WCI #371: Which Accounts Will Make Your Kids Rich?

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. This is White Coat Investor podcast number 371. At some point in our financial lives, it will be time to buy a home. A physician mortgage can be a good vehicle for a young doctor who's just out of school and and has a more effective place to use their money than on a big down payment. These loans allow doctors to secure a mortgage with fewer restrictions and a lower down payment than a conventional mortgage. But if you're further advanced in your career or deeper into your journey to financial freedom, buying a home with a conventional mortgage and then later on potentially refinancing that loan to a better rate with a shorter timeframe could be a great move. Wherever you are in your financial journey, make sure you use the mortgage that will be most financially beneficial for you. Hop over to our recommended tab to learn more about all of your mortgage and refinancing options@whitecoatinvestor.com mortgage. You can do this and the White Coat Investor can help. All right, welcome back to the podcast. We're recording this today is May 3rd. This thing's not going to drop for over a month. June 13th is when it drops. Might be something cool that happens in the world between now and then that we're not mentioning on this podcast. That will be why. Remember that we're taking applications for speakers for WC Icon 25. That's going to be in San Antonio February 26th and through March 1st. You can't register for it, but you can apply as a speaker. Go to wcievents.com to do so. We'd love to have you. It is a competitive process, but the only way to get selected is to apply. So you've got through Saturday, June 15th to apply and then we're going to close the applications and try to figure out who the speakers are going to be for next year. Also, we're in the middle of WCI scholarship season. People can submit scholarships right from June 1st through the end of August. It's an essay contest is essentially what it is. But this is kind of run by the entire WCI community. I don't pick the winners for this. I have a very heavy hand in picking the winner of our Financial Educator Award that we give out each year. But not in the WCI Scholarship. This is a cash scholarship. We just write checks to medical, dental, other professional students. But we don't choose who the checks go to. You choose. We need you to judge these essays and so if you would like to be a judge for that, you can apply. Now we typically need 60, 70, 80 judges. Depending on how many applications we get, they might be reading 10 or 20ish sort of essays. It's not that big of a thing to do, but we would sure appreciate it if you would be willing to do that. Students, residents, you're not eligible to be judges, but everybody else in their career retirees is eligible to be a judge for that competition. You have to be available in September. That's when you're going to get these essays emailed to you to read and get your feedback on them. So if you're not around in September, don't apply. But if you are around in September, in the very early part of October, please do. We'd love to have you as a judge. If you want to apply, email scholarshiphiatinvestor.com Put judge or volunteer judge in the subject line and we'll get the information you need. If you want to apply for the scholarship you can go to whitecoatinvestor.comscholarship and apply for that. You got to be full time student in good standing in professional school. People always ask can I apply if I'm in this sort of school or this sort of school? I'll be honest, almost all the winners are medical and dental students. But you can apply. So send it in and we'll take a look at it. All right, let's get into your questions. First one is about HSAs.

Hi Dr. Dali, my name is Max and I'm an otolaryngologist, head and neck surgeon from Chicago and have been listening to your podcast since 2020. And my questions today are about health savings accounts. I've been maxing out my health Savings account since 2020 as an individual each year, most recently in 2023. After getting married and with my wife now on my health insurance, I had switched my contribution to family and maxed out to the 7750 with a family eligible high deductible health plan. Using Fidelity, my wife started a new job mid year in 2024 and she now has her own high deductible health insurance and I switched back to an individual high deductible plan. She now contributes to her own HSA and am now returning to contributing to my HSA individually. My questions are is my wife able to roll over her HSA into my account as we now have two individual HSA if you switch health insurances mid year between family back to individual, do you have to change your contributions? And is it more advantageous to have two individual health savings accounts as opposed to one family health savings account to get the additional catch UP contributions at 55? Thank you for everything you do.

All right, some of your questions are really easy, some are not so easy. Let's do the easy ones first. Your first question was whether you can roll your HSA into somebody else's hsa. And the answer to that is no. Okay? You've got your HSA with your name on it. She's got her HSA with her name on it. You can't now combine these. I know there are such things as, you know, family high deductible health plans and you can make a family contribution to an HSA, but these HSAs don't have two people's names on them. I think the only exception to that is a spouse. Let me double check that so you guys don't have to call in and correct me. But I think if your spouse leaves their hsa, they can treat the account as their own. Okay, so your spouse can leave you their HSA when they die, but they can't give it to you before they die. Everybody else who inherits an hsa, it's basically cash. It's cash on the barrel head and it's totally taxable at ordinary income tax rates. It is not the best account to inherit. It's probably the worst account to inherit. And so it's a good thing to either spend during your life or leave to charity when you die. All right, so I think that's the first question. Your second question is a hard one, so let's skip that and let's go to your third question, which is whether it's better to have two accounts or one. It doesn't matter, right? You can spend on either spouse from either account throughout your life. And once you die, the spouse who's remaining gets to combine your account with theirs. So there's really no difference. The only downside to having two accounts is a little additional complexity. Now you have two accounts to manage instead of one, but I don't see any advantage to having your own account. I think it's all downside, but it's not much downside. So it's fine if this makes sense with the way your health insurance is set up right now. If it makes sense for you to be on separate plans, perfectly fine to have your own separate HSAs. Now, if you have a kid, your kid's probably on one plan or the other, right? And having a kid on that plan means you can make a family contribution, but you cannot make a family contribution to your plan and your spouse make an individual contribution to their plan. You're limited to, you know, $8,300 a year. That's the 2024amount. You know, even if your spouse is on a separate plan and has a separate hsa, there is a cool exception to this and that's for adult children, right? You got a 19 or 20 year old kid that is not your dependent and is on your high deductible health plan. A family high deductible health plan, they can make their own $8,300 HSA contribution, which is a pretty cool trick, I think, up until the time they come off your plan at age 26. So you can a million dollar HSA by the time they're in their 60s. If you max that out each year between age 19 and age 25, that's a pretty cool trick. But those are the limitations. All right, the question in the middle, the hard question, your second question was basically when you change during the year, how does that affect your contributions as far as to your hsa? So to get answer that, we got to get into the details and this is enough details that I got to look it up every time. The main rule you want to keep in mind is the last month rule. That's the one that determines whether you qualify to contribute to an hsa. But there are all kinds of rules around that. So let's get into some of those rules. Okay? The definitive source in all of this is IRS publication 969. And if you go to that publication, you'll see a section called Contributions to an HSA where it tells you any eligible individual can contribute to an hsa. For an employee's hsa, the employee, the employer, or both may contribute to the HSA in the same year. The total limit's still the same, right? You don't get matching contributions that are above and beyond your contribution. The total limit is still the same. The employer contributes more, you got to contribute less. But for an HSA established by a self employed or unemployed individual, the individual themselves can contribute. Family members can make contributions. Your friends can make contributions. You can just gift money into somebody's hsa. As long as the person who owns the HSA is eligible to have HSA contributions made that year, they do have to be made in cash. You can't like transfer stock into an HSA or some sort of appreciated security or private business can't be transferred into an hsa. Okay, the limit on contributions the amount that you or any other person can contribute to your HSA depends on the type of high deductible health plan coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. So for 2024, the individual coverage is $4,150. If you are on a family high deductible health plan, there's $8,300 that you can contribute into your HSA. If you are or were considered an eligible individual for the entire year and didn't change your type of coverage, you can contribute the full amount based on your type of coverage. However, if you weren't an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of one. The limitation shown on the limitation chart and worksheet in the Instructions for Form 8889, which is the Health Savings Account form or two the maximum annual HSA contribution based on your HDHP coverage, self only or family on the first day of the last month of your tax year. Okay, so what does that tell you? That tells you if you're in a complicated situation, you basically have to go to the Instructions for Form 8889 and fill out the worksheet and figure out what your contribution can be. But here's the deal. It's not like you just added high deductible health coverage. That's who this worksheet is usually geared toward. You're just like deciding who's on which plan. So it doesn't really matter. Your total contribution for the year is still going to be $8,300. If that all goes into one account, who cares? If it's in two accounts, who cares? It's not really a big deal. So I think I'd probably in a year that I changed to where my spouse was on a different plan, I think I would probably only do the individual contribution for mine and have my spous to the individual contribution for theirs into their hsa. If there's a kid, I'd just use one. HSA is probably what I'd do, but I hope that helps. The thing to know about though, this HSA specific rule is the last month rule. So basically, if you're an eligible individual on the first day of the last month of your tax year, typically December 1st, right, you're an eligible individual for the entire year. So if you just get a high deductible health plan. In November, you're eligible to make an HSA contribution for the entire year. But there is a rule that you have to stick with it the next year. They call that the testing period. If you made it for the entire year under the last month rule, you must remain an eligible individual during the testing period for the last month rule. The testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. So basically, for the next year, you have to remain eligible for an HSA or you got to go back and fix that HSA contribution that you had. Hope that's helpful. It's complicated, but it's well worth doing because the HSA is like the best investing account out there, right? It's triple tax free. You get a tax deduction when the money goes in both federal and state. Well, maybe not in California and New Jersey, but federal everywhere. A state in most states. And then it grows tax protected like all your retirement accounts. And when you take the money out at any age to use for health care expenses, eligible expenses, it comes out tax free, triple tax free. It's better than your 401k. It's better than your Roth IRA. And even if you, like get a super overfunded, one like ours is probably overfunded now because we haven't been pulling money out of it and we've been maxing it out for years and we've been investing it aggressively. You can take it out after age 65 without paying any penalty. You do have to pay tax if you do that. If you're not spending it on health care expenses, you do have to pay tax, but you can buy a sailboat with it. One of the cool rules about HSAs is you don't have to take the money out in the same year. You spend it on healthcare. You can just save the receipt and pull it out later, which is a cool trick. So if you saved up $50,000 worth of receipts over the years and you pull out $50,000 at age 67 and buy a sailboat with it, you can have those receipts to show the IRS that this is actually was spent on health care. It was just done years ago. So that's kind of a cool trick as well. Obviously lots of potential for abuse there because you don't get audited most of the time, right? And so you only have to have those receipts when you get audited. But the honest thing to do, of course, is if you take the money out, you don't use those receipts. More than once. Okay, we've got another question coming up about HSAs, but before we do that, let's do our quote of the day. This one comes from Paul Samuelson. He said investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. And I am a firm believer in that. Investing is not supposed to be exciting. If you're excited to check on your investments every day, you're probably doing this wrong. Your portfolio is not supposed to be full of meme stocks and bitcoin options. All right, here's a question from Steve about HSAs.

Hi, Dr. Dali. I had an HSA withdraw question for you. I've heard many financial bloggers and podcasters discuss waiting to do any withdrawals from HSA accounts until retirement age. And I have several receipts totaling a few thousand dollars that I can withdraw from my HSA right now that are eligible. And was going to do that now that the market has recovered. I haven't heard anybody discuss inflation aspects with HSA withdrawals, and I was wondering your thoughts on that. It seems that a few thousand dollars now for purchasing power compared to 30 years from now, if I wait until retirement to do my HSA withdrawals, that, that several thousand dollars would be, I don't know, worth maybe two thirds of what it is in today's money for spending power. So just wondering your thoughts on inflation with HSA withdrawals. Thanks.

Okay, I think the best resource on this subject, and I'm obviously biased, but I think the best resource is a blog post I wrote years ago. I think it was published in 2019 that I called the best ways to use an HSA. And in that blog post I talk about seven principles to guide you in using your health savings account. So let's go through those to start with. Principle number one is that your HSA is your only triple tax free account. Okay? So that's really awesome. So use it right? There's no reason not to max this account out. If you're eligible to make contributions, make the contributions. It's a great place to invest. Principle number two is that an HSA should be allowed to compound for as long as possible. The problem is you don't know how long possible is you don't want to leave this account to your heirs. As a general rule, better to leave them something else. It's fine if you're leaving a bunch of money to charities for whatever you spend to go to the charity. Right? Obviously the charity doesn't pay taxes, so it goes tax free to them. But the idea is you want to spend it on health care during your life for the most part. But the later you spend it, the better because that gives it more time to compound in a tax free way. So that's principle number two. Principle number three, of course, is that HSA dollars are best spent on healthcare. Right? If you don't spend it on healthcare, at a minimum, you'll be paying taxes on it. The entire thing. Right? Because you cut tax break when it went in. The whole thing's taxable at ordinary income tax rates if you pull the money out and don't spend it on healthcare. If you pull it out before age 65, you also pay a 20% penalty. So you really don't want to spend it before age 65 on anything besides health care. That would not be wise. Principle number four, as I mentioned, is spend your HSA prior to death. Unless you're planning to leave it to charity, it's just not a great account to leave to your heirs. Principle number five is HSA dollars do not have to be withdrawn in the same year as the health care expense. So now we're talking about this strategy. You're talking about saving receipts, saving them for years, right? And then pulling it out later at some convenient time. Just remember, as you save receipts, you really need to digitize and make sure you have an extra copy of them. The ink and paper that receipts are generally printed on is terrible and it fades over time. So just throwing these in a folder, you might go back to that folder five years later and find a bunch of blank pieces of paper. Principle number six, the higher your tax rate, the more beneficial it is to use the HSA instead of non qualified or taxable dollars. Right? So if you have a 50% marginal rate in your peak earnings years, but only a 30% marginal tax rate in retirement, there is an advantage to using those HSA dollars earlier in life. That's not because it affects health care spending, but it affects the tax rate at which you can pull money out if you spend on something besides health care. But that's a pretty minor advantage. And lastly, as a general rule, an HSA is not protected from your creditors. Now, there are states where you can get some protection. Florida, Mississippi, Oregon, Tennessee, Texas and Virginia. There's probably been a few added since I wrote that article. But most states don't protect your HSAs. It's not protected from creditors. So how do you apply all those principles to determine the best way to use an hsa? Well, the very best way to use an HSA is to pay for your health care benefits later in life. You just don't know how much you're going to spend on health care right after age 65 or 75. You know, if you got a $20,000 HSA, you're probably going to spend that whole thing. If you have a half million dollar hsa, you're probably not going to spend that whole thing. And you probably ought to get started spending it, assuming you don't want to leave it to charity when you die. So that's something to keep in mind. If you think that your HSA is larger than your future health care expenses, be sure to spend it on any available health care expense that you have throughout your life. If you reach age 65 and you still have a huge HSA, you can treat it like a regular IRA and make withdrawals from it and spend it on whatever you like. Just know you're going to have to be paying taxes on that. But if you think your HSA is smaller than your future health care expenses, then you should pay for your current health care needs with non qualified dollars and save the HSA for your retirement health care expenses. If you're not sure, then maybe spend your taxable dollars now, but keep those receipts. Hope that's helpful. Now, you wanted to talk about inflation. The receipts are what the receipts are. They don't get adjusted by inflation. If you spend $5,000 on an appendectomy this year, when you pull the money out in 30 years, you still only going to get to take out $5,000. And you're right, it's only going to be worth half as much by then. So that is an argument to maybe take the money out as you go along. But it's a good idea to save receipts, take money out later, right? That's good. Spending in retirement is good. Spending on healthcare now is good. Taking money out after age 65 and spending on something besides healthcare is okay. Taking money out and spending on something besides healthcare before age 65 is a bad idea. Hope that's helpful as you decide how to spend your HSA dollars. You know, the more I think about it, the more I think I ought to just be using it the way it's intended and spending it as we go along. But I confess, we haven't done that yet. We've never taken money out of our HSA and it's gotten to be kind of ridiculously big at this point. But it'll help us to support charity later. And we've got a few Receipts saved up. I'm not as good at saving them as I ought to be. It's a little bit of a pain, so maybe we ought to just withdraw as we go along. Okay, next question is about some accounts for your children. Let's talk about making your kids rich. Now, we already talked about how you can make them rich with an hsa. But there are other accounts you can use to make your kids rich, too. Hey, Jim, this is John, a sports.

Medicine doc in the Southeast. Thanks for all you do.

I have a question about UTMA accounts.

And custodial Roth IRAs.

Simplistically, I would like to know if you can transfer money from an UTMA account to a custodial Roth.

I think this might be a good.

Way to start saving for a Roth before your child starts to have earned income. Yeah, if you could do that, then I guess that would be around a way to start saving in a Roth IRA before the kids have income. But you can't do that. So nice try. There's not a backdoor into a child's Roth account by putting an UTMA first and then moving it to a Roth. That doesn't work. Now, if they have earned income and are thus eligible to make Roth IRA contributions, I guess that money could come out of an utma. You know, the money's all fungible. You're using the UTMA for their benefit. But theoretically, the money that goes into an IRA or other retirement account is the earned money, not the money that came out of some investing account somewhere else. Now, there is another workaround, I guess if we're going to get technical, utmas can be transferred into a 529 owned by the kid. You can do that. Utmata 529. And then after the money's been in the 529 for 15 years, there's this new rule out with the Secure Act 2.0 that allows you to then use that money to fund the beneficiary's Roth IRA when they have earned income later in life during their career. But that's a pretty big workaround for the most part. Put money in an UTMA if you want it in an utma. If they qualify to make IRA contributions, put it in a Roth IRA for them. If it's for college, put it in a 529. Utmas are for other stuff, not college. Not a great place to save for college. If you want them to have the option to use it for college or something else, you can use an utma. But for the most Part utmas, Uniform Transfer to Minor Accounts are the child's taxable account. You give it to them and you want them to use it to pay for some time in the Peace Corps or a mission or, you know, summer in Europe or a car, a house down payment or those sorts of things in their 20s. That's what utmas are for. Just remember that after a certain amount of income, it gets taxed at your income rate until they become adults. So you really only want to put a certain amount of money into an utma. At that point, it's not really doing you any good. You lost control of the money and you didn't get any tax benefits for it. That range is usually as it moves into the if you're investing tax efficiently, that ranges usually as it moves into about a six figure size. You're probably okay if you've got a five figure UMAP for the kid, but once it's six figures, you gotta start worrying about the kiddie tax. All right, next question comes from Ali, who's got a question about saving even more for your kids. We're going to make lots of kids rich today.

Hey Dr. Dahl, thank you for what you do. Here is a question that I never really heard in the podcast before. Aside from Roth IRA for kids, my question is how about solo 401k for kids? If they can show a W2 income through my entity, does it make sense to start 401k for my 21 year old who's in college and my 16 year old who's in high school, does it make sense to start a 401k? They can share employment, they can show income. Yes, it's going to be their money. They can do whatever they want to do with it. But I think the question boils down to is this a smarter way of transferring wealth to the next generation? Again, thank you for what you do and I will be looking forward to listening to your response. Thank you.

There are some great ways to make your kids wealthy. Funding a Roth IRA if they have earned income is a great way to make your kids wealthy. Putting money in an UTMA is a great way to make your kids wealthy. Put money in a 529. This is a great way to keep them from having to pay for college and medical school or dental school or whatever with borrowed money. You can put money in a very low cost variable annuity when they're 2 years old to help pay for their retirement. You give them six decades of compounding interest on that and it'll overcome the costs of that variable annuity and it'll overcome the costs of pulling that money out and having it be fully taxable by getting all those decades of of tax protected interest as long as you choose a low cost variable annuity and invest it wisely. One thing that doesn't work very well though is using a 401. And that's because there's lots of rules associated with a 401. First of all, you got to have earned income. And most kids don't have all that much earned income. They don't make that much money. You can only mow so many lawns, you can only schlep so many hamburgers at Wendy's. You just don't make that much. And you can contribute $7,000 this year to a Roth IRA. Did your kid really make more than $7,000? Most 16 year olds aren't making more than that. But if they are, then you can start thinking about other retirement accounts or you can just put it in a 529 or you can put it in an AETMA or something like that. So who could use a 401? Well, somebody that's working for an employer that offers a 401 that they're eligible for. Now most employers exclude 16 year olds. I think you can even exclude 21 year olds from 401 contributions. That cutoff might be at 18. I'd have to read the new rules. There were some new rules with that in the Secure Act 2.0. But at any rate, lots of young people get excluded by the employers, including if the employer is their parent. So also keep in mind that putting a kid on a payroll just to make 401 contributions might not be all that wise. If it is not a sole proprietorship or partnership and the parents are not just your parents and you're not under 18, you're going to have to pay payroll taxes. The cost of the payroll taxes may be higher than whatever you're really benefiting from having that 401. So you got to weigh all that when you start doing 401s. Now you mentioned solo 401s. Remember a solo or individual 401 is a self employ retirement plan. You got to have self employment income, you have to be running a business. So if you're 21 year old and your 16 year old aren't running a business, they can't make Solo 401 contributions. So you think, oh well, I'll have them do a business, they'll have a babysitting business, they'll have a lawn mowing business. Well, that's typically household employee income, which you don't have to pay payroll taxes on it as long as there's not more than, I think, 2,500 bucks of it. And they don't have to file their Schedule H if they're paying you less than that. So most people are getting their babysitting and their lawn mowing income as household employees rather than being self employed. So you can't do a solo 401 for that income. But if you had so much of it and you actually started a legitimate business and your kids mowing 8 billion lawns and there's all the other kids in the neighborhood working for them and they made $45,000 mowing lawns this summer and they have a business and they're declaring that on a Schedule C, then yeah, they could open a solo 401k and make a contribution for that. I just don't think there's very many kids that this strategy works very well for at all. So I think I'd probably encourage you to forget the Solo 401 thing. If you really want to help your kid, look into just giving them money and having them invest it. Look into their 529s. Look into utmas. If they're underage. You know, consider the variable annuity thing. If they're 19 to 25, you can fund an HSA for them if they're on your high deductible health plan. But at the end of the day, that's probably it. I don't think a lot of people are going to go doing 401s for their kids. If you have started a 401 for your kid, shoot me an email. Editorwhitecoatinvestor.com, i'd like to hear the story. Maybe we'll share it on the podcast. All right, next question is about 403s. Hi Dr. Daly.

I have a question about maximizing contributions to my 403. I'm a physician at a nonprofit hospital. I contribute the maximum individual contribution which will be 23,000 for the year 2024. I also receive my employer match of 2% which is capped at 6900 due to the annual compensation limit. The hospital plan makes employer retirement contributions of 3% of compensation. However, physicians are not eligible for this. I think this may be due to non discrimination test investing. I'm not yet eligible for catch up contributions for age greater than 50 or extra contributions for employees with over 15 years tenure. And my plan does not allow, after tax non Roth contributions, I max out my other options, including my 457 backdoor Roth IRA and HSA. In summary, I'd like to get closer to the 69,000 combined contribution limit for my 403. However, I can only get to 29,900 for the year 2024. Any suggestions to increase 403 contributions beyond what I've mentioned? Thank you so much as always.

Wow, that deserves like the Question of the Year award because you included every piece of information I needed to know to answer your question. The answer is no. There's nothing you can do. I'm sorry. You can't put any more money in the 403 because your employer isn't going to let you. The employer either needs to let you do some sort of self match into it. This is typically for partners that can do those sorts of things with their 401k profit sharing plans or they need to offer a bigger match or some other sort of contribution into it which they aren't or they have to make or let you make after tax employee contributions which they don't let you do. So no, you're out of luck. You can't put any more in the 403. But don't make the mistake that some people do that think the only way to save for retirement is in some sort of special account. So they max out their backdoor roth and their 403 and their 457 and their HSA and they go, well, I can't do anything now. I'll have to buy whole life insurance or I'll have to go buy an annuity. No you don't. You can always invest in taxable. There is no limit on how much money you can put into a taxable brokerage account. And a taxable brokerage account's great. There's lots of cool things you can do with it. You can tax, loss, harvest. You benefit from the qualified dividend lower tax rate. You benefit from long term capital gains rates. It's flexible. You can spend it on anything you want. You can pull it out anytime you want. You can donate appreciated shares to charity either directly or via donor advised fund after you've owned them for at least a year and get a charitable deduction on them. There's lots of cool things you can do with a taxable account. You should not be afraid of a taxable account. The vast majority of our money is now invested in a taxable account. It's okay. Yes, you should max out your Roth ira and your 403 first, but after you do that. If you want to save more money, put it in a taxable account. It's fine. Just make sure you invest it tax efficiently. The first types of investments you tend to put in there are things like a total stock market index fund or a total international stock market fund. Those are the sorts of investments that go in there first. You can put a muni bond fund in there. And for most people, you never end up having to move more in there. If your taxable account, for whatever reason because you sold a business or something, becomes a very large account compared to your other ones, you might have to move more asset classes into there. But for the most part, you just move the most tax efficient asset classes in there. But don't be afraid of that. You can't put any more in your 403. It's time for you to start a taxable account. Started at wherever you hold your other accounts, Vanguard or Fidelity or whatever. I'm very happy with my Vanguard taxable account. Some people don't like it. They don't like the customer service or whatever. But I think it's cool for several reasons, including the fact that their Sweep account is paying 5.25% these days. And that's a good enough reason for me to stay at Vanguard. And I mostly invest in Vanguard funds and ETFs anyway. All right, thanks to all of you out there, by the way, for what you're doing. You know, I worked a shift last night. Lots of interesting patients, of course, all of whom were in worse shape than I was, including people that hadn't been off the floor in the last year. And I imagine, man, what that must be like to have that been my life. Crawling around to get to the bathroom, crawling around to get to the kitchen, people bringing me food, people bringing me booze. And there are a lot of people out there whose lives are much less fortunate than ours. And I thank you for what you're doing for them. It really is a very selfless service you're doing doing. And you don't always get paid for it, as you know. But it is important work. Okay, let's do another question related to a 403.

Hey, Jim, I have two questions for you. First one, my 403B at work does not have a total US stock market index fund option, but it does have Vinix, the S&P 500 option, and Vieix, the extended market index. If I wanted to mimic the return of a total US stock market index fund, would I just simply divide up my contribution into those two funds? Based on market cap. For example, if I had a $100,000 to invest, would I just put $86,000 in the S&P fund and the other $14,000 in the completion index fund since I believe that's the current breakdown in market cap. Second question. My wife is a W2 employee, but her employer does not offer a 401 or 403. So how is she able to make her $23,000 employee retirement contribution for a case like this? Can she just open up her own 401k if she's only a W2 employee? We already do the backdoor Roth IRA, so we maximize that. We're just looking to increase our tax protected space. Thank you in advance.

Okay, good questions. First one. Yeah, you've got it. That's exactly how you do it. The current mix, depending where you look, 82.1 8416, 8515. It tends to bounce around in there depending on how large caps been doing compared to small caps and mid caps. But if you got a 500 index fund, the truth is the correlation between a 500 index fund and the total stock market fund is about 0.99. It's probably fine to just skip the extended market index fund. But if you truly want to get all the stocks, if you really want to approximate a total stock market fund, you're going to need to add some extended market index fund to your 500 index fund. The current ratios as you mentioned, 84% 500 index or 85% or 82%. It's usually right around there. So that's exactly how you do it. Very well done. Second question. I get these all the time. Why can't I contribute to a 401? Well, because a 401 is an employer provided retirement account and your employer hates you. So they're not going to provide you an account. So you're out of luck. You can't just go get your own 401. Now if you're self employed, you are the employer, so you can go open a 401. It's called a solo or an individual 401. Once you have employees, you got to get a regular ARISA 401. But you can't just open your own 401. That's not the way it works. It's an employer provided account. An IRA is different. Right? IRA stands for Individual Retirement Arrangement. So you can open that on your own. You still have to have earned income. But you can't just go open a 401. It's against the rules. So I know you want to max out your retirement account, so I know you want to max out those benefits. But it sounds like kind of like the last caller. It's time to open a taxable investing account. And that's okay. That's not a bad thing. At some point in our financial lives, it will be time to buy a home. A physician mortgage can be a good vehicle for a young doctor who's just out of school and has a more effective place to use their money than on a big down payment. These loans allow doctors to secure a mortgage with fewer restrictions and a lower down payment than a conventional mortgage. But if you're further advanced in your career or deeper into your journey to financial freedom, buying a home with a conventional mortgage and then later on potentially refinancing that loan to a better rate with a shorter timeframe could be a great move. Wherever you are in your financial journey, make sure you use the mortgage that will be most financially beneficial for you. Hop over to our recommended tab to learn more about all of your mortgage and refinancing options@whitecoatinvestor.com mortgage. You can do this and the white coat investor can help. All right, don't forget, you're running out of time to apply to be a speaker at WCICon25. Go to WCIEvents.com to do that. We'll open registration this fall. I hope you come. We're obviously going to have great speakers. Also, we need scholarship judges. Email scholarshipwhitecoatinvestor.com, put judge in the line and you'll be getting contacted in September and October to help us figure out who's going to get the cash this year. We want to not only boost financial literacy in the medical and dental and other schools this country, but we want to help them directly reduce their debt. Thanks for those leaving us the five star review, those telling their friends about the podcast. It does help spread the word about it. A recent review came in from jav2015 who said exceptional Podcast. The host has a wealth of knowledge and provides us with exceptional guidance with what I call no bias. Your podcast made huge impact on my financial life. That is needed for many high income professionals. I highly recommend it. Thank you so much for that five star review. For the rest of you, keep your head up, your shoulders back. You've got this. The entire WCI community is here to help you. So stop in at our communities. Whether it's the financially empowered women, whether it's our white coat investors subreddit the White Coat Investors Facebook Group or the WCI Forum and we will help you with your questions. We will help you be successful. We believe that financially successful doctors are better physicians, parents and partners. You can be one too. Stick around. We'll teach you how. The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.