White Coat Investor Podcast #451: Roth IRAs and 529s

Host: Dr. Jim Dahle
Date: December 25, 2025

Overview

In this Christmas Day episode, Dr. Jim Dahle delivers a deeply practical and thoughtful guide to maximizing the behavioral and technical aspects of investing for physicians and high-income professionals. The show covers several major topics: the behavioral challenges of spending after years of saving, the evolving landscape of student loan repayment and forgiveness programs, recent legislative updates impacting Roth IRAs and 529 plans, and actionable advice for managing overfunded 529 accounts. Industry experts join in to provide specialized tax guidance, and listener questions highlight real-world dilemmas and detailed financial strategies. Throughout, Jim maintains his signature transparent, candid, and slightly self-deprecating tone.

Key Discussion Points

1. Behavioral Challenges in Spending (00:16–09:54)

• Highlight: Many high savers have a tough time learning to spend in retirement after working hard to accumulate wealth.
• Insight: Drawing on David Bach's arguments, Jim observes, "People just have the hardest time spending their money… Maybe you ought to do whatever you can, whatever it takes to get you to actually spend your money in retirement." (01:18)
• Ways to practice spending down assets:
  • Spend down 529s for college education—gives psychological practice for retirement spending (04:22)
  • Spend from HSAs for healthcare costs; saving HSA receipts for decades is risky as legislative changes may limit this strategy in the future (06:30)
  • Use giving (e.g., donor-advised funds) as training for distributing saved wealth
• Notable Quote: "If you do what we tell you here at the White Coat Investor… you're probably going to have trouble spending that money." (08:50)
• Recommendation: Think about your comfort with asset decumulation well before retirement.

Physician Career Longevity and Financial Independence (07:44–09:54)

• Many physicians, especially in high-burnout specialties, don't make it to 30-year careers; early financial independence is critical.
  • "Awful lot of people don't make it 30 years. The burnout rates are very high—50% ish in most specialties… So start thinking now about how you're going to do that." (08:45)
• Emphasizes the importance of aggressive early savings and letting compounding work.

2. Student Loan Repayment Updates (09:54–20:38)

Guest Segment: Student Loan Expert

The End of the SAVE Program

• Big news: The SAVE (Saving on a Valuable Education) program is ending soon.
  • "On December 9th, the SAVE program was officially ended. Kaput." (10:08)
• Uncertainty around when borrowers will be moved into new plans; recommends proactive research rather than waiting for default reassignment.

Income-Driven Repayment (IDR) Landscape

• IBR (Income-Based Repayment): The only IDR plan created by Congress and considered the safest for long-term availability.
  • Upcoming: The “partial financial hardship” income requirement is being removed (effective December 2025). This opens IBR to higher-earning physicians—a "really big win" for those needing to switch plans (12:52).
• RAP (Repayment Assistance Plan): Newest IDR plan (effective July 2026), with tiered payments; will be the only IDR option for loans disbursed from July 2026 on. Payments: up to 10% of income for attendings, with SAVE-like safeguards against ballooning balances.

PSLF Buyback Program

• Allows retroactive payment to “buy back” qualifying PSLF months missed.
  • Warning: Processing backlog of 26 months (19:07). "I would not be factoring in the buyback program into your pay down strategy."
• Closing: Encouragement to make a loan plan now, given these changes.

3. Roth IRA and TSP (Thrift Savings Plan) Conversions (20:38–31:16)

In-Plan Roth Conversions for Federal Employees (TSP)

• TSP now allows in-plan Roth conversions, catching up to private-sector 401(k)s.
  • "It's cool that the TSP is offering in-plan Roth conversions now. They should have done this 15 years ago…" (22:45)
• Main points:
  • Conversion triggers immediate tax bill on pre-tax contributions.
  • “Mega backdoor Roth” maneuvers require after-tax contributions, but this is now possible for TSP participants.
  • Deciding between traditional and Roth is always a difficult calculation due to unpredictable future tax rates and circumstances.
  • "Don't beat yourself up if you don't do it exactly right, because most of us don't at every point during our career." (24:23)

4. Backdoor Roth Conversions: Real-World Dilemma (25:00–31:16)

• Email: Young couple, wife leaving workforce, $165K Traditional IRA. Should they do a full Roth conversion this year when income is low?
  • Jim’s advice:
    • You can pay conversion taxes from IRA money, but it’s suboptimal—money used for taxes is subject to a 10% early withdrawal penalty if under age 59½.
    • "Ideally you will just do as much as you have cash to cover the tax bill for or can come up with the cash." (28:27)
    • Consider spreading the conversion over multiple years to reduce tax bracket impact.

5. Expert Interview: Taxes for Physicians & High Earners (31:16–42:19)

Guest: Laura Clifford, CPA, Fox & Company

• Why focus on doctors? High interest and follow-through in financial matters compared to general clients.
• Pricing: Transparent, tier-based flat-fee for tax and planning services.
• Tax strategies common for doctors:
  • Top deduction: maximizing pre-tax retirement contributions
  • Common mistakes: misreporting backdoor Roths, depreciation issues on rental properties (39:33)
• When to hire a CPA: Especially as situations become more complex (e.g., Tier 5: multi-state, multiple K1s).
• CPAs and "audit lottery": They only use defensible strategies with proper documentation.
• Client intake: Only new clients during summer to maintain service quality.
• Website for services: foxcpas.com

6. 529 Plans: Overfunding & New Uses (42:42–54:20)

• Listener Dilemma: Overfunded 529 due to stock market growth and kids choosing less expensive college options.

  • New OBBB legislation expands 529 uses:
    • Can now pay for some credentialing, licensing, and CME (Continuing Medical Education)—but only from approved institutions.
    • CME expenses may be covered if offered through a qualifying institution, but not licensing, DEA fees, or general business expenses.
    • "You can't pay for your CME with 529 money and then write it off as a business expense. It's one or the other. That's called double dipping. It is definitely not allowed." (45:50)
  • Broadened K-12 tuition eligibility: raised to $20,000/year starting Jan 2026.

• Debate: Is $300,000–$400,000+ for 529s 'reasonable'?

  • Some listeners argue it's necessary given rising college costs ($85K+/year for private/out-of-state).
  • Jim's view: Most Americans pay much less for college; "College, like weddings, costs what you're willing to pay." (50:30)
  • Overfunding 529s can be a “good problem,” but be cautious and flexible in future planning.

7. 529 & HSA Withdrawal Timing: Legislative Risks (54:21–56:33)

• Controversy: Is it required to withdraw 529 funds in the same tax year the education expense occurs? Regulations are unclear, so it's safest to closely match expense and withdrawal timing.
• New threat to HSA “receipt saving”: Congress considering a law that may limit delayed HSA reimbursement withdrawals—which could retroactively complicate multi-year receipt strategies.
  • "Those sorts of strategies that require decades to play out are inherently risky…" (56:10)
  • Advice: Be cautious with strategies relying on legislative ambiguity.

Memorable Quotes & Moments

• "People just have the hardest time spending their money… Maybe you ought to do whatever you can… to actually spend your money in retirement." (Jim Dahle, 01:18)
• "Doing Roth conversions in years when your income is lower… can be a pretty smart move." (Jim Dahle, 27:10)
• "Can you pay for your CME with 529 money and then write it off as a business expense? It's one or the other. That's called double dipping. It is definitely not allowed." (Jim Dahle, 45:50)
• "Don't beat yourself up if you don't do it exactly right, because most of us don't at every point during our career." (Jim Dahle, 24:23)
• "Of all the financial problems to have, right? Overfunded 529s, big required minimum distributions, these are pretty good problems to have." (Jim Dahle, 53:00)

Timestamps for Key Segments

• 00:16–09:54 — Behavioral finance, spending in retirement, burnout, and early financial independence
• 09:54–20:38 — Student loan legislative changes (SAVE, IBR, RAP, PSLF Buyback)
• 20:38–25:00 — TSP Roth Conversions and Mega Backdoor Roths
• 25:00–31:16 — Backdoor Roth questions and IRA conversions in low-income years
• 31:16–42:19 — CPA Laura Clifford on tax strategies for high earners
• 42:42–54:20 — Listener Q&A: Overfunded 529s and new withdrawal options under OBBB
• 54:21–56:33 — HSA and 529 withdrawal timing as legislative risk

Final Thoughts & Takeaways

• Start psychologically preparing to spend your money as wisely as you earn and invest it.
• Stay up-to-date and flexible with student loan repayment—major changes are happening!
• Be careful about overfunding 529s; understand both new flexibility and real limits of educational expense definitions.
• Don’t solely rely on strategies that depend on legislative “gray zones”—rules can change fast.
• When in doubt, consult with specialized professionals, especially as your situation grows more complex.
• The White Coat Investor’s principles—save aggressively, invest smartly, and persevere—work for all stages of your career.

For further resources, tutorials, and up-to-date legislative tracking, visit whitecoatinvestor.com.