I have been reading this blog for several years. I read all of the blog posts and comments (except the whole life comment threads, because I don’t actually have infinite time) and just finished my second read-through. I am a veterinary academic and my wife is a pharmacy academic, and we are financially independent in our early 40s, largely thanks to Mr. Money Mustache and The White Coat Investor. In Top 10 Things Bogleheads Get Wrong, a commenter suggested Dr. Dahle write a post about things the WCI gets wrong. He indicated he isn’t qualified to write that post but solicited a guest post about it.
I find this to be an incredibly hard post to write—not only because of all the things WCI gets right, but because the authors of all the posts on here are incredibly humble. How do you find a flaw with someone who says, “So you don’t think a landlord should use a credit score as one of their tenant screens? I guess you’re entitled to that opinion.”? WCI even acknowledges that, for some people, whole life insurance can be a good idea! In the Bogleheads critique, Dr. Dahle included things that the members there say but that Jack Bogle probably wouldn’t. In that spirit, I also included some themes I have noticed with the commenters. So, what does the WCI get wrong?
#1 One Job
The litany of “one house, one spouse, one job” is often recited here. I think it’s a pretty good guide. I can imagine in private practice you develop your referral base; have patient word-of-mouth; and build a happy, productive team. But, in academia, the one job rule would most likely see you making much less than if you moved around a couple of times.
Each year, the dean and department heads get a certain amount of money to spread among the faculty for raises. Sometimes, this amount doesn’t even allow for salaries to keep up with inflation. At one flagship R1 state university where I worked, no one got a raise for many years after the Great Recession. Many full professors who stay with the same university for 30 years end up making only slightly more than the new-hire assistant professor. At some universities (notably Ivy Leagues), the bump in salary when you are promoted to associate and full professor is substantial. At others, it’s only a few thousand dollars.
There are really only two ways to bump your salary substantially: move to a new job or threaten to do so and get a retention offer. For the retention offer, you get a job offer from another university, then ask your current institution to match or beat it to keep you. So, if you want to stay at the same job and improve your financial situation, you need to ACT like you are going to another job. I’m sure there are other professions where the one job rule doesn’t work—let us know in the comments!
I’m not sure if it's the types of people who comment on this blog, physicians, my own social circle, or something else, but y’all have a lot of kids. I lost track of how many comments I saw along the lines of, “I make $400K, have a stay-at-home spouse, have 5 kids, and can’t afford to save anything.” I suppose you can’t get rid of kids like you can the lease on your BMW, but I think the tone of advice given to these posters is different from the tone given to people who went to Harvard. We hear repeatedly about how you shouldn’t attend an expensive school, which is fantastic advice and something I wish prospective veterinary students would listen to more. And, to the site’s credit, a columnist recently admitted their kids are luxury items.
I’m not suggesting that we shame commenters who had kids or censure them in any way. But I think it needs to be part of the conversation. “You had too many kids,” and, “If you want to make it easier to be financially secure, have fewer kids,” are messages that I really think are lacking on the site. I have several friends who stopped at one child (or didn’t have any) because of finances. One of my good friends said, “We could give two kids an OK life financially, or we could give one kid a great life.”
I understand there are complex cultural, religious, and personal reasons that people have children. But I think you could find someone who could argue the same for going to Harvard and leasing a BMW. So I think a better balance could be struck on this point.
#3 Tax Preparation Software
You all know the software I’m talking about—the name is nearly synonymous with tax prep software (like Q-tip for cotton-tipped applicators). I think they’re an advertiser, so I don’t want to call them out by name, but I doubt they are “one of the good guys”. They may be why the tax code is so complicated and are almost certainly responsible for why you can’t file your taxes without tax prep software or an accountant (I realize WCI has done this by hand, but I doubt many readers do).
I appreciate everything WCI does to make sure his recommended pages are “one of the good guys,” so this one is confusing. It’s particularly remarkable given that he has called out this very problem in a blog post. Like most of you, my taxes aren’t the easiest to figure out, so the free-file is not an option. I had used the big name company for years to do my taxes, but just last year found some alternatives. In researching this post, I discovered the new company I found may also be up to some shenanigans. OK, you may not be able to win with tax software. Welcome to America. At least you can find less expensive options than you-know-who.
[Editor's Note: In response to this, we removed Turbotax from our recommended list, even though I used them successfully for years. No sense looking bad in the eyes of even one reader for what we ever earned off that partnership (a two-figure amount annually).]
#4 Contribution vs. Conversion
I know, I know, this one’s rather nit-picky. I appreciate that there are “Back to Basics” posts to deal with topics like this, but I haven’t seen one on the blog yet that covers this particular problem regarding IRAs. It became acute for me when I was listening to the podcast about the five-year rule for Roth IRAs. There are different rules for conversions vs. contributions. It was suggested to read the Kitces article for more detail, so I did. But I still didn’t understand. What’s a contribution? What’s a conversion? Is what I’ve done for the past few years for a backdoor Roth IRA a contribution or conversion? How do they differ?
I finally understood it after diving into 403(b) vs. Roth 403(b) contributions and I think I know what the problem is. As a high-earning professional, most of us have never had the option to contribute to an IRA. A contribution is made into the account. In the case of an employee, the money that gets sent to your 401(k) or 403(b) is a contribution. When you already have money in an account (such as an IRA) and then move that money into a Roth account (such as a Roth IRA), it is a conversion.
It doesn’t help that the clock on one of the five-year rules is started by either a contribution or a conversion, even though “contribution” is consistently used to describe when the clock starts. My conclusion is that you can withdraw your Backdoor Roth IRA conversions (max of $6,000 in 2021) after five years, but you can’t withdraw the earnings until after you turn 59.5 years old and have had any Roth IRA for five or more years. My point is, a “Back to Basics” on this topic would be welcome, emphasizing that IRA contributions are probably unknown to us because we can’t do them due to our high income.
[Editor's Note: A post on the five-year rules is on the to-do list; until then, this one will have to do.]
#5 Personal Stories on SPIA, CRUTs, and Pensions
We all know about the one good annuity—SPIA. But … have you ever read a comment by anyone who bought one? I haven’t yet. I would LOVE to hear what that process is like, their experience, why they made that decision, and how it has worked out for them for 5-10 years. I’m sure those people are out there. Given that WCI suggests you seriously consider a SPIA, is anyone doing them? If not, why not?
What about CRUTs? Has anyone actually done one of these? What’s your experience like? Why not give money to a charitable trust instead of flushing gains out to another charitable contribution? How did they find the charity to give to? Although I’ve seen one comment by someone who started one, I don’t think I’ve seen any by people who have designed their retirement strategy for them or who have used them several years down the line.
Has anyone tried to buy years of service from their organization that offers a pension or worked for two government entities that each offered a pension? How does your math work out if your pension doesn’t kick in until 60 but you plan to retire at 45? Has anyone had a small pension and then covered the balance with your investment portfolio?
[Editor's Note: If any readers HAVE used a SPIA, a CRUT, or a pension and would like to write their own guest post detailing their experiences, here is the guest post policy. We'd love to hear from you.]
Maybe answers to these are all lurking in the forum—which, to be clear, I have not read consistently. And I appreciate that WCI can only post what he gets. It’s just surprising to me that there are topics that come up on the blog but which, apparently, none of the readers are interested in sharing their experience with. It would be nice to get more of these personal stories.
I really had to dig for four of those (the kids thing I noticed in the first 30 blog posts or so). I thought I would take a stab at this incredibly difficult topic, being a serious WCI fan and aficionado. I have started teaching personal finance to the veterinary students, and maybe I can make a tiny fraction of the difference WCI has made. I expect there will be rejoinders to all of these, which I welcome. Thank you so much to EVERYONE at the WCI for what you do—this is an absolutely amazing resource and I am continuously struck by how generous, patient, and kind the organization is.
What do you think? What does WCI get wrong? Where else are there gaps that WCI needs to fill? More whole life? More crypto? More stock picking and options? Comment below!
[Editor's Note: Dr. Hofmeister is a Professor of Veterinary Anesthesia at Auburn University and blogs about veterinary academics at vetducator.com. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]