Get Rich Fast as a Millionaire with Roth Conversions - WCI Podcast #417

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.

This is White Coat Investor podcast number 417, get rich fast as a Millionaire with Roth Conversions, brought to you by Laurel Road for Doctors. Laurel Road is committed to serving the unique financial needs of residents and doctors. We want to help make your money work harder and smarter. If credit card debt is weighing you down and you're struggling with monthly payments, a personal loan designed for residents with special repayment terms during training could help you consolidate your debt. Check if you qualify for a lower rate. Plus, White Coat investors also get an additional rate discount when they apply through LaurelRoad.com WCI. For terms and conditions, please visit www.l LaurelRoad.com forward/wci. That's www.l LaurelRoad.com WCI. LaurelRoad is a brand of KeyBank and a member FDIC. All right, how do you like that clickbaity title? I'm being told that if we title these podcasts differently, a different number of people listen to them. So the key is apparently to put Get Rich Millionaire and something about Roth in the title and then you all listen to the podcast. I can't explain this, but this is the way it works. And so we're going to talk about some of that stuff today. So I figured it was fair enough to put it all into the title. And now you know how the online, you know, financial, whatever business we're in functions. Thanks everybody out there for what you're doing. I know you're not all online infopreneurs like we are. You're actually doing important work where it makes a difference in people's lives and I thank you for that. Sometimes we don't acknowledge as much as we should just how difficult your jobs are. And I appreciate you doing that. By the way, we have got a promotion going right now on our online courses. Okay. This podcast drops May 1st. I'm told this promotion goes through May 9th, so you got about nine days if you listen to this, the day it drops. If you go to whitecoatinvestor.com courses, you'll see that we have 20% off off everything. Okay? That's all of our online courses. That makes our new fire your financial advisor student course just $79, right? I mean, people have asked for years. We need cheaper courses. Well, here's as cheap as we can make a course and have this thing I don't even know if it pencils out. We're probably, you know, losing money on this course, but it's designed for students. Inspire your financial advisor. Designed for students. You can upgrade to the resident version. You get credit for what you paid for the student version. You can upgrade to the attending version later, you can even upgrade to the to the CME version. That CME version is called Financial wellness and burnout prevention for medical professionals. It's our full attending version. Fire your financial advisor plus eight hours of wellness content. It's great content even by itself, but it makes the entire thing qualify for CME. So you can use your CME funds to buy that. Well as 20% off through May 9th. I mean, the return on investment of these courses. If you don't know the stuff we're teaching in this and you could spend a lot of hours trying to learn it yourself, reading blog posts, listening to podcasts and reading books. Or we will spoon feed it to you in these courses, having taken all the high yield stuff, put it all together in one place and given it to you all at once. There's serious return on investment for these courses. Whether it's our no hype real estate investing course, whether it is our fire your financial advisor course, whether it's our continuing financial education 25 course. You know, the one we make from the conference each year. You know you don't have to learn much from these to more than pay for the price of the course, especially when we're giving it to you. 20% off. So check that out. Whitecoatinvestor.com courses it's 20% off through May 9th. Use the code podcast20 at checkout. I got an email from one of the people we work with for insurance. We have these agents that we have worked with for a long time that help a lot of investors, a lot of white coat investors to get their term life and disability insurance in place. These are the experts in the industry. They sell together more policies than anybody else in the industry. Right. They know these things inside and out and we work with them to make sure they're serving you guys as best they can, that they're not hawking you a bunch of whole life policies or anything you don't need. But every now and then I get some feedback from them. One of them sent me an email recently so said he helped implement a disability insurance policy for a resident that had resisted at first to go through with the application, but ultimately agreed getting the policy would be in the doc's best interest. Wednesday, the Doc called this person back. This is about three months after getting disability insurance. This is a resident, I think, early 30s. And to say he's going in for surgery on Friday, turned out he had been diagnosed with cancer and was hoping it would all resolve itself within six months, but that he was going to have to make a disability insurance claim. The point of the email is being sent was that nobody thinks this is going to happen to them, right? Nobody thinks they can get disabled. We all think we're Superman. But look around, you're taking care of lots of people in their 20s and 30s and 40s that get disabled. Whether it's from a cancer diagnosis or whether it's fallen off the Grand Teton, it does happen. And imagine how grateful you would be to have that disability insurance in place, especially early in your career, before you have any sort of a significant nest egg, especially if you've got to live off it long term. Now, hopefully this doc's only living off for a few months while doing surgery and chemotherapy, et cetera, but it could become a long term disability. And it's good to get that coverage in place when you're young and healthy and it's cheap and you can still get it because once you have a diagnosis like this, it's much, much harder to get disability insurance in place. So the agent wrote to me, I'm so passionate about what I do every day. And this just makes it so evident that our work together is so valuable. As always, I'm really grateful for our partnership, which allows me to help as many physicians as possible. So, yeah, get your disability insurance in place. Okay, we've got Chris Davin here today. This is a Friends of WCI episode, which I love doing because I get somebody else to bat around with and to argue with and to help answer your questions with Chris Davin. I'll introduce him a little more in just a second when I get him on the call. But Chris was a speaker at WC icon 25, as well as a previous one. If you want to be a speaker at WC icon, first of all, let me tell you, you don't have to know as much as Chris to be a speaker. Chris really knows his stuff, as you're going to realize as we get into this podcast. But we're calling for speakers now. This is for WC Icon 26. It's in Las Vegas at the end of. End of March, right, mid March next year. Okay. We're taking applications from now until June 15th. You apply@wcievents.com if you really want to Speak. Here's the secret. Put in for more than one talk. If it's only one talk and we already got somebody giving that talk, or we don't want that talk, or we think somebody gives the talk better than you, we're not picking you. Right. But if you give us choices two, three, four different talks, you have a better chance of being selected as a speaker. It is a competitive process. About 80% of applicants don't get selected. And I'm sorry about that. I wish I could have all of you come speak at WC Icon, but it's just there's limited space, there's limited time, and we want to change it up a little bit every year. But we also want to get the really top notch, best rated people back from time to time as well. But please do apply and we'll take a very serious look at your application. I had somebody that I had on the podcast not long ago that's like I've applied five years in a row and still haven't been selected. And it's true, sometimes you don't get selected for a while, but we hope to get you there eventually, especially if you're a great speaker with a great topic that we want to get out to. White Coat investors at wcicon. Okay, let's get Chris on the line. This is a long episode already, but I think we go into so much good stuff, you're going to love it. I apologize in advance if we spend too much time on this episode out in the Weeds, but I think we spent enough time on basic stuff too, that'll be beneficial to everybody. All right, this is another one of our Friends of White Coat Investor episodes. And so we've got somebody here to help me to explain things to you, to help me answer your questions. We have Chris Davin. Chris, welcome back to the podcast.

Thank you very much.

For those who don't know Chris, Chris has been a WC Icon speaker a couple of times. He's been on the podcast before. What number was that one, Megan? 359, I think it was about a year ago. Talked about, got into all kinds of fun stuff in the weeds. Talked about Roth versus traditional contributions. We'll reference a little bit of that stuff today. But what you need to know about Chris is that Chris is not a doc. He's married to a doc. Yes, but he's not a doc. He is an engineer, which comes with its entirely different set of strengths and weaknesses. Right? I mean, docs, we probably deserve our terrible reputation as do it yourself investors. Right? That's probably not the case for engineers. Right. And the reason why is investing is actually an engineering problem. Right. That's what it is. You're trying to optimize it to be good enough. Not perfect necessarily, but good enough. And so the engineering mindset lends itself really well, I think, not only to just being a competent investor, but in particular being a competent, do it yourself investor. Engineers are almost always very comfortable with spreadsheets. And frankly, if you're not comfortable with spreadsheets, you know, maybe you shouldn't be managing your own money. At least the very basics of a spreadsheet. I'm not talking about designing some fancy high powered one. I'm just talking about, you know, a little bit of, you know, financial calculations in the spreadsheets, basic multiplication and addition and keeping columns straight and those sorts of things. I think it's pretty important. Portfolio management. So Chris, what do you see as the weaknesses of being an engineer when it comes to personal finance and investing?

Oh, geez, you're really putting me on the spot. Yeah. So I think sometimes I think you can make better the enemy of good enough. I think that is possible. I mean, I will say in engineering, when we're solving engineering problems, that's a tendency that we have to fight as well. Right. Like, you know, I see that all the time. You know, people are building hardware and, you know, they want to keep testing it and testing it. You know, not everybody, I think, you know, typically, like younger engineers have that. I think as you get older, you tend to over time learn when the times you really need to kind of test the heck out of something and when it's okay to just kind of let it go out the door. But I think, I think that's certainly a risk. Yeah, I think maybe something else I would say is kind of, kind of along the same lines is like kind of getting hung up on doing things that may not have the biggest impact overall on the portfolio. For instance, if it's rebalancing on a really strict schedule, maybe that would be an example. Or maybe having too many asset classes in your portfolio, having a small value and having a small growth and having a Europe international, having Asia international, having emerging markets and have two and a half percent, you know, of this class and 5% of the class, like it can kind of get a little bit too complicated. I think that, you know, there is, I think in general for everybody too, not just engineers, there is a tendency to kind of tinker and make things more complex over time. You know, it's like if you have three asset classes, and, you know, you had a fourth and you had a fifth, and then you, you know, once you've handled that, then you come back, you know, in a month, and you're like, well, geez, you know, what do I want to do now? I'm going to add a sixth one. So I think there is definitely that.

All of a sudden, you're up to 13 and yeah, clearly you've made it overly complex. Yeah, that's what I'd say. I mean, engineers tend to like to get out into the weeds, tend to get into the details, maybe a little too much. So fair warning for this episode, we're going into the weeds today. We'll try to pull it back every now and then. If this is your first White Coat investor podcast episode you've ever listened to, recognize that not all of them go this deep into the weeds. And so I'll try to at least make you understand where we're at when we leave the pathway to go talk about what's off in the weeds. And keep in mind that the basics remain the same. Right. You need to save a reasonable amount of money, fund a reasonable plan reasonably well, and you need to stick with it in the long term. Those are the basics. Right. But if all we ever talked about was the basics, don't carry 30% credit card debt, there wouldn't be much to talk about on this podcast. So we're going to get a little bit out into the weeds today. Chris did an awesome presentation at our last wcicon. This is available, by the way, in our continuing financial education 25 class. That was spectacular. Right. Covered all the details you need to know about business, taxes, if you thought about being a sole proprietor or you're thinking about an S corp, those sorts of issues. This presentation is excellent. Highly recommend it. In that presentation, you referenced a little bit, a rule of thumb I've thrown out there from time to time, which is that if a doc doesn't have at least $100,000 in distributions as an S Corp. Right. Money, your profit from your S corp, above and beyond what you're paying yourself as a salary, is probably not worth the hassle of incorporating. And you thought maybe even that figure was a little bit too low, especially Once you consider the 199A deduction. Share your thoughts with us about incorporating, why it gets so overblown, oversold, and maybe how people ought to be thinking about it.

Yeah, so I will throw some numbers at you in a minute, but, you know, is as part of, you know, sort of my own decision making for my own financial life and for my families. And then also, you know, in sort of preparing the talk, you know, I did some research on, you know, incorporating and if you go online, there's a lot of places where, you know, they really strongly recommend incorporating. Like it's this great thing. You know, there's a lot of kind of really vague kind of hand wavy references to tax savings without really being too specific about what it is. I think, you know, there's maybe kind of the implication that some of the income would be income tax free, which is not true. All the income from your corporation is ultimately taxable as income. You know, the only potential tax savings is that any distributions that you take are payroll tax free, which probably for most doctors, if you're above the Social Security wage base, you're only talking about 2.9 or 3.8% savings. So, you know, again, your $100,000 distribution, that's about maybe $3,800, which is not nothing. But there's a whole bunch of other costs that sort of outweigh that. And you know, there's, I don't know, I found a lot of, a lot of places where, you know, people would say things like, oh, you know, when you're incorporated, it just makes your business sound so official. You know, you can be, you know, so and so Inc. And you know, people respect that and they're going to do more business like most doctors. You know, like if you're an emergency doctor, nobody cares whether you're incorporated or not. People don't care about your tax structure at all. You know, this is just really a non issue. So you should pick the option that will a, you know, save you most overall taxes, including, you know, the payroll taxes and a couple of other things I'm about to mention. And then, you know, there is value in simplicity. You know, not having to do a balance sheet, not having to, you know, deal with payroll. You know, there's some real value in having things be kind of simpler. So certainly for some situations, if you're able to take two $300,000 of distributions, save 3.8% on all of that, and then there's no sort of offsetting downside. I'd say it's probably worth the extra complexity, but for a lot of doctors, I don't think it is. And then the other thing I'll say is depending on the state that you're in and the rules, you may not have a choice. Like I think in California, my spouse, she has to be incorporated as Like a personal, personal medical corporation, which is a type of S corporation. So she doesn't have a choice to be a sole proprietor. I would recommend to her that she would be a sole proprietor if that were an option, but it's not. So. Yeah. So there's this payroll tax savings on the distributions, which, you know, is a small benefit, but you got to weigh against that the. The extra cost of hiring an accountant to do a separate tax return. And the tax return is more complex. If you make over $250,000, I think you have to maintain a balance sheet, which is kind of an extra step and extra time, which means extra money to get that right. I think my wife, back when she had a professional account here, again, it's Los Angeles, so maybe the prices are a little higher, but she was paying about $4,000 to have an accountant do bookkeeping and corporate taxes, and then that was not even the payroll cost. And a payroll service a year costs 500 or $1,000. So right there, your $3,800 of payroll tax savings is gone, and you're actually in the hole. The other thing I think a lot of people don't realize is that this 199, a deduction, which is part of the Trump Tax Cuts and Jobs act, that is typically smaller for an S corporation. So if you're a sole proprietor, you get that deduction on your whole income, whereas if you have an S corporation, you only get that deduction on the business profit. So, and that deduction is worth quite a bit. So if it's, you know, let's be conservative, and let's say somebody's in the 24% tax bracket, and then deduction is 20%. So 20% and 24%, that's like 4.8%. We can maybe call that 5. So, you know, let's say you have $300,000 of income, you've got $100,000 distributions and $200,000 of wages, you're gaining the payroll tax savings, which is, again, let's say, $3,800 on the profit, but you're losing 4.8% on the $200,000 of wages that you're paying yourself, in addition to all those other downsides. So it's really, for a lot of people, it's not that good of a deal. Now, you can find cases where people are phased out of that deduction, not getting the deduction anyway, then it kind of tips back the other way. So. So it can kind of go both ways. But. But I think this one of the things that I want to challenge is this idea that, you know, there's, there's, you know, all this money that can be saved by incorporating and it's this great thing. It's really more of kind of a specialized thing. There's, you know, probably a relatively small percent, maybe, I don't know, 20%, 30% of doctors would actually save money by incorporating. If I had to just make a wild guess, the majority I would suspect would probably be just better off as a sole proprietorship.

Yeah, it's probably even lower than that. Given how many docs are employees. You're just talking 20 or 30% of the self employed.

I'm talking self employed. Yeah, yeah, yeah.

Totally, totally agree with that. And I think most people, if you are making enough money that an S corp makes sense, you're probably making too much money as a doc to get the 199A deduction. You're probably phased out of it would be my guess for most people. The other thing people get hung up on with these corporations is they think there's some big, you know, liability coverage there that they're going to keep themselves from getting cleaned out in a malpractice suit. Don't forget, malpractice is always personal.

Yeah.

Forming a corporation does not help you reduce your malpractice risk at all. Maybe it reduces some unusual business risks. But let's be honest, if you're an independent contractor, it's just you, you don't have a lot of business risk. The only risk you've got is your malpractice risk. And that corporation isn't going to help with that.

Yeah, okay. It can get a little more complicated if you're talking about like a non medical field, you know, if somebody is starting some other general business making things. But I do think it's worth pointing out that I think it's true, at least in most states, maybe all that you can create an LLC and that will provide you that liability protection. Again, it doesn't protect for medical malpractice. But if you're selling some other product or whatever you're doing or investing in real estate or whatever, and you want to have some extra liability protection, you can create an LLC which will give you that protection. And LLCs, you have the option of being taxed as a sole proprietor or as an S corporation. Those are sort of two separate things. So you get to pick which one you want. The tax structure is independent from kind of the business structure.

Yeah, absolutely. Totally agree with that. Okay. The last time we had you on the podcast a year ago or so. We talked about Roth contributions and Roth conversions. And you mentioned an email you sent to me recently that you wanted to add a few more factors to that discussion, maybe a little bit more nuance to it. So let's go through a little bit more on this topic. And granted, this is a topic that's out in the weeds, right? Because this is probably the most complicated thing in personal finance. When you consider all the factors that go into affecting your Roth versus pre tax contributions or whether you should do a Roth conversion, most of the time it's basically the same question. But people send me emails all the time with some trivial amount of detail about their financial life and go, which one should I do? They just don't realize how complicated this decision is. So walk us through very briefly, kind of typical physician choices. You know, sometimes it is obvious what to do. Sometimes it requires a calculation or a lot of guesswork to figure out what to do. But walk us through kind of typical physician choices of maybe when to be thinking about when to be thinking about doing Ross contributions.

Yeah, well, let me say I think you're. You're right that it is the most complex decision in personal finance. I mean, I can't think of anything more complicated just because it folds in so many inputs from your whole life. I mean, you're basically tax planning for your entire life, you know, all the way through retirement and the end of your life, and then even estate planning, if whatever money you leave to your heirs. So you're trying to make predictions about your tax situation over many decades, and then potentially your heirs who may not even be born yet, or maybe they're in diapers now. You don't know whether they're going to end up being, you know, investment bankers or teachers. And then you also have to consider where you're staying, you know, where you're living, you know, state taxes are a factor, your investment performance, you know, how can you predict and what kind of investments you're going to have and how they're going to perform over decades. So, yeah, it is a very complex problem, and I think that's one of the reasons why I like it. But that also makes it the most difficult problem that I can think of in personal finance. I think you're right about that. So I was on a year ago and we went through for about an hour in a lot of detail, including a lot of math. And I was thinking about after that, ways that try to maybe make it a little simpler or maybe add a Couple rules of thumb that I think would be applicable to a typical doc that doesn't necessarily fall into one of those categories where it's really obvious like, oh, you're in the military, you know, you're a military doc, you check all the boxes. You resident of a tax free state, half your income is tax free, you're getting a pension, therefore you do Roth, right. If you're kind of in the middle, what do you do? So the standard advice which I think is right is that if you're in a residency or you know, even if you're in medical school or whatever, if you have a second career and you have some money to convert, I think that Roth in those low income years is correct. I think that's right. You're basically one of the ways to think about Roth is you're sort of.

Although there is the caveat with that with student loan management, right. If you're trying to get student loans forgiven, everything, there's an exception, right. I mean, there's so few clear cut things with, with this issue. But for the most part I totally agree with you. Low income years is Roth.

Yeah, that's true. Yeah. I think, I think that's about the only exception that I could think of is if you're playing games with student loans. But yeah, I mean, so Roth, I think one way to think about it that I think might be helpful is you're basically making a bet on having future Inc. Right? Because if you, if you're not going to have any future income, pre tax is the right choice because you get to fill up those lower brackets in the future when you're withdrawing it. And if you're, you know, you're in medical school or you're in residency and you're, you know, reasonably confident that you're going to be a doctor, at least for a while, I think it makes sense to take that bet and pay a little bit of extra tax now and hopefully get a bigger tax savings later. One of the things that I mentioned in last year was that, you know, there is this kind of contributing the maximum effect where if you're up at your contribution limit, you're able to pack more money into your retirement accounts with Roth than with traditional. And that means that you have more money inside a retirement account where it's growing faster because it doesn't have tax drag versus leaving it outside of the account in a taxable account. And that over time can give a pretty substantial advantage to the Roth option, even if you have a relatively high tax rate now. So if you think about it, if, let's say you live in a high tax state, you know, I live in California, and you have a high tax rate that kind of cuts both ways because the money in the taxable account gets a bigger chunk taken out every year when you're paying that high rate and paying your state taxes on all those capital gains and dividends. So for, for higher income folks, the advantage for long stretches of time can actually tip back to Roth if you're contributing maximum. So for an early career doc, it's like, well, what do you do? You know, you've got this advantage where, you know, if you pack your accounts with ROTH in your 30s, you know, you can potentially get this bigger advantage in your 60s and 70s. But the other offsetting advantage though of pre tax though is if you're, especially if you don't have any pre tax money, there's a big advantage for those first, you know, few hundred thousand dollars of pre tax savings because, you know, if you have any low income years, those can be converted to Roth at a really low rate. Or you probably know the statistics better than me. But you know, medicine is a hard field. You know, if you're starting out as an orthopedic surgeon at 30, you know, there's a decent chance you might not be able to work, you know, 35 or 40 full years of that. You know, that's, that's a hard job and leaning a little bit pre tax earlier in your career to kind of protect against the possibility of maybe not having all of that income. All those millions of dollars you could calculate out having that materialized for whatever reason you're disabled or you burn out or, you know, you just, you know, get fed up with the field and go just decide to become a science teacher or something like that. Right? Like there's a significant percentage of docs do that. So one of the big tensions in my mind is for, especially for early docs is, you know, do you make this big bet on having this full career of, you know, income and maybe getting a slight advantage by doing Roth, or do you go pre tax to kind of protect yourself against the possibility that maybe not all that income coming in. I think it makes sense to do pre tax at least for the first, certainly five years, maybe 10 years. Another advantage of doing pre tax kind of early in your career is that, you know, that's when you have the biggest need for cash. Not only are you contributing to retirement accounts, you're probably paying off student loans at least for a while. Most likely you're saving up for a house, you've got, you know, probably young kids, maybe they're in daycare. That adds some expense. So by doing pre tax early in your career, you know that tax savings, you can use that. Maybe you're not saving in a taxable, maybe you're using it to do those other things like pay down student loans, which is, you know, that's basically a tax free return because student loan income interest is not tax deductible. Right. So I think it makes sense to do pre tax early in your career. I can't say necessarily how many years, whether it's 5 or 10 or 15, but that kind of checks those boxes for me anyway. I think that the balance favors sort of doing that.

Even if the other thing I love about it is the optionality. Once it's in Roth, it's in Roth, you put it in pre tax, you got some flexibility, you have some optionality, you can always do a conversion later. It gives you those options. Okay, the other thing, those of you out there don't email me saying, hey, student loan interest can be deductible. Chris is right. Most of the time for attending docs it is not deductible. It might be deductible for you a little bit while you're a resident and if you don't have a high income. But for most doctors, most of you out there listening to this, your student loan interest is not deductible. That is correct. Yeah.

So you know, if you're. Yeah. For early attending docs, I think especially if your marginal tax rate, if it's in the 30s, you know, if you're in one of the 30% brackets or maybe in 24% but you've got a 5% state tax rate, you know, if you're, if you're able to save 30 cents on the dollar for every dollar you put into your pre tax accounts, I think that's worth doing. And again we, you know, we can come up with exceptions. Obviously somebody has an earlier career and they already have half a million of pre tax money. Maybe that argument doesn't apply. But I think for the typical doc, I think getting a bunch of pre tax savings, you know, saving some sort of multiple six figure amount in pre tax, then when you're 40 or 45, then you run the numbers on the Roth because the advantage of leaving it in roth for like 25 years versus 35 years is not that big. You don't get a lot of extra benefit for that extra 10 years. So then maybe you're in your 40 or 45, you've got a house you can afford, you're stable in your career, you know, you, you've paid off your student loans, you're more stable then you're in a better position to make that decision. Do I want to make the bet of putting like you know, 30, 50, 70, $100,000 a year into a Roth account and prepaying all those taxes and making that bet on whether I want to have this, you know, big multimillion dollar portfolio by the time I'm 70? I think that's probably the best time to do it.

Yeah, absolutely. There are times though where Roth is surprisingly good. People don't expect it to be quite as good as it is in certain situations. Let's talk about a few of those.

Yeah, so you know, I gave an example. This was at last year's WCI talk. I ran through the numbers in kind of a lot of detail and I took what I thought was a typical case where the numbers showed that Roth actually had an advantage that you might not see if you just looked at the kind of the context. So the example I gave was a couple living in California, you know, high tax state, basically the highest tax state in the country, planning to retire in a low tax state, no pension, they were in their 40s, they'd saved well in their pre tax accounts they had at, at age 45, they had one and a half million dollars. This is, this is a dual income couple. So they had a pretty high limit. One of the couples, one of the spouses was an independent contractor, the other one was an employee. So they had about one and a half million dollars of pre tax account by the time they were 45. And if you apply the rule of thumb, you'd say, oh geez, this is obviously a case for pre tax, no pension, very high tax state, now tax free state in retirement. But the, when you start to go through the math of it, there were a bunch of factors that kind of added up that really shrunk that benefit, one of which was that the, the one and a half million dollars that they already saved very diligently during the, you know, the first, let's say 15 years of their career that will grow and that will fill up all the lower brackets. So this couple in when the time they retired, like maybe 65, they were already going to be in the 24% bracket just from their pre tax savings and their Social Security and they were in the maybe the 30 some percent bracket now. So that already kind of shrinks the benefit by eliminating all those lower brackets. Then you add in IRMAA, which was 5%. That's. I went through the details, I won't do it again here, but people can listen to another podcast for, for people who retire with, I think for married couples, it's between about 2 and $400,000 of taxable income, which is typical for a doc. Then you pay an extra 5% Medicare premium when you're retired. And then there's this contributing the maximum effect which, which knocked another maybe 10% off of that. So you think you have this huge gap. This couple had, I think a 44% marginal tax rate, but Roth was almost the best choice. I think maybe pre tax had like a 3 or 4% advantage when you include all these factors. Now, Roth was still a little bit behind, but then you add the possibilities. This is what I walked through and kind of the second part of that I said, okay, well, this couple's married, right? If one of those spouses dies early, which statistically there's a decent chance of that, the surviving spouse has to take all that money and all those RMDs on a single bracket scale, that completely wipes out the benefit. The Tax Cuts and Jobs act that was scheduled to have tax rates go up and starting in 2026, we don't know, I think what's going to happen with that. It may or may not happen, but that was going to wipe out that benefit. Or if this couple retired basically to any income taxing state aside from, what is it, Florida, Texas or Washington, maybe I forget all of them. But any state that taxes income, typically the rate is about 5% or more. So that 3 or 4% benefit for pre tax would be wiped out if they decide either to stay in California or to live in any state that taxes the income. So I said, yeah, pre tax is still the best. The benefit is small. But you know, if you basically, if any of these contingencies materialize, that flips over to Roth being the better. So, you know, you gotta. The way that I like to do it is I kind of, I try to make it somewhat simpler, I try to separate it and I say, okay, run an analysis for your baseline case. You know, make the simplest assumptions you can. If you don't have a plan on which date you're going to retire, assume you'll retire on the state you're in. You know, run those numbers and see where that gets you and then go through and look at the cases where, you know, you've got something that leans heavily in one direction, like the tax bracket. If you're married, you can't get better tax brackets. You can only get worse if one spouse dies. If your plan is you retire in a tax free state, you can't retire to a negative tax state, so you can only go up. So look at those differences where, you know, if something changes, it will push you in one direction. And if all of those are leaning in one direction, then you might want to lean that way. As I said, it's complicated, but this is the best way that I could think of to try to kind of simplify it and be a little bit more systematic about it.

Yeah, you know, sometimes people start getting fixated on ratios, percentages of money they want in Roth versus pre tax. That doesn't matter so much though. It's really about the dollars. When you start actually getting into the numbers and the calculations of trying to figure this out, doesn't it?

Yeah, we went through last year, we went through some common misconceptions which I hope was helpful to people. It was certainly helpful to me when I was sort of learning it. To think about this is what you're not supposed to do. This is the way you're not supposed to think about it. And you mentioned you get a lot of questions about what's the right percentage of should I have 80% in pre tax, 20% in RO? And our answer, which I think is correct, is that there is no correct ratio. But I think again, maybe, I hope this might help some people understand the concept a little better. The better way to think about it is what is your absolute number of dollars of pre tax money that you carry into retirement? Because if you think about it, what really matters as we went through this last year, is that the future tax rate matters. It's the percent that you pay, it's the rate that you pay in the future versus the rate that you pay or save now, depending on which, which retirement account that you choose. So the calculation for that is like it's the tax brackets, right. Which is based on absolute number of dollars. You know, so and so dollars is, you know, 22, 24, 32, 35 and so on. So it's not the percentage that you have that's pretax, it's the absolute number of dollars. So one of the kind of, maybe simple ways, simplest ways to think about it is, you know, however, pre tax balance that you carry into retirement, take 4% of that. That's your taxable income. You can add in any guaranteed income you have, subtract the standard deduction and then look that up on the tax bracket scale and that will tell you what your future tax rate is. So for people that have, for instance, if they have a big pre tax balance, like just because they've been big super savers, or if they had money from an earlier career or whatever, or if they, you know, they had investments that did really well in their pre tax accounts and they're carrying this huge balance in, then that should be a sign that you should lean more toward Roth or maybe do more Roth conversions. On the other hand, if you haven't been great about saving pre tax, your investments haven't done really well or whatever, if you're carrying kind of a small dollar amount in, then you should probably lean more towards saving pre tax. But the point is like that calculation of basically your future income versus the tax brackets, that's where the rubber meets the road really. That's what generates your percent that you pay. And that's really what matters the most for trying to decide which one is best.

And you've mentioned before the Social Security tax torpedo. Explain what I mean by that.

Okay, so yeah, this is maybe one of the more complex aspects of this. So there's a calculation of how much Social Security income that you have, which is taxable when you're retired. And the calculation is a little complex. There's multiple steps to it. The bottom line is that if you, if for whatever reason you enter retirement with no other taxable income other than Social Security, Social Security is basically tax free. I don't even know if you have to file a return or not, but you definitely don't pay any tax as you start to add in other income, like for instance coming from a pre tax account or you know, if you have part time income or you know, yield from your investments, real estate income, etc. Then not only do you pay tax on, on that income, but you also pay tax on a percentage of each dollar of Social Security tax. So you get this range if you're single or married. There's a range for both of them where you pay a really high tax rate as the Social Security that you pay gets phased in. And that range is pretty significant. Hang on a second, let me look it up if you don't mind.

To be fair, this is a relatively less well to do retiree problem. All right? I mean hopefully most white coat investors are wealthy enough, have enough taxable income in retirement that 85% of their Social Security income is going to be taxable no matter what this problem is for those who have some amount of taxable income less than that during, during their retirement years.

So that's the maximum. That's right, is 85% for most white coat investors. It's probably not going to be an issue where you're just basically so far above this range that you're just going to pay the 85% no matter what. And then that spike, you can kind of think of it as sort of averaging out over a much wider range of income. I have run some cases though, I think for people who are higher income, where you can actually hit it, especially if you're single, it's easier to hit it if you're single than if you're married. So if you're single, just, just for context, if you have anywhere between about 30 or $50,000 of other income, if you're single, that's non Social Security income, that puts you right in that spike. And then even if you're a little bit above that, you know, if you're at 50, 60, 70, that's not really a great place to be tax wise because you're still paying that big spiked rate on that big chunk of income for, you know, basically every year that you're in retirement. So you know, let's say if you're a single doc, and if you're not, you don't have a huge pre tax account, let's say, because you've been an employee your whole career and you've only contributed, you know, the $23,000, $23,500, you know, per year, maybe you didn't get a big match. If you're not, if you're not bringing this huge pre tax balance in, you know, the range that 30 to $50,000, if you take 4%, that's about 750k to 1.3 million. If you enter retirement with an income or, excuse me, with a pre tax balance around that range, you're going to be in or around the spike and a dot can hit that because it's not about your total income, it's about your pre tax balance. And in that case the right move is to do a bunch of Roth conversions, get that pre tax balance down and then you can kind of come in right under that spike, you're not paying that rate and then most of your income in retirement is going to be coming out of your Roth account and that's, you can actually get a significant benefit by doing that. So I think this is just something to be aware of. Usually the right time to kind of check it as maybe Five or ten years before you retire. You know, look at your pre tax balance and see if you're going to be, if you're going to be hit by that. Some of the factors that are in that calculation are also not indexed for inflation. So depending on what kind of time lanes you're talking about over time more and more of that income, that spike kind of gets bigger and bigger and gets a little bit lower and lower on the income. So you know, it may over time become less of a problem for high income docs, but we don't know. Maybe the factors will eventually be indexed for inflation or that will be updated. So it's just something to be aware of.

Yeah, for sure. And something that most people don't realize exists until they're caught in it. And they're like, why is my marginal tax rate 60%? This is bizarre. And it's because you're caught in one of those little areas in the tax code where you really do have a marginal tax rate that is that high.

Yeah.

All right.

Or if you're slightly above it too, that can actually be even more, I'll say dangerous because your marginal tax rate on each dollar might be pretty low. But what you don't realize is there's this big kind of spike below you where you would get a pretty significant advantage. It's like thousands of dollars a year of extra income after taxes by converting a bunch and getting under that rate. And you might not see it if you're just a little bit above it.

Yeah, for sure. All right, what about an independent contractor? You've got some thoughts on how people ought to think about their pre tax versus Roth contributions. An independent contractor.

So you know, when you're an independent contractor, there's an additional layer that goes on to this which is that, you know, you've got this interaction between employee contributions and employer contributions which can be taxed at a different rate. So you know, I gave an example in my business taxes talk where, you know, if you are affected by the 199A deduction and you contribute money as the employer, you are losing that deduction because you're reducing your business profit. And you basically only get 80% of the benefit of contributing pre tax as you would if you did it like for instance, out of your paycheck. So you know, if you're in the 35% bracket and you contribute your $23,000 or 23,5 out of your, you know, your paycheck, you get to save the full 35% in taxes on that. But Then if you contribute out of the business, which, you know, let's say it's 25% of your wages, your business contribution, you only save 27%. And you can get cases if your pre tax versus Roth calculation is pretty close. You know, if they're about equal in value, you can decide to do your business contributions basically as mega backdoor Roth instead of coming directly out of the business in order to avoid losing that benefit. Now just because you, you get a little bit less of a benefit by doing that doesn't mean always you shouldn't do it. Right? Like if you, you know, pre tax is, is very clearly the best option for you, then even saving a little bit less might, it might still be better than Roth, you know, if you have basically very little pre tax money. But as your pre tax income starts to rise and as that, as the kind of balance between pre tax and Roth starts to get more even, kind of the first thing that you would want to take out are those, are those business employer contributions. And you can switch those to Roth first by doing mega backdoor Roth and then you can still get pre taxed by doing it out of your paycheck.

Yeah, that's a great point. And it's not just for independent contractors. I mean, Katie and I found this out for us in the white coat investor. We do mega backdoor Roth contributions because we basically lose 199 a deduction for any pre tax ones, employer ones we do. So we don't do them, we do our entire contribution. My entire 401 contribution for the white coat investor, 401 is Mega BackDoor Roth, $70,000 this year, Mega backdoor Roth, the whole thing, because of this reason. So if the 199A deduction is affecting you, this is absolutely something to pay attention to. All right, Chris, we have a decent disagreement on this topic and I think it would benefit the audience for us to explore more about our disagreement. Yeah, you're a big fan of doing a calculation to determine whether and how large of a Roth conversion to make or whether to do Roth or tax deferred contributions. In fact, you put together a calculator. We'll link to this in the show notes. You should all check it out. He's got this cool calculator he's put together. It's a spreadsheet as you might not be surprised, but it's pretty handy. But my problem is I'm not sure the calculation is even worth doing a lot of the time because the calculation is so hard. Anybody that's Been listening to this, their head swimming, right. Because there's so many factors going into this, and the factors are not all equal. You know, I mean, the most important thing, the first question you got to ask yourself about this question is who's going to be spending this money, right. And what tax bracket are they likely to be pulling it out of the account in? And a lot of us, a lot of the calculators assume it's you spending the money, but that's not always the case. In fact, it's often not the case for all the dollars. You know, I mean, if people are only taking out about 4% of their portfolio a year on average, they're leaving a portfolio behind the heirs that is 2.7 times what they retired with. Somebody else is spending most of that money. You know, somebody else is paying the taxes at a different tax bracket. If you're leaving it to charity, Right. Doing Roth contributions is stupid. You're paying taxes on money that would never be taxed. And so I think a lot of times people don't know who's going to be spending the money, much less what bracket they're going to be in, whether it's their spouse in a lower bracket or a higher bracket, themselves in a lower bracket or higher bracket, their heirs in a lower bracket or higher bracket charity. And without knowing that, I'm not sure the rest even matters all that much. I mean, clearly there's cases where it's obvious to do one or the other. The other times, I'm not sure it matters. I don't think you can get it right even doing that calculation. But I want people to hear you make the case for doing the calculation with the best assumptions you can come up with.

With. Yeah. So I would probably separate it also into, you know, sort of older folks who are either about to be retired or are already in retirement, and then sort of younger career folks. I think. I think you can make a pretty strong case that if you're older, you know, if you're within five years of retirement or you're in retirement, you're doing Roth conversions every year. You know, let's say you're even trying to kind of come in under one of those IRMAA tax spikes, that using some software, you know, for instance, converting up to the top of your current bracket so you're getting a little bit of extra Roth money at a relatively low rate, doing that sort of shorter range planning, I think you can make a really strong case that you should be using some sort of software for that. And in Fact, I'd even go further and I'd say that, you know, if you're, if you have like basically seven figure retirement accounts and you're not comfortable doing that on your own, I think you could get benefit by hiring, you know, a, you know, a per hour financial planner, you know, a good one like the ones that are on your website, a CFP or a CFA to help you with that. Because I do think that there is some real benefit by, by doing that now. You know, again, we still don't know for instance, what tax rates are going to do. There's still some uncertainty in it. But I my opinion for that kind of shorter range planning, you know, if you're over 60 with, you know, a few million dollars of IRAs, I think it's worth it to really put some time into doing some planning for that. Where in my mind it gets maybe a little more controversial and this is probably where we have more disag would be for younger folks, right. If you're 35, 40, 45 and you know, let's say you have a couple young kids, you know, you don't know what their tax situation is going to be like. You're a good saver but you know, you have no idea what, whether state they're going to be living in, what their income is going to be, what their tax rate is going to be. You know, maybe you don't know how much you're going to be leaving the charity. You know, do you, do you just take a guess? Do you do a 50, 50? Do you use one of the rules of thumb or do you sit down and spend a few hours going through the numbers and trying to do this sort of long range tax planning. I like the number approach and that's what I did for me is I sat down and actually not only did I use the tool, I built the tool. Right. And I'm happy to share that with your listeners who want to go give it a try again.

The links in the show notes. So check out the tool he built. It's pretty impressive.

Yeah. So I think there's some factors for me that make me lean more in that direction, one of which is, of course I'm an engineer, so I'm comfortable with numbers and spreadsheets. That's sort of what I do every day. The second thing is that being a little more systematic about it, you can catch things that you maybe miss if you're not using a tool and you're just kind of using rules of thumb, like the example I gave earlier with Irma 5%, those can kind of add up to give you sort of some surprising results. And then, you know, I like the idea of sort of going through the exercise, getting an answer and then sort of doing that and not necessarily having confidence that it's the right thing, but more sort of doing it as the process. And maybe an example I would give, like I talked about rebalancing earlier. You know, some people say, well, you know, I'll rebalance, rebalance once a year. Or I'll rebalance when my bonds go plus or minus 5% from whatever that threshold is and they track in a spreadsheet. And when their bonds are 25 or 15%, then they rebalance. I don't think it's a mistake to do it that way, unless you're thinking that you're necessarily optimizing and getting the best answer. I think there is some value in having a process and doing the process, taking the information you have, getting an answer and doing it every year that way. Not necessarily convincing yourself that you've been able to accurately predict the future, but just that it gives you a way to kind of get at that number. And I like the idea of kind of having that and feeling like I've folded in the best information that I have right now and that I've made not necessarily the correct decision, but the best decision that I can do, I think has a lot of appeal for me.

Yeah. One of my partners has taken a different approach. He's like, I have no idea. And he has literally his entire career split his contributions between Roth and Tax deferred. He's like, I'm going to be wrong with half of it. I don't know which half. But that's basically the approach he's taken his entire career. And the longer I go, the longer I do this, the longer I think about this question, the more wisdom I think there might be in that approach.

Yeah, there is. I mean, some of it comes down to, you know, what do you want to spend your time doing? Right. You know, I have obviously taken this on as a hobby. I've spent, you know, a lot of hours. And if you add up all the nights and weekends, you know, that I've. That I've spent learning about this over, you know, at least 10 years by this point. You know, it's a lot. It's a lot of time, you know, I could have done if I decided, you know, forget it. I'm just going to do 50, 50, and I'm not going to worry about this. I Could, you know, we got climbing mountains or whatever with that time, but.

Not necessarily recommended on this podcast, by the way.

Yeah, yeah, I, I saw the video of your accident and the 911 call. It was terrifying. I'm very glad you're for sure. I'm very glad you recovered as well as you did from that. But, yeah, you know, I, I get a kind of a kick out of it. And, you know, I think that there, there were some other things too. Like, for instance, my. My wife and I live in California. It's very expensive. You know, our budget is actually pretty tight, you know, even despite having a decent income, just because of housing costs and childcare costs and things. So, you know, that kind of motivates me, I think, to lean a little bit more in the kind of optimized direction. And, you know, I get a lot of satisfaction out of it. But, you know, I'm not sitting here thinking, you know, at my age, that, that I have been able to, you know, definitely deduce what, what the best option is in the future. I think that would be a mistake. I think, to think that, you know, you've been able to correctly predict what tax rates are going to be and that, you know, when I, you know, make my traditional Roth choices this year, that I've definitely figured out what the right one is. I think it's more of like, hey, I've folded in all of the things that I can think about that could potentially impact this. You know, I've put all that knowledge and I've made the best predictions that I can, and this is the result that I have. And then, you know, every couple years or whenever we have a major change in our financial life, I'll go back and reevaluate those. And that's the method that works for me.

Yeah, I wanted to share something with the audience that you taught me in our email interchanges in preparation for this podcast. Something I didn't know previously, which, which is good, right? I've been doing this for a long time. I don't learn a lot of new stuff every year. Let's be honest. You know, sometimes I forget stuff and I relearn it. But this was something I'm pretty sure I never knew before, that I just learned a couple of weeks ago from you. And that is under the SEP program, right? This is the substantially equal periodic payments, basically the early retirement exception for getting to your retirement account money before age 59 and a half. Under this program, you don't pay the penalty, you don't pay that 10% penalty for getting your retirement money out. But what I learned is that you do have to pay taxes, not just on the tax deferred money that you pull out, but on the Roth earnings you pull out before age 59 and a half. Those don't come out tax free. The Roth principal comes out first and comes out tax free. But once you get into the earnings before age 59 and a half, those earnings aren't tax free. And I think it's important that people realize that if they're planning on that being a major part of their pre age 59 and a half funding, I don't think that's a big part of people's planning. Hopefully most people are usually leaving the Roth money for a little bit later and using 457 money and taxable money and, and that sort of a thing. But it's one reason to be careful not to get into your Roth earnings before age 59 and a half. For sure.

Yeah. I think just in the spirit of, again, trying to take this super complex problem and make it simpler, I think if you look at the early retirement scenario, really all of the factors line up that pre tax is the right choice for that. Both that, you know, you're able to get money out of those accounts more efficiently. Of course, you know, pre tax account, you do have to pay taxes on it coming out, but you didn't pay tax going in, whereas Roth, you pay tax going in and then you pay tax on the growth coming out, even if you use a sep. And then, you know, the other big factor is that the earlier you retire, the bigger the spread between, you know, your income when you're working and your income when you're retired. Just because you've got less opportunity for growth and savings. So, you know, the earlier you retire, the more pre tax is the right thing to do. So you know, if you're, if you're planning on retiring, I would say earlier than like age 55, where you're really going to need that, you know, early access to your money. Pre tax is the right way to go. That's, that's maybe a way to make it simple.

Plus it gives you a lot more years before Social Security to do Roth conversions. That optionality we talked about earlier. All right, I think we have beaten that horse to death between the two podcasts we've done about it. Let's do our quote of the day today. This comes from Jim Quick, who said knowledge is power. You hear it all the time. But knowledge is not power. It's only potential power. It only becomes power when we apply it and use it. Somebody who reads a book and doesn't apply it, they're at no advantage over someone who's illiterate. None of it works unless you work. We have to do our part. If knowing is half the battle, action is the second half of the battle. Love that quote. All right, let's take a question from a listener. This one's from Susanna, who's got a question about Mega backdoor rots.

Hi Dr. Dali, thank you so much for your podcast. It's incredibly helpful and one of the few places I found clear and accurate info on more advanced retirement planning topics. It's been a huge help on my FI journey. Quick question. My husband has a solo 401k for some self employment income. He maxes out his employee deferral at his W2 job and in the past he's used the Solo 401K for employer contributions and a Mega Backdoor Roth. He just switched W2 employers and his new workplace plan allows a Mega Backdoor Roth. If he maxes out up to the 70k limit at his W2 job between employee, employer and after tax contributions, can he still do a Mega Backdoor Roth in his solo 401k? I know the $23,500 employee deferral is per person, but is the 70k overall limit per person or per plan? I've seen conflicting info out there and would love it if you could clarify it for me once and for all. Thanks so much.

Well, this is so refreshing, Chris. I mean, we've been arguing about something for the last 45 minutes that doesn't necessarily have a correct answer. This question actually does and so that's reassuring. I mean, yes, you only get one employee contribution. You're $23,500 this year. If you're under 50, that's all you get, no matter how many 401 s you have access to. But the other limit, the total contribution limit. That $70,000 limit you get for every plan you have access to that belongs to an unrelated employer and that can be filled up with employer contributions, employee contributions, or after tax, employee contributions. The one you used for the mega backdoor Roth IRA process. So yes, you absolutely can do it in two 401 s if both 401 s allow it, which is usually the issue. You know, I've got two 401 s. One of them doesn't allow make a backdoor Roth contribution, so I can't do them, unfortunately. Do you have anything else to add on that one, Chris, it might just.

Be worth mentioning the unrelated condition. So the reason that that works in this case is because you think about the two employers. One is, let's just say the hospital where this doc is working. The other one is the doc himself because he's self employed. So because those are different entities, then you get separate limits where you run into trouble. For instance, let's say the stock had two separate businesses that they both own, even if the businesses are unrelated in the sense that they're completely different fields because they're both owned by the same person, you only get one $70,000 limit for both. So if this stock has, you know, one LLC for making, you know, his fishing lures, and then the other one for doing, you know, moonlighting and an urgent care clinic, different fields, but because they're both owned by him, you only get one limit. That also applies to spouses. If you're married, you know, for instance, you and your spouse are not allowed to have, you know, separate businesses and then hire each other so that you can get a $70,000 limit in both plans for both spouses. The rules are called the controlled group rules. That's. They're actually really complicated because there are all these familial relationships. But, you know, to make it simple, you know, if you're owned by the businesses, if a group of businesses are owned by either you or people that are closely related to you, then the limit applies, you know, to the totality of those businesses.

Yeah, absolutely. Unrelated employers. It is important you know the terminology and understanding what the terms mean matter. But when we were preparing for this, you mentioned that I haven't talked about PTET on the podcast in years. And I actually felt kind of bad about this because this is a really important deduction to me, and lots of people should be using this deduction. So would you mind reminding people what the PTET deduction is and who it applies to?

Yeah, so it's called the ptet. The acronym stands for Pass through Entity Tax, a ptet. So I think if you understand the background of this, the logic should make sense. So in starting in 2018, the IRS at the federal level limited the amount that a taxpayer is allowed to deduct for what's called state and local taxes. Sometimes that's abbreviated salt. So this is on your Schedule A. This is like your itemized deductions. Typically that would be, you know, any local taxes. Like, usually that's like property tax for a homeowner, and then state taxes, which, if you live in an income taxing state and most do than your state taxes. Those are all limited to $10,000. And that limit does not double if you're married. If you're married, you still only get $10,000. So for a lot of people, especially if you're a homeowner, if you're a doctor lives in a high income tax state, that deduction gets capped at that $10,000, which, which is not good. So I think most states at this point, I don't know if there are any that don't. If they have an income tax, they have an option where if you are a business owner, you can pay some of your personal income tax liability through the business and then it becomes a deductible business expense. When I say deductible, that's at the federal level. Right. Because when you file your federal business taxes, that's listed as a deductible tax that you pay out of the business and then that's a deduction at the federal level. So that's the idea, which is these states have a way to, it doesn't really benefit them in any way, but it does benefit the business owners in those states, is that they're able to reduce their federal liability and get it back to where it was hopefully close to be fully deductible. So, like, I live in California and I know the calculation from California. I don't really know it that well for other states. I'm not an accountant, of course. But if you live in an income tax and state and if you're, if that's cap, it's certainly something to look at and it can be worth thousands of dollars, it's definitely worth spending the time to set it up. Now, what's going to happen with tax laws, the federal tax laws, we have no idea. I've heard some proposals from people in Congress about, you know, keeping the salt limit at $10,000, doubling it to 20 for married folks, eliminating it completely. I don't think anybody has any idea what's, what's going to happen with the tax laws in Washington right now. So, you know, kind of keep your, keep your eye out for the changes for it. And if you haven't been doing this, it might have already been too late, I guess, depending on what, what tax law changes happen this year. But yeah, it's a great deduction and everybody should be aware of it.

Yeah, this is part of the rebellion against the limitation of the salt deduction. You know, initially it was felt by, you know, the blue states that, you know, the Trump administration, the First Trump administration was out to get them and, and really nailed them with this one. And so they found a workaround, basically, so people could still deduct their. Deduct their local taxes. But then, you know, the Republicans are like, we don't like paying taxes either, so let's lower our taxes. So those states did it as. But if you own a business, you ought to be paying your state income taxes through the business. That's the bottom line. So that's the PTET deduction. If you're just now hearing about this and this applies to you, you really need to look this up and start doing this. All right, let's do some more questions here. Let's take this one from this one also off the speak pipe.

Hi, Dr. Dali. I am currently in my second year as an attending emergency medicine physician practicing in Dallas, Texas, and I have a question regarding a prior 401k of my wife's from a previous employer. She is now only working part time at a new employer as she is finishing her PhD and therefore does not receive retirement benefit options with her current new employer. I am trying to figure out what is best to roll the prior 401k over to. From what I understand, the options include rolling it over to a IRA or to a Roth ira. Are these the only two options other than taking the money out with penalty, which we're not interested in doing? Also was curious if it would be a better option to open a spousal IRA or spousal Roth IRA for her and rolling the money over into that, given that she will not be able to contribute that much with her significantly decreased income over the next couple of years. But I was not sure if that would even be allowed given that she will still have some income outside of the home. I appreciate any thoughts and input and also sincerely appreciate all the work that you do. It has significantly improved our financial stability over the past few years. Thank you.

All right, Chris, I think we got a lot to clear up with this one, right? You want to take the first swing at this one?

Sure. Yeah. There's a few things I want to cover. So I guess first, the main thrust, I think, is what do you do with the 401 at an old employer? And there's basically three options. So you can either roll it into the plan at the new employer, you can roll it out into an ira, or you can just leave it where it is. So I'll kind of go through these one by one and we'll talk about how that, how that applies to this person. So in general I like rolling it into the new employer's plan if you can, just because there's an advantage to simplicity. It's one less account to keep track of. You know, you could even potentially forget about the old account. It makes rebalancing easier. You know, I like, in general, I like simplicity where, wherever it can be had for, you know, for a low price. And you know, that's what I did in my previous jobs. I just rolled it in the new plan when I, when I switched employers. So a couple potential problems here. The biggest one I think is that the, this person's wife is not eligible to participate in the plan. My guess would be that the employer would not allow them to roll money into the plan if they're not eligible to contribute to it. It might be worth putting in a call to HR. I'm not 100% sure about that. But you know, some, even some employers who you can contribute to, they will not allow incoming rollovers. I think that's probably not the norm. But you know, it's basically up to the plan whether they let you roll it in. So that would be one thing I would check. That's where I would expect this person to get caught up. The other thing is if for whatever reason, if the new plan isn't very good, if it has bad investment choices or really high fees, you would not want to roll old money into that new plan. That's getting less and less common these days. But there are some bad plans out there. So I would just check and make sure that there's good investment choices and low fees. Typically a low fee would be maybe less than a few tenths of a percent. I don't know where you would draw the line, but that's about what I would say. If you're less than a quarter of a percent of fees, that's probably good enough to roll the money in there. The second option would be to roll it out into an ira. So investment choices and fees are not a problem for IRAs. Very easy to find IRAs with great investment options and very low fees. The only issue is that if you're going to be doing a backdoor Roth ira, then having pre tax money in that IRA is going to interfere with that because it messes up the pro rata calculation. So if this is Roth money, and I didn't say whether it was pre tax or Roth, but if it's Roth money, rolling it out into a Roth IRA is probably the best choice because there's no downside for that. If it's pre tax money, it may not be the best. The cutoff, by the way I looked it up, is $236,000 of modified adjusted gross income. So if the couple's income is above that level, then they're going to be wanting to do the backdoor Roth ira. And then having pre tax money in the spouse's pre tax IRA is not a good idea.

Is above that level or could be in the next few years.

That's true. Yes, that's right. And then the third option is to just leave it where it is. And the only downside to this is you just have extra complexity. You have this old account hanging out there. But if the old account is good, you know, if the plan is good, it's got great investments and low fees, there's really no significant downside to just leaving it there. You know, I would if it were me, I would rather leave money in an old 401k than roll it into a new plan and pay 1 or 2% per year on it or lose my ability to do backdoor Roth. So, so those are, those are basically the three choices on there. Yeah.

And I don't, I don't think the questioner real that's an option that you can leave it. And I was just on a 401k meeting yesterday for our partnership. I'm on the 401k committee for my physician partnership. And we've got 20% of the people in the plan no longer work for our partnership. Right. I think our plan, I don't know if it's an IRS rule or just our plan rule, but we can't force you out if you have more than $7,000 in the plan. We have to let you stay. Now we can make it a little bit onerous. We can charge you some fees. I think we're actually probably instituting a fee for that 20 of people just so they're paying their fair share of the plan costs. But they probably can't throw you out of the plan. So that's definitely an option. You can leave it there for a few years until your spouse gets another job with a 401 and can roll the money in there, or until you're not going to do backdoor Roths anymore until you retire and then roll it into an ira. This is an option and probably the best one for this couple, I would think.

Yeah, that would be my guess. Yeah. There's a couple of other things that stuck out that I wanted to address too. So one of which is the person asked about Spousal ira. And I just wanted to make it clear what that was. So a spousal IRA is not a separate type of account. It's not a separate kind of ira. It's just the person's ira. It's in this case the wife's ira. And the spousal part means that she can contribute to her ira, sort of borrowing her husband's income. So if, you know, if the husband isn't attending, so let's assume he's got, you know, a six figure income, she can contribute the full $7,000 to her IRA using his income. And if she earns, you know, let's say she earns three or $4,000, that really doesn't affect how much he can contribute because then she could just contribute, let's say like the $3,000 she earns and then she would just borrow 4,000 from her spouse and then those that would go into her IRA the same as if she didn't earn it. So basically there's no impact of her earning on what she can contribute to an IRA. She can contribute the full $7,000 either way.

Yeah, I think people really need to understand that. Right. Because in the 21, 22 years or whatever we've been saving for retirement, Katie did not have an income for something like eight or nine of those years, but she has made a full IRA contribution for every one of those 21 years based on my income. And so don't forget to do your spousal, you know, IRA contributions. And if your income's high, you know, we're talking about a spousal backdoor Roth IRA in this case.

Yeah, yeah. And then also, you know, her income and whether or not she has money in an ira, if it's, you know, rolling it out to a Roth IRA or whatever she ends up doing, that does not impact the ability to contribute to, you know, the spousal contributions to the ira.

Yeah.

The other thing that was interesting is this person did mention rolling it out into a Roth ira. Now, you know, I want to be clear that if the money is already Roth, I think rolling out into a Roth IRA is the right move. If the money's pre tax, rolling it out into a Roth IRA is an option, but that then becomes a taxable event.

Yeah. So you got to go listen the first 45 minutes of this podcast and figure out if that's the right move for you or not. Small 401k it might be. Even if it's like dollar wise not the right move just because it allows you to start doing backdoor Roth IRAs rather than having this pro rata issue.

Yeah, there's advantage in simplicity. You know, if it's, I don't know where you would draw the line if it's less than $10,000, you know, even if you're paying, you know, not the ideal tax rate on it to be able to get it out of the old plan, get it into a Roth ira, you know, it's, it'll be tax free forever. You can, you can pull money out if you need it in an emergency. You know, there's a lot, there's a lot of advantages to it. I think, you know, paying an extra 500 bucks in tax, you know, compared to, you know, if you really separated out the pre tax money and kept it separate your whole life. I think it's, there's a point of diminishing returns with that for sure. If it's 250k of pre tax money, I probably wouldn't do that because that's extra taxable income. You're going to have to pay $100,000 in taxes on that. And that's probably not the right move.

Yeah, well said. All right. So when people are really out there trying to get business tax deductions, the ones they really want to talk about are home office deductions and deducting their cars. But there are so many misconceptions about these two deductions and so many people frankly cheating on their taxes with these two deductions. I think it's worth talking about what the rules actually are, how these deductions actually work, and maybe pointing out where people screw them up. Why don't you talk first about, let's do the home office deduction.

Yeah. So home office deduction, it's a good deduction. I like it. Right. My wife takes a home office deduction and you know, it's, we try to get the benefit from it because she legitimately qualifies. What I, what I covered in my talk is I think there's really three criteria you need to get a home office deduction. I think the first, and I think this, this might, for certain specialties of doc, this might be one that catches people is I think you need to be doing a significant amount of legitimate work in your home office for you to be, you know, be considering doing this, you know, if you're an emergency doc, and all you do is, you know, maybe you check on your phone, your schedule, you know, a couple times a week and then, you know, maybe once a year you put in like a holiday schedule request. I don't know if that really rises to the level of where I would say you would need a dedicated home office for this. Like, would you go rent them?

The IRS phraseology is regular and exclusive use, right?

Yeah.

If you're using it once a year, that's not regular use.

Right. So, you know, again, the idea is that this is meant to be a substitute for like an office that you would rent. So would you go and rent an office for that? You know, if the answer is obviously not, you probably shouldn't be taking home office deduction. But, you know, there's, you know, a lot of cases where people would have a legitimate, you know, use. Even if you're an emergency doc, if you, let's say you call patients the next day, or if you're doing webinars, or if you're doing admin work or if you're doing telemedicine, any of those things, you know, that would definitely put you over the line where you would want your own office for that. The second thing is it has to be your principal place of business. So, you know, if you have a dedicated office you can use somewhere else, the IRS doesn't want you also deducting a home office. And then, yeah, there's this regular and exclusive condition. So I don't know where you would say regular would start to, you know, where you would draw the line for that. But I said maybe a couple times a month, something like that would be maybe be regular.

This is the fun part about the audit lottery, right? I mean, you get roll the dice and hope you get lucky with the auditor. Clearly, every is regular use. Every week is probably regular use once a month. You got to say this with the straight face to the auditor sitting in front of you. Right. That's not as easy as you might think it is. I think the bigger problem is actually the exclusive use.

That's right.

That means you can't use this space for anything else. Yeah, right. If your kids are doing homework in it, that's not a home office, right?

Yeah. Or any sort of common area. You know, the kitchen table, the couch, you know, the breakfast bar in the kitchen. None of that. That. Those don't qualify as home offices. And then if you only have one desk that the whole family uses, then that. That would not qualify. But you can deduct part of a room. So for instance, if you have, like, let's say you have a big spare bedroom, you have a desk on one side, your spouse has a desk on the other. You guys both work from there. You can draw an imaginary line down the middle of the room, and you can each deduct your half of. Of the room, and that's half your exclusive use home office for each of you. So you can do that. That's legitimate.

Now, there's two ways to do this. One's the kind of easy way to do it. The other way is the hard way, but might be worth more money. Let's talk about how to decide between what those two ways are and how to decide between them.

Yeah, so, well, let's do the easy way first. So the easy way is you can just deduct $5 per square foot per year and up to 300 square feet. So you can't deduct a huge room or multiple rooms and call that your office. But, you know, if you have like a bedroom, 150 square feet, you can deduct $5 per square foot per year for that. And, and that's really simple. You don't have to basically show any proof of the expenses for that. You do still have to meet the criteria that we just mentioned a moment ago. But if you do, then there's really no additional accounting involved.

Yeah, deduction, super easy. Easy.

Yeah, that's right. If you want to do the. The actual cost method, you basically have to add up all the costs for the house and then you prorate them over the square feet for the whole house of the square foot for the office, divided by the square foot for the whole house. So those would be things like you can't deduct your mortgage principal payments, but you can deduct your mortgage interest. If you have a mortgage, you deduct a percent of your property tax, Homeowners insurance, utilities, maintenance. Even if you have a house cleaner, you got somebody who comes in, you know, once a month, once every two weeks, cleans the house, they're cleaning the office. So you can deduct a percent of that, you add all those costs for the year, you know, do the square foot proration, and then you can deduct that.

You can also depreciation is also a cost in there, but it has to be recaptured later when you sell the home.

Yep. So depreciation is calculated on the home office deduction form. If you. Okay, so actually, so there's a little complexity here. If you're a sole proprietor, you have a home office deduction form that you attach to your schedule C, and there is a calculation at the bottom, which is the deduction for the depreciation. So in our Family, you know, my spouse is, has an S corporation. And it gets a little more complicated to do the depreciation with an S corporation because the S corporation doesn't own part of the house. And this was something that our accountant, back when we had a full time accountant, we sorted out. There is, if you read the IRS publications, there is an exception where if you keep really good records, you don't have to recapture depreciation. And for our family and with our accountant, we went through and decided that the complexity of trying to deduct that depreciation and then having to recapture it later was not worth it for us. So what we did is said, well, can we just not deduct the depreciation and then not recapture it? And that was, that was the. What we decided to do. I'm not 100 sure every accountant in the country is going to tell you that that's okay. The big risk, by the way, is that for depreciation in general, what the IRS says overall is that even if you don't take it to begin with, you still have to recapture it even if you didn't take it, which is terrible because that's like, you know, you're basically paying, you're recapturing taxes that you never saved in the first place. But there is an exception where it says if you keep really good records and you can show that you didn't take it, which we keep good records, then you're able to not do that. But some people may want to take the depreciation deduction and then if you do, then you have to recapture it. So there's a little bit of complexity there. But that's the choice that we made.

Every time I look at that, I go, simplified looks better, even if it's less money. The other thing too is there's this other awesome, you know, real estate related deduction out there that's dramatically better than the home office deduction, which is your business renting your home from you for up to 14 days a year. And you can rent your home to anybody for up to 14 days a year. This is the, you know, the Masters rule or the Augusta rule. They name it after the town where the Masters is. You can rent your house out for 14 days a year and you don't have to pay taxes on the income from that rental. And so what people do is they rent their house to their business 14 days a year and they get a deduction for the business, but they don't get that income on the personal side. And typically that's dramatically larger than the home office deduction. Now it has to be legitimate rental, legitimate use, legitimate price, all of that sort of stuff. But if you can qualify for that, it's way better than a home office deduction.

Yeah, so the Augusta rule is definitely good. I would say we don't do any of that in our family. Part of the reason is that so under current tax law, entertainment expenses are non deductible. So you know, I've talked to my spouse about, well, you know, if we have like, you know, here for a group, has an event or a party or a holiday party or any sort of gathering, you know, could we have it at our, at our house, have her business rent it and then you know, basically pay us personally for that which would not be personal income. But any entertainment expenses are not deductible. So if you're going to do it, it has to be for a business purpose, you know, for business meetings or you know, for something like that. And we have not come up with a situation where we could with a straight face say, you know, yeah, her S corporation really needed this, you know, four bedroom house to rent for a week or for however long for a, for a business purpose. So. So we haven't done it that way.

Yeah, you should start having the WCI staff over once a month for a meeting.

Yeah, I guess that's an option. My standard for, for what I'm willing to do tax wise as far as aggressiveness is what I would be willing to explain to an auditor with a straight face why I did it that way. And you know, all the deductions that I've talked about that I've been willing to take and some of them there are area there and I am comfortable calling a gray area in my favor when I, I think I have a specific reason why. But so far, you know, the, the Augusta Rural Rental for us has not met that bar. So we haven't done it.

Yeah, but it sounds like you are, you are actually doing the calculation to, to do the more complex way to calculate the, the home office deduction.

Yeah, that's right. Yep, we do. And in preparation for, for my WC Icon talk, I went and calculated what the square foot cost would be. And again we're in Los Angeles. This high cost of living area, it was like $20 a square foot. So it was like four times what the standard rate is.

Yeah, you're getting a lot more than the 1500 bucks.

That's right. Yeah.

Okay, let's change to the cars. Right. Everybody wants to buy a Ferrari and write it off. Explain why doctors cannot buy a Ferrari, drive it to work and home and write it off.

Yeah. Okay, so there's a few things to get clear here. So, first of all, I think one thing I'll say up front is that the IRS looks at a car as a mode of transportation. So what some people try to do is they put advertising on their car. They'll buy a Ferrari, they'll get a magnetic sticker that says whatever business llc. And they'll stick it on the side and say, oh, I'm advertising my business. And then they deduct $300,000 car or whatever. So that's not allowed. The IRS does not treat a car as anything other than you getting from. From point A to point B.

So you could deduct the sign you put on the car, though.

You can deduct the sign you put on the car. That is true, but I don't think that's what most people want to. Want to get when they do that. So it's the. What you can deduct or whatever the deductible expenses for the car are, and then it gets prorated from your business miles, and I'll talk about that in a second. But whatever your business miles are divided by the total mileage for the car, that's what you can deduct product. So, you know, your gas, your insurance, your registration, your maintenance, your repairs, you know, washing the car, tolls, all of that can get prorated over. Over whatever. Whatever business miles that you have. So before I talk about deducting the price of a car, let me just talk about those business miles. So any sort of commuting, what the IRS considers commuting is then travel from your home to a work site that is never deductible because basically they say wherever you choose to live, that's a personal choice. If you want to live really close to your work. If you want to live really far away, that's a personal choice. Your commute is not deductible, even if you're an independent contractor. It's only deductible between work sites. So if you go from your home to hospital A, you go from hospital A to hospital B, hospital B, home. At the end of the day, only the mile is between hospital A and hospital B counts as deductible mileage. The rest of it is personal mileage. So that's the context, and that's surprising to many people. There is sort of.

And there's a. There's an actual wrinkle to that as well. Both of those work sites have to be in the same industry.

Oh, that's. That's right. Yeah.

Yeah, they can't be. You can't go from your job as a doc to your job as a podcaster. And that's not. That's not legit.

Yeah.

Interestingly enough. So it's. There's a lot of nuance to this. I've looked into a lot, and I basically don't deduct miles.

There's also nuance with what is considered a regular job versus an irregular job. Like if you. If you get a temporary assignment for six months and it's in the next town, I think if it's. If it's less than a year, they give you a little more leeway as to driving to that work site. If it's. If it's meant to be sort of temporary. If it's like a temporary work site. So there's a lot of. There is a lot of complexity with that. I think for most docs, you got.

To look at a different deduction. It's the travel. Travel deduction, not your work car deduction, essentially.

But I think for most docs, going between hospitals probably would be one. The big exception is that if you have a legitimate home office, and again, we talked a few minutes ago about what. What that counts as. But if you have a legitimate home office, that counts as a work site.

So the travel between, assuming you work there that day, that you're deducting the mileage. Right. That means you go to the home office, you do some work, you drive to the hospital, you do some work, you come back to the home office and you do some work, then you can deduct those miles. But if you just come home and wrestle with the kids on the living room carpet, that drive home is not deductible.

I actually am not sure about that.

Not that the IRS is going to be able to prove what you did, right?

Yeah, they're not going to. They may not be able to prove it. I have. I have heard both ways I would be interested. Maybe this is a. This is a homework assignment, but maybe I'll go see if I can find a citation for that one way or the other. I'm not 100% sure.

I mean, it seems pretty. Pretty hard to call it a work site that you're driving to a work site if you don't do any work there. That's why I'd have a hard time to try to argue that one with an auditor with a straight face.

That's fair. Yeah. So I think what people really want to deduct is like, the cost of a car. Right. Which is basically depreciation. And so there are pretty slow limits on what you can deduct. And let me also say too, again, I'm not an accountant. The rules for depreciating a vehicle are pretty complicated. There's different amount you can depreciate per year. There's bonus depreciation. Even in my case, I'm a hobbyist who's been doing this for like a decade. I consulted an accountant on what was an appropriate amount to deduct for a car and how that depreciation gets deducted. So this is an area where I'm not really comfortable doing it myself. But in general, there is a limit. I think as of 2023, it was $20,200. That was the maximum that you could deduct as the depreciation for the first year, and then that decreases years after if it's just a regular car.

So the idea we should pause for point out, like with the home office deduction, there's an easy way and a hard way to do this.

That is true. Yeah.

I mean, the easy way is the IRS gives you a number per mile of business miles driven. That's your deduction. You know, if you're driving a Ferrari, you might want to do the other method, though.

Yeah. So the deduction for mile is seven in 2025. It's 70 cents a mile. So whatever business miles you deduct, you can ignore all the other costs. You can ignore pro ratings, you know, your expenses. Over personal business miles, you can just deduct 70 cents a mile. That includes a depreciation deduction, which, by the way, has to be recaptured when you sell the car. I think that is maybe not terribly well known, but that amount, even if.

You'Re taking the standard mileage, even if.

You'Re taking the standard mileage, 33 cents of that 70 cents is a depreciation deduction that must be recaptured. Now, does everybody do that when they sell a car? Probably not, but you're supposed to.

Turns out I've cheated on my taxes in the past. I did not do that when I've sold cars. Of course, I mostly drive cars into the ground, so I haven't cheated much, but I don't think I've ever recaptured that. That's interesting. I didn't realize that was a rule.

I think so. Yeah. So, yeah. But if you want to do the actual cost, then you prorated over business and personal miles. And then there's this kind of complicated depreciation deduction with a fairly low limit of what you can deduct. So the idea of going and getting a $300,000 Ferrari and deducting $300,000 of your taxable income in one year, that doesn't fly. That's not allowed. I think it's worth, if we're talking about this, maybe mentioning the Hummer loophole. So let me explain what that is. So the Hummer loophole, a long time ago, back when cars were much lighter, basically Congress said that they don't want these limits on depreciation to apply to farm vehicles. Somebody buys a tractor to till the fields in their farm. You want to be able to deduct the whole cost of that tractor in one year. And they set a limit of 6,000 pounds, which above that you can, you still have to deduct only the personal, excuse me, only the business miles of business percent of the miles. But there's not this depreciation limit. So if you buy a $100,000 car, you use it 80% for business in, in the first year, you can deduct $80,000, the full price in that first year if the vehicle was over £6,000 ounce. Well, of course, what happens over time, you know, cars get heavier, you know, they get more stuff in them, they get more crash protection or whatever. And then now there's a lot of cars like Range rovers and larger SUVs that you can buy that are just regular, basically passenger vehicles that are above this. So this was called the Hummer loophole because the Hummer was one of the first cars that was above the 6,000 pound limit. So what people would sometimes do is they would buy a car really late in the year, you know, by December 15th, keep really good records, make sure they only drove it, you know, for whatever the 80 miles they drove it in the last two weeks of the year. Keep really good records, you know, or keep an iPhone and videotape the whole drive so it was clear. And then they deduct the full price of the car in that one year. And then they would get whatever, a hundred thousand dollar deduction. So that is, that is no longer allowed as from, from what I can tell. So there is now a limit for SUVs. There's a, you had a higher limit. This for 20, 23 was $28,900. So that is a cap of what you can depreciate for a heavy sport utility vehicle that's over £6,000 and I think, frankly, I think this is good tax policy because this was an area where people were changing a lot.

That's a loophole for sure.

Yeah. Now, the loophole still exists for pickup trucks. There's, there's rules. I think if you can climb from the driver's seat to the passenger compartment, then that rule applies. But if it's a pickup truck, then you're still out of that. So I guess if you wanted to go buy some big, expensive quad cab pickup truck and do this loophole, I guess it's illegal. I don't like driving big trucks, so I would not do this even if there was a tax benefit for it. But, yeah, there's that loophole, effectively, I think the way most people use it, which is like, oh, I want to go buy $150,000 Range Rover and deduct it all in one year. You can't do that anymore.

Yeah. Very cool. Well said. Well, Chris, it's been great to have you on the podcast. Thanks for being a friend of WCI and thanks for lending your expertise to the rest of us. And, you know, you might only be an enthusiast, a hobbyist, but you've clearly done your homework on these subjects and that effort is appreciated by the rest of the white coat investor community.

Well, thank you. Thanks for having me on. It was fun.

Okay. Hope you enjoyed that. It's always great to talk with Chris. He loves this stuff. And I just have the utmost respect for people who are actually still teaching me stuff about the tax code, about retirement accounts. And Chris has obviously done that. He knows his stuff.

Stuff.

You can check out more from Chris. You can listen to that talk he referred to a few times on business taxes by signing up for continuing financial education 25. That's our online course. It's 20% off through May 9th. It includes Chris's talk. And Chris's talk by itself will probably save you the cost of the course, but it's 20% off through May 9th. Whitecoatinvestor.com courses. If you want to be a speaker at WC Icon like Chris, maybe you're too intimidated now after listening to him talk on the podcast. I don't know. But you can sign up for that@wcievents.com thanks. For those of you out there leaving us a five star review and telling your friends about the podcast, we got a recent one in from Tiff Siegels said should be required listening for all college students. I found this podcast in 2024 and has made me so much more confident in how to manage my finances. The relief from the stress has improved my quality of life immensely. Dr. Dali and crew were so thorough in their explanations, inspiring confidence in their recommendations. The guests bring wonderful thoughts, experiences and perspectives. I wish I had this information while I was in veterinary veterinary school or even earlier. It would have made a huge difference. Thank you so much to Dr. Dahl and WCI team for helping so many of us every day. We also got a He also mentions the recommended reading list on the website has also been awesome and the blog complements the material in these episodes so well. Five stars Great. Great podcast review. We appreciate that. That does help us to get the word out about the podcast now. This episode was brought to you by Laurel Road for Doctors. Laurel Road is committed to serving the unique financial needs of residents and doctors. We want to help you make your money work harder and smarter. Credit card debt is weighing you down and you're struggling with monthly payments. A personal loan designed for residents with special repayment terms during training could help you consolidate your debt check if you qualify for a lower rate. Plus, White Coat readers also get an additional rate discount when they apply through lowerroad.com WCI for terms and conditions, please visit www.lauraroad.com WCI that's www.l Laurelroad.com WCI Laura Road is a brand KeyBank NA Member FDIC all right, we come to the end of a lengthy episode. I hope it was worthwhile for you. I doubt any of you have a commute long enough that you could listen to this in one commute. Give us some feedback if you like these long, detailed ones or not. You can shoot us an email anytime. Editoritecoatinvestor.com and let us know how we did and how you enjoyed having Chris on the podcast and what you learned or what questions you might have. This show is run by you. We're trying to create content that helps you in your life, so if it's not doing that, we want to know about it. And if we're succeeding, let us know that too and we'll keep giving you more of the same. Thanks so much for what you do. Keep your head up and shoulders back. We'll see you next time on the White Coat Investor Podcast.

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