WCI #443: From TSP to Solo 401(k): Real-Life Retirement Planning Questions Answered

Summary

White Coat Investor Podcast #443: From TSP to Solo 401(k): Real-Life Retirement Planning Questions Answered
Host: Dr. Jim Dahle
Date: October 30, 2025

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Episode Overview

In this episode, Dr. Jim Dahle fields a series of listener questions that span the practical realities of moving funds out of the Thrift Savings Plan (TSP), navigating traditional vs. Roth retirement account options, handling deferred compensation plans (like the 457), nuances of using ETFs versus mutual funds, understanding 401(k) matches and true-ups, merging finances and IRA rollovers after marriage, and fine points on calculating Solo 401(k) contributions. Dr. Dahle brings his signature candid, no-nonsense approach, sharing both technical detail and practical wisdom for high-income professionals on their path to financial independence.

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Key Discussion Points & Insights

1. Rolling Over the Roth TSP After Military Service ([01:34 – 05:50])

• Listener’s Question: Is there any real reason to keep money in the Roth TSP or should I roll it into a Roth IRA, despite the famed G Fund?
• Dr. Dahle’s Response:
  • The TSP used to be the best 401(k) due to extremely low expense ratios and unique funds, especially the G Fund.
  • The G Fund: Unique to TSP and offers Treasury bond yields with money market-like risk.
    • “The TSP basically gives you Treasury bond yield for money market risk. … The G Fund is unique to the TSP. There really is nothing that compares to it out there.” (03:35)
  • If you don’t specifically plan to use the G Fund, it’s fine to roll funds to a Roth IRA for simplicity.
  • Stick to reputable brokerages (Vanguard, Fidelity, Schwab), be wary of “gamified” platforms offering bonuses.
  • Other employer 401(k)s have improved, reducing TSP’s relative advantage.
  • Takeaway: Rolling over is reasonable if not interested in the G Fund, particularly for account simplification.

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2. Marginal vs. Effective Tax Rate: Roth vs. Traditional Contributions ([07:53 – 12:47])

• Listener’s Question: When deciding between Roth and Traditional (pre-tax) contributions, should you compare your marginal tax rate now to your marginal or effective rate in retirement?
• Dr. Dahle’s Clarification:
  • The academically correct comparison is marginal to marginal: marginal rate at contribution vs. marginal at withdrawal—"for every dollar."
    • “The academically correct answer is it’s marginal to marginal. … That’s the academically correct answer.” (10:57)
  • References to effective rate are to remind that retirement withdrawals often fill the lower tax brackets first, effectively lowering overall tax.
  • Complex, individualized decision; both Roth and Traditional options have merits. Factors can be unknown/unknowable in advance.
  • Memorable Quote: “Anybody that tells you this is simple or that the right answer is always the same thing, they don’t understand the issue. It’s complicated.” (08:44)
  • If interested, see Dr. Dahle’s March 7, 2025 post, “Should You Do Roth Contributions and Conversions?” on whitecoatinvestor.com.

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3. Deferred Compensation Plans & When to Use Them ([13:02 – 19:37])

• Listener’s Question: Should I maximize a deferred compensation (457) plan and what can be done with the distributions, especially while in a high income bracket?
• Dr. Dahle’s Insights:
  • Two Types of 457 Plans:
    1. Governmental: Money held in trust; can roll to an IRA/401(k); secure from employer creditors.
    2. Non-Governmental (Tax Exempt): Not held in trust; at risk to employer’s creditors (e.g., recent Steward bankruptcy case); limited, sometimes awkward withdrawal options.
    • “You definitely want to look at the employer’s, you know, financial stability when you’re contributing to these things.” (17:04)
  • Withdrawal options often rigid; must check if you can spread distributions or are forced to take lump sums while still employed.
  • Often used for early retirement withdrawals (before age 59.5).
  • Practical Advice: Governmental 457s are generally safe to maximize; use caution with non-governmental versions—risk of loss, withdrawal mechanics, and psychological stress (worrying if your money is safe).
  • Max out qualified accounts first; use taxable after if not comfortable with deferred comp risks.

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4. Dealing with Multiple Brokerages & ETFs vs. Mutual Funds ([19:44 – 24:18])

• Listener’s Issue: Hates idle cash from ETF purchases across accounts and is annoyed by small cash leftovers; wonders if consolidating to mutual funds at fewer brokerages is better.
• Dr. Dahle’s Wisdom:
  • The frustration is relatable—a minor “OCD” issue many feel.
  • Limit orders rarely justify the time or risk of missing an investment window for such liquid ETFs.
  • “Get a grip on your ocdness, right?” (21:54)
  • Recommends using market orders for very liquid ETFs; minor cash drag is insignificant long-term.
  • On Brokerages: Having accounts at multiple places is common; using uniform ETFs (like VTI, VXUS, ITOT) ensures simplification without consolidation.
  • “It’s okay to have a little bit of money sitting in cash in every account. It’s not going to break the bank or anything.” (24:05)

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5. Understanding 401(k) Match ‘True Ups’ ([24:23 – 27:59])

• Listener’s Scenario: Lost out on part of an employer match after adjusting per-paycheck contributions; employer had to “true up” at year-end.
• Dr. Dahle’s Take:
  • Many employees don’t realize employer matches can be affected by how you sequence contributions during the year.
  • Some plans require even contributions per paycheck to get the full match unless a “true up” (employer catch-up) is performed.
  • Action Items:
    • “Go into HR, get the 401k document, read the stupid thing. It’s your retirement we’re talking about.” (26:08)
    • Explicitly confirm with HR how matching and true-up mechanics work for your plan.

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6. Merging Finances After Marriage: Rolling Over IRA or Converting to Roth? ([28:46 – 32:26])

• Ben in PA Scenario: Wife returning to school, low income this year, $80K IRA—should they roll into a Solo 401(k) or convert to Roth, to allow for future backdoor Roth contributions?
• Dr. Dahle’s Perspective:
  • Both are “the right thing,” but which is optimal depends on unknowable factors (future income, tax rates, etc.).
  • Roth conversion would cost $25–30K in taxes now, but locks in tax-free compounding.
    • “The fact that she’s in school suggests to me that she may have higher income later, which might suggest … that Roth conversion is actually a pretty good idea if you can afford it.” (31:42)
  • Rolling into Solo 401(k) sidesteps a high tax bill, enables backdoor Roth, and retains flexibility.
  • “Don’t beat yourself up too much about it … either one of them is a good option.” (31:29)
  • Strongly suggests reading the “Roth contributions” article from WCI for deeper factors.

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7. Calculating Solo 401(k) Contributions Correctly ([32:31 – 35:08])

• Craig’s Technical Question: Is the employee emoyer contribution really 20% of net profit, or do you need to subtract half of self-employment tax first?
• Dr. Dahle’s Clarification:
  • Correct method: 20% of net business income minus the employer portion of self-employment tax.
    • “It’s 20% of your net income. … Net of the employer portion of self employment taxes.” (33:47)
  • Make sure to calculate on the post-SE-tax amount; not simply the Schedule C bottom line.
  • Reminds of three types of 401(k) contributions: employee deferral, employer, and after-tax (mega backdoor Roth)—know your plan’s capabilities.

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Notable Quotes & Memorable Moments

• On TSP’s G Fund: “The G Fund is unique to the TSP. There really is nothing that compares to it out there.” (03:35)
• On Roth vs. Traditional: “Anybody that tells you this is simple or that the right answer is always the same thing, they don’t understand the issue. It’s complicated.” (08:44)
• On Non-Governmental 457s: “You definitely want to look at the employer’s, you know, financial stability when you’re contributing to these things.” (17:04)
• On ETF Cash Drag: “Get a grip on your ocdness, right?” (21:54)
• On 401(k) Match Documentation: “Go into HR, get the 401k document, read the stupid thing. It’s your retirement we’re talking about.” (26:08)
• On Decision Paralysis: “Don’t beat yourself up too much about it … either one of them is a good option.” (31:29)

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Community and Resource Reminders ([06:00–07:44], [36:35–38:42])

• Extensive WCI communities exist on Reddit, Facebook, the Forum, and Instagram—crowdsource your personal finance questions.
• Dr. Dahle encourages listeners to give and get support, pay it forward, and educate peers.

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Timestamps for Important Sections

• [01:34] – TSP to Roth IRA rollover/G Fund uniqueness
• [07:53] – Marginal vs. effective tax rate in Roth vs. Traditional decisions
• [13:02] – Deferred comp plans (457), employer bankruptcy risk, distribution options
• [19:44] – ETFs vs. mutual funds, managing cash at multiple brokerages
• [24:23] – 401(k) match “true up” scenarios and avoiding lost employer matches
• [28:46] – Merging finances: IRA to Roth conversion vs. Solo 401(k)
• [32:31] – Solo 401(k) calculation: self-employment tax nuance

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Final Thoughts and Tone

Dr. Dahle reiterates the importance of prudent financial habits, continuing education, and participation in community for support and knowledge sharing. He acknowledges the difficult, often unknowable nature of some key financial decisions and encourages listeners not to stress over perfection when both options are fundamentally sound. The tone remains collegial, pragmatic, and supportive, with a mix of technical rigor and down-to-earth advice—a hallmark of WCI’s style.

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For deeper dives and written references, search whitecoatinvestor.com for articles on “Roth contributions” and specific plan rules. Join a WCI community group to crowdsource your next financial question.

Transcript

[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.

[B]

This is White Coat Investor podcast number 443. Today's episode is brought to us by SoFi, the folks who help you get your money right. Paying off student debt quickly and getting your finances back on track isn't easy, but that's where SoFi can help. They have exclusive low rates designed to.

[C]

Help medical residents refinance student loans that.

[B]

Could end up saving you thousands of.

[C]

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[B]

SoFi also offers the ability to lower.

[C]

Your payments just $100 a month while you're still in residency.

[B]

And if you're already out of residency, SoFi's got you covered there too. For more information, go to sofi.com whitecoatinvestor SoFi student loans are originated by SOFI.

[C]

Bank and a member FDIC. Additional terms and conditions apply.

[B]

NMLS 696891 all right, welcome back to the podcast. We're grateful you're here. Without you, it's not much of a podcast. You know, it's Megan and me and that's it. Just talking to ourselves in a room. So we're grateful to have you out there. There's tens of thousands of you listening to this podcast.

[C]

I'm honored. I'm a little bit embarrassed that that many people listen to a podcast I put together. I feel like I ought to put.

[B]

More preparation into them knowing that there's that many of you out there.

[C]

But alas, my life is busy. I've got to coach a hockey team. You know, there's important stuff going on here.

[B]

All right, let's start with your questions. First one is an active duty person. Thank you for your service. Let's take a listen to your question.

[D]

Hi, Dr. Dali. I'm leaving active duty soon and was thinking about rolling over my all Roth TSP into my Roth ira. I'm looking to take advantage of some benefits provided by my broker for hitting certain investment balance. I know you've talked about all the benefits of the G Fund before, but I'm sure there are civilian alternatives that are highly similar. Is there any other benefit to staying in the tsp? Thank you for all that you do.

[B]

All right.

[C]

Yeah.

[B]

Thanks for your service. Exciting to be getting out. I can remember the day I got off active duty and drove.

[C]

You know, we were moving out of Virginia, we were driving out to Utah Had a job here and I was whooping and hollering. I was pretty excited to get out. Not that everything was bad in the military, but, you know, there were plenty of things I didn't enjoy about being in the military. And I was pretty excited to get out that day.

[B]

I remember, okay, the TSP. I stayed in the TSP in 2010.

[C]

When I got out of the military. In fact, I've still got money there. Although just for simplification purposes, we may stop that soon and roll that money over into another retirement account just to have one fewer account.

[B]

It used to be that the TSP was the very best 401 in the country, right? It had the lowest costs. I mean, the expense ratios on the funds were like.02%, 0.025%. Even now I think they're only like 0.04 or something. Super low cost index funds. And you just couldn't get that in most 401ks. So the tsp was way ahead of its time. It also had these L funds, the life cycle funds.

[C]

So if you just wanted to set.

[B]

It and forget a solution that was available to you. And then of course it has, as you mentioned, a really cool special fund called the G Fund. And I love that you think the G Fund is available somewhere else. I got news for you. It's not okay. The G Fund is unique to the tsp. There really is nothing that compares to it out there. Now, there are some types of funds.

[C]

That are basically cash funds that might pay a little more than a money market fund, but it's not the same.

[B]

The TSP basically gives you treasury bond yield for money market risk. Okay? So you never lose principal in the G Fund.

[C]

And sometimes as rates go up, it.

[B]

Can pay you a lot of money. But when you don't lose any money, when rates go up like you would at the bond fund. So a lot of people think that's pretty cool.

[C]

And it's a big reason why some.

[B]

People leave money in the tsp. But if you don't want to invest in the G Fund in your Roth account, then it's probably fine to roll.

[C]

The money over, you know, to go to Vanguard or Fidelity or Schwab or whatever.

[B]

I'd be a little hesitant to go to a random brokerage that's just offering you some benefit, right? I mean, I'm not a huge fan.

[C]

Of some of these brokerages that you.

[B]

Put in a trade and confetti sprays onto screen, right? I mean, this is serious business.

[C]

You're investing your life savings I'd rather have a name I trust like a Vanguard or Fidelity or a Schwab, than one of these Fly by night brokerages. I'm not sure they're going to be there in five year brokerages, so I'd encourage you to kind of stick with those three. When you roll the money away now.

[B]

They will also give you transfer bonuses.

[C]

Signup bonuses, et cetera. You move a bunch of money over there, you might already be talking about one of these companies. But you know, I'm not a huge fan of these other brokerages that are gamifying investing. Investing isn't game. It's pretty serious stuff.

[B]

But it's fine to move your money out.

[C]

Just recognize what you're giving up. There's not a lot else there with the tsp.

[B]

In fact, it's getting better. But for a lot of years it was kind of a pain to get your money out of the tsp.

[C]

They only allowed like one partial distribution. I'm not sure where that's at right now, but.

[B]

It's a great 401 still.

[C]

For the federal workers and for active.

[B]

Duty folks, it's not quite as head.

[C]

And shoulders above everything else as it used to be.

[B]

Not because it's gotten worse in any.

[C]

Significant way, but because the other ones have gotten better. And so that's a good thing, not a bad thing. But I wouldn't feel bad about rolling your TSP over to a Roth ira. I think that's fine. If nothing else, it helps you simplify accounts. And the main thing you're giving up is really just the G fund. And if you're okay with that, which is not unreasonable, then I think it's fine to roll your money over.

[B]

Okay. By the way, these sorts of questions that you guys send into the podcast, you don't have to wait for us to get to them and run them.

[C]

On the podcast in six or eight weeks later.

[B]

We love having your questions. They're great because now we got something to talk about on the podcast. You can leave your [e-mail] speakpipe but if you want to get an answer to your question faster, especially if you want to get multiple answers to your.

[C]

Questions, kind of crowdsource the question, I.

[B]

Would recommend that you go someplace else else. One of our White Coat investor communities.

[C]

And we've got one of these on Reddit, right? It's R whitecoatinvestors. We've got one of these on the Facebook group. The Facebook group is also called White Coat Investors.

[B]

We've got a forum. Forum.whitecoatinvestor.com Right, we've got the financially empowered women's group, right? You can go to whitecoatinvestor.com few and.

[C]

You can get connected with that. It also has a Facebook group associated with it.

[B]

And then of course, you know, we've got growing social media communities as well. One of the fastest growing ones is our Instagram community.

[C]

Instagram slash white coatinvestor.

[B]

So check these places out. If you got questions, ask your questions. You'll get instead of one response from me, you might get 30 responses.

[C]

And maybe if I get a chance, I'll pop in there and give you my own response as well.

[B]

So don't forget about our communities. Since we've been founded, we've been bringing.

[C]

Together this community of like minded physicians.

[B]

And other high earners who are committed to financial success. So whether you're celebrating a money win or navigating a financial setback, or just.

[C]

Looking for some guidance, you'll find a wealth of knowledge in the subreddit, Facebook group or forum.

[B]

Ask your questions, pay it forward. Answer other people's questions.

[C]

Lots of these questions, as you know.

[B]

Don'T have a right answer.

[C]

People are just looking for multiple opinions and perspectives and you can provide that no matter how much or how little you know how far along you are on your financial literacy journey.

[B]

Okay? Oh great.

[C]

I see the next question coming.

[B]

Someone has asked the hardest question in.

[C]

Personal finance and investing. Let's take a listen to this version of it.

[E]

Hey Jim, I was hoping you could clarify something about the traditional versus Roth contribution argument. I commonly hear a lot of advisors and tax experts argue that you should be comparing your marginal tax rate today against your effective tax rate at retirement in order to decide whether you're better off contributing to your traditional versus Roth accounting. This argument's never really made any sense to me. It seems that the relevant comparison should be your marginal rate today versus your marginal rate at retirement. I'm hoping you can chime in on what the appropriate comparison is. Is there something to this marginal rate today versus effective rate in retirement argument or is that just nonsense spewed by folks who don't understand math? All right, thanks a lot.

[B]

Great question. Like I said, this borders on the.

[C]

Most difficult subject in personal finances and.

[B]

Investing, which is should you do Roth contributions and conversions, or should you do tax deferred or traditional contributions and not do Roth conversions? It's super complicated. Anybody that tells you this is simple or that the right answer is always the same thing they don't understand the issue, it's complicated. But here's the good news. They're both good things, right? Making tax deferred contributions is a good thing. Making Roth contributions is a good thing. You're better off having your money invested.

[C]

In these accounts than you are in a taxable account.

[B]

Your money grows faster.

[C]

It's more protected from creditors. So they're both good things.

[B]

The main factor that matters when you're deciding on whether to do Roth or not is comparing your tax rate at contribution versus your tax rate at withdrawal. And the truth is, to answer your question directly, the truth is you gotta look at that forever. Every dollar, every dollar you contribute, every dollar you convert, you got to look at the marginal tax rate at contribution against the marginal tax rate at distribution. So it's marginal to marginal for every dollar. That's the academically correct answer. I think when we, and I've done this as well in the past, talk about comparing your marginal rate to your effective tax rate at withdrawal, we're just trying to point out that at withdrawal you get the benefit of filling the brackets, right? So if you're a married couple in retirement this year, your first $30,000 of taxable income comes out at the 0% rate, right? That's the standard deduction, $30,000. And then you get another 20ish or so out at 10% and another 50ish, I think, out at 12%, another $75,000 out at 22%. So if you can contribute at your marginal tax rate of 35% and then you later take some of that money out at zero percent and some of that money out at 10% and some of that money out at 12% and some of that money out @ 22%, well, you're winning with every single dollar, but you're winning much bigger. You're bigly winning, in the words of our great president, with the ones that.

[C]

Are coming out at 0% after you save 35% when you put them in.

[B]

So in that respect, when you look at all the dollars together, maybe comparing marginal, because you almost always get the.

[C]

Whole deduction at your marginal rate, because.

[B]

Those brackets tend to be really wide and effective at the back end. That does make some sense to think.

[C]

Of it that way.

[B]

But the academically correct answer is it's marginal to marginal. And if you can take all of those contributions out at one tax rate.

[C]

Well, that makes it real easy to do marginal versus marginal.

[B]

But for a lot of people, one of their main sources of taxable income.

[C]

Maybe their only source of taxable income, for a number of years of retirement.

[B]

Is withdrawals from tax deferred accounts, and.

[C]

Some of those are going to come.

[B]

Out at very low rates if that's.

[C]

Your only source of taxable income.

[B]

So I hope that's helpful if you want to learn more about this most complicated of subjects. The most recent post I wrote about.

[C]

It was published March 7th of 2025.

[B]

It's called should you'd do Roth contributions and conversions. And if you just put into the search [e-mail] Roth contributions, it'll be the.

[C]

First thing that pops up and it'll.

[B]

Walk through all the factors that go into this decision and likely make you feel a lot better about however you're.

[C]

Making the decision currently.

[B]

If you've made the wrong decision in the past, as I have, you might be surprised it may turn into the right decision later. So don't beat yourself up too much about it.

[C]

They're both good things to do. But the further I go in this personal finance and investing stuff, the less.

[B]

I worry about this issue because I think a lot of the time it.

[C]

Depends on factors that are not only unknown but unknowable. So I quit beating myself up about getting the wrong decision for stuff I wasn't even possibly able to know years and years ago when I had to make the decision.

[B]

Okay, our quote of the day today comes from Peter lynch who said far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves. Okay, next question is from Steve. Let's take a listen on the speak pipe.

[F]

Hi Dr. Dolly, I just wanted to say thank you for all that you do. I think the WCI podcast and all the resources you have been very helpful to me and improving my financial literacy. I had a question specifically on deferred compensation plans and I wanted to get your general thoughts on them as to whether or not they should be utilized and particularly maximized, such as 457 plans. I had a very generous deferred compensation plan. My first job out of fellowship was able to utilize that for about 10 years where essentially you could put an unlimited amount of your salary into that. And my current employer only allows for the maximum of 457, which I think is $22,500. Unfortunately I have accrued quite a bit into the deferred compensation plans and they are going to be distributed now and I don't think there's a particular opportunity for me to do anything special when it comes to tax savings as they will be taxed as ordinary income at a very high level. I was wondering if you had any thoughts on what you could do with deferred comp once it gets distributed if you're still working and earn a high income tax bracket and what your thoughts are general about deferred compensation plans. Thanks so much. Appreciate all that you have done and your insights on this.

[B]

Okay, great question. There are a lot of different types.

[C]

Of deferred compensation plans.

[B]

The classic typically available to physicians is a 457B plan and the amount you.

[C]

Can contribute to these is usually $23,500. They do have some catch up aspects. As you get older, get closer to retirement, you might be able to contribute more than that.

[B]

That's typically the limit.

[C]

Now under some of the other plans it's possible to have more. But we're going to focus my comments mostly today on 457B plans.

[B]

There are two different types of these plans and it's really important that you understand the differences.

[C]

Okay.

[B]

The first type is a governmental 457.

[C]

Plan typically offered by a government employer.

[B]

And the real benefit of these is.

[C]

That the money is held in Trust like your 401. It's your money, it's not going to be lost to your employer's creditors.

[B]

And the other big huge benefit is.

[C]

One of the distribution options is to just roll it into your 401 or Iraq, which is pretty awesome to be able to do.

[B]

It's just like having an extra 401k, right?

[C]

It's great, you know, kind of like a cash balance plan for instance.

[B]

But the other type, sometimes called tax.

[C]

Exempt because they're offered by tax exempt employers or non governmental 457bs are a.

[B]

Totally different ball of wax for a couple of reasons. One, the money is not held in trust. It's available to your employer's creditors. So if that employer goes bankrupt, you could theoretically lose your 457money. Now for years I've told people I'd never heard of a doctor that ever lost any of their 457money. It seems there is a case right now where there's a good chance doctors are going to it hasn't run its course yet. This is involving the Steward bankruptcy.

[C]

For any of you involved with that. They owned my hospital for a while, so I know quite a bit about Steward.

[B]

But it's possible docs that were in.

[C]

A 457 plan associated with Steward are not going to get their money. They're actually going to lose it to Stewards creditors. More on that when it finally works its way through the courts over the years. So we'll talk about it on the podcast, I'm sure.

[B]

But it is possible to lose the money. So that's one thing to keep in mind. And you ought to consider that as.

[C]

You contribute to a non governmental 457.

[B]

Or other types of 457Bs that might.

[C]

Be available or other types of deferred compensation plans that might be available to your employers creditors is the potential of losing it. That might mean you only want to.

[B]

Contribute for a year or two, or.

[C]

You might only want to contribute a.

[B]

Few dollars to it or whatever.

[C]

Right. But you definitely want to look at the employer's, you know, financial stability when you're contributing to these things. Right.

[B]

If they're not fixing the CT scanner.

[C]

In the hospital like Steward wasn't by the time they left our hospital, you know, maybe that's not the place you want to be storing your retirement money. You know what I'm saying?

[B]

Okay. The other problem with These non governmental 457 BS is the withdrawal options, the distribution options. At the end, you've got to make.

[C]

Sure before you contribute a dollar to.

[B]

These things that those distribution options are acceptable to you. Now, a lot of times they're fine. They allow you to take the money out, spread over 10 years, or to defer it until you're 60 or whatever. You just got to make sure whatever options they're offering are acceptable to you. Here's an example of an unacceptable one. It sounds like this is what you're dealing with. You got to take it all out in five years while you're still in the middle of your career. And so now you're deferring taxes at, who knows, 32, 35%. And now you got to take it all out at once. You got to pay 37% on everything you take out of that. That's not a good deal for you. You want to be able to spread.

[C]

Those out for a while.

[B]

Now, what most people like to do with their 457B money is there's no age 55 rule. There's no age 59 and a half rule with this money. So this is often the first money spent in retirement, especially if it's a non governmental 457.

[C]

Right. And you're worried that the employer's creditors could get it.

[B]

That's often the first money you spend.

[C]

So this is money you're spending if.

[B]

You retire early at 50.

[C]

This is maybe what you spend from 50 to 59 and a half is your 457 money.

[B]

But just make sure that the withdrawal.

[C]

Options, the investing options, the fees, and maybe most importantly the financial stability of.

[B]

The employer are all acceptable to you.

[C]

Before you make any contributions to these plans, hope that helps you to think generally about them. If you have one available to you. As a general rule, most people are at a university employer and they got a 403 and they got a governmental 457 and maybe they have a 401A.

[B]

Those are all fine to use. Max them all out.

[C]

If you want to save more, put it in a taxable account in your Roth IRAs, et cetera. But you got to be a little bit careful if you're being offered a non governmental 457 in deciding exactly how much of that you want to use. I've had at least one white coat investor come back to me in the.

[B]

Past and say he wished he'd never.

[C]

Put a dollar into it.

[B]

He got all his money back out, but he says the hassle of worrying.

[C]

About whether he'd get his money back was enough, that he wished he'd just invested in taxable the whole time. And maybe that's what you'd like to do as well.

[B]

Okay, my next question is by email. This listener says I have my retirement account with Schwab, Fidelity and Vanguard.

[C]

Because of work, my 401k is with.

[B]

Schwab, my wife's is with fidelity, and.

[C]

Our IRAs are with Vanguard.

[B]

They each have their own mutual funds which you can purchase without fees or you can buy ETFs without fees. To keep all my accounts on the same page I. E. Buying VBR across multiple brokerages. I've been including some ETFs in my portfolio, but I hate ETFs. I want all my money invested when I invest and it irks me that I invest at market price. I end up with upwards of $200 just sitting in cash due to my ocdness. I've left thousands sitting in cash with limit orders hoping to keep my after purchase remaining balance to a minimum. I look back at a prior order for VBR which did not transact for $170 and now just placed another limit order for $200. I mathematically understand I'm chasing pennies and losing dollars or hundreds of dollars and but I find it hard to get over the mental barrier. What should I do? Just leave Vanguard and consolidate to Fidelity and Schwab and stick to mutual funds? What do you do about remaining balances when purchasing ETFs? I understand this is a silly and.

[C]

Relatively insignificant question, but would love to hear your thoughts.

[B]

It's actually pretty good insight there, right? There are therapists out there that specialize in ocd, and maybe you and I ought to go together to see one.

[C]

I've dealt with this issue over the years where it bugs me to have.

[B]

Money that's not invested, especially like Schwab, where you're not actually earning anything on.

[C]

That $200 or whatever that's sitting in cash until next month.

[B]

But as the years have gone by, I've gotten better at not worrying about.

[C]

The small stuff like this listener is.

[B]

So get over it. Get over it. It reminds me of that Phil DeMuth quote, right?

[C]

I've probably mentioned this on the podcast before, but it's probably been a while.

[B]

And this is on a different subject, but it's the tone that I want you all to take from Phil said Even if risk tolerance existed and could be measured accurately, why would it be an important factor to consult when considering how to invest? You should invest in the way that has the greatest prospect.

[C]

Fulfill your investment goals.

[B]

That might mean taking more or less risk than you would prefer if you are a sensitive soul who can Brooklyn no paper losses. The solution is to get a grip, not to invest safely if that locks.

[C]

In running out of money when you're old.

[B]

So what I tell this listener is get a grip on your ocdness, right? I probably also quit using limit orders. These are very liquid ETFs you're talking about buying, right? They transact instantaneously. The bid ask spread is very narrow, especially on any normal market day where the market's not up and down 5%.

[C]

In the day or something.

[B]

A market order is fine. I used to put in limited orders.

[C]

I don't bother anymore.

[B]

I just put in market orders. Okay, I'm buying vti. I'm buying vxus. I'm buying itot, right? I'm buying Ava. They all transact instantaneously. These are very liquid ETFs.

[C]

I used to chase my tail with these limit orders. It wasn't worth it.

[B]

And if I was still doing that, I'd be driving my OCD nest even more batty. It'd be worse though. It'd be worse if I was trying to use three different sets of mutual funds. Some from Schwab, some Fidelity, some from Vanguard. Right? This is the benefit of using ETFs. You can just stick with one set of ETFs. Right? I also have an account to Schwab my partnership 401k is at Schwab, the WCI 401k and our HSA is at Fidelity. Our Roth IRAs and our taxable account are a Vanguard. So I get it. I've got money spread across these three brokerages. But by using VTI and VXUS and ITOT and IXUS, right? These, these ETFs that are available for free at all three of these brokerages, then I can have the same investment.

[C]

Even if it's held at Fidelity versus Vanguard versus Schwab.

[B]

So I think it's probably worth the hassle.

[C]

You gotta learn to put in a.

[B]

Few trades when you're using ETFs. They're slightly more tax efficient than just a regular index mutual fund.

[C]

You know, the Vanguard ones, they've got the multiple share classes. So the difference is very minimal with Vanguard.

[B]

But it's probably worth, if you're investing.

[C]

In a taxable account especially, it's probably worth dealing with the hassles of ETFs.

[B]

It's not that bad to do.

[C]

Once you do it for a little while, you'll probably stick with it. I think it's better than dealing with the hassle of owning multiple mutual funds across multiple brokerages. So I'd encourage you to, if you're.

[B]

Feeling a little OCD about not having every dollar you have invested, get used to it.

[C]

And this too shall pass. It's okay to have a little bit of money sitting in cash in every account. It's not going to break the bank or anything. And just adjust whatever method you use to track your money for that cash.

[B]

Okay, next question is about a 401 match trueup.

[G]

Hi Jim, this is Shwetha from California. Longtime listener. Thank you for what you do. I wanted to bring up the idea of the 401 match true up. For 22 years I've been a W2 employee and always had the option to put a certain percentage dollar amount or just to check the maximum IRS contribution for my 401k. Back in 2023, my husband changed employers from 1w2 to another and in an effort not to over contribute, we actually reduced the amount of percentage of his per pay period. We would contribute to the 401k. So we didn't go over the IRS limit. However, unbeknownst to us, that stopped the match when he reached the income limit for that year of $345,000, which then shorted us by almost $6,000 on the employer match, which we noticed at the end of the year. We did contact hr and while Reluctantly, they did true us up several months later. We were not aware of this. Just thought maybe it would be interesting for your listeners to know as after 22 years of being a W2 employee, this is the first time I'd actually encountered this type of situation. Thanks again for what you do.

[B]

Okay, this is a great question because.

[C]

I don't know that we've ever talked about a true up on this podcast. It's hard to Keep track of 450 podcast episodes done over I don't know how many years, but I can't remember ever talking about this. So let's talk about it.

[B]

I've never actually had a 401 that.

[C]

Offered me a match.

[B]

I've never received a dollar of a.

[C]

Match in my entire career.

[B]

So those of you who have a match of some kind, thank your lucky stars.

[C]

It's great, right?

[B]

I've never gotten an employer match, but if you get an employer match, you should be aware of an issue. Some employers, 401ks, the way they're set up is if you put the maximum in the 401k early in the year, they will not give you the whole match you can get if you spread your contributions out throughout the year. Okay? And it sounds like this issue you had in the 401 was slightly different than that. But you got to understand how the 401k plan works. Go into HR, get the 401k document, read the stupid thing. It's your retirement we're talking about. Read the document. You'll be amazed what you learn. And if it's not clear what happens with this true up issue with the match, go to HR and ask them exactly how the true up issue works. Ask them what you have to do to get the maximum amount of match. Ask them, if you just write a check for the whole 401k contribution in January, do you still get the entire match? Ask them if you drag it out over 12 months, do you still get the full match available to you? Make sure you understand exactly how the match and any true up of that match works. The true up is basically your employer fixing it so they don't screw you at the end of the year, okay? Because a lot of them won't do a true up and you're just out of luck. You know, they're only going to match you $1,000 a month if you put it all in, you know, in the first month. Well, you just miss out on that thousand dollars a month for every month for the rest of the year. And obviously, if that's the case if that's the way your 401 match works.

[C]

You want to spread your contributions out throughout the year, but you got to.

[B]

Understand how the plan works.

[F]

You.

[C]

If there's a true up, how does it work?

[B]

If there's a match, how does the match work?

[C]

And what are the possible ways you could not get the full match?

[B]

Have that conversation. It's part of your compensation. Not getting your full match is like.

[C]

Leaving part of your salary on the table.

[B]

So understand it.

[C]

Understand how it works.

[B]

Do what it takes to get it. Thanks out there for what you're doing, by the way. It's not easy work.

[C]

You might be walking the dog. You might be jogging after work. Maybe you're going into work, coming back.

[B]

From a hard shift or something. I know it's hard work.

[C]

Something bad happened to a significant number of you today, and I'm sorry for that. But I'm thankful for what you're doing. It's important work that you do. We forget that sometimes until we or one of our family members or friends is dealing with a serious medical problem. And we realize, oh, yeah, there's all these people who dedicated their entire 20s and significant hours of the rest of their life to being there for us when we need them at those times. So thanks for being one of those people.

[B]

All right, next question comes from Ben. Let's talk about merging finances.

[H]

Hi, Dr. Dali. Thank you for everything that you do. You made a massive difference in my financial life. I am a general surgeon working in Pennsylvania. Make about $450,000 a year. Great news is I just got married and my wife and I are merging our finances. She will have had virtually no income for 2025 as she's a career changer and in school, except for a couple of very small odd jobs. We're wondering what to do with her IRA. She has about $80,000 in IRA. I see the two options as rolling it into a solo 401k or converting it into a Roth. We're trying to get it out of the IRA so that we can do a backdoor Roth for her next year. I'm wondering which the better option is, given that I would, you know, we want to obviously file taxes together, given that she's not making any income. So that'll make our tax brackets much more advantageous. Any help you can offer would be really much appreciated. Thank you.

[B]

Okay, Ben, this is a great question. And you're super financially literate, right? Because you're asking the right question. You're asking the hard question. That has a very difficult answer, if there's a right one at all and you're doing everything else right. You recognize you got to do something about this ira. If you want to do a backdoor Roth IRA every year for her, you've recognized she's got some side income. So she could get an ein for.

[C]

This business of hers and she could.

[B]

Open a solo 401k and roll the money in there. So this is the classic do I do a Roth conversion or not question, right? It's the hardest question in personal finance and investing. And in order to answer it, you have to know who's going to spend this money when and what's their tax bracket going to be in the future. It's super hard to know that, right? So that's what you have to know in order to get this right. They're both reasonable things to do. If you've got the cash, and it's going to be a lot of cash.

[C]

To convert this $80,000, it's going to.

[B]

Cost you, what, something like, I don't know, $25,000 or $30,000 in taxes to convert this to a Roth IRA. If you've got it, that's not a terrible move. And then you've got that $80,000 in Roth money going forward, compounding and it's awesome, right? That's a great thing to have. But the Solo 401k is not a bad thing to have, especially if she's gonna make future contributions to it anyway.

[C]

From some of these side gigs and stuff she's doing, then that might be.

[B]

Great to have that open anyway.

[C]

And if it helps you not have to pay that 25,000 or $30,000 in.

[B]

Taxes and just keep this as tax deferred money, but still eliminate that pro rata issue for your backdoor Roth ira, that's also a great option. So I don't know that I can tell you which one to do.

[C]

I don't know enough about your finances.

[B]

And your future to an answer to.

[C]

Whether you should do this Roth conversion or not. But either one of them is a good option, so I wouldn't beat yourself up too much about it.

[B]

The fact that she's in school suggests to me that she may have higher.

[C]

Income later, which might suggest you two.

[B]

Are not yet at your peak earnings.

[C]

Which suggests that maybe that Roth conversion is actually a pretty good idea if you can afford it, but you've got to have an extra 25,000 or $30,000 sitting around to do it with, and that's a problem. For lots of docs to come up with that kind of cash.

[B]

So either one's fine.

[C]

I don't know enough to tell you.

[B]

Which one to do.

[C]

But again, I think I mentioned earlier in the podcast, if you go to.

[B]

The website you search Roth contributions, you'll.

[C]

Come up with my latest blog post that talks about all the factors that go into making this decision that might help you make a little bit better decision. But it's probably impossible to know for sure whether you should do this Roth conversion or not.

[B]

Okay, next question's about Solo 401 contributions.

[I]

Hi Jim, it's Craig calling from Midwest, hoping you could clarify something really quick. When we are calculating our annual solo 401k contribution, we always say it's 20% of net business profits or the amount of line 31 schedule C. Saw something online that also mentions something about factoring in self employment taxes. Basically it's 20% of net business profits minus one half of your self employment tax, which I guess is the value of line four in part two of schedule two on our 1040. It's kind of like splitting hairs, but if we wanted to make an exact contribution, do you know which one it is? Thank you.

[B]

Yes, I do know which one it is. It's the latter. So I'm glad you found out about that. It's 20% of your net income. Now a lot of times you see this figure, 25% in the tax documents. Basically the 25% is when you include the contribution. 20% is when you don't include the contribution. It's the same number, but it's 20% of your net income. And that includes being net of the employer portion of the self employment taxes. So that's what that half of the.

[C]

Self employment taxes are.

[B]

That's the employer half. It's an employer expense. So you didn't make as much money as you thought you made.

[C]

You made less.

[B]

And so the amount you can contribute as an employer contribution to that solo.

[C]

401 is less because of that.

[B]

Keep in mind though, there's three types of contributions to 401s, right?

[C]

There is the employee contribution that can.

[B]

Be Roth or that can be tax deferred.

[C]

In 2025 it was $23,500.

[B]

There's the employer contribution. This is the 20% of net, you know, business income. And if your 401k allows it, and if it's just a solo 401, you're the only one you can get one that allows it.

[C]

It might cost you a few hundred.

[B]

Dollars a year is after tax contributions. This is the mega backdoor Roth IRA contribution. So even if you're only able to put in your 23,500 plus $10,000 as an employer contribution, you could put in another, whatever that works out to be, another $35,000 or so as an after tax contribution. If the plan allows it do an.

[C]

Immediate Roth conversion of that money.

[B]

So the limit is not necessarily just 20%.

[C]

You've also got this possibility of making.

[B]

Other types of contributions assuming you've put.

[C]

A plan in place that allows those to happen. So keep that in mind. Hope that's helpful for you.

[B]

All right, as I mentioned at the beginning of the podcast, SoFi could help medical residents like you save thousands of dollars with a exclusive rates and flexible.

[C]

Terms for refinancing your student loans.

[B]

Visit sofi.comwhitecoatinvestor to see all the promotions.

[C]

And offers they've got waiting for you. One more time, that's sofi.com whitecoatinvestor Sofi.

[B]

Student loans originated by Sofi Bank NA.

[C]

Member FDIC additional terms and conditions apply.

[B]

NMLS 696891 it's been pretty amazing. Student loan refinancing is back in to vogue, right? People are refinancing their student loans. We're out of that three and a half year student loan holiday where nobody had to make payments and interest rates were 0%. Those are gone. A lot of the income driven repayment programs are not quite as favorable to you as they were prior to the One Big Beautiful Bill act passing last summer. And a lot of people are coming to the end of their training and going I want a private practice job.

[C]

I'm not going for pslf. I'm going to be refinancing my loans and paying them off.

[B]

But we're seeing lots and lots more.

[C]

People refinancing their student loans.

[B]

So be aware. You can go to one of our partners like SoFi and get great deals on refinancing.

[C]

Your student loans.

[B]

Knock off 1, 2, 3, 4% interest.

[C]

So more of your payments are going.

[B]

To principal instead of interest. You get them paid off months, maybe even years sooner.

[C]

It's a good thing to do if you know you're paying back your student loans, even federal student loans and you're.

[B]

Not going for pslf.

[C]

You can refinance them, pay less in interest, pay them off sooner.

[B]

Don't forget about our communities, right? The subreddit White Coat Investor Forum, the Facebook group, Instagram, the financially empowered women. All these communities are out there for you to help you, give you support, walk along with you as you go down your financial journey, answer your questions, and you can make a contribution as well. You know more about this stuff than.

[C]

Somebody, I promise you, and you can help them.

[B]

Thanks for leaving us five star reviews and telling your friends about this podcast. A recent one came in that said excellent and thorough. This podcast is an example of a motivated physician gaining substantial knowledge on a.

[C]

Non medical topic and sharing it with everyone.

[B]

He's altruistic and thoroughly engaged in this material, I find when he lacks information.

[C]

On a topic, which is not uncommon.

[B]

He is not afraid to admit it and research it thoroughly to provide an.

[C]

Accurate and actionable answer.

[B]

His staff should be given significant credit for the success of this podcast as.

[C]

It clearly must take more effort than just one man can muster. That is certainly true. Thank you for recognizing Megan and the.

[B]

Rest of the team. A great combination for a podcast knowledgeable.

[C]

Altruistic host who surrounds himself with intelligent guests and hardworking staff. Keep up the good work. Five stars.

[B]

Wow.

[C]

That was a really nice one. I don't know how motivated I am though. These days it seems like sometimes I'm more motivated to go hiking or play a hockey game than I am to do more White Coat Investor work. But I do still share a deep passion for this work and I love helping people, including you. Whether it's with their medical problems or with their financial problems. It brings me great joy and satisfaction.

[B]

And I do still need some purpose.

[C]

In my life, even beyond financial independence. I need something where I'm making a difference in the world and this is one of the ways I'm doing that.

[B]

So thanks for what you're doing out there. Thanks for supporting us. Thanks for leaving Farstar reviews. Thanks for educating your peers and your colleagues. Even if it's just you ought to search for that on White Coat Investor. I bet he's got an article on that. Those little comments you make change people's lives, and when you can change a physician's life early in their career, it might be worth a couple million bucks to them, right?

[C]

And that really adds up over time. When there's a million doctors in the.

[B]

Country, you multiply a million by a couple million bucks.

[C]

It's a lot of value we're trying to create here in the White Coat Investor community.

[B]

So keep your head up, your shoulders back. You've got this.

[C]

We're all here to help you be successful. See you next time on the podcast.

[A]

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.