Asset Protection, 529s and the SAVE Plan - WCI Podcast #374

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All right, let's get into your questions here.

Hi Dr. Dali. My elderly mother was a victim of fraud. She was coerced into transferring a large amount of money from her traditional IRA to her checking account. The total was about $340,000 split into three separate transactions within a single week. There were 200k, 80k and 60k. She sent half or about 170k to the perpetrators and that money is now gone. The remaining 170k is still in her checking account. Her traditional IRA has $120,000 remaining and she also has $100,000 in a Roth IRA. She has no other liquid assets. My understanding is that she has 60 days to repay the withdrawal from her traditional IRA without having to pay taxes. My question is, can she withdraw the $100,000 from her Roth IRA and then add that to the $170,000 in her checking account to repay a total of $270,000 to her traditional IRA in order to minimize the tax burden? Or would the repayment be capped at 200k, her largest single withdrawal amount? Because of the limit of doing one transaction per year, her typical taxable income is around $45,000 per year. Just trying to minimize the huge tax bill from this fraud. Thank you very much for all you do. I appreciate your time.

Oh, Kyle, I'm so sorry. That is so terrible. It's one thing when I see a.

Multimillionaire doctor be the victim of, you know, a few thousand dollars of fraud. It's totally different than it's half your nest egg.

Breaks your heart to hear that story.

It's just awful.

As a general rule, this is for.

You and for everybody else.

If you've got a time sensitive question, the Speak pipes may be not the place for it.

All right?

I hope you found the answer to.

This long before you heard this podcast.

But by the time you leave something on the Speak pipe and by the time we run it, we're probably looking at five weeks, right? And when you got 60 days to.

Perform a rollover after you ask the question, that's probably not going to make it.

So just keep that in mind. If you have a question you want.

Answered Sooner, email me editorwhitecoatinvestor.com and we'll try to help. I'm not going to promise I'm going.

To answer you the same day.

Sometimes it's a week later if I'm on a trip or something, but most of the time it's within a day or two. And that's better than five or six weeks later on the Speak bite.

But yeah, you got 60 days, right? Anytime you pull money out, you can.

Essentially do a Rollover. You've got 60 days to do a rollover once a year.

And the fact that this all came out in three different payments, would that.

Count as multiple rollovers or could that all be considered one?

If they were close together, maybe it could be considered one.

Certainly they all.

The date starts with the time the first money came out.

Right. If you're trying to put all the.

Money back in there, it's going to start the first withdrawal that was made.

And so you got 60 days from that.

You mentioned Mom's elderly, so there's no 10% penalties on pulling anything out. You could pull all the money out of the Roth IRA today. It wouldn't cost you anything in taxes. You could subsequently put that back into the traditional IRA and avoid the tax.

Bill on those withdrawals.

But there's gotta be something else here to help you, right? I think there's deduction if you have stuff stolen from you, isn't there, on your taxes? So it seems like everything that was stolen, yes, that's taxable income, but there should be an offsetting deduction.

Now, she'd obviously have to, you know.

Itemize to get that, but I'm pretty sure that having something stolen from you is deductible. Let's look at Schedule A.

Let me pull up Schedule A here. And look at that.

It's got your medical and dental expenses. You got taxes you paid interest you paid gifts to charity. Here it is. Casualty and theft losses, line 15 on Schedule A.

Right.

That's from a federally declared disaster, though. Oh, is that the only ones that you can deduct? Let's go to the instructions here. I'm pretty sure you used to be able to deduct these.

Maybe you can't anymore.

Let's go to the schedule A instructions.

And see if you can deduct this anymore.

All right, 2023 instructions for Schedule A comes from IRS.gov let's go down to losses. You used to be able to deduct.

You know, if you had stuff stolen.

Out of your garage.

Let's see what it says now.

It says attach Form 4684 to figure the amount of your loss or only enter the amount from Form 4684, Line 18. Let's go to 4684 Casualties and Thefts of property not used in a trade.

Or business or for income producing purposes.

Section B is business and income producing property. I mean, I think you can still put this on 4684 as a theft and then it can go to schedule A. So, I mean, she may not have wanted to itemize, but it sounds like she can itemize this year. That'll offset some of this and maybe that'll make it. So you don't want to put all the money back in the traditional ira. Maybe you don't want to Raid the Roth ira. If you can offset some of this.

With the deduction, I think I'd look very, very carefully into that before I cashed out a Roth ira. That's seems like a little bit of an extreme solution to that particular tax bill. But I think you got a deduction there that you may not be aware of that you ought to look very carefully into and check that out.

In general, fraud is one of these things that's embarrassing to admit.

People don't want to admit they've been victims of fraud, which is interesting, right?

Nobody's afraid to admit that they were.

A victim of breaking and entering. Nobody's afraid to admit they were the victim of grand theft auto. But somehow we feel like it's our fault that we were defrauded and it makes us look stupid for falling for the trick.

Well, these tricks are incredibly complex.

And this has been going on for years and years and years and years and years. Right. You know, they can be incredibly complex. I watched a Robert Redford movie. It was an old Robert Redford movie not long ago. I can't remember what it was called.

But it was a very complex fraud. And it was based on real life, you know.

So a lot of these are impressively complex deals that people are getting suckered into.

So don't beat yourself up with your victim of fraud. Obviously, maybe you don't want to publicize.

It because it makes you seem dumb.

And maybe that affects your business prospects. But don't sit on this stuff and be hurt by it because you are the victim. You are a victim of fraud.

Right?

People did this to you. It's not a mistake you made.

You're a victim. And many of us have been victims of fraud.

I had a syndication that was.

I lost a great deal of principle on. It's almost surely not coming back. It's not done yet. But it was a result of a fraudulent operator.

And there was no amount of due diligence that would have cued me into.

This, clued me into this, and helped me avoid that. It was just fraud.

It was just crime.

And that's the way most fraud is.

So do what you can to mitigate the loss. Try to get your money back.

Report to the appropriate authorities, but recognize that this stuff's really, really complex.

I was really bummed, actually.

I was reading in the local newspaper.

The SEC is closing down the Salt Lake City branch.

Apparently they had some attorneys that retired or left or went somewhere else and there was a big to do over crypto case here that maybe they were.

Overreaching on and now they just closed the office, which I think is a very bad idea given the history of fraud in Utah.

We've got this long, long decades long history of being the fraud capital of the world out here. It goes back to the era when.

They were literally selling uranium company stocks.

On street corners in Salt Lake City.

So I'm not thrilled to have the.

SEC going away out of Salt Lake City. Apparently the Denver office is going to help cover Utah, but I think we merit our own division of the SEC here and I'm not excited to see them pulling out, but there's a lot of fraud out there. That division was always very busy and I'm sure that Denver's not going to be able to ramp up and cover the need out here for anti fraud protection.

All right, let's talk about another kind of protection. Let's talk about asset protection. This question comes From Matthew hi Dr. Dali.

I just finished reading your excellent WCI guide to asset protection and I have some additional questions. I am two years out of residency working as an independent contractor, splitting time 5050 in Kansas and Missouri. My first question is what happens if a malpractice suit arises in one state versus the other? Do the laws follow whichever state malpractice suit originates? If I own a home in Kansas, would it be subject to creditors from a suit originating in Missouri unless titled by entirety or does the unlimited Kansas homestead exemption protect it regardless? And on the flip side, would a brokerage account titled by entirety in Missouri be from a suit originating in Kansas which doesn't have titling by entirety protections? My second question is in regards to neither state having decent non ariza protections as most of my wife's and my retirement savings are in a solo 401 and Roth IRAs, while the cap on non economic damages in both states and my two and six million dollars malpractice policy means I'm not particularly worried about an above policy judgment. It still makes me a little uncomfortable that our retirement accounts aren't fully protected. Can all these accounts go into a domestic asset protection trust? And would this situation make you more likely to suggest that? Thanks for all that. You do really appreciate it.

All right, great questions on asset protection.

I love it. We're getting into the weeds here.

Your first question is such a doctor question, right? Doctors think this is the way asset protection works, that there's this category oh that's protected and this isn't protected.

And the truth is that's whatever works out in court. Some things are pretty clear and we know pretty much how they're going to work. Other things are not so clear.

So if you went into court with.

Assets in Missouri, in a lawsuit in.

Kansas or vice versa, the prosecution is.

Going to argue for the state laws that are most favorable to them, and.

The defense is going to argue for the state laws that are most favorable to them. And it's going to come down to the judge, jury or whatever, and that's what's going to happen. So I think you ought to be prepared for the worst case scenario.

Whichever state laws are less favorable to you could be the ones that end up getting used and you hope for.

The best, which is that the better.

Laws are the ones that are used in the case. But I don't think there is a.

Definitive answer in this, and I'm positive.

You talk to an asset protection attorney that they'll give you a similar answer because they're always waffling on stuff like.

This because nobody knows there's some case law.

But it basically comes down to the.

Battle of the attorneys. So good luck sorting that out. That said, do what you can, right? You probably get some protection for your non Ariza investments that you wouldn't get.

In a taxable account, so probably still worthwhile using them.

But in your situation, if you had the chance to roll money out of a non Ariza account into an Arise account, say you get an access to an employee job with a 403 or something, maybe you roll your solo 401k in there and get that additional protection.

That sort of step would be worth taking in your state. It would make me a little bit nervous too. Utah's got great retirement account protections, but we don't have much of a homestead protection. So our house is in an asset protection trust.

Utah has a nice asset protection trust. The house is in there.

I don't know that you can put a retirement account in a trust though. I don't think that's an option. I wonder if a beneficiary of the.

Retirement account where the trust, if that might help.

But I don't think it's a given because you own it. So I think it's possible you can still end up losing that in above policy limits judgment kind of situation where you had to declare bankruptcy.

But remember, when we're talking about asset protection, we're talking about what do you keep. If you declare bankruptcy, you get this $10 million judgment. It's not reduced on appeal.

You literally owe it and you go.

I can't pay it.

I'm going to declare Bankruptcy, and they.

Get whatever's not protected and you get.

To keep what is protected. Those are very rare situations. This does not happen very often at all in medical malpractice. So I'd still sleep well at night. I wouldn't spend a lot of time worrying about this, but I would do those things. That can be helpful. I don't think you can just stick your retirement accounts in a trust.

Sticking something in a trust, remember what it is. It's that the trust owns it and the trust can't own your retirement account.

Right. Especially while you're alive. So I don't think that's really an option. Good thought, though.

Maybe you ought to consider other states as well if this is a big concern for you.

But it doesn't sound like it's any more of a concern for you than it is for any other doctor, so hope that's helpful to you.

Our quote of the day today comes from Gary Player who said, the harder you work, the luckier you get.

There's a lot of truth to that. We create a lot of our own luck these days.

Okay, another asset protection question. This one I think has to do.

With the kids driving your cars.

Hi, Jim, this is Sherene from Florida. In your book A Physician's Guide to Asset Protection, you talk about reducing liability by removing my name off the title of the car that my kids kids use. I've got four kids, ages 21, 19, 19 and 15. Two of the kids, the 21 year old and the 19 year old, share a car at college. The other 19 year old is also in college at a different school, doesn't have a car on campus, but does use the car when home from school on break. My 15 year old is just starting to drive and we may purchase a used car for her when she turns 16. We already pay a ton for car insurance. Especially since one of the twins was in a minor accident a couple of years ago. I can't imagine paying separate policies for them. If we take our names off of the title, I'm assuming they would all need coverage because they all drive at some point during the year. In this situation, what would you do, if anything, regarding reducing my personal liability? I know you have four kids too, maybe a little younger than mine. What are you planning to do? Thanks.

Okay, great question.

Love this one.

Okay, first of all, if they're away at college and college is a long distance away, you may not need to have them on your insurance. If they're not driving a car out.

There, and they only drive yours when they come home.

When we checked on this, I think it was 40 miles, might have been 100 miles that they had to be away. If it was more than that distance, we didn't have to keep them on the insurance. If it was less than that distance, we did have to keep them on the insurance. Maybe it was 100 miles because our kids college.

Our kid, we only have one in College, is 40 miles away and we.

Had to keep her on the insurance while she was there. She's now in another state for a year and a half. And so we took her off the insurance.

She's not on our insurance currently, which obviously helps save a few bucks.

So look into that for the kid.

That'S not driving a car at college.

The other two that are sharing a car, you're basically weighing two things. One is maybe you can get cheaper insurance by having them on your insurance versus additional asset protection by getting them off your insurance. Remember, you're reading my book on asset protection, so I'm going to tell you how to get the most asset protection. That doesn't mean it's the best deal for you. You might be better off keeping them on your insurance, but at least price it out both ways, right? If it's exactly the same price or not much different, sure.

Get their own policy.

Even if you're paying for it with a gift you give them.

Then that might still be worth doing.

Whether the titling is more important than the insurance is a good question. It's probably best to change both.

But maybe you can argue in court.

In this sort of a situation that it's not your car, even if it's on your policy.

I don't know how well that would work.

You'd have to ask an attorney how well that argument would work. But it might be an option.

Probably better if it's their own policy and their car and your name's not on it. As far as asset protection purposes go.

Now what do I do? I've got a big fat liability policy on our cars with a big fat umbrella policy sitting on top of them. And if people aren't happy with the amount of money they get from my umbrella policy, they're incredibly greedy.

I mean, I would have to hit a really nice car with a very.

Expensive person inside it to hit policy limits on my umbrella policy. Most people driving around just aren't worth that much money. The economic value of their life is not as high as my umbrella policy.

And that's what matters, unfortunately. I mean, everyone wants to think they're worth millions, but the truth is, they really may not be. When they actually added up, you basically look at your earning potential. If you get somebody that's 65 and retired, they're not worth as much as a 40 year old CEO making $2 million a year.

All right, so good luck with that. You got to make a decision of.

It might cost you more for insurance.

And you get a little extra asset protection or you just decide to have a little less asset protection to save.

Some money on insurance. Your call.

As far as a 15 year old, when kids are on a permit, they don't cost anything. Your insurance doesn't go up to have.

A kid on a permit when they.

Turn 16 and get a license.

It sure goes up in a hurry though.

And obviously the best thing for your expenses and for your asset protection is to not let them drive until they're 18. I think that's a bad idea. It's really a trend these days. Lots of kids don't want to get their licenses. I remember when I turned 16, I was very antsy to get my license. It represented significant freedom in my life and all of my kids have felt the same way. And so it's a little bit surprising.

To me to see that there's kids out there that don't want to do that. But it's apparently true. I don't know if it's anxiety, they.

Don'T want to drive, or that people are just less social now. They all just hang out online and on social media or what it is. But it's been a real change in.

Society in the last couple of decades.

All right, let's take a new question. Enough asset protection. Let's talk about 529s.

Hi, Jim, this is Mike from Ohio. I had a question about 529 plans. I live in Ohio and Ohio offers a tax deduction of up to $4,000 per year per beneficiary. I do contribute to 529s for both of my children and have maxed out Those contributions at $17,000 per year times five years at once for myself and my wife. My question is, can I contribute $4,000 to a 529 for myself or my wife? Take the state tax deduction and then later change the beneficiary on the account to one of my children. Does this cause an issue with the gift tax exclusion limit? Similarly, could I initially contribute to an account for an aunt, uncle, grandparent, etc. And then again change the beneficiary down the road? I don't plan on doing the latter, but from my understanding, it seems like all of these would be allowed, although it seems like it should not be. Thanks in advance for your advice here.

Stop. Seriously, how much money do you need in a 529? Stop. Why are people trying to do these schemes? Don't do these schemes. College is not that expensive. I say this as somebody with four overfunded 529s, and I did not put the maximum amount in there Every year.

For years and years and years, we.

Basically stopped contributing to our 529s.

I think we put the max in.

For, I don't know, four or five years.

After all, just started talking about medical school, and we felt like we had to keep the other ones equal.

And there's way too much money in there.

None of them are going to spend it because they're going to a pretty cheap school. Now, if you're sure your kids are all going to a super expensive school, maybe you got to put the max in there for years and years and years to get there.

But let's just run the numbers, right? I think it's $18,000 a year you.

Can put in there.

Your spouse can go open an $18,000 529, too, and put $18,000 in there for them. All right, so $36,000.

Right?

Is what you're putting in there a year. They got 18 years. So let's do a future value calculation here. Let's just use 8%. Let's say 18 years. You're putting $36,000 a year in there, and that works out to be 1.3 million. What school are you sending these kids to that you got to do more than this, right? You start working out these schemes to put some in your own 529 and change the beneficiary or grandparents or uncles or whatever. Stop doing all this crap Now. I get it. You're trying to get a little tiny deduction on $4,000, right? I mean, what. What are Ohio tax rates anyway?

They're not that bad, are they?

Let's see, Ohio tax brackets says.

Do.

They go from 0% to 3.99, is that it? 4% tax, that's what you pay in Ohio. So if you get a deduction on 4 grand, $4,000 times 4%, that's $160.

You know, deduction you're getting, or that's.

What you're getting off your taxes?

I don't know. I don't know that I'd go opening a bunch of accounts to get $160 a year.

I guess you could. You need to read the Ohio rules.

Though on this, right?

I'm pretty sure in Utah that once you're 19 or once the student, the beneficiary of the 529 is 19, it might be 20. I can't deduct the contribution into that account anymore. At 18 I'm pretty sure I can. At 19, I don't think I can. So at that point, right, Doing uncle, doing grandpa, doing you, you're not getting the tax deduction anyway. So this scheme of yours I don't.

Think is going to work if the Ohio rules are like the Utah rules.

So keep that in mind. You got to know the Ohio rules.

If you're messing with the Ohio tax code in the Ohio 529 system.

But you can change beneficiaries.

That would help you get around things.

The gift tax rules, right? Let's talk about gift tax for a minute. For the most part, most doctors are never going to pay gift taxes.

They can change the rules.

But most docs, you're just not rich enough, have to pay any sort of gift tax ever. Because remember what a gift tax is, right? You're just using some of your estate tax exemption early. And what's the estate tax? It's like $13 million a person right now, I think. So $26 million for a married couple. And it's portable so one spouse can use the other spouses. Now that's scheduled to be cut in half. But even cut in half, right, it's still indexed to inflation. $13 million. Now $14 million by the time you die is 25 or $30 million. Really, is this an issue for you? You better have something really successful on the side or you basically don't spend any of your money. And you have a very high physician income for many years if you're planning.

To get to an estate tax problem.

So all the gift tax ends up being, if you do have a gift tax issue is just filing a return. You're not actually paying any tax. You just have to file the gift tax return. But the basic rules of the gift tax are $18,000 a year.

You can do without having to file a gift tax return.

If you give more than $18,000 a.

Year to anybody, you got to file.

A gift tax return and use up some of that estate tax exemption. We've had to do that return once in our life when we set up our trust.

Otherwise all our gifts have been under that amount every year.

So you put $18,000 into your. Into a 529 that you own, 18,000 to a 529 that your spouse owns. Anything above and beyond that that you.

Give the kids, other than paying for stuff like living expenses and their education directly, you have to file a gift tax return.

Later down the road. If you were changing beneficiaries, you usually.

Would have to file a gift tax return for that as well if the total amount puts you over the limit. But it's usually not that hard to work around that. You got to really want to give them a lot of money to not be able to work around that and have to get into the specifics of these rules.

Now, your general comment about 529 rules and laws being really weird, I totally agree with. I don't think Congress and even the IRS thought this through very well when.

They passed all these laws about 529s and able accounts. I don't think they really thought through how that's going to interact with gift tax laws. And so it doesn't always make sense. I absolutely agree with you.

I mean, for example, it counts as a contribution when you put it into a 529 that you own that the kid's the beneficiary.

Right?

You own it. You can take the money out of the 529 and buy a sailboat with it, and yet it already counts as a completed gift. You know, that doesn't make any sense, but that's the way the rules are.

So you just got to work with the rules that they have.

Hope that's helpful to you. I'm sorry if I rained on your.

Parade a little too hard, but I think people get a little crazy about 529s, these people trying to open them before they even have a Social Security number for the kid.

It's overkill.

Okay?

You're going to be able to save.

Up enough for college.

And even if you can't, right, you can cash flow a huge part of it.

It's not the end of the world.

If you don't make a maximum contribution to multiple 529s every year for 18.

Years, you're going to be able to pay for your kids college. It'll be all right.

Okay, let's go on to our next question.

Hi, Dr. Dali. I had a question regarding 529 plans and withdrawals and how to document those on federal and state tax returns. I have a daughter starting college this fall and I'm unable to find online how to properly document those withdrawals on tax Returns. Ideally, I would like to be able to take a withdrawal a few days before I pay those bills, so I have that money I can use towards that. I was just wondering how I document that on. On the federal and state tax returns to stay in compliance with the irs. I'm an Illinois resident, if that matters. But I was just wondering if you could please review how to do that properly. Thank you.

All right.

Great question, and a lot of good questions today. What a great episode we're putting together here. So let me tell you what I do. I am now withdrawing. Starting this year, I think I'm withdrawing from nine 5 29s.

You'll recall. I started them for all my nieces and nephews. And we got nine kids in college. One of them just graduated, actually, between our nieces and nephews. So this is exciting. But this is why I have 34, 35 529s. I got one for all these kids.

Here's what I do. They all have a Venmo account, and they say, uncle Jim, I need $1,750.

For this fee or for rent or whatever.

I say, okay, and I venmo them $1750. Then I log in to my529.org and I make a withdrawal to my bank account. It's a partial withdrawal, and it's for higher education. That's all the529 asks me, and it goes to my bank account.

And then, you know, we reconcile our Venmo account and our bank account and whatever money moves between the two, no problem.

Now, they go and pay for their fee, they pay their rent, whatever, and they send me the receipt, they email me the receipt, and I save it on my computer in my folder for 529 receipts for 2024. That's it. That's the whole process. At the end of the year, my 529 sends me some tax forms, and I hand those to my tax preparer.

But I don't think they even do much with them. This isn't really a taxable event.

These are legitimate withdrawals. So they're not income to me.

They don't really show up on my taxes, you know. And so I get a form from.

Them for my contributions, I get a deduction for contributions, and I get a.

Form from them showing withdrawals.

And if I ever got audited, the IRS could say, okay, show me the receipts for these withdrawals. And I have the receipts, and that's it. Now, I've talked to an expert about paying for college and her recommendation was actually that you have the 529.

Send the money to the school or.

To whoever the payment's going to whenever possible.

That looks cleaner and is less likely to get audited.

But you know what? It's a huge pain. You know what's not a pain? Venmo. Venmo's not a pain. Putting it in my account. Not a pain.

And I think it's worth the risk of an audit. I'm confident I would pass an audit on this point. They're all legitimate expenses. I have all the receipts. It's a very clean paper trail. And I don't think it's a problem. They're not going to audit me on this. This is small potatoes. When it comes to my tax return. And they want to do an audit, they're going to audit something else. But that's what I do. So I hope that's helpful. We could go through the forms that the 529 send you. We could talk about how that actually.

Gets entered into tax software. But I'll be honest, I've never done it right.

I haven't been doing my own taxes for the last two or three years. I just hand it to the tax guy and they take care of it. But since it's not taxable, I don't think it even really shows up on the return the deductions do for my contributions. Absolutely they show up. I can show you where they show up on my Utah return, but that's not going to help you in Illinois. I'm sure they show up somewhere similarly on the Illinois return. Actually, I think I may be filing Illinois return, so I might be able.

To tell you where that sort of.

Thing would show up on an Illinois return.

But I'm not making contributions to an Illinois 529.

So I'm not going to get that deduction anyway.

Hope that's helpful to you. It doesn't have to be that complicated.

It's really not that big a deal. You just want to make sure you're spending on legitimate things in general.

That's computers, that's room and board.

Or if they're living on their own.

You know, rent and food up to the amount the school authorizes its tuition, it's fees. One thing it is not, however, is transportation.

I've had some of the kids ask.

Me to send them money for transportation expenses.

No bueno.

That is not a 529 expense.

So keep that in mind.

Almost everything else they need for school is, though. All right. WCI scholarship Season. The WCI Scholarship is out there again. You got to be a professional student to apply. You can apply@whitecoatinvestor.com scholarship. Last year, I think we had 1,000 applicants.

All right, what is it?

It's a cash award. We send you a check. We give you a white coat investor course as well if you win. There's 10 winners. There's two categories. One category is like inspiring story category.

That's where most of the applications come in.

The other one's like a financial story. And, you know, tell us a financial.

Story from being in med school, maybe a trick you learned or how you're.

Paying for things or keeping your debt down or whatever. The other one tends to be people.

Who come from an incredibly hard financial.

Background and, you know, our incredible people that started orphanages or whatever.

And those tend to be the people that win in that category.

But you can apply.

We encourage people to apply.

You have to be a full time professional student in good standing. Most of our winners over the years have been medical students with an occasional dental student. That's one. But other professionals can apply.

You one thing we do need with this though, because now we're getting not.

Just like 600 applications like we used.

To, we're getting like 1,000 applications a year.

We need help judging.

We don't decide who gets the money.

None of the WCI staff are judges. You guys are the judges. The white coat investor community is the judges. So we need judges. And last year we had so many.

Applicants, I think it ended up being.

Like 20 of these thousand word essays.

That the judges had to read.

We'd like to get that down closer.

To 10, so it's not as much of a burden on the volunteer judges.

So please, please, please, even if you've never judged this before, we'd like you to be a judge. You can't be a student or a resident, but if you're a professional or retiree of any kind, you can be one of the judges and expect to read 10 to 20 of these thousand word essays. And they're pretty inspiring. I think you'll really enjoy it. But apply to be a judge by emailing scholarshiphitecoatinvestor.com put volunteer judge in the title. We'll get you in there.

You'll need a little bit of free.

Time in September to be a judge.

But please, please, please volunteer. We can't do this program without you.

It would be overwhelming for our staff, number one.

But number two, we just want to be as unbiased as possible as far as who the winners are of the contest are, but I think we're at.

60 or $70,000 this year.

We're going to give away.

You divide that by 10, that six or $7,000 a piece. That's a big deal to a medical student, right?

That's a big deal to get a check for that. It really does make a difference in their lives and we continue to support that and appreciate our sponsors who help us to keep this program going year after year. I don't know what year we're in, seven or eight. I think we've been doing this and we hope to keep it going, but.

We do need your help to do so. So those who want to apply whitecoatinvestor.com scholarship you have till the end of August.

There's no benefit to applying early, but maybe don't wait till the last minute.

Those who want to judge, email scholarshipinvestor.com.

With the words volunteer judge in the title. Thank you so much for being willing to do that.

Okay, next question comes from Nicholas.

Let's take a listen.

Hi, Dr. Dali, this is Nick from Idaho. I have a question in regards to the SAFE plan that replaced repayment. As far as I understand, as long as the monthly payment calculated on this plan is made every month, no interest.

Accrues on the total student loan balance.

My previous student loan plan was to enroll in, repay during residency and refinance privately after residency for a lower interest rate. However, as far as I understand, the safe plan seems to have essentially a 0% interest rate for those who are like me and are interested in paying off loans within just a few years of graduating residency. Am I missing something or is this the best student loan hack available? I didn't hear you say anything wrong, so I don't think you're missing anything. I don't know if I should rant on this again.

I feel like I've talked about this before, but the federal student loan program has become incredibly generous for doctors. When you combine the save plan with.

PSLF and a few other things like the fact that.

You know, basically people.

Aren'T taking out private loans in med school anymore and it takes a year or two to certify your new income. When your income goes up, you put these four factors together and super generous. I'm not even sure it's good public policy to have it be this generous.

To doctors, but I'm glad you guys.

Are all benefiting from it.

Obviously, play by the rules of the.

Game you're given and take advantage where you Can. But yeah, this is the way save works, right? So let's say you got $200,000 in student loans. They're at 6%. So that's $1,000 in interest a month, right? Let's say your payment's 200 bucks. So you'd pay $200 and $800 in interest would be waived.

That's the way save works, okay?

Repay was, you know, basically $400 would.

Be added onto your loan and $400 would be waived.

Well, now under save, all $800 is waived. So your loans no longer grow in residency. You do have to make payments though, right? And those payments are going toward interest. So it's not zero percent interest. It's a heavily subsidized interest rate, even more so than under repay.

But it's not zero percent interest.

You're paying some interest during residency with your payments. Just the only guarantee is that they.

Don'T grow because no interest is getting.

Added to the loan. You can't stay in repay though, right? Everybody in repay is being converted to save.

So it's not like repay is even a thing anymore. It doesn't even really exist. It's being all converted to save.

Now after residency, you're going to pay off your loans. You're not planning on going for pslf. So basically you wait until you have to recertify your income and that's not.

Going to be the day you walk out of residency. It might be the next spring, it might be two years later.

Just depends, right?

This is a moving target. The rules keep changing. Sometimes they don't come to you for.

Quite a while and you're still making payments based on your resident income. I mean, your first couple years of residency. If you file a tax return as a fourth year medical student showing zero income, your first year or two of residency, you're basically making $0 payments. And then your payments go up a.

Little bit more as you go through residency. And then when you come out for.

A year or two, you're still making payments based on that resident or fellow income. And if you can get your student loans paid off in a year, 18 months, two years after coming out, it might not make sense to refinance.

Right?

Your subsidized interest rate is not zero. Like I said, that subsidized interest rate may be better than what you can refinance to. On the other hand, if you think it's going to be three, four, five.

Six years, whatever, to pay off your student loans, you're probably going to need.

To refinance and when do you refinance? You refinance about that time that they.

Basically take into account your attending income.

Because at that point, you're no longer getting a subsidized interest rate. What interest rate are you paying? Well, you're paying these days, medical students are taking out loans. I think this next year it's going to be 8.05% and 9.05%. Now, those of you who are out in training right now, you don't have loans that high.

You don't have federal loans that high. Anyway, for the most part, yours are six or seven, probably, but that's how high they are.

So if your loans are going to where your effective rate is 8%. Yeah, refinance them. I think people are refinancing at 5.

5 and a half, 6% right now.

It's not the 2% you used to.

Be able to get. And so of course, the volume of.

Refinancing has gone way down. But if you're paying off your student loans and your federal student loan rate is really high. Yeah, refinance, refinance still makes sense for lots of people. Just remember, once you refinance, you're no longer in save. You can't go back into save if you go back to residency or anything.

And of course, you're no longer eligible for pslf.

So refinancing is kind of a big decision.

But if you're going to pay off your student loans anyway, why not save 2 or 3% on them? It still makes sense. We still have our partners for student.

Loan refinancing here@whitecoatinvestor.com, it's under the recommended tab.

If you go to the website, we're.

Still giving away cash. You're still getting. Fire your financial advisor for free if.

You sign up for, you know, to refinance through our links.

So it's a way better deal than.

Going directly to them.

But let's be honest, the volume's way lower.

Right.

Because interest rates went up, number one, and save became so generous.

So not nearly as big a part of the business as it used to be a few years ago, but it still makes sense for lots of people to use. Your loans are not 0% just because they're not going up in residency. You're still paying some interest. So hope that answers your question.

Now, as I mentioned at the top.

Of the podcast, SOFI is helping medical professionals like U.S. bank, borrow and invest to achieve financial wellness, whether you're a.

Resident or close to retirement. Sofi offers medical professionals exclusive rates and.

Services to help you get your money right.

Visit their dedicated page. See all that SoFi has to offer at whitecoatinvestor.com SoFi one more time. That's whitecoatinvestor.com sofi loans originated by SoFi.

Bank NA NMLS 696891 advisory services by SoFi Wealth LLC. The brokerage project is offered by SoFi Securities LLC.

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All right, thanks. For those of you leaving us a five star review and telling your friends about the podcast, recent one came in from Woof755, you said Essential Financial Podcast. Dr. Jim Daly has been looking out for docs for well over a decade. He provides evidence based and influence free advice in order to help docs get.

Their finances in line. Absolutely essential. Listen. Five stars. Thanks for that great review. It really does help.

Don't forget scholarship time.

Right?

Apply. Please volunteer to be a judge. Don't forget that it's the new medical year. Watch out for those new interns, new residents, new students. Make sure they're getting the financial literacy they need. Please pay this wonderful gift that we've.

All been giving to be financially literate. Please pay it forward. There's somebody out there that you might not feel like you know that much, but you know more than somebody that you're interacting with. I'm always appalled by the questions I get in real life from real intelligent doctors that don't know all that much about finance. You can help them.

Please do.

Please do. We appreciate it.

Okay, that's the end of another great podcast. Keep your head up, shoulders back. You've got this and we can help.

We'll see you next time on the White Coat Investor Podcast.

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