WCI #455: Student Loan Forgiveness, Taxes, and Retirement Accounts

Summary

White Coat Investor Podcast #455: Student Loan Forgiveness, Taxes, and Retirement Accounts

Host: Dr. Jim Dahle
Release Date: January 22, 2026

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Episode Overview

In this episode, Dr. Jim Dahle addresses pressing questions submitted by listeners about student loan forgiveness—especially in unusual scenarios like borrower defense—even after refinancing, tax strategies for maximizing loan forgiveness, navigating retirement account contribution limits, and optimizing cash balance plan participation. The episode is packed with actionable advice for medical professionals (and similar high-income earners) on handling student debt, filing taxes as a couple pursuing PSLF, efficiently investing with limited retirement options, and making the most of cash balance pension plans.

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Key Discussion Points & Insights

1. Security Updates: ACATS Fraud and Account Locks (00:43–07:45)

• ACATS Fraud Clarifications: Dr. Dahle updates listeners on advancements in securing brokerage accounts from fraudulent transfers via the Automated Customer Account Transfer Service (ACATS).
  • Vanguard now offers an ACATS lock: You can call and have your account frozen against external transfers; to move money, you'll need to call to lift the freeze.
  • Cell/SIM Locking: Mobile carriers like Verizon allow locking phone numbers and SIMs against porting to prevent two-factor authentication theft.
• Quote (on account security):
  “If you’re lying awake at night worrying about this sort of thing, those are some things that you can do.” – Jim Dahle [07:17]

Timestamps:

• [00:43] – ACATS fraud story and solution at Vanguard
• [05:18] – Cell phone SIM hijack prevention

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2. Listener Story: Borrower Defense Success After Refinancing (08:02–09:30)

• Success Story from Reagan Hanson (Nurse Practitioner, Denver):
  Despite being told that refinancing eliminated eligibility, Reagan persisted and won borrower defense loan forgiveness for $80,000, even after her federal loans had been privatized.
  • Key Takeaway: Persistence can pay off even in borrower defense cases after refinancing.
• Quote:
  “I got a check in the mail for $80,000 that paid off the balance of my student loans and I am student loan debt free.” – Reagan Hanson [09:17]

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3. Student Loan Repayment Strategies and PSLF Tax Choices (11:10–19:38)

• Listener Question:
  Married couple: one psychiatrist (not PSLF-eligible, refinanced), spouse is a stroke fellow eligible for PSLF with SAVE plan payments. They consider filing taxes separately to reduce PSLF payments, potentially saving ~$200K, but are concerned about lost tax benefits.
  • Dr. Dahle’s Response:
    • Filing separately is a common and reasonable way to reduce PSLF payment calculations.
    • Caution: Staying too long on SAVE (which no longer offers qualifying payments due to recent legislative changes) could hurt PSLF progress. Switch to REPAYE/IBR-3 or RAP for PSLF.
    • Ethics of “refiling taxes” trick: Some couples file separately for PSLF, then later amend their returns to jointly, which is technically legal but ethically questionable.
  • Quote:
    “I don’t know that I feel this is particularly ethical...but if you do not know that, there are people out there managing their student loans that way.” – Jim Dahle [18:30]

Timestamps:

• [11:10] – Listener’s situation explained
• [12:38] – Dr. Dahle’s PSLF/tax filing analysis
• [17:34] – The “refile taxes for the refund” trick

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4. Saving and Investing with Retirement Contribution Limits (19:38–26:44)

• Listener (Matt):
  Maxes out his 403(b) with mandatory contributions, restricts solo 401(k) contributions; asks if it’s okay to invest the rest in taxable accounts or consider newer Roth SIMPLE IRAs.
  • Dr. Dahle’s Advice:
    • If maxing the 415(c) limit at work, you cannot make further pre-tax or Roth contributions via a solo 401(k) for side income.
    • No workaround via SIMPLE IRAs here; fine to invest in a taxable account.
    • Taxable accounts are flexible, tax-efficient if managed properly (using index funds, buy-and-hold, tax-loss harvesting, donating appreciated shares), and are not something to feel bad about.
  • Quote:
    “You seem to feel like there’s something terrible about using a taxable account…There’s nothing wrong with it.” – Jim Dahle [22:53]

Timestamps:

• [19:38] – Matt’s question
• [21:06] – Dr. Dahle’s analysis of taxable investing
• [25:14] – Final tips for taxable account management

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5. Mega Backdoor Roth Contributions — Tax Filing Guidance (26:44–31:17)

• Listener (John):
  Completed his first Mega Backdoor Roth via solo 401(k). Asks about tax forms and what to watch for.
  • Dr. Dahle’s Breakdown:
    • Your solo 401(k) provider (like mysolo401k.com) handles tax paperwork (1099-R).
    • No need for Form 8606 (for IRAs).
    • Enter the 1099-R properly into tax software; after-tax contributions roll over or convert to Roth 401(k) are generally tax-free.
  • Key Point:
    “Don’t sweat it…Thousands and thousands of doctors before you have sorted out how to file taxes when you've done a mega backdoor Roth.” – Jim Dahle [29:55]

Timestamps:

• [26:44] – Mega backdoor Roth question
• [27:17] – Practical advice on paperwork

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6. Cash Balance Plan Contributions — To Pause or Not? (31:17–36:50)

• Listener (Abby):
  In early 40s, maxing cash balance plan with six-figure contributions; concerned about being locked into low-growth, conservative investments for ~17 years since her group won’t terminate the plan until age 59 or departure.
  • Dr. Dahle’s Assessment:
    • Concerned about very high contributions at a younger age and lack of plan “restart”/closure (common every 5-10 years in most groups).
    • Primary benefit of cash balance: tax deduction, not aggressive growth.
    • Plan asset allocation is purposely conservative to avoid excess contribution requirements or excise taxes; group should revisit plan structure and consider participant needs.
    • If you’re concerned, consider joining the plan committee, adjusting CB contributions, or seeking a full financial plan review.
  • Quote:
    “I think you’re asking good questions. I don’t know that I can answer your specific questions without knowing your desired asset allocation and all that financial planning stuff…it’s a complicated question you’re asking.” – Jim Dahle [34:35]

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Notable Quotes

| Time | Speaker | Quote | |----------|-------------|---------------------------------------------------------------------------------------------| | 07:17 | Jim Dahle | “If you’re lying awake at night worrying about this…those are some things you can do.” | | 09:17 | Reagan Hanson | “I got a check in the mail for $80,000…and I am student loan debt free.” | | 18:30 | Jim Dahle | “I don’t know that I feel this is particularly ethical…But…there are people out there…” | | 22:53 | Jim Dahle | “You seem to feel like there’s something terrible about using a taxable account…There’s nothing wrong with it.” | | 29:55 | Jim Dahle | “Don’t sweat it…Thousands and thousands of doctors before you have sorted out how to file taxes when you’ve done a mega backdoor Roth.” | | 34:35 | Jim Dahle | “I think you’re asking good questions. I don’t know that I can answer your specific questions without knowing your desired asset allocation…and all the planning stuff…it’s a complicated question you’re asking.” |

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Section Timestamps

• 00:43 – ACATS lock and security tips
• 08:02 – Borrower defense forgiveness success
• 11:10 – PSLF/family tax strategy for maximum loan forgiveness
• 19:38 – Retirement account limits and investing in taxable
• 26:44 – Mega backdoor Roth tax procedure
• 31:17 – Cash balance plans: optimal contributions and investment concerns

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Memorable Moments

• Reagan Hanson's story — a rare case of loan forgiveness after refinancing ($80K check for privatized loans).
• PSLF tax refiling trick — a “gray area” that’s legal but ethically questionable.
• Validation for taxable investing — reassurance that taxable brokerage accounts are not a “last resort,” but an efficient tool for high savers.

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Actionable Takeaways & Resources

• Account security: Proactively lock brokerage and phone accounts to stop fraud.
• Borrower defense: Persistence can pay off, even for refinanced loans.
• PSLF Planning: Ensure repayments count for PSLF; choose the right filing status and repayment plan, but weigh tax pros/cons and ethical lines carefully.
• Retirement savings: Don’t fret when running out of tax-advantaged space; taxable accounts can be powerful and flexible.
• Cash Balance Plans: Review periodically with your group; maximize tax benefit, but don’t sacrifice long-term investment goals.
• Always seek tailored advice: For complex questions, consult with a specialist or engage with the WCI community forums for crowd-sourced experience.

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Resources Mentioned:

• Studentloanadvice.com
• Whitecoatinvestor.com/perks
• SpeakPipe submission for podcast questions
• Retirement plan consultants – see WCI’s recommended list

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The episode is a must-listen for any healthcare professional looking to optimize debt payoff, tax strategy, and investment choices on the path to financial independence. The focus remains on maximizing value, minimizing unnecessary expenses, and being intentional with financial tools at your disposal.

Transcript

[Jim Dahle]

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 455. 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 help medical residents refinance student loans that could end up saving you thousands of dollars, helping you get out of student debt sooner. SoFi also offers the ability to lower your payments to just $100 a month while you're still in residency. 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 Bank, NA member FDIC. Additional terms and conditions apply. NMLS 696891 all right, we've had Gretchen Green on this podcast before, at least a couple of times. Gretchen's one of our partners because she offers you something we don't. She calls it Expert Witness Startup School. And the enrollment for this is January 14th through the 26th. So you got four days. From this time, this podcast drops Expert Witness Startup School. And. And all you gotta do is go to whitecoatinvestor.com expertwitness to sign up for this. Well, who's this for? This is for you if you're thinking about a side gig as an expert witness, which can be not only a cool way to use your expertise to make a little bit of money, but also a chance to contribute. Right? A lot of these contributions are defending people whose care has been perfectly fine. Obviously, if you're a good expert witness, you don't care who you're working for. You're just giving your opinion on what you think appropriate care in that situation would have been. But you can launch and build an expert witness business in four weeks to build another source of income while still doing what you do best, being a doctor. With physicians charging a typical range of $500 to $900 per hour for expert work and a typical retainer of $2,500 to $3,500 per case. The course could pay for itself with one case and is generally tax deductible as a business expense or using CME funds. You were also going to THR. We're going to throw in Continuing Financial Education 25. If you buy this course, it's got a $789 value. It gives you 35 plus hours of material from our annual conference, including up to 17 hours of CME and CE credit. Maybe if you buy the combination of the two, you can write it off or you can use your CME funds. I mean, you ought to be able to use CME anyway for Expert Witness course. But go to whitecoatinvestor.com expertwitness if you want to learn more. And it can be a pretty nice side gig that's heavily reliant, of course, on your medical knowledge that you already have. Okay, let's get into your questions. Before we do that though, we got to do a correction or clarification. We did a post or a podcast a few weeks ago about ACATS fraud, right? ACATS is automated customer account transfer service, Right. This is basically a way where you can move securities between brokerage accounts. And what has happened is some people scammers have taken the fact that this is a system designed to rapidly move things between accounts and rapidly move things between accounts that you didn't want them to move. They got into one account and moved it to their brokerage account and then they sold it, took the cash and ran off with the cash. There's an article in the Wall Street Journal or the New York Times recently where this happened to somebody and they barely caught it before Vangu, you know, lost all their money. Well, I went to a conference a few weeks ago, spoke at a conference, the Bogleheads conference. And guess who spoke there, The CEO of Vanguard. He said, yeah, our security guys are working on this. We think we're gonna have this solved soon, essentially was what he was saying about it. And it sounds like since we ran that podcast in December, they have I got a couple of emails on this or something on the forum and something on the emails. The forum said I was able to do an ACATS lock on Vanguard last week. This is a new feature they now offer. I did have to call Vanguard to place doesn't affect transfers to preset banks. It's just an ACATS lock. And he was asked, well, how'd you find out about that? He said, I was speaking with the Vanguard rep on another matter. I asked about it and he said, yeah, it's in place. It won't affect other transfers. So that is now available at Vanguard. You don't have to move your money to Fidelity if you are just worried about ACATZ fraud and you can actually call them up and kind of put an Acatz lock on there. You'll have to call them up and unlock it before any of your securities can be transferred out of your account using the ACATS system. Also had somebody else email me about it. Said on one of your most recent podcasts, one of your listeners asked about this and talked about how is it available on Fidelity, not on Vanguard. I just checked with my advisor on Vanguard. He said it's possible to put a freeze in the brokerage account internally, so I had him do that for me. It's not something one can turn on and off, but if there was a transaction expected, then I call Vanguard and they would lift the freeze right away. I found the New York Times article really frightening. I've been a victim of an online scam previously where somebody got access to my business account. These scams are only going to get worse with the AI adding to the mix. You may want to double check with your Vanguard advisor as well and perhaps mention your next podcast that Vanguard does offer a freeze for their clients. That way they do not have to move to a different institution if they don't wish to. Otherwise there might be an exodus of people leaving Vanguard unnecessarily from a lack of updated knowledge about this issue. Okay, that's great. The other email I got on this topic though says for folks that really want to get into the weeds on financial security, Verizon and other carriers allow you to lock your phone number and ESIM from transfers, preventing scammers from getting access to your cell to bypass your two factor authentication. I think the idea behind that scam is that they transfer your phone number and your SIM card somehow and then can if they've got your password too. Well now they've got your phone essentially, and they can do your two factor authentication, get into your account, initiate an ACATS transfer, et cetera, so you can lock your phone too, as well as your Vanguard account. At a certain point you gotta go man, what a pain. But if you're lying awake at night worrying about this sort of thing, those are some things that you can do. A few weeks ago I told you about a discount with T Mobile that we have [e-mail] perks I told you it was $20 off your T Mobile bill. That's not entirely true. It's not $20 off, it's only $20 per line for unlimited talk, text and data. You pay an annual membership fee of $99, but then all of your lines up to 10 lines. If you got eight kids, $20 each a month for the year. So it's pretty great deal. Check that out. We got all kinds of other deals on there. By the way. Whitecoatinvestor.com perks. You can see all of them. The phone deals are particularly good, the travel deals are particularly good. But there's all kinds of other deals as well. Why pay full price if you don't have to? Certainly the less you spend, the more you can save and invest. Let compound interest work on and reach your financial goals sooner. Okay, we got a kind of a cool. I don't know if it's an email. We got an audio message sent in by email. Just in case you guys forget. We've got a speak pipe, right? Whitecoatinvestor.com speakpipe. It's super easy to use. You don't have to record your own audio and send it to me, but this person did. And it's a cool enough story that I wanna play the audio for and then talk about it for just a minute. Here's that audio.

[Reagan Hanson]

Hi, this is Reagan Hanson. I'm a nurse practitioner in Denver, Colorado and a listener of the White Coat Investor. I wanted to share a little information that I don't know that is out on the Internet because I surely didn't find it when I was looking. And this is in regards to borrower's defense cases. I applied for borrower's defense as a student of walden University around 2018 and my application was denied because of lack of evidence. However, in the spring of 2023, I got a letter stating that it had been reversed and I now owe $0 of $120,000 that I originally had applied for. Unfortunately, in the meantime, I made a better decision to refinance with Laurel Road for an interest rate, at least half of the government's interest rate, which allowed me to pay my student loans from 120,000 down to 80,000 in that time frame. I continued to fight and everyone told me that I was fighting an uphill battle. I talked with attorneys here in Colorado who specialize in student loans as well as attorneys on the east coast. Class action attorneys. Everyone told me that because I privatized, I lost my ability to get the loans forgiven. And so yes, this felt like a punch in the stomach. I continued to fight and send letters to the ombudsman. Ultimately, this last spring, I got a check in the mail for $80,000 that paid off the balance of my student loans and I am student loan debt free. Thanks for all your Help.

[Jim Dahle]

Okay. Hope you were able to make out that audio. We'll clean it up as best we can, I'm sure. But what are we talking about here? We're talking about borrowers defense cases. This is for schools that basically engaged in misconduct. All these fly by night universities that offer crap education basically scam people and go out of business or whatever. Well, if you went to a university like that or some sort of program like that and ended up with a bunch of student loans from it, you can apply to have those student loans go away with the federal government. That's called borrower's defense. And I don't think it's very common among wciers. I don't think it's very common for med schools at all. You know, most med schools are legitimate institutions, not the schools for whom borrower's defense cases typically apply. But the problem for this wcier is that she had refinanced the student loans. They were no longer federal loans for the federal government to forgive. She'd refinanced them with a private lender and started paying them down. And so I think she said she'd paid them down from $120,000 to $80,000. And then she was realizing, oh, this is a borrower's defense case. Let me see if I can get the federal government to pay for these. And she fought and fought and fought and fought and did get them to pay for at least what she hadn't paid off yet. She got $80,000 of student loans wiped out even though they were private student loans. So that's pretty cool, right? If you're in that situation, know that this is worth fighting for. And you can get, you know, borrower's defense cases even if you have already refinanced the student loans. Okay, speaking of loans, let's talk a little bit about some loan repayment strategies.

[Loan Repayment Questioner]

Hi, Dr. Dali. I'd appreciate your advice on loan repayment strategies. I'm a first year attending psychiatrist and my wife is a first year stroke fellow. We've maxed out our HSAs, backdoor IRAs and gotten our 401k matches. I'm not eligible for PSLF, so I recently refinanced my $240,000 in federal loans at 6.5% to a 7 year fixed rate of 5.3% with SoFi. My wife will pursue PSLF. She has $180,000 in federal loans at 6.5% and is still on the save plan. She's made about 3.5 years of qualifying payments we recognize she needs to switch REP payment plans to begin making PSLF qualifying payments again. However, her projected payment amounts vary significantly when my income is or isn't included and this depends on how we file taxes. Running the number, she would pay around $200,000 less over 10 years if we file separately. This number doesn't include her additional PSLF loan forgiveness, but it also doesn't factor in any future potential missed tax benefits of filing jointly if we were to have a kid in the future or donate larger sums of money. Given this, our current plan is to file separately as soon as possible in 2026, switch her repayment plan so that it qualifies for PSLF, and then likely file separately over the next several years until she gets her loans forgiven. I would greatly appreciate your thoughts on our plan and to see if there's any other variables or other factors I should consider before we make this change. Thank you for all that you do.

[Jim Dahle]

Okay, well that was very comprehensive. Thank you for sharing your student loan plan. It sounds like you've done a pretty good job thinking about it and putting that together. Let me give a plug for two of our sponsors. You mentioned SoFi. You go to whitecoatinvestor.com sofi they will refinance your student loans and you get a lower rate. The shorter term you're willing to commit to paying it back in the lower your rate. If you're willing to use a variable rate loan and make sure you can handle the worst case scenario, right? If there's another 2002 or 2022 and rates go up 4% in a year, can you handle that before you take a variable rate loan? But if you're going to be paying them off in two or three years, maybe that risk isn't that high. You can even get loans refinanced with SOFI while you're in residency. They limit them to $100 payments a month until you get out of training. So great partner. We've been working with SoFi since SoFi almost started. White Coat Investor and SoFi basically grew up together. At one point I went to San Francisco and sat around a conference table with the entire C suite of SoFi. Now they grew a lot faster than White Coat Investor did. They're a much bigger company than we are now, but they've been a great partner for a long time for White Coat investors. So great for you. You got a better rate. Yeah, 6.5 to 5.3. Doesn't seem dramatic, but if you went through our links, you probably got some Cash back too. You got a free copy of fire your financial advisor and you got a lower rate. What's not to like? So if you're paying back your student loans, you might as well pay them back at a lower interest rate. More of your payments can go toward principal and less toward interest. Good job refinancing your student loans. I don't see any problem whatsoever with how you're managing that other than I bet you can pay them down sooner. Maybe you ought to go back and look at, you know, a five year loan. Maybe it'd be a little better deal for you. Okay. The other person I want to plug or the other company I want to plug is the one we started a few years ago called studentloanadvice.com and we're eventually going to work this into white coat planning. But this company was founded because I just got a bunch of hard questions that I couldn't answer by email or on the podcast by Speak Pipe to help people manage their student loans. So what you get for a flat fee when you go to studentloanadvice.com and book an appointment is you have somebody go over all your stuff before your appointment. You spend maybe an hour on the phone or a teleconference call with somebody there and then they will help make sure you have the right plan for your student loan loans, that you are filing taxes the right way, that you're using the right kind of retirement account, tax deferred versus Roth, that you're in the right type of IDR program, that you're working together with your spouse on their student loans in the same way. And your student loans are complicated enough that I'd say, well, that's well worth paying a few hundred dollars to have a [e-mail] but as you present your plan, it seems like you kind of know a lot of the stuff already that they're going to be teaching [e-mail] right? You recognize that still being in SAVE is not making progress toward PSLF right now, right? SAVE is not making payments. No payments are counting toward pslf. That's a bad idea. If you're trying to get pslf, you want to be making payments that count. So most people are now transitioning. Most of them are transitioning to the new IBR program out of save. But there is the RAP program as well, right? This new one that came out in mid-2025. So if you want to evaluate all those with somebody that can help you run the numbers go to studentloanadvice.com to do that, and you can get some assistance with that. But it sounds to me like you got to get out of SAVE ASAP at a minimum. And I think that's at least one piece of advice that I can give to you and other people out there. A few people are writing out SAVE just because they don't want to make payments on their student loans. And as long as SAVE isn't making them pay, they think that's great. It's great for their cash fl. I don't think it's actually helping them get rid of their student loans right now, though. So if you actually want to get rid of your student loans, and I hope you do, you probably need a different plan than SAVE right now. I mean, SAVE sounded great. It was very, very generous. This is a program that came from executive fiat, basically the Department of Education under the Biden administration and was challenged in court and has had changes made to it now via Congress and the new administration. SAVE is not an option going forward. It's going to be RAP and IBR three years from now. Those are going to be the only plans that are available to manage your income driven repayment plan. So you might as well make those changes now and get out of save. Very little reason to be hanging out in SAVE right now that I can see, other than if you just don't want to make payments. But those are going to restart again soon, I'm sure. Hope that's helpful. Hope those resources are helpful. Your plan sounds like you've thought things through. Okay. One other thing I ought to mention in connection with your particular plan. I don't know that I feel that this is particularly ethical, but there are people managing their student loans this way. So I'm going to tell you about the strategy you mentioned. Married filing separately is going to increase your tax bill but decrease her student loan payments and leave more of that to be forgiven. Okay, so what's the strategy? The strategy is recognizing that the Department of Education and the Department of the treasury do not talk to each other. So what some people do is they file their taxes, married filing separately, and then show that tax return to the Department of Education and get lower student loan payments. Then they turn around at some point in the next three years because you're allowed to refile your tax returns for three years and they refile their taxes married filing jointly with the Department of the treasury and usually getting a tax refund, sometimes a significant tax refund from the Department of the Treasury. Who never goes and tells the Department of Education that you refiled those taxes and then the next year they do it again. They file married filings separately, show the Department of Education and then refile their taxes with the Department of the Treasury. I don't know that I feel that's super ethical. I think I'd have a problem with doing it personally. But if you do not know that there are people out there managing their student loans that way and you would probably come out ahead financially for doing that, I want you to be aware of the strategy. I suppose you can decide if that's ethically okay to put your student loans on the taxpayer in that manner. Okay, our quote of the day today comes from Thomas J. Stanley. Stanley of Stanley and Danko fame wrote the Millionaire Next Door. He said, before you can become a millionaire, you must learn to think like one. You must learn how to motivate yourself to counter fear with courage. Okay, our next question, also off the speak pipe is from Matt. Let's take a listen.

[Matt and John (two different questioners)]

Hey Jim, this is Matt from the Midwest. I wanted to thank you so much for everything you've done in the physician financial sphere. I got your book during medical school and the knowledge that I've gained from it has given me and my wife the confidence to be able to manage our own finances and to take careers that for both of us in medicine have allowed us more autonomy in caring for our patients and more time with our family because we don't have to worry about absolutely ma out our salaries through work. I get a 403. It's the only employer sponsored retirement plan that we have and there's a mandatory contribution that goes along with it. Because of my salary and the mandatory contribution rates, I actually max out the 415C limit entirely with that mandatory contribution. Still have the entire elective contribution on the side. I also have a little bit of 1099 side gig income which depending on the year varies from the mid to high five figures. Historically we've just invested everything else in taxable. We max out our Roth IRAs, we do not have a hydraulic health plan and otherwise we're satisfiers. So we just kind of put the rest in taxable and let it ride. I wasn't sure if, because I can't open a solo 401k or rather can't contribute to a solo 401k because of the 403 maximization at work, whether this would be a situation where it would make sense for me to open one of the Newer Simple Roth IRAs or if there was any other way to shield a little bit of the retirement income. Again, if not, that's totally fine. We're fine investing in taxable, but just wanted to see if that was an option, given our unique situation. Thank you.

[Jim Dahle]

No, that's the answer. No, you're doing fine. Right. I love that you describe yourself as a satisficer, though. I've got news for you, Matt. You are not a satisficer. At least not right now. At this point in your career, you're an optimizer. I mean, you're asking me if you can somehow open a Simple IRA, a Roth Simple IRA, in addition to the 403, you're maxing out your backdoor Roth IRAs and your HSA because you've already learned that a 403 and a Solo 401 share the same 415C limit. I'm sorry, Satisficors don't talk like that. All right, it's fine. There's nothing wrong with being a little bit of an optimizer. And of course, it's a spectrum. Right? But if you were a satisficer, you'd call me up in 20 more years going, I probably ought to save something for retirement. And was what I did good enough? No, that's not how satisficers work. Right. You're a bit of an optimizer. That's okay. I probably lean way too much toward the optimizer side as well. Although I've been making progress in the last few years of really only concentrating on what really matters, which, of course, is not where you put your retirement savings, but how much of it you put in there. And it sounds like you're doing a pretty good job. I mean, if you put $70,000 into your 403, you're putting another $14,000, I presume, into Roth IRAs. You're doing an HSA. I mean, we're up to what, $90,000 right there. And you're putting stuff into taxable every year as well. Let's say you're putting another $30,000 into taxable. That's $120,000 a year. And if I pull up Excel here, equals future value, we'll use a rate of 8%. We'll use 30 years. We'll use $120,000 a year. In 30 years, you're going to have $14 million, Matt. You're going to have a great retirement. Right? You're going to do just fine. Okay. You seem to feel like there's something terrible about using a taxable account as well. And I don't think that's the case. I like my taxable account now. I'm of course going to max out my Roth IRA and my 401s, et cetera, before I put money in taxable.

[Matt and John (two different questioners)]

Right.

[Jim Dahle]

I'm not dumb, but I don't feel bad about doing it. Sometimes people feel so bad about doing it, they run over to their local insurance agent and they buy a whole life policy. I think that's usually a mistake. So it's okay to use a taxable account. It is our largest investing account now. Almost all of our investments are in a taxable account. That's okay. There's lots of ways to invest a taxable account very tax efficiently, right? You want to be a little bit conscious about what goes in the taxable account. You want your more tax efficient asset classes in there. We're talking about things like a total stock market index fund, a total international stock market index fund. If you have to stick bonds in there, they're probably municipal bonds, maybe something like one of Vanguard's excellent municipal bond funds. Those are the sort of things you tend to put into taxable first. So pay attention to asset location. Once you're using a taxable account, don't put your target retirement fund in there. Especially if you are an optimizer like Matt and I are. What else can you do in there? Well, you buy and hold. So if you're not buying and selling stuff all the time, you don't get short term capital gains. In fact, you don't get capital gains at all because most of those asset classes, and you're probably using most of those funds that invest in those asset classes and you're probably using ETFs in your taxable account anyway. Don't distribute very many capital gains unless you buy and sell. So by buying and holding, you're putting off those capital gains taxes for a long, long time and reducing that tax drag. Also by holding things for a long time, almost all of the dividends coming out of there are going to be qualified dividends, right? So not only do you only pay taxes, rarely at long term capital gains rates, but you only pay taxes on the dividends at qualified dividend rates, right? And if you're investing in muni bonds, you don't pay at least federal taxes, sometimes state taxes too, but at least federal taxes. You don't pay taxes on those muni bonds dividends anyway. So that's very, very tax efficient. But there's more, right you can tax loss, harvest when you buy something and then the market falls, well, you swap it for something similar, but not, in the words of the irs, substantially identical. You book those losses, and now whenever you have some capital gains, you can offset them with those losses. You can even use $3,000 of those losses against ordinary income every year. But wait, there's more. What if you give to charity? Well, look what you can do. You can donate appreciated shares you've owned for at least a year instead of cash, and you can flush those capital gains out of your account, making it even more tax efficient, right? There's all these cool things you can do with a taxable account that you can't necessarily do with a tax deferred account or a Roth account, but you can with a taxable account. Plus, it's super flexible. You can use it for whatever you want. You can give it away. You can spend it before you're 59 and a half without having to worry about that 10% penalty. You know, it's just awesome. It's not like an HSA where you got to spend it on healthcare. It's not like a 529 where you got to spend it on college. Right? You can spend it on anything you want. It's very flexible. So don't beat yourself up about a taxable account. It's fine. You're already getting $70,000 a year in your 403. You're already getting $14,000 a year in your Roth. You're already getting 8,000 something a year, almost 9,000 now, probably into an HSA. It's okay to put some money in a taxable account. You're going to be fine. All right, let's take our next question. Hello, Jim.

[Matt and John (two different questioners)]

This is John, SportsMed doc from the Southeast. Thanks for all you do. I just completed my first mega backdoor Roth IRA. I set up a Solo 401K through my Solo 401K, and they set me up with accounts at Schwab. My question is, do I need to fill out any special forms or is there anything I need to know when I am filling out my taxes for this upcoming year? Any help would be appreciated. Thank you.

[Jim Dahle]

That's a pretty broad question. Is there anything you need to know while filling out your taxes? Yes, there's a lot of things you need to know if you're going to file your own taxes. But I think you mean with regards to the mega backdoor Roth you just completed for the first time. Remember out there in WCI land, the mega backdoor Roth IRA is different from the backdoor Roth ira. That mega means something. What it means is that this isn't an IRA at all. It's a 401. So this is a process similar to what you do with the backdoor Roth IRA, except you're doing it in a 401. You're making after tax contributions to your 401, then you're converting them to a Roth IRA, usually inside or not to a Roth IRA, to the Roth 401 sub account, usually inside the 401K. Okay. It's also possible to have in service distributions and actually convert it to a Roth ira, but I think that's much more rare these days. So you've set it up, right? You got yourself a customized Solo 401 that allows not only after tax contributions, but in service conversions or in plan conversions. So you've done the right thing from that perspective. Typically, you can't just go to Vanguard or Schwab or Fidelity and open up their free cookie cutter solo 401 and do this process. You do have to get a customized one from somebody like mysolo401k.com. We've got a number of those companies listed. If you go to whitecoatinvestor.com and you go on our new website, what's it look like? You go under recommended and then you go under retirement accounts, retirement plans under experts. And that's where you'll find that list of people that can help you with this. But here's what you got to keep in mind. You paid my solo 401 a few hundred dollars and you'll pay them 100 something a year to maintain this plan for you. Well, guess what? They do as part of maintaining that plan? They do the paperwork. So they do the 1099R sending you this information. All you do is you enter it into your tax software, right? And because that's after tax money, you don't have to pay taxes on the conversion. But you don't do a Form 8606 like you do for a backdoor Roth IRA process, right? That's a form you fill out for IRAs, not 401ks. It ends up on line seven or something of your 1040. Right. But it's just coming off the 1099R that your 401 provider is going to send you for that conversion step that you did. So it's not quite as complicated, I think, as the backdoor Roth IRA from that respect. But obviously when you include everything else you have to do to do A mega backdoor Roth. It's kind of a little bit more complicated but still better than investing in taxable. Like Matt, right? Matt's got to put all his money in taxable. You can do a mega backdoor Roth ira, so that's great. Might as well take advantage of that. But don't sweat it. It won't be that bad. Just make sure you do it right the first time and copy it the next year. If you need some more help with that, feel free to reach out to us. Or better yet, just ask on one of the WCI online communities if you got a question about that. The regular posters, both on the subreddit, in the Facebook group, on the WCI forum, in the few, they all know how to do this. It's not that hard. Ask your questions there. We're a community. We'll walk you through this together and the next time you got to do it, you'll remember how to do it and you'll see somebody else asking on the subreddit or the forum or the Facebook group about it and you can help walk them through it. You know thousands and thousands of doctors before you have sorted out how to file taxes. When you've done a mega backdoor Roth, you'll be able to figure it out as well. Thanks everybody out there for what you do. It's not easy work, whether you're walking the dog, whether you're off running or at the gym or commuting. No one said thanks for what you're doing. Let me be the first. All right? We've talked about mega backdoor Roths and 403s and solo 401s and taxable accounts. Now let's talk about cash balance plans. Our next question comes from Abby. Let's take a listen.

I'm in my early 40s and have been maxing out my cash balance contributions every year. Six figures. I recently realized my company does not close the account to roll it over unless you hit 59 or leave the company, which I'm not planning to do anytime soon as I have a long financial horizon. I was thinking about not contributing anymore and just investing in the market given the conservative investments in a cash balance versus continuing to contribute. When I run mock calculations, I would contribute later when I'm closer to retirement. My other retirement accounts include a maxed out 401k with full employer contribution, a backdoor Roth and a brokerage all invested aggressively. Thank you for all your financial advice over the years. I wanted to hear your thoughts on this situation.

Okay, well, I don't have all the details, so we're just going to have to talk generally, as a general rule, I'm surprised that in your early 40s, which I think is what you said you are, you've been making six figure cash balance plan contributions for years. Typically, to be able to make contributions that large, you need to be at least in your late 40s, preferably 50s or 60s, because a cash balance plan is an extra 401 masquerading as a pension. And so it's governed by pension laws and pension rules. And there's only a certain amount of money you can put into a pension. And so the younger you start, the less you can put in there. And so being able to put in large amounts for long periods of time isn't really consistent with the cash balance plan. So I worry that whoever's running your cash balance plan maybe isn't managing it all that well. The other reason I worry about that is because you're saying you don't think they're going to close this thing at any point in the next 17ish years. And that's usually a mistake. Okay. Most physician partnerships, companies, et cetera, that running these cash balance plans find a good reason to kind of close them every 5 to 10 ish years. And the reason why you want to close them is because you want to eliminate the possibility of really poor market returns or really great market returns either ended up with too much money in there or not enough money in there. And so that's the other reason why you don't invest these things super aggressively is because you don't want a lot of fluctuation in the returns. The main reason you're doing a cash balance plan is for the tax benefit. It's not for necessarily the awesome return. So typically cash balance plans are not invested very aggressively. I think the one in my partnership is like 40% stock. We're all invested in one thing. It's like a Vanguard Life Strategy fund. And I think it's the one that's 40% stock. And even that, some people think it's a little on the aggressive side. But the point is, you don't want to have too high a returns in the cash balance plan or you have the potential of excise taxes, and if they're too low, then you got to make additional contributions. Now that might not be a problem for you because those are additional savings and you get another tax break if you put that money into your cash balance plan. So that's not all bad. But when you look at a group of physicians or something. A lot of them aren't going to be able to come up with the cash flow to be able to make that extra contribution and get that additional tax deduction. And so that can be a bad thing. And that's why you don't invest them super aggressively. Now, it sounds like you're worried about the fact that you're going to have money in this cash balance plan, and quite a bit of money because you're putting in six figures a year, invested, not that aggressively for a long period of time. And maybe that's okay because you're investing so much money elsewhere. I mean, you just mentioned you're maxing out a 401. You've got backdoor Roth, maybe you set an HSA too. And I know you set a brokerage or taxable account, so maybe you're saving enough money that even if the cash balance plan isn't invested that aggressively, your overall asset allocation is still about what you want it to be. But if not, then yeah, I think it does make sense to maybe make a little bit smaller contributions to the cash balance plan when you're allowed to change them. And oftentimes you're locked in for three years with the level of contributions that you've selected. But I would start asking more questions, maybe get yourself onto this retirement plan committee at your work, because I'm worried that cash balance plan is not being managed maybe optimally like it could be. So I think you're asking good questions. I don't know that I can answer your specific questions without knowing exactly what asset allocation you desire, where you're at right now, and what your future contributions and how long you plan to work and all that kind of financial planning stuff is. I think really this question requires a full financial plan to answer, and if you need help with that, you can go to our recommended financial advisors and hire one. Or you can work it through yourself, maybe with some assistance from some of the folks on our forums. But it's a complicated question you're asking. Recognize that. Also recognizing that you're doing awesome, right? If you're putting away that kind of time, that kind of money for retirement, you're going to hit financial independence. Probably pretty young. Nice work. So congratulate yourself, Abby. Maybe you can optimize it a little bit better. I think you're asking enough questions that maybe it's time to get onto your retirement plan committee at work. Though as I mentioned at the beginning of the podcast, SOFI could help medical residents like you save thousands of dollars with exclusive rates and flexible terms for refinancing your student loans. Visit sofi.comwhitecodeinvestor to see all the promotions and offers they've got waiting for you. One more time, that's sofi.com whitecoatinvestor SoFi student loans are originated by SoFi Bank NA member FDIC. Additional terms and conditions apply. NMLS 696891 yeah, love that sponsor. I think I mentioned this at the top. You know that $100 a month thing they offer to residents? That was my suggestion like 13 years ago and I'm pleased to see them doing it. I think Laurel Road's doing it as well. For whatever reason, they just didn't understand how exactly medical residency worked. So I helped them do that. And I think that's helped lots and lots and lots of White Coat investors over the years. All right, don't forget Expert Witness Startup School. If you're interested in that, go to whitecoatinvestor.com ExpertWit Thanks. For those of you leaving us 5 star reviews telling your friends about the podcast, a recent one came in from I think it's itman who said love it. Psychiatry intern here who no longer worries about finances. Thanks to wci five stars. Thanks for that review. All right, keep your head up, shoulders back. You've got this. We can help. We'll see you next time on the White Coat Investor Podcast.

The White Coat Investor Podcast is for your entertainment and information only and should not be considered financial, legal, tax or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.