender diverse than most conferences that I attend and more people of different ethnicities as well. Kudos to you for bringing aboard a diverse community of doctors to attend your conference.

Dr. Jim Dahle:
Part of that is just medicine though, Christine, right? The admissions committees all did that 15 years ago for me.

Christine Benz:
Well, whatever it is, I love to see it. In terms of women who I respect in this field, there's a long list. Several of them were in my book, the thought leaders who I leaned on for the interviews in my book, but a short list would include Laura Carstensen, who runs the Stanford Center on Longevity. One of my favorite speakers on any topic is Laura and her main focus is aging and how we can age well, which is of interest for all of us.

Carolyn McClanahan is another person who I love. She is an MD, but also a financial planner and is very in demand on the speaker circuit. She's a bit of a firebrand, I think, in the best possible way. She's not afraid to call out entrenched interests.

Mary Breath Franklin is largely retired now, but I think a terrific thought leader in the realm of getting what you have coming to you in social security benefits.

And then I have a long list of up and coming folks, women who I really admire. Jackie Cummings Koski has become part of our Bogleheads community. Jackie is a leading light in the FIRE world, the financial independence retire early world. And in fact, she wrote the book FIRE for Dummies. She's just a wonderful kind of open book sort of person who talks about her journey to financial independence.

S.C. Gutierrez is someone who I've met through your community, Jim, through your introduction. She's a financial planner who is focused on hourly financial planning, very index fund centric. She's another person who I love to introduce people to.

Valerie Rivera is a financial planner in the Chicago area who works with what she calls first gen investors. People who have come into some wealth, who have had great professional careers, but are not from money. And so, dealing with all of the dynamics and the emotions around being the first person in your family to make money is a focus of Valerie and her practice. That's just a short list of people who I really love, of women whose work I really love and admire.

Dr. Jim Dahle:
Yeah, awesome. Definitely check those people out. I think I've met most of them.

Christine Benz:
I think you have.

 

RETIREMENT INCOME DEEP DIVE

Dr. Jim Dahle:
And they're wonderful. I agree. Okay. So, if you want to meet Christine, shake her hand, thank her for all the work she's done. Come see us in Las Vegas in March. The other thing you get when you come there, I'm pretty sure I'll have to double check with Katie, but I think we're giving away a copy of your book, “How to Retire” to everybody who attends there. 20 lessons for a happy, successful, and wealthy retirement. Christine, what motivated you to write this book? Are you thinking about retiring or how'd you get so focused on all this retirement stuff?

Christine Benz:
I realized that all of the retirement planning research, it's just the richest vein in the world of financial planning. And I call the whole thing about how much you can safely spend in retirement, the hardest problem in all of financial planning, because you're planning for this unknowable time horizon. You don't know how long you'll live. You might not even know when you'll actually retire. You don't know what market conditions will prevail over your retirement.

There's just a lot to dig into. And the more I dug into retirement planning, the more I realized it's not just a financial issue, obviously. There are so many different non-financial questions to delve into as well.

Where you live in retirement, what sort of healthcare you're seeking and how to make sure that you're getting the best possible healthcare, how you maintain social connections once you step away from work.

There are just a lot of different dimensions to retirement planning. And I am a big believer in just lifelong learning. I want that to be part of what I do and who I am. And so, focusing on retirement planning has been a way to just keep on learning. Each of the 20 chapters in the book is a discussion with a thought leader about his or her specialty area. Again, it covers the financial issues like how to asset allocate a portfolio for retirement and how much to safely spend. But it also delves into a lot of the non-financial issues that I just mentioned.

Dr. Jim Dahle:
You've been very busy lately. You were also, I believe, listed as one of the editors on this Best of Jonathan Clements book lately. Somehow this book came to press within weeks of Jonathan's untimely death. Tell us a little bit about that project.

Christine Benz:
That book was the brainchild of Bill Bernstein, Alan Roth, Jason Zweig, all friends of Jonathan's. And we wanted to do something to honor Jonathan's tremendous legacy. Jonathan was a Wall Street Journal columnist for, gosh, at least 15 years. And he was so influential to me and how I wanted to think about the investment space. And so, we had initially proposed coming up with some sort of journalism award. And Jonathan felt that that was too self-aggrandizing. He wasn't interested in anything like that.

But he did allow us to pursue this book project, which is the compendium of his Wall Street Journal columns. Bill Bernstein did a lot of the heavy lifting in terms of curating the columns. He had Jonathan's help as well. And then I just went through as sort of an editor offering some feedback on some of the chapters Jason and Alan did as well. And they also wrote some supplemental material for the book.

It came together beautifully. It has sold really well. I think people have an appetite for the straightforward, empathetic sort of writing that was Jonathan's stock in trade. So I feel like it's a wonderful way to honor him. And all of the proceeds from the book do go to benefit this charity that we have stood up under the John C. Bogle Center umbrella. It's a nice way to get a download of Jonathan's best columns while also benefiting the Jonathan Clements Getting Going on Savings initiative.

Dr. Jim Dahle:
Let's make sure we put a link to not only the initiative, but the book into the show notes, Megan. All right, that's pretty awesome. Jonathan's an incredible person. And it's really a great way to honor him. Thank you for doing that.

Now, this is a podcast and everybody likes entertainment on a podcast. And the best way to get entertainment is to have controversy. And so, we're going to get into some of that about retirement topics. But before we do that, I want to ask you a question that got asked to me and other panelists on a panel at the Bogleheads conference this fall, which is “What are one or two things you think Bogleheads frequently get wrong?”

Christine Benz:
Top of my list, Jim, would be they are too focused on optimization. I think this has been a bit a drum that I've been beating recently. There's this research that's been done in the realm of how we human beings shake out in terms of our personalities. On one side would be the optimizer sort of person who's going to finely tune everything in their lives. Financial matters really lend themselves well to this whole optimization mindset where you think, “Okay, I'm going to put 3% in small value and I'll have 16% in large growth.” And you're really going to tightly calibrate everything.

And on the other side would be what's called a satisficer personality, a person who's willing to say, “You know what? This is good enough. I'm going to buy three total market indexes, U.S., international and bond. I'll allocate in what seems like a reasonable way, given my life stage. And then I'm just going to walk away and say enough is enough.”

And so, I think that Bogleheads, some of them, not all of them, do tend to head down the optimizer rabbit hole, maybe a little more than they should. And the net effect of that is that perhaps they're neglecting some more important aspects of their financial lives and their non-financial lives. To me, that's the big kind of blind spot for a lot of Bogleheads.

I remember it was probably four years ago, five years ago at a Bogleheads conference. I think you were there, Jim. And Michelle Singletary spoke about how to help people in your life financially and how to decide how much is reasonable to give to other people, how to put some guardrails around how much you're giving away to people who you love. And we were laughing, we were crying. She's a wonderful speaker. I think she's been a speaker at your conference before. And I hopped off the stage and someone came up and said, “Christine, I just have to ask, how much should I put in small cap value?” I thought he was kidding.

Dr. Jim Dahle:
They missed the whole point. The whole point of the conversation.

Christine Benz:
The whole point of the conversation was much more than about your style box allocations. And so, I think that is a risk for some Bogleheads. They get too into the minutia and they lose the forest a little bit because they're so focused on some of these small bore aspects of their financial lives.

Dr. Jim Dahle:
Yeah, for sure. When I was asked that question, I mentioned two things. One is people need to spend more money. They've just got to realize, this is a lesson from Die with Zero, is it gets harder to turn money into happiness every decade of life as you go along. So, you have to find the balance between taking care of future you and current you. But lots of people are getting that wrong and having a real hard time spending money.

And the other one I said, and I saw it again, I think yesterday on the Bogleheads forum, I commented to somebody about it. Their goal was to reduce their RMDs. And I'm like, that should not be the end all goal. To pay the least amount in taxes that you can. The best way to reduce this is to lose all the money in your tax deferred retirement accounts. And you don't have to pay any RMDs but sometimes people just get so focused on stiffing the tax man that they're stiffing themselves along the way, which I think is pretty unfortunate when you see that happening.

Christine Benz:
Those are wonderful points.

 

STATE OF RETIREMENT INCOME 2025

Dr. Jim Dahle:
Yeah. What I really wanted to focus on today is this paper that you sent over to me. It's actually under embargo as we record this. It's not yet published, but it should be by the time this podcast drops. And I'm sure you'll tell me if something happens and keeps it from publishing before then we'll put this podcast off. But I wanted to spend some time today going over it. It's called the State of Retirement Income 2025. And I want to go over it and some of its key findings. But before we do, tell us who was involved in the paper and why we should listen to them.

Christine Benz:
Sure. This is a paper that I worked on with my colleague, Amy Arnott, who is part of our small portfolio and planning team at Morningstar. Jason Kephart from our manager research group is also part of the team. Jason does great work on some of the multi-asset type investment products like target date funds.

Tao Guo is our quantitative researcher on the paper. We could not do it without Tao. He runs all of the simulations. He's really creative about helping us look at the data in different ways. He's a CFP. He really gets the substance of the work, which having someone with experience and that CFP background is invaluable. That is our team. We also work with Jeff Patak, who is our boss on our small research team. And he offers valuable feedback about different types of research that we might do. So, it's a wonderful team of co-researchers who are coming back at this topic every year.

Dr. Jim Dahle:
Now, one of the interesting things about this paper, and essentially you've been updating this paper every year for the last five years or so, is that each year it comes up with a base case safe withdrawal rate. That changes every year. It's ranged everywhere in the last five years from 3.3% to 4.0%. The current version says it's 3.9%. Tell us what you mean by a base case safe withdrawal rate.

Christine Benz:
Right. This is meant to be a forward-looking view if you're retiring, say, in January of 2026. This is meant to be some guidance around how much you could reasonably take out. And that base case is super important to discuss, Jim, because it's quite conservative in terms of the spending system that it embeds. We're assuming that someone is looking for a fixed paycheck in retirement, that you would take out the same real amount, the same inflation-adjusted amount throughout your retirement.

The problem is that's not really how people spend, which we can discuss, but that's kind of the baseline system that we assume. If someone is taking out 3.9% on a million-dollar portfolio at the beginning of 2026, they're getting their $39,000, and then they can inflation-adjust that dollar amount thereafter. It's assuming a static spending system throughout a 30-year time horizon.

We're also assuming that that individual wants a 90% probability of success. They want a 90% probability of having at least a dollar left over at the end of that 30-year period. In many of the simulations that we do with that base case, there's much more than a dollar left over, but that's sort of the minimum standard to pass as a safe withdrawal rate system.

Dr. Jim Dahle:
Now, why is it changing year to year? Are you basing that off valuations, mostly off bond yields, or is it you're adding one more year of historical data to the data set? Or why is it changing?

Christine Benz:
Right. It is a forward-looking view. We turn to a team within Morningstar that does capital markets assumptions. They do essentially forecasts for stock returns, bond returns, inflation, and we extrapolate that over a 30-year period. It's a 10-year forecast that they do, but then we add on kind of a normalized version for the next 20 years.

We use those forecasts to underpin the starting safe withdrawal rate. These things ebb and flow a little bit. You referenced that 3.3%, which was the low ebb for the safe withdrawal rates. That was back at the end of 2021, when fixed income yields were really low.

Equity valuations were high and inflation was flaring up. Kind of a perfect storm for new retirees. And so that was flashing a yellow light saying, “Okay, if you are about to retire, be prepared to tap on the brakes a little bit here.”

And of course, the way 2022 played out, we didn't know specifically how it might play out, but we had rising bond yields that clobbered bond prices. We had falling equity prices in response to higher interest rates. We had very high inflation. When I look back on that, that seems like it was a pretty good call to tell people, “Okay, if you are just starting out in retirement, be prepared to rein it in a little bit in terms of your spending.” It will ebb and flow based on those forward looking views for what we think equity returns might be, fixed income returns, as well as inflation.

Dr. Jim Dahle:
But the idea isn't that people will change their withdrawal rate each year based on these projections. It's that if this is the year you're retiring, that's our best guess of what the safe withdrawal rate is for your next 30 years.

Christine Benz:
Exactly. We aren't suggesting that people change up their withdrawal substantially based on this research. If you're already retired, continue on whatever path you're on, because people would be terrified at the end of each year if they knew that, “Okay, Morningstar is saying that we really need to rein it in.” It just is not a comfortable withdrawal plan for most retirees, I wouldn't think.

Dr. Jim Dahle:
We're going to talk about comfortable plans here, but I think we ought to start, as all good podcasts do, diving into the most controversial thing we can find in there. This is what I found interesting in the paper, and I'll quote from the initial summary. It says, “The highest starting safe withdrawal percentage for 30 year time horizon comes from portfolios that hold between 30 and 50% in equities and the remainder in bonds and cash. More equity heavy portfolios generally don't support the highest starting safe withdrawal rates because there are higher levels of volatility and associated sequence of return risk.”

30 to 50%, that's way less than lots of people have been recommending for the last few years, especially my parents who retired years ago, I put them into a 50-50 portfolio, which we've maintained since that time. I think classically, lots of people had these lower equity percentages in their portfolios.

But what I've been hearing the last five years is not only start high, but raise it as you go through retirement to keep up with inflation, to keep up with longevity risk. What's your response to that criticism that 30 to 50% just isn't enough for longevity and inflation risk? Besides, stocks have the highest long-term returns anyway, right? That's what everybody says these days.

Christine Benz:
Right. Jim, I remember when we first did this research, we came up with that conclusion that our highest safe withdrawal rate when we first did this back in late 2021, also corresponded with a fairly light equity weight. I remember telling our researchers, “Go back, do it again, that can't possibly be right.”

But then when we dug into it and thought about it, it's a function of that very robotic spending system that we're assuming is our base case. We're assuming that someone wants to set their starting withdrawal percentage, and then effectively put blinders on and never look at what their portfolio value is, never take a bit less in a poor market, never take a bit more in a better market.

If that is someone's goal, where they just want to take the same real amount out of their portfolio year after year, the Monte Carlo simulations that we run to help arrive at this starting safe withdrawal percentage basically says, given where fixed income yields are today, I can get a lot of what you're looking for in fixed income today. If we lock that down, given that yields are in the neighborhood of 4%, even maybe a little bit over 4% in some cases, that you can lock up a lot of your return needs in fixed income assets. But it is a function of that very conservative spending system that we use as our base case.

I would not recommend that anyone use such a spending system. In fact, most of the flexible spending systems where you are paying a little bit of attention to your age, as well as your portfolio value, they're just better. They allow you to take more from your portfolio during your lifetime. And that's what most people should be going for. They shouldn't be settling for the very low number attached to our base case, in my view.

Dr. Jim Dahle:
Yeah. We'll get into those flexible spending systems. But before we get there, let's talk for a minute about the four risk factors that the paper really identifies. And what's the risk we're talking about? We're talking about the risk of running out of money before you run out of time. That's the risk we're talking about.

The paper mentions four of those. Two of which I would lump into sequence of returns risk. Well, maybe not. But the first one is poor market returns at the beginning of retirement. You retire and you have five years that are just the worst returns we've seen in 50 years and really decimates your portfolio while you're taking withdrawals from it.

The second one being high inflation early in retirement. The third one being a long retirement. A typical FIRE person that ends up with a 40 or 50 year retirement necessitating them to take withdrawals over a longer time frame. And then lastly, really high long term care costs at the end of life.

Can you talk a little bit about these risk factors and how people ought to be thinking about them and doing about them other than just spending less because these risks exist?

Christine Benz:
Yeah. Amy and I both worked on this section this year. Amy looked at the sequence of return risk questions. If bad market returns show up early in your retirement and you don't take steps to constrain your spending during those periods, that leads to a higher probability of running out at the end of the time horizon.

On the other hand, if you've made it through, say, the first 15 years or 20 years of retirement and then that really bad market environment shows up, it's much less impactful. You've made it through the difficult period, even if you make it through the first decade without really bad losses.

The key point there is if you have the misfortune of retiring into a really bad market environment, if say the first five years of your retirement are poor in terms of market returns and your portfolio returns, you need to take steps to address that with your spending. And unfortunately, from a practical standpoint, those are the years when a lot of people have pent up demand to have a lot of fun.

Dr. Jim Dahle:
Those are go-go years when it matters the most.

Christine Benz:
Exactly. But a best practice in that situation is to try to address the poor market returns with lower spending. And the reason is pretty intuitive, which is that if you're spending less from your portfolio during that time when it's dwindled, it leaves more in place to repair itself and recover when the market eventually does.

That was the first risk factor. The second one, which I think the past several years have accentuated, is this sequence of inflation risk. That if high inflation shows up early in your retirement, that can be just as big a problem as if bad market returns show up. And the reason is that prices will tend to stay elevated, that even though inflation may abate, the inflation rate may abate, we're probably stuck with the hotel prices that we have today.

I hate to say it, but food prices probably aren't going meaningfully lower from here. Housing prices may have some bobble in the future, but the fact is you're building off of a higher level of spending from the get-go if that higher inflation shows up early on in your retirement. Here again, whatever steps you can take to address that high inflation, if you can spend a little bit less, all for the better, for the longevity of your plan.

And then the second two risk factors that I focused on were early retirement. It could be a FIRE type person retiring with a portfolio that has grown really well, so a person retiring in her 50s or maybe early 60s, or a more sort of traditional age retirement who is knocked out of the workforce, maybe at age 62 or something like that.

If that is the case, if you've got a longer time horizon, a best practice is to try to reduce spending from those baseline levels that we talk about in the paper. Taking a bit less, I think assuming a 40-year time horizon, took the base case spending rate down to like 3.6%, 3.7%.

And then the final risk factor relates to long-term care. If someone has effectively a balloon payment at the end of his or her life where you have much higher spending to address long-term care costs, how does that affect lifetime spending up until that time when you have those very high costs?

And so, the negative there is that spending would need to be curtailed across the whole time horizon if you hadn't set aside a plan for long-term care in some other fashion. Ideally, I think you would address that either by buying long-term care insurance or setting aside some kind of a long-term care fund and segregating that from your spendable assets versus factoring that into your lifetime spending plan.

Dr. Jim Dahle:
Although toward the end, at least for single people, spending down, you get to those high expenses at the end. What's your money for if not to take care of you in your life? And eventually, you may end up with a Medicaid funded long-term care at the very end once you've spent down to those levels.

Certainly, the big risk there is leaving your spouse impoverished. I think this is a much bigger issue for a married couple where the first spouse to get sick can just decimate their portfolio with long-term care costs. I think that's probably the biggest risk there. I suspect most of those people who have burned through a multimillion-dollar portfolio in long-term care costs probably don't have a whole lot of life left, much less quality of life left, and may not mind quite as much that they're in a facility being paid for by Medicaid.

Christine Benz:
No, absolutely true. And there are lots of practical dimensions to the long-term care problem. Home equity, I think, has been an under-discussed element of funding long-term care that most retirees do own their homes. And if they can tap that home equity in some fashion, either by selling the home or by going into some kind of reverse mortgage to fund long-term care, that can be an attractive lever as well.

But you're so right about the Medicaid qualifications that there are some really negative implications for married couples where you effectively have to impoverish the well spouse in order to qualify the spouse who needs care for Medicaid-provided long-term care.

Dr. Jim Dahle:
Okay. Well, you mentioned you're a big fan of these flexible approaches to retirement withdrawals. I am as well. In your paper, you tested four additional flexible spending methods this year, and you said two of them actually increased your starting safe withdrawal rate as high as 5.7%.

Now, that's good news for people who want to retire now, but maybe don't have enough to retire on 4%. Should they maybe consider retiring when they can retire on 5.7% now and follow one of these plans?

Christine Benz:
I think so, Jim. And the idea, as I mentioned before, is that the flexible strategies prompt you to recalibrate how much you can spend each year based on how your portfolio is performed. And some of the methods will also let you take a little bit more as you age, because quite intuitively, as your time horizon shrinks, you should be able to take a little bit more from the portfolio.

We examined a number of different popular strategies for recalibrating withdrawal rates. I continue to be a fan of the guardrail system that was initially developed by Jonathan Guyton and William Klinger, but Amy looked at a couple of additional strategies this year that even boosted the starting safe withdrawal percentage beyond that.

One was a really simple system of taking the same percentage out of the portfolio year after year. That'll buffet you around a little bit because, of course, your portfolio's value is going to ebb and flow, but that was one of the ones associated with a nearly 6% starting safe withdrawal rate over a 30-year horizon with a 90% probability of success.

The other one was one that Charlie Ellis raised to us in a conversation that we had about his great little book, and I'm blanking on what it's called, but it's a really nice, efficient book about how to invest reasonably well. He raised the point that someone could use an endowment method where they're taking like a 10-year average of their portfolio's value and letting that drive how much they could take out each year. That was another method that was associated with a fairly high starting safe withdrawal percentage.

For people who have tighter plans or who really want to live it up during their lifetimes, they absolutely should investigate some of these dynamic spending systems, but also understand the trade-offs that are associated with them.

Dr. Jim Dahle:
The criticism of these flexible methods is that you have to be really flexible with how much you spend. You have to be okay with significantly cutting your spending in order to increase your spending to these sorts of 5.76%, whatever levels. You've got to be willing to take a major pay cut if that sequence of returns risk actually shows up in your life. Do you think most people are able, willing, interested in doing that?

Christine Benz:
Well, wealthier people certainly are because a bigger share of their spending is probably coming from discretionary items like travel, going out to dinner, whatever else falls into that non-discretionary bucket. It's just easier for them. For someone, if you've run the numbers on your household spending and a lot of it is more or less fixed, then you'd obviously have less leeway to adjust.

An important dimension of this, Jim, is that most of us, in fact, I would guess almost all of us, are not just bringing our portfolios into retirement, that we have some non-portfolio cash flows that we'll be able to rely on in retirement. For many of us, it'll be Social Security. For a smaller share, it'll be a pension. People might have rental income from rental properties that they own. Maybe you're working a little bit in retirement.

Having that non-portfolio income and boosting that share of non-portfolio income in terms of your household cash flows makes the portfolio spending adjustments that much more palatable.

We do examine the combination of portfolio income and non-portfolio cash flows. We find that those two things work really well, that if you can take a flexible approach to spending from your portfolio but also line up as much as you can from those non-portfolio sources of income, that's a really nice stabilizer for your household cash flows.

Dr. Jim Dahle:
Speaking of Social Security, the recommendation in the paper, as usual for most personal finance authorities, is to wait until 70, at least for the higher earner, even if it means spending other assets in the meantime.

Now, I heard an interesting counter to this. It was from a podcast, Money for the Rest of Us. They had David Bach on. David Bach is the author of The Automatic Millionaire and a great guy. Hopefully, we'll be having him on the White Coat Investor podcast soon.

He argued, at least for those who don't really need Social Security, to take it at 62. The essence of his argument was a behavioral argument. He said, people have the hardest time in the world spending their money. But for whatever reason, Social Security acts like your paycheck. It acts like your income. It's easier for people to spend it. Of course, if you take it at 62, that's your 60s or your go-go years when you want to spend more anyway.

He says, “Go ahead and take it. I'm taking mine at 62 because I'm going to start spending it or giving it or whatever. I'm going to use it now because people have such a hard time diving into their portfolio and spending portfolio assets and withdrawing money from retirement accounts, whether they're tax-deferred or Roth accounts.”

What do you think about that behavioral argument against waiting until 70, which clearly is the financially optimal thing in most cases?

Christine Benz:
Right. The math definitely argues for waiting, if you possibly can. I'm part of a blended couple where we have probably the same age, equal earnings history. We plan to have one of us take probably at our full retirement age, 67, and the other wait until 70. It doesn't really matter who does that. It'll work out to be the same either way.

I think the math does not favor that answer. But behaviorally, he's on to something in that income isn't income isn't income, that we do have a little bit of mental accounting going on for better or for worse, that we give ourselves more permission to spend certain types of income.

Social Security income tends to be one of those really comfortable types of income to spend. For whatever reason, maybe it seems like an abstraction that it's not really your money. And it's not really your money, actually. Although it is once it starts flowing to you.

Social Security, annuity income, there's been some research done on this topic that people who buy an annuity just tend to be more comfortable spending that paycheck that comes in the door.

Dividend income versus total return spending is another source of income that people tend to just, for whatever reason, feel like it's more mad money than it is taking a chunk out of my portfolio, something that is appreciated in terms of its value that doesn't feel great. Whereas getting a dividend check sent to my house and spending that seems more natural.

There is some mental accounting that goes on. People may, especially if they have very flush plans, like it's sounding like David was referencing, maybe take that and run with it if you know there's really no wrong answer in terms of you running out. But for people with tighter plans, I would advise probably hanging on and delaying filing as long as you possibly can. Because I think of 2022 as a perfect reference point for why you should try to enlarge Social Security.

We had bad equity returns, bad bond returns, high inflation. The Social Security recipient was insulated. The cash flows from Social Security were insulated from those forces and you got that really nice inflation adjustment. So, if you delay, you're inflation adjusting an even larger number. I still think that there are a lot of reasons for people to consider delaying.

Dr. Jim Dahle:
Yeah. Now Morningstar in this paper, like Bill Bernstein, who we just had on the podcast a few weeks ago, loves the idea of a TIPS ladder. People love TIPS ladders. Those who get into this stuff and are optimizers and are really detail-oriented, they love this idea of a TIPS ladder. Explain to us why and what you think about the additional complexity and who's it really worth building a TIPS ladder for.

Christine Benz:
Right. A TIPS ladder is the idea of assembling a basket of Treasury inflation protected securities. These are securities issued by the U.S. government and they have a really nice feature that most bonds don't have, which is that you receive an inflation adjustment in your principal value that reflects whatever is going on with the current inflation rate.

The idea with this TIPS ladder is that you're assembling a basket of TIPS with each bond maturing in each year of your retirement. So, you're essentially spending that TIPS bond and you're getting the inflation protection. And so it's a beautiful way to meet your household living expenses while also addressing the big risk of inflation.

I think one of Bill's major attractions to this whole TIPS ladder idea is that he views inflation as one of the key wildcard risks for retirees. A TIPS ladder would nicely defend against that risk.

We look at using a TIPS ladder in the context of retirement spending. And right now, actually, given where TIPS yields are, it actually beats our safe starting withdrawal percentage. If you just buy this TIPS ladder, if you assemble it, it would yield a roughly 4.5% starting withdrawal percentage, which is better than that 3.9% starting safe withdrawal rate that I was talking about.

But the downsides are that it's rigid. Once you set down this path, there's really no looking back. It's very hard to undo the TIPS ladder. And then the other big caveat is that your money isn't going to grow as long as it's in this TIPS ladder. And when you spend through it, it's gone.

So, if you live 35 years, well, if your whole portfolio was in this TIPS ladder, then there's nothing left over to support you. So it's rigid, it's inflexible. I could see people using it for part of their retirement spending, but I don't think any of us would recommend that someone take all of their assets and park it in a TIPS ladder. I think most people would want more flexibility and want the possibility of some portfolio growth.

Dr. Jim Dahle:
Yeah, for sure. It can't be all the portfolio, no doubt about that. But the other issue with it is something Katie and I ran into recently. I started building a TIPS ladder a few years ago, buying some five and 10 year TIPS and buying these individual securities. I was doing it at Treasury Direct, although you can do this at a Vanguard or Fidelity brokerage or whatever as well.

But at a certain point, we've kind of swung from the optimizer side to the satisficer side. And I talked to Katie, I'm like, “What do you think about having 30 individual TIPS allocations sitting in the brokerage?” She's like, “Why are we making our lives complicated?” The alternative, of course, is just sticking into a TIPS fund or a TIPS ETF from Vanguard or Schwab or iShares or whatever.

Do you think it's worth the additional complexity for most people to go ahead and build a formal TIPS ladder for that portion of their definite spending, fixed spending, whatever you want to call it? Do you think it's worth it? Or do you think it's too much complexity and behaviorally, most people end up screwing it up anyway?

Christine Benz:
Realistically, I'm more in your camp that I think it probably is too much complexity for individual investors. Advisors might well build them for their clients. But another consideration, Jim, that's top of mind for me is cognitive decline, that we know that older adults can run into some cognitive diminishment as they age.

And having more moving parts to manage in their portfolios just adds more potential for trouble, if you ask me. I do think that as we age, it's just a wise strategy, especially if you're a DIY type person where you aren't working with an advisor to try to reduce the number of moving parts, try to reduce the number of decisions that you have to make, gravitate to total market index funds, all in one funds, like target date funds, or the retirement income version of target date funds.

They may not be optimal, but they can really reduce the number of moving parts in your portfolio and the number of decisions that you'll make in the future. And also it'll reduce the number of things that you could potentially goof up if you lose some cognitive ability, or if you just forget or decide that you have other things you want to do with your time.

Dr. Jim Dahle:
Yeah. Speaking of leaning more toward the satisficer side and the behavioral finance side, Morningstar in this paper still likes SPIAs, single premium immediate annuities. Even though you really can't buy inflation adjusted ones anymore, tell us what you think their place in a portfolio is now.

Christine Benz:
Right. I see the major advantage of some type of an annuity product like that in the context of if you've looked at your social security and tried to make a smart decision there, whatever it is for your household, and then you still have fixed living expenses that you want to try to address.

And to me, that is the best use of an annuity where maybe my social security is providing $40,000 of my household's fixed outlays, and I still have another $10,000 that I want to try to address in terms of some kind of an allocation to a very safe vehicle like an annuity.

I think it can make sense to do a fairly small annuity buy to help shore up that source of income, to help align my household spending with those non-portfolio sources of cash flow. I think that that is an effective use of an annuity. It's not perfect in that, as you said, an annuity, you can't buy one that is tied to the CPI, unlike social security, which is tied to CPI. An annuity, you can buy an inflation rider, but you can't buy one that's linked to CPI. That's a drawback.

And then the annuity is only going to be as good as the insurance company backing it. And so, you want to be sure that you are putting your money with an insurance company with a really strong financial strength rating. You want to do your homework on that front.

The good news is that the annuity rates are up a bit along with rising interest rates. And also the SPIA space, the single premium immediate annuity space, is a really unsexy part of the insurance industry. The bad actors tend to not want to be there because it's not very lucrative for them.

For consumers, there's a lot of transparency there in terms of payouts. It's just not a great moneymaker for insurance companies. There aren't a lot of bells and whistles, there's not a lot of complexity, and there's not a lot of opportunity for an insurance company to embed unwanted fees in the proposition for you.

That's one reason why I would gravitate to that very vanilla type of product because there's a lot of transparency for the consumer. And I think there's just a lot less opportunity for monkey business on the insurance company's part.

Dr. Jim Dahle:
Yeah, of course, you still have to buy it from an agent who's probably going to try to sell you some more bells and whistles, a product with more bells and whistles when you go to buy it.

Christine Benz:
Potentially so. And yeah, that is a potential drawback. I would say if anyone is considering any type of an annuity product, get some objective advice. And even if you have to pay that hourly planner for a small piece of his or her time, to me, getting some quarterbacking on that decision-making can be money well spent.

So, don't cheap out and go strictly the DIY route. I would get a second opinion on that decision because it is a one and done decision. It's not something you can readily undo or would want to undo if you needed to. I would get some financial planning guidance from someone who doesn't have a vested interest in you buying that particular annuity product.

Dr. Jim Dahle:
An unsung benefit of buying an annuity like that is that studies show that annuity owners live longer. I don't know if they just want to live longer and stick it to the insurance company or what, but that is what the data shows. And maybe there's a little bit of garbage in, garbage out from that. Maybe people who are likely to live longer are more likely to buy annuities, but that is an association they've seen with annuity buyers is they live longer on average.

Christine Benz:
There's probably some adverse selection in there for insurance companies where the people who, if you're looking back on your family tree and seeing that you had a lot of 90 year olds running around, you're more likely to be attracted to a product that's going to protect you against longevity risk. I would guess that insurance companies have looked at that issue and have addressed payouts accordingly, that they know that people buying annuities are more likely to exceed the average life expectancy.

Dr. Jim Dahle:
Yeah, for sure. And if you're considering buying a SPIA, you should be aware that the best deal on an annuity out there is delaying your social security to 70.

Christine Benz:
100%.

Dr. Jim Dahle:
That is the best deal because the insurance companies are pricing these annuities for people that are going to live a long time. Whereas social security is just for the average person as pretty much everybody gets it.

Christine Benz:
That's a beautiful point.

Dr. Jim Dahle:
It is the best deal.

Christine Benz:
Definitely the best annuity you can buy by far.

Dr. Jim Dahle:
Well, Christine, our time is short. What have we not talked about the white coat investors ought to know about retirement income?

Christine Benz:
A key dimension, Jim, is the trajectory of retirement spending. You referenced the go-go years, the early years tend to be the high spending years. When we look at the data on retirement spending, we do see that spending on an inflation adjusted basis does not trend up throughout the retirement time horizon that people tend to spend less as they move into their mid-70s and into their 80s. And some people do have that balloon payment of long-term care expenses later in life.

But people should take that to heart when they think about their retirement spending. That should give them a little bit more comfort spending early on because even when we look at affluent households who have the wherewithal to keep spending at a higher level that maybe they were spending right after they retired, they just choose not to. Their travel might be a little closer to home. They're slowing down a little bit. Maybe they have some health issues that are coming into play.

So, don't feel badly if you need to spend a little bit more in your first couple of years of retirement. And especially if the market's good, give yourself permission to spend in those years when your health is good and you have the ability to really enjoy that spending because you may not always feel that way. So, I think that's an important dimension of this as well.

Dr. Jim Dahle:
Christine, I tend to agree with you because this is what I've seen in my parents is that as they move into their slow-go years, they're spending less. Bill Bernstein argues that people spend less because they have to. And that those who actually have the means don't actually spend less as they move into those “slow-go” years. You think he's right? You guys are both citing data saying kind of opposite things.

Christine Benz:
David Blanchett, who was my former colleague at Morningstar, has looked at this issue. Even with wealthier households, they tend to exhibit that pattern of spending a bit less. But Bill is onto something in that wealthier households tend to be healthier. And there's a real connection there that if you are someone with more means, you've had more healthcare, you've had better quality healthcare throughout your life, you're more likely to live a bit longer.

Some folks may be in that cohort that is still spending and living it up later in life. But when we look at the aggregate data, when we look at even affluent households, we do tend to see that same pattern of people spending a bit less.

Another thing that can come into play for affluent households is if maybe there were two homes, but the second one just becomes too much to maintain that comes into the portfolio and becomes an asset that the household can spend. There are a lot of real world considerations there, but even wealthier households do tend to spend a little bit less when we observe the data over whole retirement time horizons.

Dr. Jim Dahle:
Yeah, that's a good possible explanation of that difference is that the slow-go years actually start later for wealthier people because they have better health. That's an interesting possibility.

Well, Christine, it has been wonderful to have you here. Christine, for those of you who didn't catch her at the beginning, she's the Director of Personal Finance and Retirement Planning for Morningstar. She's going to be a WCICON keynote speaker this year. If you want to meet her in person, shake her hand, thank her for her work, ask her hard questions about retirement income, come to the conference. We'd love to see you there. It's going to be a great time and it is CME eligible. So, you can write off the cost of attending or use your dedicated CME funds to come. We'd love to see you there. Christine, thanks for your time today.

Christine Benz:
Thank you so much, Jim. It's always great to talk with you.

Dr. Jim Dahle:
Okay, I hope you enjoyed that as much as I did. We've mentioned WCICON a couple of times in our discussion. You can sign up for that at wcievents.com. You can come in person still. We've still got space, at least when I'm recording this, possibly it'll fill between now and then, but I don't think so. I think we're still going to have space for you. And of course there's unlimited space to attend virtually if you would like.

The dates are March 25th through 28th. It is in Las Vegas. It is not on the Strip. It is close to the Strip. If you want to go there, you can. If you don't want to experience any of that Strip stuff, you can totally avoid it while coming to this conference. And you can just go for a fun hike out at Red Rock, which is probably way better in my view than hanging out on the Strip all day anyway. But however you like to enjoy Vegas, you can come, wcievents.com. As I mentioned, it's CME eligible, but it is worth it even if you had to pay the full price yourself.

The reviews we get from this, 99.5% of people say they would recommend it to their colleagues. Please come. I'd like to meet you personally. It fires me up for the whole year because I get to not only hear about your triumphs, I also get to hear about your challenges. And it directs our content, both on the podcast as well as on the blog and in the newsletters on what we work on for the next year.

Right now we're doing lots of stuff about retirement because you guys gave us that feedback that we want more retirement focused material. And so, that's why we're talking so much about retirement, not only today, but in other episodes and on the blog itself.

Thank you for helping us spread the word about this podcast, whether that's directly telling people about it or just leaving us a quick five-star review. Those reviews do help people find the podcast and help them to listen to it and realize this is something that can help them in their lives.

A recent one came in that said, “I was so angry, but then I found White Coat Investors. For the first 10 years of my career, after finishing internal medicine residency, I was working for another doctor as a W-2 employee. Then in 2015, I started working for myself as an owner of my small primary care practice.

When I had to pay my first tax bill, I was in disbelief. Then it turned into anger and frustration. I was in my early forties and I had never learned or been exposed to basic investing and personal finance topics. I immediately started searching on how to lower my tax bill and to begin saving for my personal goals and even retirement.

This is when I found White Coat Investor. Now I can easily say that my personal financial life has improved immensely because of the simple but powerful principles discussed on the podcast and the forum. Thank you WCI for helping us become better doctors by securing our financial futures.” Five stars.

Congratulations to you on securing your financial future and thank you for leaving that review to help others to do the same.

 

SPONSOR

Dr. Jim Dahle:
Brought to you by Lower Road for Doctors, Lower Road is committed to serving the financial needs of doctors, including helping you get the home of your dreams. Lower Road's physician mortgage is a home loan exclusively for physicians and dentists featuring up to 100% financing on loans of a million dollars or less. These loans have fewer restrictions than conventional mortgages and recognize the lender's trust in medical professionals credit worthiness and earning potential.

For terms and conditions, please visit www.laurelroad.com/wci. Laurel Road is a brand of KeyBank N.A. Equal Housing Lender. NMLS number 399797.

We'll see you next time on the podcast. Until then, keep your head up and your shoulders back. You've got this. The whole community is standing behind you and wants you to be successful. Let's do this.

 

DISCLAIMER

The White Coat Investor podcast is for your entertainment and information only, and should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.

Milestones to Millionaire Transcript

Transcription – MtoM – 257

INTRODUCTION

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

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 257 – Emergency physician becomes financially independent, changes work and spends weeks biking across Europe.

As a white coat, you have valuable knowledge. Various companies want this knowledge and they're willing to pay you for it. That's why we put together a list of recommendations for companies that pay you to take surveys. If you're looking for a profitable side gig for not too much effort, getting paid for surveys could be the perfect solution for you.

You make extra money, start a solo 401(k) and use your medical knowledge to impact new products. One of the WCI columnists makes an extra $30,000 a year just doing these surveys. Sign up today and use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com/mdsurveys. Don't write into us and say, “What's up with the MD thing?” DO surveys will also get you to the same place. You can do this. The White Coat Investor can help.

We have got a recommended list you may or may not know about. If you go to whitecoatinvestor.com/recommended you'll realize just how much we offer here. Whether you need help with insurance, help with a mortgage, help with a contract review, help with a financial advisor, help with your taxes, whatever it might be. You'd be surprised how many different recommended lists we have. And you can see them all at whitecoatinvestor.com/recommended.

The next Financially Empowered Women live webinar is on January 14th at 06:00 P.M. Mountain Time. Just two days from now. I'm going to be talking about all things Roth. Roth versus taxable, when to choose Roth, when not to, backdoor Roth, make a backdoor Roth, Roth conversions, et cetera. And we'll walk you through exactly how to do your backdoor Roth and answer your questions afterward. Sign up at whitecoatinvestor.com/few. That's FEW, the Financially Empowered Women.

All right. We've got a great interview today. We tell you guys all the time, any milestone, we'll celebrate with you. And today we've got a unique one. So I hope you enjoy it.

 

INTERVIEW

Dr. Jim Dahle:
My guest on the Milestones podcast today is Gail. Gail, welcome to the podcast. I don't know, maybe I should say back to the podcast, but it was really the White Coat Investor podcast that you've been on before.

Gail:
Thank you so much, Jim. Excited to be back.

Dr. Jim Dahle:
For those who don't know, Gail has spoken at WCICON before. It's like we have a star on today sharing her milestone. Give us a sense for those who don't know you, give us a sense for where you're at in the country and where you're at in your career, what you do for a living, et cetera.

Gail:
Yes. I finished my emergency medicine training in 2000. And since that time I have mostly been in New England at the same job except for two years when I was on a sabbatical in Norway. Yeah, 25 years in practice.

Dr. Jim Dahle:
Okay. Now we always tell people we will celebrate any milestone with you and we'll try to come up with some financial lessons from it to teach. And you have a little bit of an unusual milestone this time. So. tell us what you've accomplished.

Gail:
Yes. My milestone is actually 2,500. And that's 2,500 miles that I rode on my bicycle this summer in a self-supported bike adventure that went from Northern Italy to Northern Norway.

Dr. Jim Dahle:
Okay. Now the 2,500 miles may not be the most impressive part. I want to hear how long this took you.

Gail:
It took me just over 18 days. It was an organized bike event with 5,000 participants. Most of us started in Northern Italy, but there was also the option of joining in Berlin. And the deadline for doing it was 20 days. And I finished it in 18 days. So, biking about 145 miles per day.

Dr. Jim Dahle:
That's a lot of riding. I'm impressed just with the physical nature of this particular feat. But to finish this, you took off three plus weeks as an emergency doc. That is not easy as a full-time emergency doc.

Gail:
It's not easy. I actually wound up with seven weeks off.

Dr. Jim Dahle:
Wow.

Gail:
During the summer, I thought I was going to have to quit my job to do that. And I was seriously considering an early retirement.

Dr. Jim Dahle:
To be able to do this. You were willing to retire early to go on this trip.

Gail:
I was willing to retire early. It's something I wanted to do. And at the age of 56, I didn't think I should wait too much longer because you never know with health issues and injuries, things that could happen. I figured it was like now or never. I couldn't take a leave of absence off in the summer, but I would have had to resign and then try to get my job back.

But because I work for a public university healthcare system, we were pretty severely hit by cutbacks from the federal government. I was basically informed that if I did resign, probably, it would be difficult to get my job back in the near future due to hiring freezes. And I do have three young adults that I support with health insurance. That was another consideration I had to take into account. After working things out with some very helpful colleagues, I was able to go down to halftime and swap some shifts around in order to get the time off that I needed.

Dr. Jim Dahle:
Okay. So, give us a sense for how you've lived your financial life since 2000, such that this was an option that you could retire early, that you could go to halftime at 56. Tell us what you've done with your finances over the years that allowed you to do that.

Gail:
Basically living below my means, maxing out my retirement accounts. And that was basically it. It's a slow and steady and just not making any major financial mistakes. Made a few minor financial mistakes along the way, but nothing major. Pretty lucky with real estate, just working hard.

But what I like to say is I like to live life on the FIRE to YOLO continuum, somewhere in the middle. I like to find balance. I've had great experiences along the way. I have never suffered from not being able to travel. My husband is Norwegian. We travel to Norway at least once a year and take other scuba diving vacations and other types of vacations, depending on where we were in life.

Dr. Jim Dahle:
You never had a 50% plus savings rate is what you're saying?

Gail:
No, I've never calculated my savings rate. I was going to do it for today, but I think I've never done it before and I'm not going to start now.

Dr. Jim Dahle:
Okay. But it's worked out okay. You said you got lucky in real estate. Now, are you any luckier than the rest of us? Because our house went up in value like crazy the last five years. Did you do something particularly lucky or just it's been a tailwind the last few years?

Gail:
No, I think just it's been a tailwind since the beginning. I actually did what you recommend not doing by getting a house during internship. But I had a dog when I was moving out by myself. So, I needed a fenced in yard and a doggy door. And then a few months after moving to Detroit for my residency, well, housing prices in Detroit are extremely cheap. I bought a house for $63,000 back in 1997 after graduating medical school.

Dr. Jim Dahle:
That only got you one house in Detroit? That didn't get you two?

Gail:
That got me one house, two bedrooms. And then I met my future husband and he was very handy. We did some repairs around the house. And when it came time to move for my attending job, we were able to sell the house without a real estate agent. With very low costs and made a nice profit on that.

And then use that as a down payment for the next house. And it definitely was not a doctor house. We kind of stepped our way up over the years. And fortunately, the interest rates were coming down each time I needed to move, each time we found another house. I would basically just refinance the mortgage, take money out, paid off my student loans that way. I had less than $100,000 in student loans coming out of medical school. Those were pretty quickly paid off by refinancing the house mortgage.

And then we bought some investment properties along the way. And each time we bought the investment property, we'd refinance our primary mortgage, take some money out and use that to buy the rental property. So, it's pretty debt averse and didn't use much leverage. I probably could have used more or should have used more, but I didn't.

Dr. Jim Dahle:
Yeah, in retrospect, now you know your income was steady along the way and that the values of the houses went up. That's not necessarily given when you're first buying them though. Okay, a few rental properties. How many doors under management do you have?

Gail:
Well, we had, let's see, one, two, three, four, five, six, seven doors under management. I also started a financial literacy interest group with my hospital. And we talk about real estate a lot. And my husband and I were looking to wind down our real estate so we could possibly move back overseas if and when we wanted to. And one of my colleagues who's in the financial interest literacy group was interested in purchasing some house and getting into real estate. We basically sold him our real estate little mini empire and did seller financing. We cut out all the middle people, so to speak. We did it without real estate agents or banks. And so, we still hold the note on the mortgage for the two rental houses. It's kind of steady income from that.

Dr. Jim Dahle:
And what's the rest of your portfolio look like?

Gail:
My total portfolio, I guess I've also been celebrating hitting financial independence as well. We have $3.4 million in retirement accounts. And that's broken down into about 80/20 stocks bonds with some REITs in there as well. And then we have about $2.6 million in direct real estate. And that includes our home, another local rental property that we have in our same town, the two duplexes that we sold to my colleague. And a cabin in Norway.

Dr. Jim Dahle:
Yeah, essentially you're a penta-millionaire.

Gail:
I guess so.

Dr. Jim Dahle:
$5 million plus if we added up all that net worth. That's pretty incredible. Give us a sense what your household income look like. I know you're an emergency physician. So I have a sense of what you're making, at least while you're in the US. But you spent some time in Norway and sounds like your husband did at least a little bit of working along the way. But what would you say your household income varied from over the last 25 years?

Gail:
I've always earned about the median emergency medicine salary. I think in 2001, that was maybe $150,000 or $180,000. And currently about $360,000 for working full time. Now past that since I went down to half time in June, the end of June of this year.

My husband was actually a stay-at-home dad. We did not have a dual household income. When our children were young, we decided that we would rather have one of us stay home. We did have an au pair to help when they were really young, when we had three children, because there's only 21 months between the three of our children. When they were young, it was too much for even my Norwegian husband to take care of on his own. So, between myself and an au pair for a few years, we made that work.

Dr. Jim Dahle:
Very cool. You've got to this point, last year or two, you're 55, 56. And you're like, I got some stuff I want to do. And you're looking at people coming in that are 55 and they're having MIs and they're having strokes and they're in renal failure and they're in nursing homes. And you're like, “I got some stuff I want to do.” Tell us about the calculations, the mindset changes, et cetera, that went into you going, “I want to do these things bad enough that I'd walk away from work to do them if this can't be worked out.”

Gail:
Yes. The first episode happened back in 2012 when I took the sabbatical to go to Norway. I was just over a midlife crisis in my early 40s, mid 40s. I'd never had a study abroad year and figured I always wanted to do that, felt like I was missing out. My husband and I actually saved up a year's worth of living expenses.

And then I went to my boss to ask if I could potentially work two weeks on, have four weeks off. And he basically told me no because if he allowed me to do that, everyone else would want to do that, it would make his job difficult. It wasn't the answer I wanted, but it worked out for the best because it forced me to actually take a full leave of absence. And at that time, I was able to take a year leave of absence. They held my job, moved to Norway on our savings. We had to cut our kids' hair because we were on a budget at that time, trying to make sure that our money didn't run out.

And while I was living there, I made some connections along the way with physicians. And word got out that there was an American emergency physician living on a potato farm in rural Norway, teaching swimming lessons. I was recruited to help start up a pilot project in Norway for their first emergency room. They didn't have emergency medicine at the time in Norway. I said yes to that job. One year sabbatical became two. My salary at that time, when you're asking about salary, I forgot to mention, was about $100,000 for the year. So much less than we would get paid in the US, about a third of our salary.

But it was one of the most memorable experiences that I've had. It helped shape the rest of my career and no regrets about that. And then I've had some episodes as an endurance athlete with some SVT and some scary episodes there.

And you never know what can happen. I wanted to do this bike race and figured I can't wait until I'm 70 to do it because the chance of me being physically capable of doing that at that age was less likely than being able to do it at my current age of 56. I was willing to walk away from the job. I always have, we call it the go-to-hell fund. I get a savings account, emergency fund, so that if anything happened, we would be able to walk away from the job.

Dr. Jim Dahle:
Yeah. Well, I imagine the hardest part of this was not Denmark or crossing the bridge to Sweden. You started in Italy. You had to cross the Alps. Tell us about that.

Gail:
Yeah, it was pretty amazing. Again, there's 500 people from all around the world. And the strategies that people used were so different. I went in with my first week planned of where I was going to stay in hotels. Other people had their entire 20 days planned on where they're staying each night. And some people had planned nothing. And I was kind of in the middle there.

Started in Northern Italy. First day was over the Alps. It was a little cool and rainy, which I think is probably better than if they'd had a heat wave. And I was fresh. I planned on doing 145 miles that day. And after about 12, 14 hours, I came to Innsbruck. I was with a bunch of other people. The camaraderie was amazing. I actually rode out with one of the fastest groups starting out. I was on the front peloton for the first few hours, which really made things fly. And as soon as we hit some elevation, I totally got dropped. So dropped back.

But the interesting thing about that story is five days later, when I was near Berlin, I was in the rain and a little bit miserable. It was probably one of my lower days on the trip. And I get a WhatsApp phone message from this guy named Gabriel from Spain that I had met in that front peloton the very first day. And he was just calling to see how things were going and to cheer me up and encourage me. That was really, really amazing.

Going over the Alps wasn't too difficult. And then Germany, we biked along the eastern portion of Germany for days. There were tons of fruit trees. I stopped and picked fruit. There was no real race mentality to it. There were some people who were doing the same distance as I was doing, and who did the days, like usually two hours less of biking time. Others who would come in late at night, several hours after I'd already gotten into town. That was amazing.

We did the little tip of the Czech Republic and then we biked to the western tip of Poland and took the ferry from Poland to Jesud, Sweden. And that was an overnight ferry.

That was the southern part of Europe. And then things got a little bit more spread out as we got into Scandinavia. And I spent over a week biking through Sweden. One of the days when the cyclists were spread out, I was getting a little bored. I had some books on tape that I listened to. And one day I actually caught up on all of the WCI podcasts.

And then the hardest part, we biked up through Finland, passed through the Arctic Circle and Rovaniemi, Finland. And then the last two days were in Norway. As soon as I hit the border to Norway, it hit terrible, terrible weather. Had really, really cold driving rain. Gotten a bit hypothermic. I had to stop and wait in the SOS telephone box for a little while before I hit a seven kilometer long tunnel.

Dr. Jim Dahle:
Wow. Sounds like quite an ordeal. Okay. So, you said you had to go half time, basically, to do this. They wouldn't let you stay full time. Tell me about that transition and what that means for the rest of your career.

Gail:
I could have stayed full time, but the chance of getting the four weeks off to do this bike race would have not been possible. I went down to half time in the end of June. And since then, I've been doing a lot of travel. Not only the bike race across Europe, but I was out at ASEP in Salt Lake City in September. I just came back from hiking Machu Picchu in Peru. And it seems like whenever I'm not traveling, then I'm picking up a few shifts. But half time is basically only seven shifts per month. So, it's like nothing. As far as work, it's really much easier. I haven't really noticed any change.

Dr. Jim Dahle:
It's a lot harder to burn out when you're only working seven days, isn't it?

Gail:
It is hard to burn out. I don't feel burnt out at all. If anything, I'm thinking I'm traveling a little bit too much. I may need to slow that down.

Dr. Jim Dahle:
Yeah, I'm a big fan of part-time medicine. I found it thoroughly enjoyable for the last five, six years or whatever that I've been doing, about the same amount of work in the emergency department. And I agree. At a certain point, you go, “You know what? That was enough travel for me this year.” And so, I can relate to that for sure.

Well, Gail, congratulations on your success, not only in completing the ride, but on setting up your life financially in a way that allowed you to be able to do that, as well as what you're doing now and what you'll do in the future. You've really demonstrated what financial freedom can mean in the lives of a White Coat Investor.

Gail:
Thank you for having me, Jim.

Dr. Jim Dahle:
All right, that was a fun interview. It's interesting to see what people do with financial freedom. And Gail's done a lot of stuff that I've done with financial freedom. A cutback at work. Works are really fun. Six or seven shifts a month is great. 15 shifts a month in your late 50s doing night shifts, you're feeling a little crispy. A six day shifts a month, it's hard to get burnt out on that. Meanwhile, you get a chance to travel while you're healthy.

You get a chance to adventure while you're healthy because that health is not guaranteed. You meet people all the time who are not healthy. You've got parents. How late could they have gone and traveled the world and biked across Europe and done things like that? Probably not in their 70s, 80s, 90s.

These are chapters of your life that belong to your 40s and 50s and 60s. If you want to do them, you've got to figure out a way for them to coexist with your parenting responsibilities, with your career responsibilities. It might not mean retiring completely. In Gail's case, it just meant cutting back half time.

But finding that balance is challenging and finding a way to do all the things you want to cram into your short life on this sphere can be challenging, but it's worthwhile because then you live the life you were meant to live. A life you can look back on with no regrets and say that, yeah, I did do it all.

And all you have to do sometimes is think outside the box, take care of your financial to-do list and you'll be surprised how much freedom you have by mid to late career to do what you want to do with your life.

 

FINANCIAL BOOT CAMP: HOW DOES PSLF WORK?

One of the best ways to manage federal student loans for doctors over the last 15 years has been Public Service Loan Forgiveness or PSLF. And what this is, is this is a program available to not just doctors, but to anybody that is employed full time, which is defined as at least 30 hours in a week, full time by a nonprofit, aka 501(c)(3) or government employer.

If you're working for the military, if you're working for the VA, if you're working for a nonprofit hospital, all these sorts of places and most academic centers, you are eligible for Public Service Loan Forgiveness. Under the program, you need to make 120 monthly payments, i.e. you have to pay on your loans for 10 years in an approved program. And then the remainder, whatever else you owe, whether it's $40,000 or $400,000 is forgiven. And that forgiveness, unlike many other forgiveness programs, is totally tax free. You do not pay state income taxes on it. You do not pay federal income taxes on it. It's like if you had $200,000 forgiven, it's like your net worth instantly goes up $200,000. It's pretty awesome.

And the cool thing about it is, at least under current law, and laws for this are always changing, payments you make during your training, during residency, during an internship, during fellowship, almost always count. And the reason why they count is because those programs are run by nonprofits and by government employers. You're usually a university employee while you're an intern or a resident or a fellow. And so those payments all count.

Now, the way you make payments is typically through an income-driven repayment program. There are always changes being made to these programs. You have to stay as up to date as you can on which one you should be in. But as a general rule, these programs certify your income only periodically. And they typically do it by going back to your last tax return that you filed and looking at what your income was on that tax return.

What a lot of docs do is they file a tax return their last year of medical school, even though they're not required to, but they file a tax return that says their income's zero. And so, for the next year or two, their payments are zero. But those $0 payments count. They count for these 120 monthly payments.

And even after that, you'll certify with a year where you had no income for half the year and an intern income for half the year. So, those payments aren't going to be very high. And then you'll certify using some residency payments where your income's not very high. So you're not making very large payments. And even when you come out of residency, you've got a year where you only have half of an attending income. And so, your payments are a little bit lower.

And it's not unusual for a year or two after you finish training, you're still making low payments like you were making as a resident. So in reality, lots of doctors are only making real payments, large multi-thousand dollar payments on their student loans for one to five years after finishing their training, after recertifying their income. In fact, some people even delay their tax return so they can get another year out of this. They file an extension on their taxes. Their taxes aren't filed until October. And then they're going back an extra year to look at their lower income in setting these payments.

The amount that can be forgiven can be substantial. It is not unusual to have six figure amounts forgiven. I don't know that I've yet run into somebody who had a seven figure amount forgiven, but it is theoretically possible. Especially if you ended up going to a really expensive dental school and you paid for all that with debt and you went to an orthodontics residency and paid for all that with debt and went to an expensive undergrad. Seven figures is not impossible to have the public service loan forgiveness. There is no upper limit on it, at least under current law.

Pay attention to legal changes. There's always things being talked about in Congress, things being talked about in the executive branch. And it's possible there will be future changes in public service loan forgiveness. But what typically happens is those that are currently in the program are grandfathered in.

Now it's a good idea to hedge a little bit against the possibility of changes. Not only changes that are brought about by Congress or by the executive branch, but changes in your career. Maybe you decide you don't want to work full-time. You want to go on the parent track. Or maybe you decide you don't want to work for a nonprofit anymore. You realize you can be making twice as much money working in a private practice or a for-profit position or something. And you decide, “No, I don't want to do public service loan forgiveness anymore. I'm going to refinance my student loans using links at the White Coat Ambassador and get some cash back. Then I'm going to pay off my loans quickly, maybe by living like a resident.”

It's okay to change. But the nice thing about having a public service loan forgiveness side fund is that you've still got the money to pay on those student loans. And so, what I recommend you do is instead of making these huge payments, like you would make if you're trying to pay off your loans quickly in just like a couple of years, instead of making them to the lender, make them to your brokerage account.

And that way, if you change your plans or something happens to PSLF, you've got some money in the brokerage account. You might have $50,000 or $100,000 or $200,000 in that brokerage account. You can turn around and send to your lender and not be behind as far as getting your student loans paid off yourself.

All right, that's public service loan forgiveness. Everybody should take a look at it. It doesn't necessarily mean you should take a job that qualifies for public service loan forgiveness, but it's something to consider, especially if you like that job just as much and that job pays just as much, why not take the one that's also going to qualify for you to have a substantial amount of money passed to you in the form of student loan forgiveness.

 

SPONSOR

Dr. Jim Dahle:
As a White Coat Investor, you have valuable knowledge. Various companies want that knowledge and they're willing to pay you for it. We put together a list of recommendations for companies that will pay you for your opinion, essentially to take surveys.

If you're looking for a profitable side gig that really does not require that much effort, getting paid to take these surveys could be perfect for you. You make extra money. This is self-employed money. You can start a solo 401(k) and you might even be able to change the world and impact some new products, some new drugs, et cetera, that are coming out using your medical knowledge.

It's possible to make as much as $30,000 or more a year doing these surveys, according to one of our columnists that's written an article about it. Sign up today and use a fraction of your downtime to make extra cash at whitecoatinvestor.com/mdsurveys or whitecoatinvestor.com/dosurveys. Either one gets you to the same place. You can do this. The White Coat Investor can help.

This has been the Milestones to Millionaire podcast. You can sign up to star on this podcast, whitecoatinvestor.com/milestones.

And until then, keep your head up, shoulders back. You've got this. We're here to help. Let's get you to your next milestone.

 

DISCLAIMER

The White Coat Investor podcast is for your entertainment and information only. It should not be considered financial, legal, tax, or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.

Financial Boot Camp Transcript

What Is a Stock? | WCI Financial Bootcamp

Dr. Jim Dahle:
A stock is a share of ownership in a company. When you buy a stock, you are buying a small piece of that business. That means you participate in the company’s success and its failures. If the company does well, the value of your stock can go up. If the company does poorly, the value of your stock can go down.

When you own stock, you may benefit in two main ways. The first is price appreciation. If the company grows and becomes more valuable, other investors may be willing to pay more for your shares than you paid. The second is dividends. Some companies share part of their profits with shareholders by paying dividends, usually quarterly. Not all companies pay dividends, especially younger or fast-growing companies that reinvest their profits back into the business.

Stocks are typically bought and sold on public exchanges, such as the New York Stock Exchange or the Nasdaq. The price of a stock changes throughout the day based on supply and demand. If more people want to buy a stock than sell it, the price goes up. If more people want to sell than buy, the price goes down. These price movements can be influenced by company performance, economic conditions, interest rates, news events, and investor emotions.

One important concept to understand is that stocks are considered riskier than investments like bonds or cash in the short term. Stock prices can be volatile, meaning they can move up and down significantly over short periods of time. However, historically, stocks have provided higher long-term returns than safer investments. This is why stocks are commonly used for long-term goals such as retirement.

It is also important to understand that you do not need to pick individual stocks to invest in the stock market. Many investors use mutual funds or index funds, which own hundreds or even thousands of stocks. This provides diversification, meaning your investment is spread across many companies rather than relying on the success of just one. Diversification helps reduce risk while still allowing you to benefit from overall market growth.

In summary, a stock represents ownership in a company. Stocks offer the potential for growth and income, but they also come with risk. When used thoughtfully as part of a diversified portfolio, stocks can be a powerful tool for building long-term wealth.