WCI #233: Insurance Q&A

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 is your host, Dr. Jim Dahli.

This is White Coat Investor podcast 233. Insurance Q& A Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state or health status, and one in seven doctors get disabled at some point during their career. Because these policies can only be purchased through brokers, we put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. If you have questions about insurance and what kind of policies would be the best fit for you, check out our insurance recommended list@whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. You can do this and the White Coat Investor can help. All right, we're recording this October 4th and it's going to run on October 21st. So wonderful, wonderful month in Utah. October has beautiful crisp weather, wonderful color changes in the leaves, and it's a beautiful time. We're excited as we watch the coronavirus case count tick down both nationwide and in Utah. We're actually a little behind the curve in Utah. It looks like it's dropping a little more rapidly in the national numbers, but it's a wonderful thing to see. You know, I was talking about this the other day with one of my neighbors, happens to be a physician as well, and his hypothesis was that we're going to continue to see these periodic spikes, but each one of them is going to be smaller and smaller than the previous ones. And I hope that is correct. It will sure be nice to have this all over. Those of you struggling on the front lines, thank you for what you do. It's difficult work and if nobody's ever saying thank you to you at work, let me be that person today. Let's do our quote of the day today. This one comes from George Foreman said the question isn't at what age I want to retire, it's at what income. And that's the truth. All of you can retire today at some income, but for many of you it's not an income you're actually interested in not working at. So keep that in mind as you go along. It's really not about an age. Retirement is a number, and that number is either your nest egg or your income, however you want to define it. If you're not aware, we have a newsletter here at the White Coat Investor. It's a great newsletter. It goes out to 60,000 people every month. You can sign up for it at whitecoatinvestor.com free monthly newsletter that's right, it's free. It's got lots of great stuff in it. It's got a market report each month, it has got special deals. It's got a blog post that doesn't appear anywhere else. You have to subscribe to the newsletter to get it. And it's got some stuff from across the Internet. The best stuff for doctors that I've curated in the last as well as a review of what's been happening at the White Coat Investor in the previous month. So sign up for that. Whitecoatinvestor.com free monthly newsletter we also have a real estate newsletter if you're interested in private real estate deals or just learning more about real estate. Sign up for that as well and we'll share those with you. That one feels a little bit more like a marketing newsletter, so keep that in mind. Every one of those is talking about a sponsor, but keep in mind that you know that's what you get when you sign up for that. So I want you to be aware of that when you sign up for the real estate newsletter. The regular one of of course does have a sponsor, but it's primarily content. All right, let's get into our podcast today. Today we have all kinds of questions about insurance. We're going to talk about universal life insurance, long term care insurance, umbrella insurance, whole life insurance, and even health insurance. We also have a special guest we're going to bring on halfway through the podcast. Let's get into some of your questions. To start with though, this first one comes in about employer group Universal Life Insurance. Let's take a listen first.

Thank you for all that you do. I really appreciate the practical financial advice. I particularly appreciate your advice on insurance, which is often glossed over by other financial podcasters. What do you think about employer group Universal Life? My employer pays for 1x of my base salary in coverage. I can elect an additional 1-9x of my base salary and coverage. The Premiums are competitive at 540 per year per million of coverage for a 38 year old tobacco free mail. It is also transferable. I'm getting my financial ducks in a row and I like that. I can taper down the coverage each year as My assets grow. I've been using the max coverage for many years. Separately, I was somewhat horrified to see that there's a cash balance pension program scabbed onto the side of it, which is maybe slightly better than a savings account, but has so many caveats and limitations that it doesn't seem close to worth the hassle. What do you think of this plan?

All right, what do I think about this? Well, I think your employer got suckered, right? I mean, cash value life insurance is not right for the vast majority of people, including physicians. So if your employer is offering this to you as a benefit and they think it's like some great benefit for you, they basically got suckered. Almost everyone would rather have more salary or some other type of retirement plan, you know, a bigger match or cash balance plan or something like that than a group universal life plan. Now, obviously your employer is paying for some of this. You might as well take what they're paying for, right? That's free. It's part of your salary. Might as well take that one X that they're offering you. Obviously, that's not a terribly valuable benefit since it's pretty darn cheap to get 1x term life insurance. 1x of your salary. That's just really, really cheap to buy out on the open market. So it's not a huge benefit, but you might as well take it. And then of course, what the life insurance agent that sold this idea to your employer wants is for you to buy more because you assume it's such a thing that your employer's offering it to you. I wouldn't buy anymore. I wouldn't buy it on the open market. I'm not going to buy it through your employer. So, same kind of thing. It's a little bit like the split dollar life insurance that we've talked about before. And if you go to the website and you search split dollar life insurance, you'll find both a podcast and a blog post on that subject with all kinds of detail, far more detail that I can get into in answer to this question. But the bottom line is if your employer is going to pay for something, you might as well take it. But if you got to pay for it, you better look at it a whole lot more closely. Now, you mentioned this is somehow combined with a defined benefit cash balance plan. That's usually not the case. Maybe they're both in the same paperwork or something, but they're usually not the same plan. Defined benefit cash balance plans can be a great deal. They're usually not invested very aggressively for Various reasons, they're more of a tax play. But in the end, you know, when that plan's closed in three or five or 10 years or whatever, you can just roll that Money into your 401 and invest it however you like. So for the most part, if you've already maxed out your retirement accounts, like 401ks or 457s or you know, Roth IRAs, those sorts of things, and you want to save more for retirement, a defined benefit plan is a great place to do that. So take a closer look at that. I wouldn't get super excited about this group universal life insurance plan, however. All right, our next question is about long term care insurance. This one comes from Dan. Let's go ahead and listen.

Hi, my name's Dan, I'm an anesthesiologist and I've been practicing for about two years. Washington state now requires a long term care insurance for physicians. Many companies have stopped selling these policies due to the increased demand. I'm considering converting a small part of my term life policy to a permanent or whole life policy with a long term care rider in order to satisfy the new state policy. The premiums would be $2,000 annually. I've read your flowchart, but this is a new situation affecting many physicians in this state. Thanks for weighing in.

Yeah, I've been following this situation. It's a mess for those of you up in Washington. I mean, this is the classic scenario of government meddling in the private sector and really screwing things up, right? So basically Washington state government has said everybody's got to have long term care insurance in the state or you got to pay this big fat tax. Now the tax actually isn't that much if your income's not very high. But if you have really high income, the tax is substantial such that almost anything you buy is going to be cheaper than the tax. And of course, a lot of these people don't even have a long term care insurance need. So it's really screwed up. And the worst part is what have all the long term care insurance companies in the state done? Well, they've decided we don't want to sell this stuff anymore. So now everybody's scrambling to try to meet these requirements to try to avoid this tax. And they're doing things like, you know, buying permanent life insurance with long term care writers, anything that qualifies them to get out of this tax. I've requested a guest post from an agent in Washington. I haven't received it yet. I'm hoping to run it When I get it. To give you some more insight into this situation. But the bottom line is you're just in a bad situation. You need to find the cheapest way out of it. If the cheapest way out is buying a permanent life insurance policy with a long term care rider, go ahead and do it. If the cheapest way out is buying long term care policy, go ahead and do it. Maybe you can buy an annuity with some sort of interesting long term care rider on it and get out of that. Or maybe in your case, it might be just cheaper to pay the tax, but you'll have to weigh those options. I would definitely talk to insurance agents in the state. There's a lot of them dealing with this right now, and they can give you some options. But don't buy some huge whole life policy just to get a little tiny rider on it to meet this. Try to make the policy as small as possible. If you decide to go this route, good luck. Sorry you got to deal with this. And hopefully this mess will be a good example to other states so they don't put in a law like this because it's really a mess up there. All right, let's bring our special guest today. We have Laura McEldery coming on the podcast and she's going to be one of our speakers at WCICON 22 here in next February. So let's talk with her a little bit about what's going on with her and what she's going to be talking about at the conference, and then we'll get back to your other insurance questions. All right, we now have Laura on the podcast with us. Welcome to the White Coat Investor Podcast.

Thanks for having me. Excited to be here.

For those who don't know, Laura McEldery is the mind and the brilliance behind the podcast. Married to doctors. She is not a physician. She is a physician's spouse. And the podcast focuses a lot on issues that physician spouses and partners face in being married to doctors. And so it's a great resource for those of you who are married to a doctor or have any sort of, you know, struggles or disagreements, particularly in the training pipeline where it's very difficult while your spouse is away for 80 plus hours a week and. And you feel like you're living life all alone sometimes. When did you start that podcast, Laura?

The first one came out in December of 17.

Yeah. So you're many years into it now.

It's been going a while.

Yeah. How many episodes do you have now?

Almost 200.

Almost 200. Very impressive.

Almost 200, 192 or 3 somewhere in there.

You know, that's a remarkable amount of persistence and work. I know because I put together 200 plus podcasts. So congratulations on accomplishing that. That's no small feat. So at the conference, we're going to have an afternoon. This is at WC ICON 22, the Physician Wellness and Financial Literacy Conference, on February 9th through 12th, 2022 in Phoenix. But one afternoon there, I believe it's Friday. Aftern, we are going to have what we call the spouse or domestic partner track. And these are basically four talks that we want you to come to with your spouse who's registered for this portion of the conference. And so it's really great opportunity. And your talk there is going to be one of those. The other ones include a talk on money and kids with Mitra Sadhu, how to host the Perfect Financial Date night with Kate Mangona. And then Katie and I are going to do one on working together toward your finance to achieve your financial goals. Tell us a little bit about what you're going to be talking about at the conference.

Thank you. So I've been giving this a lot of thought, and I think the best thing for me to discuss is the invisible load of physician partners. And what I mean by that is there's a load or a burden, if you will, that physician partners often carry, but it's often not seen, right? Because what we're told from society a lot of times is, oh, you're so lucky you married a doctor. But the truth is there is a certain burden that a lot of us carry. And it looks kind of like this. It looks like wanting attention and time from your physician spouse, but then feeling needy. So you label yourself and you're like, oh, my gosh, maybe I'm too needy to be married to a doctor. Right. Or it may look like, you know, you're a strong, confident person, you know, and you want, you're ready to speak up for your needs and you even know how to speak up for your needs, but you hesitate to do so because your spouse is under so much stress that it's not that you don't know how or it's not that you don't want to take good care of yourself. Right. It's just that you hesitate because of the stress that they feel. The invisible load that physician partners carry can be things like just feeling like you're the emotional support during their exams, whether they go good or bad, or even patient care if they get an outcome that is less than ideal in other ways. It shows up. We don't get the accolades our spouse gets often. Sometimes we've put our own careers on hold. Sometimes we even put the number of children we have or when we have children on hold, all based around their career. And then all of this is complicated because of this guilt we sometimes feel because we're like, gosh, there are worse things than being married to a doctor. And the majority of people I work with adore their spouse, right? Like they married this smart, intelligent person and they want their success so much. But at sometimes it feels like it comes at a cost to them. And then saying that out loud, like I said, it can feel like this first word problem or I shouldn't complain about this or, you know, this isn't worth something speaking about. And so then we end up with feelings like resentment or regret or just frustration in general. So I think that's where I'm going to focus my talk. I'm really excited about it.

How important is it to band together with other people in a similar situation when you're going through something like the medical training pipeline?

Oh, I think friendships are essential and community is essential. That was always one of the goals with the married to doctors community. That's why I do a Facebook group for free. And then of course, I do have my ME Marriage and medicine course, which is such a great opportunity for people to come together to say some of these things out loud, to feel seen and heard, and then also work towards solutions as well. So it's really powerful.

You know, it's really interesting. Katie has reunions periodically with a bunch of people that we knew in Tucson, but they're people that I barely know because I barely saw them because I was at the hospital all the time. And they are great friends for Katie. I mean, they're still getting together and having weekends together. And I'm like, remind me again who that person is. And these were our friends in Tucson, but I was in the hospital the whole time. And so it was really a very important support group for her and has grown into lifelong friendships. So. Absolutely, I agree with that point. Well, we're really excited to have you in Phoenix with us. It's going to be a great opportunity. If you and your partner have not yet registered for this conference, you can register. Register@WhiteCoatinVestor.com WCICon22 and be sure to register your spouse. So you guys can come to this spouse partner track on Friday afternoon at the conference. And I'm looking forward to seeing you there live in person, Laura.

Yeah, me too. I can't wait to see you guys and look forward to meeting you. Even if you can't bring your spouse, you should totally come.

That's a good tip. Good tip. All right, well, thanks so much. And for those who want to hear more from Laura, you can check out the Married to Doctors podcast.

Thank you.

This is going to be a lot of fun at the conference. If you haven't yet registered, you still can. Keep in mind our next deadline is the swag bag deadline. If you register before December 1st, you get the swag bag and it's going to be awesome. It's got a book from each of the keynote speakers, all kinds of fun WCI stuff. And even if you attend virtually, if you register before December 1st, we're going to send that out to you. Now, if your spouse is going to come to the conference with you, which we think is a great idea. I mean, it's, you know, it's a pretty sweet resort in Phoenix. Then make sure your spouse registers and comes to the spouse and partner track with you. I think it'd be really valuable material. And, you know, medical marriages are pretty stressful things, so be sure to do that. Obviously, if you're registering virtually, that's also a great time to grab your spouse and watch those sessions together. There is no virtual spouse registration. We assume they'll just sit next to you if you register virtually. All right, let's get into our next question here. We are still talking about insurance today. We've talked now about group Universal Life. We've talked, talked about long term care insurance. Let's talk about umbrella insurance. This question comes from Dean.

Hi, Jim. This is Dean from the upper Midwest. My question is regarding umbrella insurance coverage and more specifically, how much is needed. I have read and heard people say that you should have enough umbrella coverage that would roughly equal your assets that are at risk in a potential liability lawsuit. However, consider this scenario to illustrate. What if I had, say, $1 million in assets, maybe in a taxable account? I therefore obtain a one million dollar umbrella policy. However, I get sued by someone that slips in my driveway, gets injured, and they win a judgment for the amount of 2 million or maybe more dollars? The umbrella policy would only partially cover that judgment amount and the remaining amount could then wipe out my assets. So is it therefore the case that I could only be expected to pay the maximum amount of my assets at risk, $1 million in my example, which would be covered by the umbrella insurance policy, and that the assets are really therefore safe? Otherwise, the logic to obtain enough coverage that equals the amount of assets to me, maybe seems faulty. Thanks for everything. I really do appreciate it.

Yep. It's faulty logic. I've been talking about this for a long time. The amount of umbrella insurance coverage that you need is the amount of the judgment that comes against you. That judgment's $100,000. You need $100,000. If that judgment is $10 million, you need $10 million. If there's no judgment ever, you don't need umbrella insurance. The problem is you can't know that in advance, so it's guesswork. And yes, any amount above that that isn't protected or exempted in some other way, if the plaintiff and their attorney decide to go after it, is certainly at risk. So here's some guidelines I think you should use, and they're similar to what I recommend when it comes to malpractice insurance. You know, with malpractice insurance, I recommend you have the amount similar to other specialty specialists in your specialty in your geographic area. So if everyone's carrying 1 million, 3 million coverage, you should get a $1 million, $3 million policy. That does a couple of things. One, it says, hey, you know, I did the right thing. I bought insurance. Something bad happened. I'm really sorry about it. Here's $1 million, right? And so that gives something for both the plaintiff and their attorney to say, hey, we got what we wanted out of this case. We're not going to go after that doctor's personal assets. And that's usually what happens, is they're willing to settle for policy limits. On the umbrella side, it's not nearly as standardized, but I think a lot of the same principles apply. You want to have enough money to do a few things. One, you want the insurance company to provide a robust defense, right? You don't want them to go, well, you only got a $50,000 policy. We're just going to pay that and move on. We don't want to spend a bunch of time defending this. You want them to have a lot of money on the line, like seven figures, right? The other thing you want is, in the event that something happened, that you can actually compensate that person, not feel bad that they got hurt. That's a wonderful thing about insurance is you can go, hey, you know, I'm really sorry about that. At least we have this great insurance policy I've been paying premiums on for years that we can make you whole. So that's a great thing, too. And then third, I think you want to have enough money that that plaintiff and Their attorney feel like they got a lot of money. Okay. For most people, getting a million dollars feels like a lot of money. And so that's where I'd start with your umbrella policy. Now usually that means you got to increase your auto and homeowners or renters policy up to about $300,000 of liability, and then the umbrella sits on top of that. But I think that's probably where most people ought to start. Even a resident probably needs a $1 million umbrella policy. As your, you know, assets that are exposed increase, as your income increases, as your net worth increases, you can afford a little more. And so I think it's entirely reasonable to go to 2, 3, 5 million even. And again, this isn't malpractice insurance. It's way cheaper than malpractice insurance. That million dollar policy probably only costs 2 to $500 a year. And even a $5 million policy, you're probably spending less than $1,500 a year. And so it's not super expensive insurance, but it protects a lot. Right. In any asset protection situation, insurance is your first line of defense. And so I think the amount that most physicians ought to be carrying as far as umbrella policy goes 1 to 5 million. Now, does that mean that's going to cover every single possible judgment that could ever be brought against you? No, but it's going to cover the vast, vast majority. And, and it's going to be enough money that most plaintiffs and their attorneys are going to go, all right, I feel satisfied I got a couple million dollars. I don't feel the need to go after this doctor's taxable account or force them to sell their house and declare bankruptcy or, or go after their Tesla or something like that. Right. And so I think for the most part that's enough. But you know, there's no guarantees, there's no 100% guarantee in anything asset protection related. There's always the possibility, however rare it might be, of an above policy limits judgment where you would have to declare bankruptcy and all you would get to keep are those assets that are exempt under your state and federal laws, which usually means your retirement accounts and a little bit of your home equity. And so keep that in mind. That's basically how asset protection works. The good news, you're probably never going to need it. All right, let's take our next question. This one is going to be about whole life insurance. One of our favorite subjects here at the White Coat Investor. Let's take a listen.

Hi, Dr. Dali, thank you for everything that you do I know you mentioned whole life insurance and how it's generally not a good idea for most people. I am 41 and plan on retiring in eight years. I have been recommended to get whole life insurance as a way of providing an income for myself from when I retire to when I'm eligible to tap into my retirement accounts. What do you think about that? Thank you.

Good question. Ash, let's be clear in our terminology here, okay? You have not been recommended to buy whole life insurance. I'd be very surprised if some unbiased person that you paid just for their advice is telling you to buy whole life insurance to cover this need. What is happening is somebody is trying to sell you a whole life insurance policy, and so they learn a little bit about your financial life and they think, well, what angle is going to help me sell Ash a whole life insurance policy best? Well, this guy's a really good saver that wants to retire early. Let's pitch it as a way to solve the age 59 and a half problem, right, that you can't get into your retirement accounts until age 59 and a half without paying a 10% penalty. And, you know, for the unsophisticated, maybe that sounds like a smart thing to do, but it really isn't. Let me explain why. If you decide to use whole life insurance to pay some of your retirement income needs, it's generally best to do that toward the end of your life. One of the last assets you tap, not one of the first assets you tap. Because remember, when you borrow against a whole life policy and you can do a partial surrender up to the amount of premiums, that comes out tax free and just reduces the death benefit. But after that point, you're borrowing against the policy now, like borrowing against your house or your car. That is tax free, but not interest free. So if you start borrowing a whole bunch of money against your policy at age 50 and then you live another 40 years, you're going to pay a whole lot of interest to get at your own money. So that's a big downside of using it early in retirement. It's far better to use it late in retirement if you have it at all. Issue two, if you have saved enough money to retire in your 40s, chances are it's not all in your retirement accounts. A whole bunch of it is probably in your taxable accounts. In fact, I can't think of anybody I've ever met that retired in their 40s that was a physician or other high earner that had it basically all in their Retirement accounts. Right. The physician on fire, substantial taxable account, all these real estate fast fire folks, guess what? That's all outside their retirement accounts. And so the age 59 and a half rule doesn't apply. Okay, the third point, there are so many exceptions to the age 59 and a half rule that there are these loopholes so big you can drive a truck through them. One of the exceptions, perhaps the most notable one, is what they call the SEP rule, Substantially equal periodic payments. What that means is if you retire early, before age 59 and a half, you can start taking money out of your retirement account without paying that 10% penalty. Okay, if it's a tax deferred account, you do have to pay the taxes on it. If it's a tax free or Roth account, you don't even have to pay the taxes on it. You can take that money out. What's the catch? Well, the catch is you can only take out a certain amount per year. How much does that amount work out to be? Well, it works out to be about 3 or 4%, about what you would want to spend anyway. According to the 4% rule guideline, you do have to keep it up for the longer of two periods, five years and until age 59 and a half. So if you start at age 48 or whatever, you've got to keep taking that 4% or so out every year until you're 59 and a half. No big deal, no penalty due, no reason not to invest in a retirement account if that is your goal. So if you've got money to buy a bunch of whole life insurance premiums, you've got money to invest that money in a taxable account and then live on it between the age you retire and age 59 and a half. So this is just a sales technique that this whole life insurance agent is using. If you haven't heard all these sales techniques before, I recommend a blog post on the White Coat Investor blog called Debunking the Myths of Whole Life Insurance. And it goes through all the different ways that these agents like to sell these policies, try to talk into using them to pay for your kid's education or for asset protection purposes or for whatever other reason they're trying to talk you into buying it. The truth is, the vast, vast majority of people, including physicians, do not need a whole life insurance policy. So you need to have a really good reason to buy it. You need to really understand how it works and still want it. Because the vast majority of those doctors who buy one, especially in their first 10 years or so out of training, end up regretting it, end up surrendering it, end up sending me emails going, how do I get out of this thing? I'm still underwater on it after 10 years and it just doesn't turn out to be anywhere near as good as they thought it was going to be when they were talking to the person selling it. Meanwhile, the person who sold it to them is laughing all the way to the bank because the commissions on these things are 50 to 110% of the first year's premium. So if they can talk you into buying a policy that's $30,000 a year, they pocketed somewhere between $15,000 and $30,000 to sell you that policy. Now you know why they work so hard at it. All right, hope that's helpful. Let's take our next question. This one's going to be on health insurance and let's take a listen to it.

Hi Dr. Dali, thank you for answering my earlier questions and your continued efforts to educate all of us. As I continue to prepare myself to transition from W2 employment to 1099, I've been investigating health insurance strategies for my healthy family of four. A high deductible HSA seems to make the most sense. I recently read a book titled Never Pay the First Bill and was intrigued by the idea of paying cash and negotiating payments outside of my insurer's pre negotiated rates. I recognize that you also recommend something similar to this in a blog post, and I also understand that in doing so I bypassed building towards the deductible. However, it's so high anyway, I could only conceivably use it as a catastrophic backstop, just as you already recommended. Aside from using this as a Medicare Gap fund or a Stealth ira, I read that I could use this to pay myself back for any health care expenditures over any length of time with no tax or penalties. Have you heard of this strategy? Is that a legitimate use of this account? Thank you.

Okay, let's make sure we're not confusing two different things here. Right? There are high deductible health plans and there are health savings accounts. Now, you're only allowed to contribute to a health savings account if your only coverage is a high deductible health plan. But they are not the same thing. Just opening up a high deductible health plan doesn't create an HSA to start with. If a high deductible health plan is the right plan for your family, then sure, go ahead and open an hsa. It's your best investing account it's the only triple tax free one out there, right? You get a tax break. When the money goes in, it grows tax protected. When you pull it out, so long as it's used for health costs, it comes out tax free. So it's better than your 401, it's better than your Roth IRA, it's better than everything. So go ahead and use that if a high deductible health plan is right for you. Now, as you're going along, paying for things, health care, whether there's a doctor visit, maybe it's a prescription, whatever, you can pay for that using cash. You can pay for that using the Health Savings Account. Either one is perfectly fine, perfectly legal. You are also correct that there is no rule that says you pull money out of the Health Savings Account in the same year that you spend it on health care. You can hold that receipt for 10, 20, 30 years, whatever, and then pull the money out of the Health Savings Account after It's growing for 10 decades in a tax protected way. And then, you know, if the IRS audits you, you show them that receipt and you go boom, hey, you know, this was a legit withdrawal. Now maybe that loophole changes at some point in the future and you won't be able to do that. But as the law is currently, that's what you can do. Naturally, a lot of people that are maxing out these HSAs and not spending them as they go along are going to end up with very large HSAs after a while. I've already got a six figure HSA, okay. And you start wondering, well, am I actually going to be able to spend that in retirement? And so people start doing one of two things. One, they start spending the money from the HSA on health care expenses as they go along. And two, after age 65, they basically treat it as a stealth IRA. You can take that money out after age 65, use it for whatever you want without penalty, but if you don't spend it on health care, you do have to pay taxes on it. So in that respect, it's no different from an IRA or a 401. You got the tax break up front, it grew tax protected, and then you pay taxes on it when it comes out. So after age 65, you can always do that. An HSA is not a great account to leave to your heirs, however, it's basically fully taxable income to them in the year you die. So this is the sort of thing you want to spend before you die. This is the best way to use a Health Savings account. So I hope that general information is helpful in answering your question. But as far as when you're actually paying for health care, are you better paying cash or are you better paying insurance? Well, it turns out that this is an individual decision on every single purchase. You actually have to ask them, what's the price if I run it through my insurance? And what's the price if I pay cash, including any possible coupon. Right? Especially with prescriptions. There's lots of coupon companies out there like GoodRx that sponsored the podcast in the past. The pharmacists do not like GoodRx because it lowers their profits, which you can totally understand, right? But you know, you can use those coupons, you can ask them cheaper through cash, cheaper through insurance. Whichever one's cheaper, use that. And you can do that with any aspect of the health care system that someone will give you a price on. A little harder to do at the time of emergency care. But usually you don't pay for that at the time of service anyway. And so when the bill comes due, you can go in and say, hey, what would it be with cash? What would it be through my insurance? Every now and then it actually will be cheaper cash, but lots of times it's just cheaper to run it through your insurance, even if you end up paying the bill yourself. Now the health sharing ministries kind of use a similar tactic here. They say, pretend you're a cash payer, go negotiate the best price you can for cash and then share it with the rest of the ministry. And in that respect, the idea is that sometimes they get a really good deal on it. But you know as well as I do the difference between your cash prices and your insurance prices. In my ER, we give a 25% discount for cash. But you know what, you can do a whole lot better than that if you have insurance. And so it's not actually going to work out well to get the cash price in our situation. I think it's that way in a lot of places in the healthcare system. So you just got to play it by ear. Every single transaction is different. And then what you decide to do, whether to use that HSA as you go along or to save receipts and pull it all out later, that's up to you as well. Lots of ways to skin that cat. There's not necessarily a right or wrong way to do it. A lot of people just think it's way too big of a pain to save receipts. So they either don't save them or they just spend as they go along. To just make it easier to keep track of your choice though, getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state or health status, and one in seven doctors get disabled at some point during their career. Because these policies can only be purchased through brokers, we put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. If you have questions about insurance and what kind of policies would be the best fit for you, check out our insurance recommended list@whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. You can do this and the White Coat Investor can help Be sure to sign up for our Free monthly newsletter WhiteCodInvestor.com Free monthly newsletter make sure you sign up for WC Icon 22 by December 1st to make sure you get your swag bag that's available both to in person attendees and virtual attendees. And thanks to those of you who have left us a five star review and told your friends about the podcast. Our most recent one comes in from TrishtanMD said. Awesome podcast for any high income earner. I've been listening to Jim since 2018. I wished I found him sooner. It has changed how we manage our finances and we have grown our net worth since then. Excited to see Dr. Dahl and his team when they come here in Phoenix in February. Thank you for answering my questions through the Speak Pipe about gold and international investments and properties. Your podcast is number one for me by the way. If you want to leave your questions on the speak pipe whitecoatinvestor.com speakpipe and we'll get them answered on the podcast. Otherwise you can ask them in person in Phoenix. I hope to see a bunch of you there. Head up, 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.