White Coat Investor Podcast #448: Smart Retirement Moves for High-Income Professionals

Main Theme and Purpose

In this episode, Dr. Jim Dahle guides high-income professionals—especially doctors, dentists, and similar fields—through smart retirement planning. He addresses optimizing retirement account choices, understanding complex plans like 457(b)s and cash balance plans, and handling periods with limited retirement plan access. Drawing on listener questions, Dr. Dahle provides practical, actionable advice tailored to the unique financial challenges facing white-coat professionals.

Key Discussion Points & Insights

1. Spending Money—Even “Dumb” Decisions Can Be Smart

• Personal anecdote: Dr. Dahle shares he bought a new boat, discussing the rationale and financial implications.
  • Boats have appreciated over the last decade.
  • Sometimes, spending on happiness in a financially responsible way is okay.
  • Quote (02:26):
    “If you've bought anything stupid, don't beat yourself up about it. As long as you can afford to do it, it's fine. You can't take the money with you when you go.” — Jim Dahle

2. [03:48] Clarifying Pension Risk: Actuarial Feedback

• Dr. Dahle shares a listener (an actuary) clarified comments from a past episode about pension risk and the Pension Benefit Guarantee Corporation (PBGC).

  • PBGC covers up to $93,000/year for a single life at age 65 (2026).
  • Federal pensions are most secure (“ability to print money”); municipal plans pose the most risk as they lack PBGC backing.
  • Key: review annual funding notices; thresholds:
    • ≥80% funded: no problem
    • 60–80%: concern but not panic
    • <60%: start discounting expected benefit

• Quote (05:38):
  “Municipal plans are the riskiest as they don’t have the PBGC to back them.” — Quoting listener actuary

3. [08:03] Optimizing Retirement Plans as a New Attending

Question from Alejandro, Chicago

Stepwise Retirement Account Prioritization

Dr. Dahle lays out a clear progression for new high-income earners:

• Backdoor Roth IRA for self and spouse (income phaseout for direct contributions).
• 401(k) or 403(b)—Always collect any employer match first.
• Health Savings Account (HSA)—If eligible. Invest the HSA, and if employer HSA is subpar, transfer to Fidelity/Lively.
  • “Our HSA now is up over a quarter million dollars. It can pay for all your healthcare for the rest of your life, including Medicare premiums.” (11:07)
• Max out employee and employer contributions to 401(k)/403(b) plans (2025/6 limits: ~$24,000 employee; ~$70,000 combined).
• Consider 457(b) plans:
  • Governmental 457(b): “Pretty good.”
  • Non-governmental 457(b): Substantially riskier and subject to employer solvency. Money is not in trust, can’t easily roll to an IRA/401(k)/403(b) if you leave. Also, distribution options may be forced lump sum or short payout windows.
    • Steward Hospital Case: Some physicians may lose their 457 money due to employer bankruptcy.
    • Quote (13:50):
      “If your employer doesn't look so financially stable, don't put a lot of money into their 457.”
  • Evaluate plan distribution options, stability, and fees before contributing.
• Taxable Brokerage Account: Unlimited contributions, useful strategies include tax-loss harvesting and donating appreciated assets to charity.
  • “For many investors, including me, my largest investing account is a taxable account.” (16:51)

Roth Conversions

• Best in low-income years like early retirement, sabbaticals, or back in fellowship, not during peak earnings.
  • Quote (18:24):
    “For the most part, in your peak earning years, you gotta think long and hard before making a Roth contribution or conversion.”

4. [20:43] Cash Balance Plan Investments

Question from Wayne, Pacific Northwest Radiologist

• Cash balance plans allow high pre-tax contributions (potentially up to $200k).
• Conservative investment strategies (e.g., ≤30% equities) are common and prudent because:
  • If returns fall short, the employer/partners must contribute more to the plan.
  • If returns overshoot, you may owe excise tax on excess assets.
  • “You're doing it for the tax break and the asset protection and the tax protected growth later. Not necessarily because the investments are expected to blow everything else out of the water.” (23:13)
• Portfolio Optimization: Glide risk to other accounts. E.g., make your 401(k) more aggressive to achieve your target overall risk.
  • “The overall asset allocation is what matters.” (24:38)
• Cash balance plans are often closed and rolled into 401(k)s every 5–10 years.

5. [26:29] Target Retirement Funds in Taxable Accounts?

• Pros: Simple, good for new investors, low maintenance.
• Cons: Tax inefficiency (bonds generate taxable interest; better held in tax-advantaged accounts). Risk of large, unexpected capital gains distributions (as seen with a Vanguard debacle).
  • Quote (28:26):
    “Not a great idea. Not a fan of target retirement funds in a taxable account, but it's not crazy. You could do much worse things investing wise.”
• For white coat investors with many accounts, “roll your own” asset allocation is recommended for tax-efficiency across accounts.

6. [30:59] What to Do When No 401(k) Available

Question from Emily, Dental Provider in Northeast

• Situation: No access to workplace retirement plan until late 2026.
• Priority Actions:
  • Max husband’s 401(k)
  • Backdoor Roth IRAs for both
  • Use taxable brokerage for additional savings; no shame in this, especially when it's the only option.
  • Consider using this period to address other financial priorities (student debt, 529s, down payment saving).
  • Self-employment (even side income) could allow opening an individual 401(k).
  • “There’s not some magic retirement account out there we haven’t told you about.” (32:32)
• Taxable investing can be efficient through tax-loss harvesting, donating appreciated assets, and using step-up basis at death.

Notable Quotes & Memorable Moments

• “If you've bought anything stupid, don't beat yourself up about it. As long as you can afford to do it, it's fine. You can't take the money with you when you go.”
  — Jim Dahle [02:26]

• “Municipal plans are the riskiest as they don’t have the PBGC to back them.”
  — Quoting actuary listener [05:38]

• “If your employer doesn't look so financially stable, don't put a lot of money into their 457.”
  — Jim Dahle [13:50]

• On non-governmental 457s:
  “I'm not aware of any other instances when doctors have lost 457 money, but it is a risk. So if your employer doesn't look so financially stable, don't put a lot of money into their 457. Maybe don't put any in there.” [13:53]

• “You're doing it for the tax break and the asset protection and the tax protected growth later. Not necessarily because the investments are expected to blow everything else out of the water.”
  — Jim Dahle [23:13]

• “The overall asset allocation is what matters.”
  — Jim Dahle [24:38]

• “Not a fan of target retirement funds in a taxable account, but it's not crazy. You could do much worse things investing wise.”
  — Jim Dahle [28:26]

• “There’s not some magic retirement account out there we haven’t told you about.”
  — Jim Dahle [32:32]

Timestamps for Key Segments

• 00:00–03:48: Intro, boat story, philosophy on big purchases
• 03:48–08:03: Clarifying pension risk, PBGC, actuarial listener feedback
• 08:03–20:43: Alejandro's question—step-by-step on optimizing retirement accounts, detailed 457(b) plan advice, Roth conversions
• 20:43–26:29: Wayne's question—cash balance plans, investing strategy, portfolio risk allocation
• 26:29–30:59: Target retirement funds in taxable accounts—simple vs. efficient advice
• 30:59–36:12: Emily's question—what to do when you can’t access a 401(k); taxable savings options

Closing

• Final thought:
  “A wise person should have money in their head but not in their heart.” — Jonathan Swift (29:35)
• Dr. Dahle underscores the value of financial literacy and encourages listeners to be deliberate and thoughtful in their retirement planning, urging, “You’ve got this. We’re all here to help you along the way.” (Outro)

Summary Table: Smart Retirement Account Flow

| Step | Account Type | Criteria/Priority | Reason | |------|-------------------------------|-------------------------------------------|------------------------------------------------| | 1 | Backdoor Roth IRA | If over direct Roth contribution limits | Tax-free growth | | 2 | HSA | If high-deductible plan | Triple tax advantage | | 3 | 401(k)/403(b) (Employee Match) | If employer matches | Free money/tax break | | 4 | 401(k)/403(b) (Max) | Fill up combined employee/employer limit | Tax-deferral, asset protection | | 5 | 457(b) Plan | If employer stable (govt > non-govt) | More tax deferral, but be cautious | | 6 | Cash Balance Plan | High earners with access | Additional pre-tax savings, plan-specific risks| | 7 | Taxable Brokerage Account | Unlimited contributions | Flexibility, strategies for tax-efficiency |

This episode delivered thorough, practical advice for high earners approaching retirement planning. With clear-eyed caution and actionable suggestions, Dr. Dahle reinforced the importance of understanding each plan’s limitations and making informed, resilient choices.