MtoM #231: Dual Doc Couple Saves $100K for Retirement During Residency and Finance 101: Plan Documents for Employer-Provided Retirement Accounts

This is the White Coat Investor podcast Milestones to Millionaire Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast number 231. Dual dot couple saves $100,000 for retirement during residency Many investors know about the historic returns, tax advantage and wealth building opportunities of commercial real estate investing, but they're confused about where to start or who to trust. Walling's Capital has created a diversified fund that offers investors an easy on ramp to access carefully vetted commercial real estate operators and opportunities. Their goal is to provide income growth and tax benefits with limited downside risk. With the minimum investment of $50,000, investors get a stake in a portfolio of self storage, manufactured housing, RV parks, industrial properties and more. To learn more, go to whitecoatinvestor.com Wellings that's W E L L I N G S All right, we've got a great interview today, but before we get there, I want to make sure you are aware of the White Coat Investor recommended list. Whatever service that you are in need of, right? Financial services, whatever they might be, chances are good we've got a list for it, okay? We've got companies that help you with your student loan refinancing. We got people that can help you get disability and life insurance. We've got people that'll help you get physician mortgage loans, okay? As well as regular mortgage loans, real estate investments. You just heard about one of our advertisers that offers real estate investments, private real estate investments. We have a list for financial advisors. We have a list for contract review. We have somebody for student loan advice. We have a list of people that offer surveys you can take for additional income. We have legal services, right? We have real estate agents. We've even got a company that offers a retirement calculator, some personal loans and some burnout coaching. All right? So whatever financial services you may need, your fellow White Coat investors have vetted people that are going to give you good service, give you a fair shake, give you good advice at a fair price. And we keep those lists@whitecoatinvestor.com under the recommended tab. So check those out. I hope everybody on the podcast is aware of that. I don't want to spend too much time promoting stuff, but I keep running into people that have no idea we have these lists and that not only helps support the site, obviously they're paying us, they're advertisers, but it helps you to get the services that you need. And some of these people invented by literally thousands of White Coat investors depending on what the service is. So check that out. Stick around. After this interview, we're going to talk about something that we allude to a little bit in the interview, which is the plan documents for your employer provided retirement accounts. We want you to learn about those and know exactly what you're being offered. So stick around. Afterward, we're going to talk about that. Our guest on the Milestones podcast today is Carson. Carson, welcome to the podcast.

Thank you very much.

Carson. In between the date we record this and the date that it runs, you are graduating for residency. So congratulations to you and everybody else who finished residency this year.

Thank you. Thank you.

Okay, now you and your spouse have accomplished something pretty remarkable, actually, for residents. Tell us what you did during residency.

Yeah, so we saved up $100,000 towards our retirement within the span of the last three years.

Wow. $100,000 toward retirement while on residency income. So, I mean, residents make, you know, what, 60, $65,000 a year. Is that about right for what you guys were making?

Yeah. Yep, that's about what we were at.

Was there a bunch of moonlighting income, too, or something else?

Nope, not really. I did a couple shifts this last year, but overall, it was primarily just our president salary.

Okay. So, I mean, I'm calculating here. This is 120ish a year. You guys made like $360,000. Some of that went to taxes. You've still got 100 of it.

Yeah, yeah.

How did you do that?

So the biggest thing was we had a. I think it was up to like, a 5% match at the place we were at. And so at the beginning of residency, we sat down, we tried to figure out what we would need to spend and what we could put towards residency and. Or towards retirement. And so we set that percentage that would go towards retirement, every paycheck. And then I think we increased it once when we realized we could probably save a little bit more and just let it kind of do its work.

So what. I bet you've calculated this. What was your savings rate?

So if I include the match that we got and then what we had put in, it was about 23%.

I mean, this is what I tell attending physicians to save, right? Save 20%. If you're an attending to residents, when I talk to them or I write something directed at them, I tell them, get in the habit of saving something for retirement during residency. The habit is more important than anything else. You probably won't get rich as a resident. You didn't necessarily take that advice. You said, you know what? This is our career. We're going to get started. And now to be fair, there's two incomes, not one. And you know, the average American household income is about the equivalent of one residency salary. So it's not like you were, you know, impoverished by any means, but you decided to get started during residency. Tell us why. Why was that important to you?

Yeah, so I know as a physician, we kind of come late to the game in saving for retirement. We start saving, you know, in our 30s instead of when we get our first job out of undergr in our twenties like most of our colleagues. And so I knew we were kind of starting from a little bit of a time deficit there. And so I just wanted to try to get going on that as early as possible so that we could have compound interest working for us for 30 years instead of 27.

Were you guys in agreement on this goal? And if so, how did you get there?

Yeah, I think so. My wife deferred a lot of the kind of personal finance stuff to me, but was definitely on board.

You're the math nerd in the couple then?

Yeah, yeah, a little bit. From the finance standpoint. Yeah.

Okay. And, but, but she was, she was okay with it?

Yeah, absolutely.

I mean, there's lots of other stuff you can spend your money on a residency, right? You've spent eight years in school and feel like it's time to reward yourself with a new Jaguar. Right? You guys didn't buy a new Jaguar. What was the hardest thing you didn't buy in order to save 23% of your income during residency?

I would say probably a different car for myself. We do live in the Midwest and we have decent amount of snow every now and then. And I've been wanting maybe an all wheel drive car, but I stuck it out with my little front wheel drive Mazda 3 and it's worked pretty well for me. We did get her a little small SUV right before residency. But yeah, that's probably the only big thing that I feel like we've withheld. We've done several nice vacations, we visit family when we can. It's worked out well.

Okay, we gotta talk about the Mazda 3, right? This is an older Mazda 3. I talk to people all the time about cars and I have driven older cars. I got a fancy new F250 now, but I have driven older cars. The car I drove as a new attending cost $1850 and literally had like no problems with it. I had to replace a battery and some windshield wipers and some tires and that was it in the time I owned it. I want to hear your story. Over the last three years with this Mazda, how many times has it gotten stuck in the snow? How many times has it broken down on the way to work? How many big repairs have you had to do over the last three years?

Yeah, it's been a great car. And I shouldn't. I shouldn't make it sound like I was deprived. Like, I got the car early in undergrad and it was fairly new at the time, and so it's been a great car. I did have it parked, and we had a pretty decent snowstorm. And just how things worked out. I was able to either carpool with my wife or didn't have to take it out. And then when I did try to get it unstuck, that took about two hours to just get out of my parking spot. So that was the only, like, really bad experience. But.

So at least one day you were stuck. But what about big repairs?

No big repairs. It's been super reliable. I enjoy driving it. It's a manual transmission, so that's kind of fun. And no, it's been a great car.

Okay, so it never broke on the way to work. You got to your residency job six weeks, six days out of the week for the last three years without it ever breaking down once.

Correct.

Amazing. Amazing. You would think that you would need a $60,000 sedan with less than 20,000 miles on it to get to work these days. Hearing from some doctors. All right, you're not what you drive, people. You're not what you drive. Carson has just demonstrated it for the last three years. All right, so I assume there's a new car in your. In your near future now that you're an attending.

We'll see. We'll see. Yeah, we might get. I'll probably get used, but some sort of either SUV or small truck or something like that.

Very cool. All right. Two doc couples often struggle with two docs worth of student loans. So. So give us a sense of what your student loan picture looks like and what you're. I mean, given how much you're saving. I know you've got a written plan for your student loans. Tell us about your student loan plan.

Yeah, so we both went to a do school. Fairly expensive. We've got about 550,000 student loans. That's what we started residency with, and it's gone a little bit up since then.

And what's your plan to take care of it?

Yeah, so we met with Andrew, student loan advisor, right after we matched into residency. That was a point in time where everyone was predicting interest rates were going to go through the roof. And we kind of decided we didn't want to do PSLs. And so we locked in some low interest rates before residency started. And so we're going to kind of just slowly whittle away at those over the next 10 years or so.

Okay, so 2022, you refinanced right before rates were went up 4%. So tell us what rates you got when you refinanced your student loan.

So mine I think is at 2.9 and my wife's right around the same. I think 3 or 3.1.

Okay, so this took a lot of. I don't know what the word is. Chutzpah. Whatever. Your student loans were 0% at the time. Student loans were 0%. And you decided, we're going to refinance these because I don't think the student loans are going to stay at 0% forever. Tell us about that decision. Was that really stressful?

Yeah. So they, they were predicting like the 0% to end then obviously, like what had happened many times before, they extended the 0% interest multiple times. And we had made that decision before they had made any extensions. And so we both knew we didn't want to do PSLs. And so at that point we're like, let's try to lock in a low interest rate. And that was a pretty hard. That following year was a little. A little difficult when we saw how much interest we were accruing and all of our co residents were still at 0%. But I think in the long term it will end up paying off for us because we do have good low interest refinance rates now, and we weren't really planning on PSLs.

Did you get the $100 a month payments while residents?

Yes. Yep.

So at least the payments were still low, like they would be under an IDR program, but obviously that wasn't covering the interest. Even when you're with your interest rate as low as it is now, you also sound like you're comfortable investing on a little bit of margin using a little bit of leverage, at least for a little while. In the beginning of your career, you don't sound like you're in a hurry to pay back those 3% loans.

Yeah, I mean, if it were higher than 3%, I'd probably be a little more inclined to try to tackle them as soon as we can. We've talked about trying to almost pretend like we're paying them off in two or three years. And setting the money aside in a brokerage account, trying to beat that 3% and at least like trying to get that money set aside and saved and kind of earmarked for our student loans. But we'll see how the next year goes. We're obviously going to try to prioritize retirement savings, and we'll see. Maybe we need to house in a little bit or we're starting a family soon. So, yeah, there may be some. Some changes there, but we're. We're pretty comfortable with, you know, that 3% over. I think mine's seven years versus 10 years. Not in a big hurry to pay it off.

And of course, with money market's paying 4.2% right now, it's not that hard to out invest a 3% loan right now. All right, very cool. Well, that's pretty awesome. You've got that plan. Okay, so tell us a little bit about how you guys. I mean, 23% is way more money than Katie and I saved during residency. We did not save that much for retirement. Tell us about the periodic meetings, budgeting process, whatever you guys use.

Yeah, so I started using a budgeting app called Monarch, and really that was just to try to look at what we were spending. I wanted to make sure that we had a good understanding of what we were spending before kind of making big budgets and whatnot. And it's good to have so we can monitor it. I really like that the saving for retirement has all been kind of automated that we don't even see it hit our savings account. So that what we have in our savings, we try to keep a little bit of a buffer there, but we can know kind of what we can spend when we're thinking about our next vacation or other kind of expenses that come up. And so it's been good to have a budgeting app primarily to track what we are spending, knowing where our money is going.

Way easier than paper and pencil.

Yes. Yes.

So it sounds like you kind of automated everything. Do you have to meet periodically and go over expenditures or you both kind of see it in the budget and you're like, oh, we're winning. I guess we don't have to pay any more attention to it.

More the latter. I made sure she had a login to the budgeting account so she can look at it as well. And then we have a shared savings account that our paychecks usually hit our checkings first. Then we put them into our savings and both just keep a close eye on things.

Pretty awesome. Pretty awesome. How easy it can Be, you know, in a lot of ways a budget is training wheels. Until you learn to spend less than you, than you earn, you guys are kind of done with the training wheels. You figured this out. If you can do this as a resident, you're not going to have any trouble doing it as an attendant. Have you thought about your long term financial goals? What do you guys want out of life financially?

Yeah, so I think the biggest goals are to be able to cut back pretty far down the road. I mean, I think we'll both be working full time for 20 years or so, but when we get to that point, to be able to cut back when we want and then to have the ability to go on the vacations we like provide good kind of entertainment for, for our family. Hosts do things like that. Yeah, we, we do have kind of this mindset or lifestyle we're looking to forward to at some point, but knowing we have to make a lot of steps currently right now.

You know, this is fascinating to talk to you at this point. Right next summer, I Suppose I hit 20 years out of residency. I know what 20 years of a dual physician full time income while you're saving 23% of your income looks like. Right. 20 years from now you are a DECA millionaires, the equivalent of whatever that is, you know, DECA millionaires today, the equivalent of whatever that is in 20 years. I mean you're going to have so many options and so many choices and so many, so much financial freedom that you may not know what to do with it. So it's pretty, pretty inspiring actually to meet you at this point and know that you are this on track because I know where you're going in life and it's a pretty good place. You're going to like it along the way and it's going to give you all kinds of flexibility as you go as well. Okay, what advice do you have for others who kind of want to get started like you early like you did? You know, maybe they're coming out of residency and, or coming out of med school and they're like, you know what we're feeling hardcore, let's do this. What advice do you have for them?

Yeah, I would definitely say learn what your employer offers. As far as retirement goes. If there's a match, make sure you're at least getting the full amount of your match. And then I would look at some numbers, I looked at like compound interest tables and would see, you know, if we save this much during residence, see how much does that change down the line in 25, 30 years. And that was like pretty inspiring.

Those hockey stick shaped charts, right? The hockey charts, yeah.

Yeah, those look great.

Very cool. Well, congratulations to both of you. You have done amazing work. You should be very proud of yourselves. And thank you for being willing to come on the podcast and inspire others to do the same.

Awesome. Thank you very much. I appreciate it.

Okay. I hope you enjoyed that interview. It's fun to see people that get all hardcore early on in their career, right? I did not have $100,000 saved for retirement when we left residency. I think we had $15,000. Maybe something like that is probably what we had saved for retirement from residency. It might have been a little bit more than that, but we did the best we could. Right. Roth IRA contributions back there were much lower and we almost maxed them out. That's it. That's all we saved for retirement during residency and we still managed to become millionaires after seven years. So don't feel like you have to save $100,000 as a resident. The truth is, the most important year of your financial life is that first year out of training, not anything you do during training. The financial priorities during residency should be things like getting your disability insurance and your life insurance, making sure you're managing your student loans properly, having a written plan for your first 12 paychecks you get as an attending physician, and then just getting in the habit of budgeting and saving something for retirement. If you can accomplish all that in residency, I think you are winning financially. But obviously it's possible to do even more, as Carson has demonstrated. And obviously the money you save first has the longest time for compound interest to work on it. So it's not like it's a bad thing to do. But make sure you're not just eating ramen during residency in order to max out your retirement accounts. At the top of the podcast I mentioned we were going to talk about plan documents and employer provided retirement accounts. Part of becoming financially literate is understanding what is available to you. Now, all of you out there with earned income have Roth iras available to you. You may have to fund them via the backdoor process, but you've got a Roth IRA you can invest in, where you can basically invest in just about anything. Certainly any publicly traded, non leveraged, non option assets, but basically any sort of mutual fund or stock or bond or whatever you can invest in in an IRA in your employer accounts. That's not necessarily the case. Your employer provided retirement accounts often have limitations on what you can invest in. They have other rules and other things you need to be aware of as well, other opportunities. You know, for example, the matching dollars that Carson talked about. I've never actually had a 401k that provided any matching dollars. But matching dollars are basically part of your salary that you don't get unless you save for retirement in your employer's retirement plan. Not putting enough money into that retirement plan to get the full match is like leaving part of your salary on the table. Don't do that. So you need to know how these retirement plans work. And the way you figure that out is you go to HR human resources and you go, I want the plan documents for the retirement accounts I am eligible for. Now that might be a 401k, it might be a 403, it might be a 403 and a 401a and a 457b. Right? It might be a, you know, especially if you're not in an academic center, it might be, you know, a 401k profit sharing plan and a cash balance or defined benefit plan. You need to understand the ins and outs of these plans. You need to understand what the fees are, you need to understand where the investments are. You need to understand what the withdrawal possibilities are. Sometimes they're not that good. Particularly in something like A non governmental 457B. You make sure, you need to make sure all that stuff's acceptable to you. Especially before using a non governmental 457B. But know that you can often move money out of these accounts. Pretty much everything but a 457, sometimes a cash balance plan, but even most cash balance plans. As soon as you separate from the employer, you can roll this stuff into your next 401k or you can roll it into an IRA. Although that can cause you some pro rata issues with your backdoor Roth. But the point is your tax break is forever. The asset protection benefits and estate planning benefits, those retirement accounts are forever. And you might only be stuck with higher fees and not so awesome investments for a few years. So max out that space when you can and take advantage of those employer provided retirement accounts. They really are a huge gift, not just from the employer, but from the government. Because the money grows faster in those accounts. It grows faster because it's protected from taxation while it grows because there's either going to be some sort of tax break either up front or at the back end when you take the money out. And it's just a good idea when you have the option to save for retirement in tax protected accounts to do so, all right, so know what's offered to you. You can understand your plan document, ask for it, read it. If you don't understand what something means in it, ask HR about it. You can ask on the White Coat Investor Forum or White Coat Investor Facebook Group or the White Coat Investor Reddit or the White Coat Investor Financially Empowered Women's Group. You can ask in all these groups, hey, I don't understand what this term means. What should I use in this 401k? You can ask all these questions. There are people who want to help you absolutely for free. And if you need professional help, as I mentioned at the top of the hour, we've got those lists of recommended people that yeah, they're going to charge you, but they're going to charge you a fair price for good advice. So I hope that's helpful to you. Make sure you understand what's available to you and take advantage of it. Our sponsor for this episode is Wellings Capital, a company that I have invested some money with. They hear from many White Coat professionals who spend most of their free time lunch breaks, evenings, weekends and even vacations chasing elusive deals or doing their own labor on real estate properties. They're often disappointed with the returns they get for the time and money they invest. Other passive investors have been burned because they didn't do the due diligence necessary before writing a check. It's hard to know who to trust and you could get burned. Wellings Capital is your professional due diligence partner helping you invest in private real estate with projected mid double digit returns. They take an extreme approach to vetting each operator by visiting their offices and properties in person, doing in depth background checks, analyzing their debt structure and much more. To learn more go to whitecoatinvestor.com Wellings that's W E L L I N G S thanks for listening to another episode of the Milestones to Millionaire podcast. I hope these are helpful to you. If they are not, send us an email, let us know why and we'll try to make them so they are. We appreciate you being out there. We know no podcast will exist without its audience and we are grateful for you. Thank you for what you're doing out there. Thank you for being a member of our community and thank you for helping us spread the word to other white coat investors out there that need this critical life improving information. See you next time on the podcast. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice, you should consult the appropriate professional for specific advice relating to your situation.