WCI #182: Stock Market and Elections

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. Here's your host, Dr. Jim Dali.

This is White Coat Investor podcast 182 Elections in the market. If you are finding our podcasts informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors, you can find information on how to manage your student loans, fix and avoid common financial mistakes, understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and White Coat Investor can help. Welcome back. It's the 13th of October when I'm recording this. It'll be running on the 29th of October just before Halloween. So happy Halloween to all of you and hope you don't pick up anything with your treats this year. I hear a lot of neighborhoods are kind of canceling the trick or treating. I'm not sure what they're going to do around here. Probably some sort of modified version, I suspect, but thanks. For those of you who are working, it's not easy work. It hasn't been this whole pandemic. Things are the worst now in Utah as they have been the whole time. So we're starting to wonder if this is going to get really bad still. You know, most shifts I go, I don't see a COVID patient. But they're telling us that our ICUs are filling up and we're certainly having, you know, 10 times the number of cases we were having last June. So those of you on the front lines, thanks for what you do. And, and for those of you who aren't on the front lines, thanks for what you do. It's not easy either. All right, our quote of the day today comes from Thomas J. Stanley, PhD. You may recall him from the millionaire next door. He said, at the end of the day, success cannot be purchased. And I agree. I think that's true. All right, we got a lot of great stuff today. A lot of great questions coming in from you guys. We're going to spend the bulk of the episode talking about your questions and the things you want to talk about on the podcast. We've got a special guest a little bit later. We've got Jimmy Turner checking in with us for a few minutes about something new and cool that he's got. But let's start with one of your questions. This one's from Lon on the Speak pipe and if you want to leave something on the Speak pipe, you can whitecoat investor.com speakpipe and you can record a question of up to a minute and a half and we'll get it on the podcast.

Hey Jim, My name is Lon from Houston. Firstly, I just wanted to thank you for being a big part of my growth in financial literacy and as a college senior and aspiring physician, you've taught me a lot about insurance, investment strategies, contract negotiation, and other concepts that will surely help me in my future career. I have a question today about the relatively new Fidelity Zero index funds. As the name suggests, these funds are expense free with an expense ratio of zero. This sounds great, but I'm a little skeptical, particularly about how Fidelity is able to completely cut its expenses compared to other popular index funds. One argument against these funds is that dividends are issued annually and not quarterly, which means that investors could lose out on market changes throughout the year. I see that as just another form of timing the market that I'm happy to live without. Another argument is that these funds are relatively new compared to the more established index funds, but at the same time, Fidelity as an investment company has an excellent track record on par with other credible companies like Vanguard. So what do you think of the Fidelity Zero funds? Is it really a big deal if dividends are issued annually and not quarterly? Do you see any hidden issues that investors should be aware of? Thank you for your time and I look forward to hearing your insights. All right.

Lon is asking about these new Fidelity Zero funds. Wants to know if it's a big deal because they only pay dividends once a year, that they're new, etc. Well, I did a big blog post about this not that long ago. I called it Don't Obsess About Expense Ratios. And if you go to the White Coat Investor blog and you search for that, it'll pop right up. But I talked About Fidelity's new 0% expense ratio mutual funds at the time, you know, and Fidelity was advertising these. Obviously going after the Vanguard crowd, right? Their ads would say things like Index investors no value when they see it. Fidelity Stock and Bond Index mutual funds and sector ETFs have lower expenses than most comparable funds at Vanguard, right? So they're really focusing on, on the expense ratios. And at the time they came out, you know, Fidelity's other index funds were only 1.5 basis points. Vanguard's at the time were 4. For their total stock market fund, I think it's 3 now. And Schwab's were 3 basis points at the time. And then all of a sudden, here's Fidelity with a zero percent expense ratio. Now, obviously, zero percent is less than three basis points, but it's not very much less. And the problem is people start obsessing about them, right? Cutting a basis point off your expense ratio. Now, remember, a basis point is 0.01% a year. Cutting a basis point doesn't matter. Now, if you're cutting 1% off the expense ratio in mutual funds, that makes a big difference. But.01%, all of a sudden, expense ratio is not the most important thing when it comes to that index fund. But based on the number of people thinking about changing their investment holdings based on that change Fidelity made, I would say this marketing strategy of theirs is working very well. You know, call it a publicity stunt if you want, but it's really, you know, a marketing strategy. There's not a new investing strategy. It's the same old, same old index fund thing. So how does an index fund get to a 0% expense ratio? Well, there's a couple of ways it can do it. The first is they can just take a loss on it. You know, there's loss leaders in the grocery store, there's loss leaders in the financial world. But more likely, the way they do it is they simply give you or use securities lending. So they lend securities to people who want to short those stocks, and they get paid for doing so. And so that provides a little bit of income to a mutual fund. And this is one of the ways in which mutual funds keep their expense ratios low. And Vanguard does this. They pass all the savings on to you as the owner of the fund. Fidelity is not quite so clear exactly where those profits that come from securities lending go to. And I think that's probably what they use to pay for the management of the fund. So they can charge a 0% expense ratio. As far as whether you need to do something special to go to Fidelity and use their index funds? No, not really. Your Vanguard index funds are fine. Your Schwab index funds are fine. Your iShares index funds and ETFs, they're fine. You know, if you're down here under 10 basis points. It just doesn't matter that much. You shouldn't switch from one to another to get lower costs at that point. What matters matters more is what index they're following and how well they're following it. And if you look at the long term data, for example, in that post I did that I referenced on the blog, I looked at the data for Vanguard, Fidelity and Schwab over 15 years, right? And this is with Schwab and Fidelity having lower expense ratios. The 15 year annualized fund returns at that time period were 9.77% for Vanguard, 9.71% for Fidelity and 9.74% for Schwab. So despite having a slightly higher expense ratio, Vanguard's returns were slightly higher. But the truth is these are all essentially identical, right? They're all fine. So if you want to use the fidelity one because your 401k is already at fidelity or your Roth IRA is at fidelity, it's great. Go ahead and use it. No big deal. But it's not a reason to all of a sudden move all your money from Vanguard or Schwab to Fidelity to take advantage of these zero expense mutual funds. I actually have one. My HSA is at Fidelity. And I have both a Vanguard ETF that I transferred there in kind from my old HSA as well as the new money I put in there I have in a Fidelity zero index fund. So I obviously think they're fine, I'm using them, but I don't see them as dramatically better than a similar fund that charges three or four basis points. All right, let's take our next question. This one is from Matt.

Hey Jim. I'm a first year resident heading into anesthesia who used the pandemic to learn about and begin investing. Since I'm relatively new to the market, I was wondering if you could speak a bit to the general market trends during election seasons. I know past outcomes don't indicate future returns, but I assume there's a general sway in the market during elections and afterwards. What usually happens if a Republican president were to win a second term at the same time? What usually happens if a Republican president were to lose to a Democrat and if the office were to change hands? What's the usual market trend during the lame duck period and also just after a new president takes office? I'm just trying to prepare for what's to come. Thanks for all that you do.

Okay, let's get political or at least talk about market trends during election seasons and what happens if Republican presidents and Democrats Win. Well, it turns out that Google is your friend on this topic. Lots of people have looked into this. There's a particularly good article by Kristen McKenna at Forbes that got into a lot of interesting statistics on this topic. You know, like most investing articles, it warns you to watch out for increased volatility. Okay, well, that's. That's certainly fine. And also warns you to beware of bold predictions, reminding you that most people did not think President Trump was going to win the 2016 election. You know, it's interesting that not only can elections affect markets, but markets can affect elections. In this article, they talk about how the s and P500 has been a great indicator of presidential elections. Three months out, it turns out if the market is down, the incumbent is much less likely to win. And so you can see maybe why the President is so focused on market returns this year. But if you look at, you know, how markets actually do after an election, you can see that in the election year, when a new president is elected, stocks have a return of on average 9.3%. And in all presidential election years, that's 11.3%. And if an incumbent president wins is 13.4%. So when the incumbent wins, the market has actually had a higher return that year. Now, whether that's cause or effect is hard to say, right, because the election tends to be toward the end of the year. So maybe it's more interesting to take a look at the year after the election because stocks historically have performed better during election years than the year after, at least for domestic stocks. It's actually just the opposite for international stocks. So if you're really trying to time the market, and I recommend you don't, you would be swapping at the end of the year from US Stocks to international stocks. At any rate, you got to keep that in mind. So they also looked into some other things, such as the returns when the Democrats, Republicans, or a mix of both, have control of the House and Senate. The highest returning partisan control combination for The S&P 500 since 1933 has been a Democratic Senate, a Republican House, and a Democratic President. So good luck getting that this year. I don't think that's predicted by anybody to happen, but returns average 13.6% per year under that combination. Our current mix of a Republican Senate, Democratic House, and Republican president averages a 10.8% return. Interestingly, the combination here that a lot of people are thinking we're going to have, which is a Biden victory, Republican Senate and Democratic House, that combination apparently hasn't been seen since 1886. So we don't really have any data to correlate with that. But at any rate, you know, the truth is, whoever's elected president four to eight years from now, they're not going to be president. And your investing plan needs to last for the next 10, 20, 30, maybe even 60 years if you're young. This is just a blip along the way. So don't make any huge changes to your investing plan based on how the election's going, what's in the political news, even what's in the economic news. Set a plan. Follow your plan. It's far more important that you follow a good plan than what exact good plan you choose to follow. So keep that in mind and don't put too much faith into this past data. It's all retrospective and it's not. You can't, you know, look at it going forward and expect it to be predictive of what's going to happen in the future. The market doesn't care what happened in the past. And this isn't physics. Right. It's economics and ongoing events affecting the data that we have to use to study. And so it's really something. You got to be a little bit careful about changing your investment plan based on what happened in election years in the past. Not something I would do. All right, let's take our next question. This one is from jin Liu.

Hey, Dr. Jim Dali. My name is Jin Lu from San Diego, California. I really like your podcast and I really appreciate what you are doing. I got to know you only recently and I'm listening to all of your podcasts one by one, starting from the latest. Now I'm on number 158, so 157 more to go. My question is, can I use a HSA or FSA account to pay for IVF? I know the simple answer is yes, according to IRS Publication 502. But the publication says it only applies to costs of procedures performed on yourself, your spouse and your dependents. We are a gay couple, so we are using an egg donor and a surrogate. So I'm not sure whether the following costs are eligible. For example, egg retrieval, IVF lab fee, embryo transfer, embryo genetic testing, egg donor screening and monitoring, egg donor insurance and legal fee, egg donor compensation, surrogate screening, surrogate procedure, and ultrasound. Thank you so much.

All right, can you use an HSA and an FSA to pay for IVF in vitro fertilization? Well, here's the way these accounts work. You are covered. You may have some other covered People, usually in your family, spouse, children, etc. Usually covered. That's it. So any procedures done on you or your spouse or your kids, check, it's covered by your insurance. You can use your HSA to pay for it. If you have an fsa, you can use those funds to pay for it. But if you have a surrogate, this is a person that is not in your family, that is not covered under the policy or by the HSA or fsa. And so you cannot cover their expenses. Even though the child that's produced from it is eventually going to be in your family, those expenses cannot be paid for using an HSA. I am very sorry. Okay, we have Dr. James Turner, Jimmy Turner, back on the White Coat Investor podcast. He's doing some new stuff I wanted you to know about. He has become a life coach. Welcome back to the podcast, Jimmy.

Thanks, Jim. Appreciate you having me on.

What is life coaching for doctors? Can you tell us a little bit about it?

Yeah. So coaching is all about helping people think through their thoughts. Because as it turns out, a lot of doctors, a lot of people think that their circumstances cause all of their feelings and all of their actions in their life. And so a common scenario would be, you know, a burned out doctor or someone that's having a tough marriage, or, you know, someone that's going wrong, and they blame that circumstance for how they feel. And so what coaching does is it teaches you to dive into the thoughts you have about those things that are going on and seeing if those are thoughts that are helpful for you, if they're serving you, and if not, how to help your brain, which really just cares that it's thinking. It doesn't care what it thinks to think something different that actually ends up serving you to create the feelings and the actions, the results that you want in your life. And so specifically for physicians, it is same process, coaching tools, but it's by physicians, for physicians that know the background, know people's stories and how they. How they got to where they are. So coaching in and of itself is really predominantly thought work, but that thought work controls everything else. So your feelings, your actions, your results, how you show up in this world as a partner, a parent, a physician. And so we spend a lot of our time talking about life, career and money topics.

So this seems like, I feel like this is a new thing in the last couple of years that everyone seems to have a coach. Why is coaching becoming so popular the last few years?

Yeah, so I think that coaching has caught on, particularly in the physician world. Like you said in the last couple years and one of the reasons why there have been some pretty predominant coaches out there already that are physicians, Katrina Ubel and some others. And so what happened, I think really the springboard, interestingly, it was within the White Coat Investor network. So Peter, through that Leverage and growth summit, had 10,000 people show up to this thing and coaches were involved in it. And so people got exposed to coaching for the first time. And after that, like it just seemed like it exploded. People got into other programs and then they became coaches themselves. And so that summit really was one of the pivotal points, I think that kind of exploded this topic in the physician world, I think it had already been pretty large. So there are things like executive coaches and life coaches for other professions. But inside the physician world, like many things, we were slow on the uptake and so it took us a little bit longer to kind of dive into this stuff. But now there are even randomized control trials on this stuff within the doctor world.

And what do the trials show?

Yeah, so the most interesting one was From Jamas in 2019, and if I recall correctly, there are about 80 women, 80 men in the two groups, the control group and the coaching group. And they looked at, basically if you got coached, it was three and a half hours total. For those who were in the coaching group, I think it was six sessions maybe. And the other group had access to like some self tools, but not really getting direct coaching. And as it turns out, those that got coaching had higher quality of living afterwards, they had higher quality of life, they had higher resilience scores, they had less burnout by substantial margins. And so it was kind of funny because the control group actually ended up kind of continuing to go up, which is, you know, where medicine feels like it's heading right now. But the group that got coaching went down by 20, 30, 40%. And so it was pretty profoundly impactful. And the interesting thing is that after those people went through those programs, those findings were still found to be present six months after the coaching had ended. And some of the other stuff. So there have been peer to peer support groups and some other things going on that are like coaching in terms of talking about things, talking about problems that doctors are having, but in terms of sitting down, having some face to face time where someone just listens to you and what's going on in your life, that's pretty rare for doctors. And so that piece is pretty interesting. But the randomized control trial basically showed it was helpful. And that was in Jama 2019. So it wasn't like a random journal that you haven't heard of before.

Now you've actually used a coach yourself. What benefits did you see from working with a coach?

Yeah, so my coach is Sunny Smith, and she's awesome. And so she has helped a ton. So she's helped a lot with the business, honestly. And a lot of doctors come in with. With limiting beliefs about what they can accomplish, what they can do. And when you sit down and think about it and you think about where those thoughts come from and what they're doing, they often aren't very helpful. And so Sunny's really helped me kind of progress in terms of the limits that I put on myself and on my business and help me actually start to treat the physician philosopher like a business as opposed to like a solopreneur, single entrepreneur kind of shop where I'm doing everything. And so it's really kind of expanded my thought process when it comes to my business. And of course, it's helped on personal topics, too. So I'm in a pandemic, right? I have a home business, so I'm 85% clinical now. And anytime that I'm not clinical, I'm at home working on the physician philosopher and the stuff that we do here. And I've got three kids, and they're at home, and they're yelling at me, and they want to build the 47th paper airplane, and all this stuff is going on. And so balancing being a good dad in the midst of running a home business is challenging. And so we've talked about topics like that. So it's life topics, it's business topics. It's really a mix of everything. But it's been really, really powerful in my life, and it's one of the reasons why I ended up becoming a coach.

Now, it's interesting, as you got into this, you realized there were almost no men that were physician life coaches. Can you talk to us about that?

Yeah. So I actually had an interesting journey kind of into this space. So, you know, I'd been burning out for a while, for two or three years. I'd been writing about it before that ironically ended up burning out myself. And then I found out I had graves disease, so I thought that was the cause. Started having anxiety and panic attacks and all sorts of fun stuff that I was dealing with. And I thought, hey, maybe once I get euthyroid. So I've never really struggled with anxiety before. Maybe once I get euthyroid, I won't be so burned out. Well, I took my methimazole, like I was supposed to, my endocrinologist was great and I got euthyroid and my burnout did not go anywhere. It was exactly the same that it was. So apparently it wasn't my thyroid. And so I started looking into it. Yeah, as it turns out, there's not a lot of men coaches. And in fact, I've got a friend of mine that's coaching in the alpha coach experience. He tried finding a coach for a while, asked like four, five, six different coaches that were women physicians who did coaching, and they're like, no, I'm sorry, I only work with women, but why don't you try so and so. And he kept getting kind of pushed down the line. And so as it turns out, There are over 100 physicians that are life coaches and the vast, vast majority, like 99% of them are women. And so it became pretty clear to me that there's a space and a need for men physicians to coach as well. And so we opened up the alpha coach experience to kind of help with that need because there's a chance, we know from the studies that women are much, much more likely to ask for help, which should surprise nobody. They're much smarter than we are, I think. And they are also more likely to become coaches. So the field kind of lends towards that. But if you're a guy and you want coaching, it's hard to find a guy coach if that's what you want. And so, yeah, there are three or four now that are going to be getting certified through this cohort right now. And even then it'll be three or four out of 150 or 200 doctors that are coaches.

So you have this new coaching program out. Listeners can get more information added@whitecoatinvestor.com coaching what do people get when they sign up for your coaching program?

Yeah, so the coaching program is a hybrid coaching program. So it involves 12 weeks of coaching and that means one weekly group coaching session. And that'll be for about an hour, hour and a half. And that is also recorded. So if you can't make it, you still have access to it afterwards. That happens once a week. And then there are up to eight one on one coaching sessions. And we know from the studies that about three and a half hours or about six sessions is what you need to find impact. And we provide substantially more than both of those numbers within the program. So we provide up to eight one on one coaching sessions for 45 minutes with an Alpha coach in the program. You also get access to video lessons that Teach you about self coaching topics for physicians, specifically for doctors. A book written for self coaching tools for doctors. And then you get tech support. So you like there are literally. So I'm becoming more and more of a minimalist as it, as it turns out. But in terms of what comes to my phone, so only three things come to my phone directly, which are texts, calls and an app called Slack. The reason why Slack comes to my phone is because of business stuff and also because that's how my clients can get in touch with me. So they have direct access to me should they need anything in between coaching calls. And they have access to the other coaches that are in the program too.

Now you're giving them some other free stuff too with the program. They're getting access to your medical degree to financially free course. Right. And also you have a new book out they're getting.

Yeah, so the, the book is self coaching tools for, for physicians. And it talks about those tools, the coaching tools that might be helpful for doctors and talks a lot about the stuff that I've personally gone through as well. And they will get medical degree to financially free. You have to go to one of the webinars to find out how to do that. And I know you've got a link for that one too, Jim.

Yeah, that one's@whitecoatinvestor.com coachingwebinar and so if.

You attend that webinar, then you will have the access to medical degree financially free, complimentary. At the end of that, you'll find out how to get that and that basically that webinar is to talk about defeating burnout without leaving medicine because a lot of doctors feel like they need to leave medicine. That's why there's, you know, side gig groups and you know, all these groups that you want to quit medicine. There are hundreds of thousands of doctors. I want to teach people how to defeat burnout without leaving medicine. And if you need to change your circumstance, you need to leave medicine. You should probably do the tough thought work first to figure out why you're unhappy. Because it turns out if you change your circumstance without doing the thoughtwork, you have a really high chance of being unhappy no matter what you do. So that, that is what that webinar is about, is teaching you how to, how to do that.

Now what does coaching typically cost and how does yours compare to that?

Yeah, so coaching, coaching can be pretty expensive. So a lot of coaching, including the one that I pay for, is a, you know, a five figure number. So I pay, you know, over $10,000 for same period of time that my coaching program exists and I would pay it like the the money gleefully flies out of my pockets now that I see the roi, the return on investment that I get from participating in these sort of programs. The alpha group coaching experience costs $5,000 for the 12 weeks and so it is less expensive than many, many other programs out there and it includes both group coaching and one on one coaching. Most programs that cost more than this include one or the other. And so it is well priced given the extent to which we have to run a business and pay the coaches that are coaching within the program and everything else that goes on with that. So it's $5,000.

Awesome. So if you want to learn more about alpha coaching, get to know Jimmy Turner a little bit better. You can learn more whitecoatinvestor.com coaching if you're not quite ready and want to learn more. Whitecoatinvestor.com coachingwebinar is a great opportunity for you to learn a little bit more as well as learn how you can get medical degree to financially free along with the coaching package. Thank you so much for coming on Jimmy. Appreciate it as always.

Yeah, no problem Jim. And let me throw out one other idea here real quick which is that you know, the price is oftentimes a stopping point for a lot of people and so we'll talk about it more in the webinar. There's a Q and A involved in that at the end. So if you have questions about that, you know, I highly encourage you to come and I'll be happy to answer any of them. But I would ask you, you know, how much your life satisfaction happiness are worth to you and the fact that you've probably paid a very high six figure number to get professional satisfaction and fulfillment. So how much would you pay for personal satisfaction and fulfillment? I think that's an important consideration when you're thinking about coaching because it is a different sort of product than what you'd be typically buying.

All right, thank you very much. All right, I hope you enjoyed that segment. If you're interested in coaching Again, that URL is whitecoatinvestor.com coaching if you're interested in the webinars, one is tomorrow, that's October 30th and one is November 1st. So in the next few days, if you're listening to this right when it comes out and you can find those@whitecoatinvestor.com coachingwebinar all right, our next question comes from Kevin off the speak pipe hey.

Dr. Dali, thanks for all that you do. I have a question regarding a physician mortgage, not for the sake of a primary residence, but rather for an early real estate investment opportunity. I found great inspiration in the message of Dr. Corey Fawcett's book, the Doctor's Guide to Real Estate Investing. One scenario that I've considered is using a physician mortgage to get into real estate investing at an earlier age. The idea being if I acquire a investment property with close to 0% down at the age of 30, pay it down in approximately 20 years, perhaps this could help to enable financial independence. Alternatively, if I wait until I have 20% down payment for this investment property, that would delay my start for real estate investing. A couple additional points. I understand that you can only use a physician mortgage for your first home purchase. Two, I'm not sure if this is legal to use a physician mortgage for purposes not relating to primary residence. And then three, I still continue to save money. Every paycheck for which I Plan to have 20% down payment in cash for any home that I end up living in. Thank you. Have a nice day.

Okay, this is another great question. Can you use a physician mortgage essentially for investment real estate? The general rule is no. It's also probably not the awesomest idea because in general, in order to get a property to cash flow, you need to put down something like 25 to 35%. And the whole point of a doctor mortgage is to put down less than 20%. You know, 0%, 5%, 10%, something like that. So in general you probably don't want to be using a Dr. Mortgage for your investment real estate because most of the time you're going to end up with a cash flow and negative property. But can you use it? Yeah, you probably can. There are quite a few who have offered that sort of a thing. Usually you have to occupy at least part of the property, but. But it just depends. Semi Retired MD A blog by Letty and Kenji if you have, if you're aware of them, they do a lot of real estate stuff. But they actually went through my list of banks that offer doctor mortgage loans and called them up and asked, hey, do you do this for investment real estate? And they found a few of them that would. Most of the time it's owner occupied multifamily properties, meaning you buy a duplex or you buy a quadplex and, and you live in one of them. In that case they'll give you a doctor loan. Bank MD BMO Harris will do that, Chemical bank will do that. Citizens bank will do that but only for duplexes. Fairway can do a lot of different things. It does require 15% down for a multi unit, so it's not the typical 0 to 5% for a doctor mortgage. First federal Lakewood will do it on a case by case basis. Again, if it's owner occupied. Franson bank will do it, but requires a 10% down payment. Homestar Mortgage for owner occupied again. Huntington bank for owner occupied. Loan Depot for homeowner occupied. NBT bank. You know, duplexes and triplexes again, owner occupied. New American owner occupied. Physician loan, same thing. A duplex. Simmons bank, same thing. Owner occupied. U.S. bank owner occupied, duplex only. And Washington Trust owner occupied, duplex only. So. So really, you know, you basically need to live in it if you're going to use a Dr. Mort loan. Now that doesn't mean it can't be investment property, doesn't mean you can't turn it into investment property in a year or two. But you got to live in it at least for a while. Yeah, you could buy a single family home and rent out some bedrooms. You know, you could do that sort of a thing if you're a medical student or resident. But in general I think you probably shouldn't be buying homes as a medical student or residential. But you know, can you do it? Yes, you can do it and you can probably do it even more than once if you really want to. But honestly, if you really want your rental properties cash flowing, you got to put more down more than 5 or 10%. So you know, it's probably not a great thing to be doing. Okay, our next question comes from an anonymous caller on the speak pipe. Let's take a listen.

Hi Dr. Dali. This question is in regards to my student loans. I refinanced my loans with First Republic bank into a 15 year term at 4% fixed interest. As a resident I recently started my attending position and plan to pay off my loans within three to five years and wanted to refinance into a lower rate variable interest loan. However, I've run into issues refinancing my loans from First Republic as it appears that these have been re characterized as personal loans which was done back in 2017. Specifically, SoFi and Laurel Road have both denied being able to refinance my loans. Do you have any advice for my situation? Any lenders that you know would be willing to refinance these loans from your affiliate list? Thank you for your advice and any advice that you can offer.

Okay, so this is a Mohs surgery, Mohs surgeon who refinanced with First Republic and is now thinking about refinancing again. Well, here's one of the unique things about First Republic. They will refinance your student loans and they often, if you live near one of their branches and qualify to borrow from them, often have the lowest rates you can get. The problem is it's no longer a student loan. They refinance it into essentially a private unsecured loan. Now that's not such a bad thing, right? Because student loans don't go away in bankruptcy and private unsecured loans do. But what you can't then do is go to somebody else like Splash or Laurel Road or SoFi and refinance it as a federal or as a student loan. It's no longer a student loan, it's now a private loan. So if you've refinanced with First Republic, you're kind of stuck there. You can't refinance again when rates go down. So be aware of that. And I think that's just what this doc has run into. The good news is he and his wife are on a 4% loan with a 15 year term. And so, you know, they're going to be paying this off probably relatively rapidly, especially if you continue to live like a resident. And so it's not that big of a deal that it's 4% instead of 2.5%. But let's call a spade a spade. Once you refinance with First Republic, that's it, you're not going to do it again. So that's just the way it works with First Republic. All right, our next question also comes from an anonymous caller. Let's take a listen.

Hi Dr. Dali, I'm a longtime listener and a first time caller. I'm a subspecialty surgeon now looking for my first full time job after nearly a decade in training. I have for a long time anticipated entering academics. However, because of the pandemic, the employment landscape in my field has changed somewhat and I found myself looking at both community practice employed positions as well as private practice opportunities. One such opportunity is a strictly private practice group of approximately 60 physicians, including 15 to 20 surgeons which I would be joining as the only provider in my subspecialty. They're an established group that has been steadily growing in market share over the past few decades and they offer both guaranteed salary support for the first few years as well as full benefits package and attractive partnership. Nonetheless, I feel a strong need to, quote, unquote, kick the tires on this business in order to understand what risk I'm taking on and what my opportunity is to really grow a full practice with this group. My two questions are as follows. One, what business and productivity details can and should I be asking for in order to vet the company's financial health? And as a potential future partner, am I entitled to review their billing history or even ask to see their business records? And two, should I be considering hiring a consultant to research the practice and its financials? And if so, where do I find such an expert? Thanks so much for your help.

Okay, this is a doc. Being hired as an employee with the possibility of partnership down the road. Well, this is really hard interview to have as the employee, right. Because not only do you have to ask all the regular employee questions, but you got to ask the questions of being a partner. And so you have to be a little bit careful doing that because they don't want to give an employee that they don't know anything about and barely know all the intimate details of their partnership and their finances. Are they going to let you review the books? Probably not. When you're applying as an employee, will they tell you something about how the business is doing? Probably. Should you hire an expert to comb through their books? They're probably not going to let an expert comb through their books when you're basically interviewing to become an employee with the group. So I think the approach I'd take is I'd ask more general questions now and leave the really detailed deep dive to the time you're offered partnership if you don't already have the info you need by that point. Now, the way it tends to work in our partnership is once we kind of know you're probably going to make partner, which takes what, six months before we know somebody's good and that we're going to want to be with them long term, and then we start talking about the finances with them. So by the time they come to the partnership step at two years, they know all about it. They've been shown the monthly spreadsheets, what we're making, what we're being paid, all the books, et cetera, and they're pretty intimate with it. And so this issue really never comes up in my partnership. But if you're in a partnership where they don't talk about that sort of stuff with the pre partners who are on track to make partner, then I can see why that would cause a lot of angst. Obviously, if you start finding out those things in your pre partnership track and you're really not interested, well, it gives you some some time to start changing jobs. But I wouldn't expect anybody interviewing you for a partnership track job, an employee job, to really give you totally open access to the books. You can ask, but I think they probably wouldn't. And I'd stick to just trying to get more general information about how the partnership works and really honestly focusing on the people. The people are what make a partnership. It's a lot like a marriage. You're gonna be with them for 20 or 30 years. So these are people that screw other people over. You don't want to be in business with them for 30 years. And that's made all the difference in my partnership for sure, is to be in there with good people, because good people attract good people and, and they treat each other fairly and treat each other well and, you know, make decisions in the best interest of everybody in the group. So try to find yourself a group like that. But do ask them if there's any consideration to sell the company to a private equity group. There's a lot of that going on. If they're having those discussions, you ought to know about that when you take the job. And you can ask them, what should I expect to make as a partner in this group? In my field, you know, ballpark figures are obviously fine, but you can ask ballpark figures, what are other subspecialty surgeon partners making and give you some idea so you can plan your finances and so you can, you know, know if it's comparable to what you might make working for some contract management group or something like that. You should also ask them, what factors will determine whether I make partner or not? And ask specifically, whose decision is it if I make partner? Because you want to know the whole time who's really making that decision? Because that's the person you have to impress and you have to please. All right, our next question comes from Sumit. Let's take a listen.

Hey, Jim, this is Sumit Sagal from Las Vegas. I had a quick question for you. I have a Roth 401k from my job in which I put in the employee post tax contributions and the matching employer contributions. Now I want to convert my Roth 401K to Roth IRA. Now, my, my employee contributions that I convert from Roth 401k to Roth IRA, I won't have to pay any taxes on. My question is, in regards to the contributions that were paid for by my employer, when I roll over that amount, is that portion considered taxable?

Thank you so much for your help.

Okay, you want to convert a Roth 401 and some employer contributions in your 401 to a Roth IRA and want to know if you have to pay taxes on it when you convert it. Well, you don't on the Roth stuff, right? Because that's already after tax. But all employer matches and profit sharing contributions, all employer money really, that goes into a 401 is always pre tax. So if you move that out to a Roth ira, you got to pay taxes on it. That's just the way it works. It's a Roth conversion, essentially. And so you got to look at it and make sure you have the money to pay those taxes by the end of the year and obviously make sure that's the right move for you to do a Roth conversion at this point in your financial life. All right, this next question comes in via email. Thanks for all the priceless information you provided on White Coat Investor. I'm a dermatologist. When you're out of residency with a student loan debt of around $370,000 at 3.5% refinanced on a five year fixed making $425,000. Congratulations. That's great. My wife and I have three children. We're about to purchase our first home that is about $549,000, which is well within my guidelines of a mortgage of 2x your gross income. We have enough saved to put 20% down, but would drain most of our bank account. I was curious what recommendations you may have on how to navigate this financial situation of home mortgage versus student loans. Would it be more beneficial to put less than 20% down, possibly have PMI and pay more toward my student loans, do a physician's loan, put 20% down, et cetera? Any advice would be greatly appreciated. Okay, well, don't pay PMI. That's the worst of the choices. The two choices you really have are get a doctor mortgage and only put down 0 to 5% or use the money you have to pay for a down payment and get a conventional mortgage. Frankly, if you've got $370,000 in student loans, I think it's okay to use a doctor mortgage. You got a better use for your money. You can pay off that student loan debt with your savings and you know, take the doctor mortgage. I think that's probably the best option in this case. But I wouldn't pay pmi. No, that's a terrible choice. So no reason for a doctor to pay pmi. Either get a doctor loan or save up a down payment and get a conventional mortgage that doesn't require pmi. All right, next question is from an anonymous caller.

Hi, One of my colleagues decided to stop contributing to his pre tax retirement account and instead contribute to his after tax Roth 401k after about 15 years of maximum contributions. His thinking is he'll be less impacted by RMDs in the future. To me this seems like a judgment call because there seem to be just too many variables in deciding whether to take the tax it now or push it to later. I'd like to know if there are any sensible ways to calculate or estimate at what number we should stop contributing to pre tax accounts and switch to after tax. If that's even possible. Thank you.

All right, should your colleague do Roth 401 or traditional 401 because he's worried about RMDs? Well, there are two resources on the website you ought to know about with regards to this question. The first one is a post called should you'd make roth or traditional 401 contributions. It's really actually a fairly complex situation. There's a general rule of thumb. The general rule of thumb is when you are in a low income year, you do not take the tax deferral. You use a Roth account. If you are in your peak earnings years, you use a tax deferred account. That's the rule of thumb. There are lots of exceptions to it. For example, a resident that's going for public service loan forgiveness is going to want to use a tax deferred account despite the fact that they're in a low income year. Likewise a super saver that's going to have $15 million in their IRA by the time they're done with everything. You know, you may want to actually be do making Roth contributions even during your peak earnings years. But the general rule is during peak earnings years, use tax deferred. Other years, sabbatical years, early retirement years, residency, fellowship, that year you leave training. All those years are great years to make Roth 401 contributions. Frankly, a lot of people are way too worried about RMDs. The RMD on a typical physician IRA or 401K or retirement is not enough that you should be worried about it. Quite honestly, unless you've got a tax deferred account that's going to be $5 million plus the RMDs just aren't that high and so I wouldn't spend a lot of time worrying about those. You can learn more about that in a post called don't fear the Reaper on the White Coat Investor blog. All right, our last question here, also from an anonymous caller. Let's Take a listen.

Hey Dr. Dali, thank you so much.

For all that you do with the White Coat Investor.

You've helped so many people with it, including myself. I have a question about disability insurance. I currently have own occupation disability insurance and I'm wondering what would happen if I decided to change careers or if a side hustle turned into my main gig. If I have occupation specific disability insurance, would I need to change my policy since I wouldn't be doing my original profession that I got the coverage for? Or would I need to let the insurance company know that I've changed jobs?

I'm not really sure where to find.

Answers and Google didn't really have any useful information for me. Thanks a lot.

So what happens to your individual disability insurance if you change profession? Well, you bought an own occupation policy. Now that is priced according to what your occupation is when you bought the policy. But the way it pays out is it pays out if you can't do what you were doing when you were disabled. So for most people that's going to be the same thing. They bought a policy as a general surgeon, they're a general surgeon. When they get disabled, it's all the same. But if you buy a policy as a pediatrician and you later become a pediatric emergency physician, it's going to consider your own occupation, pediatric emergency physician, even though it's charging you premiums for a pediatrician. Same thing if you change and go into law or go into blogging or going to anything else. Right? It's based on what it was when you bought the policy, but it's still own occupation at the time you get disabled. So keep that in mind. All right, thanks. For those of you who've been leaving us a five star review and telling your friends about the podcast, our most recent review comes in from desnuts431 says top notch, as good as it gets for personal finance. Give it a try. Tells it like it is. Five stars. Thank you very much for that review. If you are finding our podcast informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors. You can find information on how to manage your student loans, fix and avoid common financial mistakes, understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate, and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and White Coat Investor can help. Keep your head up, your shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor Podcast.

My dad your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor.

So this podcast is for your entertainment.

And information only and should not be.

Considered official personalized financial advice.