WCI #260: Self Employed Retirement Accounts 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.

This is White Coat Investor podcast. 260 self employed retirement accounts. Q and A. As a white coat, you have valuable knowledge. Various companies want that knowledge and they're willing to pay you for it. That's why we put together a list of recommendations for companies that pay you to take surveys. If you're looking for a profitable side gig for not too much effort, getting paid for surveys could be the perfect solution for you. You can make extra money, start a Solo 401 and use your medical knowledge to impact new products. One of the WCI columnists makes an extra $30,000 a year just doing these surveys. Sign up today and use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com mdsurveys you can do this and the White Coat Investor can help. All right, today's episode we're going to be going over a whole bunch of your questions. You know, on the blog I write what I want to write about. On the podcast. It's directed almost completely by you, by what you've asked for, by interviews with you as the audience. A lot of times some of our interviews of course are with other people, but we answer a lot of your questions. So what you guys want to hear about, let us know and we will cover it. But if you'd like to leave us a question to use on the podcast, you can leave those@whitecoatinvestor.com speakpipe all right, today we're going to be talking about self employed retirement plans. There are lots of questions about these. I don't find them particularly complicated. You know this is pretty straightforward. If you are self employed, go get yourself a solo aka an individual 401k. If you make a lot of money you might consider a personal defined benefit plan. But most people it's an individual 401k. It's a backdoor Roth IRA plus minus a health savings account. Those are your retirement, you know, retirement plans for a self employed doc. You know, if you've got a 401k on the side, you know, if you, if you got a W2 gig as well and you have some self employment income, then you have a 401k or a 403b at the main employer and then you've got a solo 401k for your self employment income. Again with a backdoor Roth ira, plus minus an hsa. And that's the basic setup for most docs. Anything you want to save above and beyond that goes in a taxable account. So the basic setup's not that complicated. When you get into all the details, sometimes there's a lot more questions. All right, let's take our first question from Sarah.

Hi, Dr. Dolley. This is Sarah from Boston. I was curious about doing the backdoor Roth IRA. If I make a contribution in January of 2021, is that contribution for the previous year or is it meant to be for the present year that I file it in, meaning 2021 as to 2020. And then secondly, if I choose to open a SEP IRA for some consulting income that I have in order to have a tax benefit, where do folks usually roll that SEP IRA into to ensure that that total amount is zero at the end of the calendar year to avoid the backdoor IRA from being having it from having a tax penalty? I'm just a bit confused about this process. Would love some more clarity if you are able to. Thank you so much.

All right, great questions, Sarah. Let's take the first one first. All right. When you're contributing to an ira, whether this is a Roth ira, whether this is a traditional ira, whether this is a traditional ira, as part of the backdoor Roth IRA process, you can contribute during the calendar year and up until the time you file your taxes the next year. So in January, you could make a contribution either for the previous year or for the current year. And when you make the contribution, it typically has you specify which year it is for. It'll do that at Vanguard or Fidelity or wherever you have your IRA open. And so it'll ask, is this a 2021 contribution or is this a 2022 contribution? And you can do either, or you can do them both in the same day. If you're under 50, it's $6,000 for 2021, it's $6,000 For 2022. You just tell them which year you want it to go to. No big deal. Okay, your second question. Let's address this, and I want everyone to be really clear about it. Don't use a SEP ira. Was I clear enough? Okay. Don't use Screws up your backdoor Roth ira. When you go to do the conversion step on your backdoor Roth IRA. Question six, line six. I guess it's not a question. Line six of IRS form 8606 asks for the balance of your traditional IRAs. That includes any rollover IRAs but not any inherited IRAs, simple IRAs and SEP IRAs. You want to be able to answer that line or put on that line $0. So you don't want any money in a SEP IRA at the end of the year if you are doing a backdoor Roth IRA process each year. Okay, so why would you use the SEP IRA in the first place? Why would you want to put money in a SEP IRA and then have to do another step, have to do a rollover somewhere else? I mean, you could do that. You could roll it over every year into a 401k or 403b or a solo 401k. But do yourself a favor and never Open the SEP IRA to start with. Open a solo 401k, an individual 401k. You can open it at Vanguard, you can open it at Fidelity, you can open it at E Trade, wherever you want to open it, and then you never have to deal with this issue at all. The only reason to really use a SEP IRA is if you kind of drug your feet, got behind the 8 ball and didn't get a 401 open and funded in time. You really have to have it open before the end of the calendar year. You really don't have a lot of time into the new year to make the employee contribution. You get a little more time to make the employer contribution. But the bottom line is you can open a SEP IRA the day you file your taxes and make a contribution. So it's easier to make a SEP IRA contribution later than it is a Solo 401 contrib. That's the only real reason to use a SEP IRA, in my opinion. Then of course, you open the Solo 401 for the current year, roll the SEP IRA in there, and never do the SEP IRA again because you're not going to make that mistake again. But for the most part, just avoid the SEP IRA completely. Use a Solo 401. All right, let's do our quote of the day. This one's from Jonathan Clements. He says there are those who think the goal of investing is to beat the market and amass as much wealth as possible, that street smarts and hard work ensure investment success, and that the road to happiness is paved with more of everything. And then there are those who get it. Love that quote from Jonathan. All right, let's take a question from Bob off the Speak pipe. Here we go.

Hi, Jim, this is Bob from Pennsylvania. I appreciate all the work you do. And I had a quick question regarding a prior podcast, something you had Stated you had said that you had converted a lot of your 1099 independent contractor employees to W2 employees at the White Coat investor. And I'm just curious your decision behind that decision, if it was tax related decision, if you had one of your tax advisors recommend you do that. We're in a similar situation here. We have a number of doctors and a few of them are independent contractors on 1099. And I'd heard that there are some criteria in which you would exclude them from being independent contractors and they would be have to be mandated as W2 employees. So wondering if you knew anything about that or if that was behind your decision or not. And again, appreciate everything you do and thanks for taking my question.

Great question. In our personal situation, we didn't have any employees except for Katie and I up until a certain point. And as we decided to expand the business rather than, you know, really shrink it at the end of 2019, we needed to bring on some full time people, some serious, you know, qualified, experienced employees. So at that point we were going to have employees. And here's the deal. When you're running a business, the first employee that's not you anyway, the first employee is a big huge hassle to add an employee. The paperwork's a pain, it kind of stinks. You don't really want to do it if you don't have to. But once you have one employee, it's not hard to add more employees. You've already got all the systems set up to do it. You got payroll and 401ks and all that kind of stuff. And so once you have one, it's no big deal to have more. So up until that point, we had some part time people, most of which did something else, worked very independently, they might have done it for another business. And we were able to more or less justify that they were independent contractors and we didn't have to make it employees. Once we had some employees that we couldn't justify as independent contractors, it was relatively straightforward to convert the other ones from independent contractors to employees. Now the truth is on this that you're not supposed to just decide what they're going to be. You don't get a choice. You're supposed to treat them as what they really are. If they're an independent contractor, treat them as an independent contractor. If they're an employee, treat them as an employee. But the truth is, there's a fair amount of gray here. But here's some of the guiding principles that the IRS will give you when deciding whether somebody is an independent contractor or an employee. Now keep in mind, a lot of employers like we did err on the side of calling them independent contractors for various reasons. One, they've got to pay both halves of the payroll taxes, Social Security and Medicare when they're independent contractors. So it might save you some money if they're not smart enough to realize that. Another reason is that they, they have to go set up their own benefits, their own 401k plans. Cause they're self employed when you're paying them on a 1099. Lots of people like that, like this was the biggest problem we had moving some people from independent contractors to employees is they're like, I'm putting $58,000 into a Solo 401. Now I want to keep doing that. How are you going to be able to make it so I can do that in your 401? And so we spent a lot of time trying to put together the world's best 401 to allow all those people that wanted to max out those 401s to allow them to be able to do that in the new WCI 401K. And so that was a big concern that they had. But basically the IRS gives you these guidelines. There's behavioral guidelines, financial guidelines, and a type of relationship guideline. So for behavioral, they ask does the company control or have the right to control what the worker does and how the worker does his or her job? If the company does, they're employees. If the company doesn't, they're contractors. Financial are the business aspects of the worker's job controlled by the payer? These include things like how the worker is paid, whether expenses are reimbursed, who provides tools and supplies, et cetera. So if they're buying their own computer, if they're doing their, you know, buying their own supplies, then they're more likely an independent contractor. If you are providing that for them, then they're more likely an employee. Then there's a type of relationship. Are there written contracts? Are there employee type benefits like a pension plan, insurance, vacation pay, et cetera? If so, they're employees. Is the work that they're performing a key aspect of your business? If so, then they're likely employees. So there's lots of docs out there that are being called independent contractors that really probably ought to be employees. But the IRS says businesses must weigh all of these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There's no magic or set number of factors that makes the worker an employee or an independent contractor. No one factor stands alone in making this determination, and factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship and consider the extent of the right to direct and control the worker and then document each of those factors used in coming up with the determination. But when we did that, after we brought on our full time employees, we realized that the contractors we had were probably more employee like than they were contractor like. So we converted them to employees. I suspect you may need to do the same thing. All right, let's take a question from Nita off the speak pipe.

Hello Dr. Dali, this is Nita. I am recently out of residency and working as a nocturnist full time in my WC job. I already have a 401k as well as an after tax account which is basically a mega backdoor Roth ira. I maxed out both of those accounts. I have started to work locum gigs on my off week to try to pay off my loans quickly and I'm looking for ways to save in a tax advantaged fashion. There is SEP IRA and a defined cash balance plan and I've read your blogs as well as listen to your podcast regarding those two. What I'm running into is the three year rule. It says that I cannot contribute to either of those accounts unless I work for the company for at least three years. So it'd be solo proprietor for at least three years before I can contribute. So if that is true, then can I not contribute to a SEP IRA or a defined cash balance plan within the first year of me doing locum gigs and being a 1099 employer? If again this is true, what other options do I have to save money in a tax advantage fashion if I cannot do those until three years being a 1099 contractor? Once again, thank you so much for all that you do and the wealth of knowledge that you share with us.

Okay, great questions. I'm presuming that you are the only person at this side gig that there's not employees there. All right, let me be real clear about this in case anybody missed it earlier in the podcast. Don't use a SEP IRA there. Hopefully that's clear. Use a Solo 401. Okay? It avoids some of these issues, but most importantly it allows you to keep doing a backdoor Roth IRA each year. Plus if you don't make all that much money and you don't have a plan at work you may be able to max it out on a lower income. What should you do in your situation? Well, you're talking about the three year rule. Now. This three year rule really doesn't apply to the owner. Okay? You can write your SEP IRA plan as the owner so that you can participate immediately. And then if you have employees, you can establish actually different set plan eligibility requirements for future employees. But you don't have to deal with that if you just use a Solo 401, which is what you should be using anyway. So I hope that's helpful. But the three year rule is essentially. Let me give it to you straight from IRS.gov? what is the 3 of 5 rule? The 3 of 5 eligibility rule means you must include any employee in your plan who has worked for you in any three of the last five years as long as the employee has satisfied the other plan eligibility requirements. This is the most restrictive eligibility requirement allowable. You can choose to use less restrictive participation rules in your plan, such as allowing employees to participate immediately after they start work or after a shorter period of employment. For example, after working for only one year. If you use the 3 of 5 rule, you must count any work, no matter how little, in each of the prior five years. Use plan years, often the calendar year, not years, based on the date the employee started working for you. All right, so that's the three year rule. Just use a 401. Okay? But if you decide for whatever reason that you're going to use a SEP IRA anyway, that's like the most restrictive you can be. Not the least restrictive. So I hope that's clear. So just be less restrictive and then you can use a SEP IRA right away. All right, I think I answered all your questions. Let's take the next question from Andy.

Hi Dr. Dali, this is Andy in the Midwest. My wife is in an interesting employment situation in which she works part time within your favorite low paying specialty. She works as a W2 employee for a small private practice which has mostly a handful of part time providers. Other than malpractice insurance, they really don't offer any benefits. No health insurance, no dental, no baseline disability or life insurance, but there's no retirement plan. We've been pestering the financial people to try to get a 403 started even if it didn't have a match, just to get access to the tax deferred retirement contributions. I'm wondering if it would make more sense for her to be a 1099 contractor instead of being employed. This would give us access to the employee and employer portions of the individual 401k and potentially save us like 5 or $7000 in taxes while preserving the backdoor Roth. So aside from having to negotiate a salary increase to compensate for payroll taxes, what would be the downsides from her standpoint to become a 1099 employee? And then what would be the downside to her employer if she converted to a contractor such that they might decline to do this? Thank you.

Okay, as I mentioned earlier in the podcast, it's not technically a choice. You don't get to choose whether you want to be 1099 or whether you want to be W2. You have to qualify. Now granted, the IRS criteria are pretty gray and there are lots of situations for docs where you can probably justify it either way. If she is in one of those situations where it can be justified either way, then you're absolutely right. If they will pay her enough more to make up for any benefits they're providing, malpractice, whatever, plus the employee or the employer half of the Social Security and Medicare taxes, then there is no downside. And you're right, she could go and open a solo 401k plus, minus a cash balance defined benefit plan if she wanted and actually have retirement accounts. So that could be a great option if it can be justified. No downside to you. The downside to the employer is that they've got to make some changes which isn't the end of the world. But they also might get burned if the IRS comes in and says, these guys are not independent contractors, they're employees. Now pay us all those payroll taxes you should have paid us. So that's the risk for them, and that's probably the main reason why they may not want to do it. But it's worth a try in this situation. Ask them, hey, can I be 1099? Just pay me 10% extra so I can cover my payroll taxes and buy my own malpractice or whatever and we go from there. But it's worth a try. Go ahead, talk to them and see what they say. Maybe it might show them just how serious you are about the need to have a retirement plan and they might get a little more serious about putting a retirement plan in. That wouldn't be a bad option at all. One thing you ought to keep in mind when your employer does not offer you any sort of retirement plan is your traditional IRA contributions are deductible no matter what your income is, so keep that in mind. That's a bit of a unique thing about it, actually. I think if your spouse is making money there may actually still be some limits on that. The rules get really complicated in that situation, so double check there. But keep that in mind as you're preparing your taxes. Even if you did a typical backdoor Roth ira, it may show up a little bit differently on the paperwork as a deductible contribution and then a taxable conversion version. The end result's the same of course, but keep that in mind. Hope that's helpful for you. All right, let's take another question, this one from Wilson.

Hi Jim, longtime reader of the blog, but this is my first year listening to the podcast so I figured I'd submit a question. My wife is this is the first year she'll be an independent contractor with the practice and thus we set up a professional corporation taxed as an S Corp and so we'll be paying her a reasonable salary and processing through payroll. So FICA taxes on both sides as well as the federal income tax will be taken out of there. So I just had a question around additional taxes as a pass through entity, my understanding is that other taxes aren't being paid by the S Corp personally. So for example owner distributions that I assume will have still income taxes but no FICA taxes will need to be paid. So does that need to be added to estimated payments quarterly or is it just can be done at the end based on what you will be withdrawing eventually? Because I'm not sure if we know exactly how much she'll be getting every year in this manner. So I figured you might be able to answer that question for me. Thank you.

Okay, the answer is yes. When you are self employed you are responsible for paying your own taxes. Now if you are the employee of your S corp, some of those taxes are paid by withholdings. The S Corp has to withhold taxes from you as the employee just like it would from any other employee you know. On your wages those taxes have to be withheld and sent in according to IRS prescribed rules. You will obviously also have to pay income tax but not payroll taxes on any owner distributions. That's the whole point of owner distributions of course of forming an S Corp as a doc is to not pay payroll taxes on a certain part of your income. That's why you form the S Corp most of the time if you're a doc. But do you have to pay estimated taxes? Well, probably depends on how big those distributions are. If you just reduce your whatever they're calling them exemptions or whatever. So more money is withheld from your salary from your wages, then maybe you won't have to pay quarterly estimated taxes. It really depends on your other sources of income. What determines whether you have to pay quarterly estimated taxes is what's called the safe harbor. And if you're in the safe harbor, you don't have to pay those. You can pay it all at the end. So there's a few ways you can be in the safe harbor. One is if you owe less than $1,000 when it comes time to pay taxes, then you're considered in the safe harbor. You don't owe any penalties, you just owe whatever tax you owe come April 15th. Another way you can be in the safe harbor as a high income earner is to have paid 110% of the taxes that were due last year. So if last year you had to pay $100,000 in taxes and this year you have paid $110,000 in taxes, you are in the safe harbor. And you don't have to make quarterly estimated taxes. Usually you're not. And so usually you make those quarterly estimated payments on April 15th and June 15th and September 15th and January 15th. And yes, I know that second quarter is only two months long, not three months long. It's really a cash flow nightmare for all of us doing this. But you've got to make the payments. And so you calculate them out based on what that safe harbor is. You look at last year's taxes, you multiply them by 110%, divide by four, and that's what you send in for your quarterly estimated payments. But if you are also having money withheld, then you subtract that out before you divide by four. And so it can be complicated. And frankly, it's a guess. A lot of times I often end up paying tens of thousand dollars more than I needed to pay throughout the year just to be sure I'm in the safe harbor and don't have to pay any penalties. And I'm essentially giving the IRS a tax free loan. The alternative is to underpay and then pay taxes and penalties come April 15 and try to make something with the money in the meantime. But I wouldn't recommend that. I'd probably try to pay a little over a little. Err on the side of paying a little too much, then err on the side of not paying enough. Hope that's helpful. All right, let's take a question from Justin, who's in the marine Corps.

Hi, Dr. Dali. My name is Justin. I'm a lieutenant colonel in the Marine Corps currently with 19 years of service. So Not a doctor since we get all our doctors from the Navy, but a p starting to look at retirement. And one of the options available is a survivor benefit plan that's supposed to supplement our income should we pass away for our wife. Looking at the cost benefit analysis of it, it seems like it's pretty expensive for what you could buy for term life insurance. But all the flyers seem to be pointing towards it being a good thing for you. Curious to get your thoughts on it. Most of the guys I've talked to that have retired already tend to say, well, I had to get my wife to notarize notarized letter signed by my wife to opt out of it. So they tend to take the easy road and just let it happen and opt in, which happens automatically. My second question is, what are your thoughts on not investing very much in the G fund for someone who's going to have a retirement with the military? Since we already have a pension coming, one of my friends says he sees the pension as his G fund and, and uses everything else instead. I just wanted to get your thoughts. Thank you very much.

Okay, great questions. Thanks for your service, by the way. You're getting close to that 20 year mark, so it's pretty exciting. I got a little bit more detail in a follow up email on this question as well. But you know, here's the truth. This survivor benefit plan is what the military calls it. But just about everybody who gets a pension, which isn't that many people anymore, but you know, government workers, et cetera, have this option to have it pay the surviving spouse something. Now that money has to come from somewhere. So what happens? Well, they pay you less. They pay you less while you're alive in order for there to still be something when your spouse outlives you. And that happens a lot of times, you know, because a lot of time it's the guy getting the pension and maybe the guy's two or three or five years older than a spouse and then guys don't live as long. Right. And so the, on average, I think wives probably live five to 10 years longer than their husbands. And so the idea behind this sort of a system with a pension is to provide for them. Now this particular system, this, that they call the survivor benefit plan will pay your spouse 55% of the benefit benefit after you pass until they die. So essentially it's kind of longevity insurance for them in that respect. So the question is, should you buy it? Well, you need a plan. Whatever the plan is when you die, it needs to be enough money, enough income for your spouse to really not have to change their lifestyle. Now, you probably don't need quite as much money when one of you is gone as you needed beforehand, but it's probably not that much less, right? Because some things you still got to pay for one house, right? And that's the same whether there's two of you living there or one of you living there. Also, keep in mind that you are going to the single tax brackets after your spouse dies, so you may have more expenses as far as taxes go, but some of your expenses probably go down. But bear in mind you got to do something for the spouse, outliving the pension holder. My parents, they were faced with this decision. My dad's got a pension from the state of Alaska where he was an employee for a long time, and they chose to take the option where the pension pays my mom, my surviving mom, 75% of the pension if my dad dies first. So that reduces the amount they're paid each month now while they're both alive. And so there was a cost to it. Now, you mentioned as an alternative plan using term life insurance. I think that works for a few years, but I don't think that works if you die at 80 and she lives to be 100. Okay. Because term life insurance in your 70s is not cheap. The whole point of buying term and investing the rest is so you can quit buying any insurance by the time you're 50, 60, 65, etc. You don't want to be buying term insurance in your 70s and 80s. So a reasonable plan might be to buy a permanent life insurance policy if that happens to be cheaper than this sbp. But it probably isn't. It probably isn't cheaper. And so I think that's probably why most people pay for this sort of an option on their pension, especially if that pension is a significant source of the retirement income. And it sounds like it probably will be in your case. So I think most people are probably right to buy it, quite honestly. Run the numbers, but I'll bet that's where you end up once you look at everything and really consider what the plan is going to be. Okay, as far as whether you can be more aggressive. Well, a pension is not bonds. If your plan calls for bonds, buy bonds. If your plan does not call for bonds, then don't buy bonds. If you don't have a plan, get a plan. The easiest way I know of to get one if you don't have one yet and don't feel qualified to write it yourself is to take or Fire your financial advisor online. Course it's cheaper than any financial advisor is going to be and it'll take you step by step and help you to write your own financial plan. But you can pay a few thousand dollars and have a financial planner help you draft up a financial plan. Either way, you need a plan. Now, can you be a more aggressive investor if your spending needs are completely covered or mostly covered by a pension? Sure, you have more ability to take risk, maybe you have less need to take risk. But rather than trying to incorporate the pension into your asset allocation, just subtract it from your spending needs and use the portfolio to make up any shortfall. But certainly it sounds like you have a need and the ability to invest aggressively. So it certainly seems reasonable to not put as much money into bonds like the G Fund or the F Fund in the tsp. I hope that's helpful. Hey, if there's someone that's been helpful to you, someone that has been educating their peers, their colleagues, their trainees about financial literacy, if they're a practicing physician or dentist or we'd like to recognize them, please nominate them for our Financial Educator Award. You can do that@whitecoatinvestor.com Educator the deadline is May 2nd. We're going to give away $1,000 and a nice certificate and give them a lot of recognition. Even those who don't win usually get some recognition. So please nominate those that you see out there spreading the good word of financial literacy to their peers. All right, we've got a question from Navy doc. Let's take a listen to that.

Hi Dr. Dali. I'm a Navy doc about to graduate residency. I'm a member of Navy Federal Credit Union and I received a letter stating that I have up to $2,000 of no cost accidental death and dismemberment coverage with the option to sign up for even more coverage at fairly low cost. Being in the Navy, I have sgli, but do you think something like this on top of that is worth it? Thanks for all that you do.

Okay. You'll see these deals all the time from your bank and credit union that they'll give you $1,000 of free term life insurance or accidental death and dismemberment insurance or $2,000 in this case. Recognize these for what they are. They are a marketing scheme. They are giving you a tiny piddly amount of insurance in exchange for all of your financial information. I mean, what does term life insurance cost? Right. A million dollars of it. If you're a healthy 30 year old female probably 600 bucks a year. Okay, so what is $1,000 of it, right? That's what, a dollar? A dollar a year? Something like that. So this is not a hugely, you know, great benefit they're offering you. Is it worth your time to sign up for it? Maybe, maybe not. I'll leave that up to you. But recognize it for what it is. This is just a marketing scheme. The idea is they get you $1,000 of free insurance or $2,000 of free insurance, and then they try to sell you other products. Maybe you need those other products, maybe you don't. If it's coming from a bank, chances are you don't. But that's what that is. So recognize that. You're talking about sgli. You're talking about term life insurance. You're talking about this free $2,000 in insurance. It doesn't sound to me like you have a plan for insurance. You need an insurance plan. If anybody else is depending on your income besides you, you need term life insurance. May SGLI be part of that plan? Sure, it may be. But last time I looked, SGLI was limited to $400,000. And chances are, if there is someone else depending on your income, that $400,000 is not enough. The other downside to SGLI is it's fairly cheap now, but it goes up in price every five years. It's not like a level term premium level premium term life insurance policy. And so what most people do if you're a Navy doc is they go out and buy a real life insurance policy from an independent agent like those on the list@whitecoatinvestor.com under the Insurance agents tab and they go buy a real policy for $1 million, $2 million, $3 million, whatever. Maybe they buy $400,000 less via that and fill the gap with SGLI. Maybe they keep VGLI veterans group life insurance once they leave the military, but that's only part of their plan. You know, I think when I was in the military, I think I had about $2.3 million of insurance. I had a million dollar policy with MetLife. I think I had $750,000 with USAA. And then I had SGLI. And so that was our insurance plan. This was part of the plan. But if that's your entire plan, it's probably inadequate. So keep that in mind. People die all the time. Yesterday. I was at the hospital yesterday morning. And it's a community hospital. It's a decent sized community hospital, but at that time of morning, it's single coverage in the er, in fact, it feels like a single coverage in the entire hospital right at 6:00 in the morning. There's usually not a hospitalist, there's usually not an intensivist, there's not an anesthesiologist, et cetera, in the hospital. So we go to the codes. When there's a code on the floor, the ICU or somewhere else, we go and see if we're needed. And that time of day, we usually are. And the big fear when you're an emergency doc, when you're a group of emergency physicians, is if you got to leave the ER to do a code somewhere else. Well, what happens if somebody really sick comes into the er? And that usually doesn't happen. You can usually roll the dice and you win. The ones who come into the ER can wait, no big deal, while you go and take care of trying to bring that patient back to life. Well, yesterday we got a little bit burned on it. Got called to a code in an OR and was not an anesthesiologist managing the case. And it was a really sad case. Young patient, and trying to bring that person back, Getting the pulse back, losing the pulse, getting the pulse back, losing the pulse. This was fairly extended. Code is we move that patient to the ICU and still waiting for the intensivist to come in. So what happens? Naturally, we have a STEMI patient come into the er. Well, no big deal. STEMI is pretty bread and butter, emergency medicine. Our nurses know how to take care of it pretty well. We rush them out of there to the cath lab about as quickly as we can. And most of them do fairly well. Well, this one was not doing well and actually coded in the error. So as I'm coding a patient in the icu, one of my patients is now coding in the er. So I ran back down there and thankfully that was a ventricular fibrillation arrest, responded well to a dose of electricity, went off to the cath lab and had 100% occlusion reopened. And of course, help eventually arrived to help with the other code as well. But the truth is our jobs are hard. There's a lot of risk there. There are important things happening. Sometimes it is life and death. That's the reason why you get paid so well to do what you do is because it's hard, because it's risky, because it takes a lot of training, and because everybody can't do it, everybody doesn't even want to do it. So if nobody has told you, thank you for going through a decade A decade and a half of training to do what you do today. Let me be the first. Thanks for what you do. All right, let's take our next question. This one from Jason Dr. Dali.

I had a question about real estate proponents out there. Why does it always feel like people who love real estate is always trying to sell me something? It's almost kind of like those in the insurance industry selling whole life policies. Don't get me wrong, I truly believe in real estate and using it as a part of our investment portfolio in the long term. But I just don't like the way proponents of real estate love to evangelize all the benefits of real estate in general. And I understand the tax benefits and the returns and the liquidity premium, but I just don't like the way many real estate professionals or proponents try to compare it to investing in the stock market and how it is so much better. Just curious your thoughts and love the work you do.

Thanks, Jason. This is a good question and I agree with you. There's a lot of hype. There's a lot of sales in real estate and it makes you feel like multi level marketing. It makes you feel like whole life insurance sometimes. And part of the reason that it's like that is, is because people actually are selling you something, right? They're selling you their services, whatever they might be. Maybe it's a mortgage, maybe it's realtor services, maybe it's turnkey services. Maybe it's a private real estate fund or a syndication or something. I mean, people are making money on it. So yeah, they want you to come in and invest along with them and pay them some fees, right? So they are selling something to you. That's why it feels like they're selling something to you, because they are. It's a lot harder to sell somebody an index fund with an expense ratio of 0.03%. Right. There's not a lot of sales coming out of that investment. It's an investment that is bought, not one that's sold. So that's part of it. I've never really been a big fan of the rah rah, rah, you can do it kind of stuff. Why do they have that in real estate, besides the sales aspect? Well, part of it is because it takes work to be successful in real estate. Even if you are investing passively through private funds and syndications. It takes a fair amount of work just to evaluate those, not to mention doing your taxes on them when you start getting 15k1s a year from multiple states. But it does take work. And so it takes some motivation to do it. And that's part of the reason why there's that rah rah rah aspect to it. But I don't like it any more than you do. I don't think you or I are going to change it. That's the way it is. And, and keep in mind, people are trying to make money off you, whether they're selling you a real estate course or access to a real estate community. I mean, those are some of the stuff we sell here at the White Coat Investor. We've got partners that do lots of real estate. And so it feels like rah rah rah, do real estate all the time. But keep in mind, we're also running a business. We sell ads. We gotta bring a certain amount of money in the door to make payroll like anybody else. This is a for profit business. And so if it feels like it's rah rah rah real estate, well, chances are we're getting paid for it. And we try to have full disclosure on how we get paid. And if you don't see our state of the blog posts every year, we make that very clear. But I think that's probably the best way to think about it is there certainly is an aspect of sales, an aspect of hype, an aspect of cheerleading associated with it, and it's probably not going away anytime soon. It's been there for at least the last 30 or 40 years. All right, so let's take a question now on some student loans. It sounds like this one's from Sam.

Hey, Dr. Daly, it's Sam the intern. Quick question for you about student loan refinancing. I'm in the process of refinancing my student loans as the federal student loan holiday is coming to a close. And going through one of your sponsored links, all of the fixed rate loans for every time frame I can look at have a lower interest rate than the variable rate loans, which to my knowledge is the opposite of how it's supposed to be. Am I missing something here? Is this just because the loan servicer expects for interest rates to lower in the future? I appreciate any thoughts you have. Thanks so much.

Great question. It's really weird. That's usually not the way it is. Usually you are offered a discount for being willing to take the variable rate loan and running that interest rate risk yourself. It might be 0.5% less, might be 1% less. You know, in the last few years people have really made out like bandits taking variable rates because then as rates went down, some of them were paying like 0.1% on their student loans. So it's not like interest rates always go up. Everyone's convinced interest rates must go up and must go up quickly, and maybe they will this time, and eventually they probably will go a little bit higher than they have been lately. But sometimes they don't. Sometimes they stay right where they are, sometimes they go down. And in those situations, you certainly come out ahead with a variable rate loan. In fact, if it doesn't go up for a while, even if it does go up or doesn't go up substantially, you still come out ahead with a variable rate loan. But given inflation's now over 8%, I think the last report I saw, you know, there certainly is going to be some impetus to raise some rates at the Federal Reserve this year. I think they've announced they expect to raise them six times this year. So I would expect by next year rates would be at least, you know, 1.5% higher. So why are you running to this situation now? I have no idea. But what would I do in that situation? I'd take the fixed. Right. It's a lower rate. Chances are good rates are going to go up. Why would you take the variable, especially if they're not giving you some sort of a discount on it? Why they're doing that, I have no idea. But if that's what they're offering you, all you can do is apply and take the best thing they're offering you. Now, keep in mind, if you're not aware of this, that they have extended the student loan holiday yet again for another three months. And frankly, I think it's highly unlikely that it will not be extended again, because what's going to be right around the corner in three months? Well, congressional elections are, and in an election year, I can't imagine that it's going to be super popular to start charging people that you haven't charged student loan interest to in the last year and a half, or two and a half years rather. So it wouldn't surprise me to see this get extended one more time, two more times into the new year, maybe forever. Who knows, the way things are going now. So if you have federal student loans, you might not quite want to refinance them yet. Wait and see what they do in Congress, wait and see what the Biden administration does. But if you have private student loans and still haven't refinanced them, boy, you should get that done right away. That's especially with concerns for rates going up. And of course, if rates go back down, refinance again, right? You get the cash back through the links. If you go through the WCI links, you get hundreds of dollars of cash back. We're still giving away fire your financial advisor to anyone who refinances a certain amount on there. And so you get a better deal going through our links than you do going directly to the companies. So if you are going to refinance, please do go through the White Coat Investor links. They're very prominently displayed@whitecoatinvestor.com if you go to the recommended tab, it's the first link there. But I wouldn't necessarily take a variable rate loan. If they're charging you more than a fixed rate loan, why should you be paying to run the risk? They should pay you to run the risk. As a white coat, you have valuable knowledge. Various companies want that knowledge and they're willing to pay you for it. That's why we put together a list of recommendations for companies that pay you to take surveys. If you're looking for a profitable side gig for not too much effort, getting paid for surveys could be the perfect solution for you. You can make extra money, start a Solo 401 and use your medical knowledge to impact new products. One of the WCI columnists makes an extra $30,000 a year just doing these surveys. Sign up today and use a fraction of your downtime to make extra cash. Go to whitecoatinvestor.com mdsurveys you can do this and the White Coat Investor can help. All right, don't forget, nominate anybody that you want to win our financial educator award. Whitecoatinvestor.com educator deadlines May 2 thanks. For those of you leaving us five star reviews that help spread the word about the podcast, our most recent one came in and said WCI isn't just for docs. I'm not an md, but Jim Dally's advice has been invaluable to me, my family and our employees, that is A consultant and spouse of a small, small biz owner, I've learned not only about financial pitfalls and scams, but how to use the system to our and my wife's employees benefit. The podcast, blogs and website resources provide clear, simple and specific information on a wide range of topics in an industry beset with scammers scheming to get your money. WCI provides you with evidence based information, much of which has been field tested by Jim, not to mention hundreds of thousands of other White Coat investors. Thanks Sam for that great five star review. For the rest of you, keep your head up, shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor Podcast.

The hosts of the White Coat Investor Podcast are not licensed accountants, attorneys or financial advisors. This podcast is free 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.