← White Coat Investor Podcast
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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.
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Welcome to the White Coat Investor Podcast. This episode is sponsored by Bob Baiani at Protuity, an independent provider of disability insurance planning solutions to the medical community in every state and a longtime White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or just get this critical insurance in place, contact bob@whitecoatinvestor.com Protuity. You can email infoprotuity.com, you can also call 973-771-9100. All right, we love making this podcast for you. We hope it is enjoyable to you. We're grateful for what you do in your daily lives. If you had a roug day to day, I'm sorry number one. Number two, thanks for doing it right. It's a hard job you have. And if you're coming home from a bad shift or a patient death, or just given some bad news, or just being chewed out by somebody, this too shall pass and the world is grateful for your contribution to it. Okay, let's get right into your questions here. The first one is someone that writes in with some some additional information. In podcast 466 we talked to someone who's looking to isolate basis in their thrift savings plan, right? Combat zone tax exempt contributions, right? Get lumped in with your tax deferred money in the tsp. And so it makes it a little bit tricky to get that money into a Roth account. So the earnings will be tax free as well. Otherwise if you just leave it where it is, the earnings will will be tax deferred. You won't pay tax on the principal when you take it out, but you will on the earnings. So best to get that into a Roth account by doing a Roth conversion of some kind on it. Anyway, this active duty person, it's an army doc, writes in and says I just solved this issue for myself with my similar situation. Your answer would work fine. I told them basically to roll it all out or almost all of it out to an IRA and then just roll back the tax deferred money, leaving the tax exempt money in the traditional ira which can then be converted to a Roth ira. But there is another option, especially if he wants his Roth to stay in the tsp. He says he can combine the accounts by calling the thrift line. That's 877-968-3778 and requesting they send form tsp 65 request to combine civilian and uniformed services TSP accounts. You remember this particular questioner had been active duty and now was working as a civilian. Said had two different TSP accounts. Says fill it out and upload it to the website. That'll roll over the Uniformed services TSP both to traditional and Roth and to a civilian tsp. But they will not accept the combat zone tax exempt contributions nor will they go to the civilian TSP Roth. It just stays behind in the uniformed services TSP traditional. He'll then be left with a larger civilian TSP and a smaller uniformed services TSP that only has tax exempt traditional contributions. Then he just does a Roth conversion of his entire Uniformed services TSP account which now only consists of tax exempt contributions and nothing bad will happen in the civilian account. The process makes it very explicit what you're doing. He does note that there's one what he calls a baloney item. They will do the Roth conversion for all of the tax exempt money except for $500. That's going to remain tax exempt traditional for what they call a correction buffer or operational efficiency. I guess my method works similarly in that you got to leave a little bit of money behind or the account will be closed behind you. So apparently there's no way you can convert every single dime of those tax exempt contributions, but you can get most of it done. Alright. Speaking of Roth accounts and traditional accounts, let's take this question off the speak pipe.
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Hi Dr. Dali.
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Thank you for everything you do.
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My name is Russell. I'm a general surgery resident from New York. My question is about Roth versus traditional ira. Whenever someone discusses this topic with me, they always only reference the level of income as the determining factor of which one you contribute to. However, in my mind, if you have high income earning potential early on in your career, Roth might still make sense because the time horizon could allow the investments to overcome the upfront tax savings that a traditional IRA provides. So I'm wondering what your thoughts are on this and also why no one really talks about time at the same time as the income level.
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D
Thank you.
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B
Great question. You know, this is the most complicated question in personal finance and investing. Whether to make a Roth contribution, whether to make a Roth conversion. It's complicated. There's a lot of factors that go into it. The main factor is that you want to pay taxes at the lowest rate possible, not necessarily the lowest tax Bill, but the lowest tax rate. So if you are in a place in your life where you can pay a very low tax rate, it probably makes sense to make Roth contributions to do Roth conversions, et cetera. If you're in your peak earnings years. Oftentimes it doesn't. Right. Because you may be in a lower tax bracket in retirement and so better to take the tax break now and pay taxes later. So that's the main factor. But there's tons of other factors that go into whether to do Roth or traditional contributions, including things like who's going to spend the money. Maybe it won't be you, maybe it'll be a charity. If it's a charity, you definitely want to use a tax divert contribution because it's tax free money to the charity anyway. Similar situation if it's going to one of your heirs in a low tax bracket. Sometimes people make traditional contributions even though they're not necessarily in a high tax bracket because they're trying to minimize their adjusted gross income so they can minimize their IDR student loan payments. And maybe the break they're getting on their student loans, the additional public service loan forgiveness they're going to get from that is worth paying a little bit of extra money in taxes on this money. So lots of different exceptions to it. It's a very complicated situation and anybody that tells you it's just all about income just hasn't delved into this enough. There's a lot of factors that go into it. Probably the best post on the website to check it out. If you go to the website and you just search Roth contributions, you'll get my latest on this and how complicated it is and what the right thing to do is. But mostly I want to encourage you to not beat yourself up about it. The truth is, a Roth contribution is a good thing. A traditional or tax deferred contribution is a good thing. At times, one will be significantly better than the other. Sometimes it'll be obvious which one of those two is. But the less obvious it is, the less it probably matters in the long run. So what's really important is how much money you're putting toward wealth building activities like paying off debt or making Roth contributions or making tax deferred contributions. Not exactly where that money goes. So don't beat yourself up about it too much. All right. Our quote of the day today comes from Warren Buffett, who said, someone's sitting in the shade today because someone planted a tree a long time ago. And don't forget that investing is a long term game and Sometimes you're not necessarily investing for you. Our next question comes in via email. It says, I'm an incoming first year med student, an international student from Myanmar, and since getting my acceptance offer, I started reading your White Coat Investors Guide for students. My foreigner status makes me ineligible for many of the government loans and forgiveness programs you described, but I'm still greatly interested in the content you produce. I recently got my Social Security number and have $16,000 in a high yield saving account paying over 4%. If I can set aside $2,000, do you recommend I invest in any index funds? If you have any recommendations? Or is it better to keep it in the High Yield Savings Account? I greatly appreciate any advice you can provide. I told him I'd leave it in the High Yield Savings Account. Use it to pay for medical school rather than investing it in stocks. You can do that after you finish your school and your training. This is the time to spend money investing in your future earning ability, not the time to save and invest in stocks. If you want to earn more on your money in a safe way, move it to Vanguard, put it in the Federal Money market fund. At the time I got this question, it was paying a little bit more than this High Yield Savings Account was. At times the High Yield Savings accounts pay a little bit more. But the bottom line is if you don't use this for school, you're probably taking out 7 or 8% loans, right? And so if you can only earn 4 or 5%, maybe only 3.5% by the time you guys hear this, if that's all you can earn in a risk free way, then it makes sense to use that money to not take out a 7 or 8% loan unless you think there's a good chance you're going to get loan forgiveness for that money. This particular person doesn't sound like they're going to be eligible for loan forgiveness. Sounds like we're talking about private loans for them. So all the more reason to use this Cat Cash to pay for school. I mean, there's nothing that's a great use of money. You don't have to feel like you have to invest and out invest an 8% student loan. That's a tall order of business. All right. The One Big Beautiful Bill act passed in 2025. It changed the landscape for medical student borrowing. Federal student loans are now capped at $50,000 per year, $200,000 total for medical and dental students, which means many students will need private loans to cover a significant portion education costs. We just launched a new resource to make this easier. You'll find vetted private student loan companies plus two bonuses you won't get anywhere else. You'll get cash back from some of the lenders themselves. You take out a loan and they give you some cash and all of them. If you get a loan through our links, you'll get free access to our flagship Fire your Financial Advisor course, the student version that you can upgrade later if you wish, which is our best selling course for medical students just starting their financial journey. So check out two or three lenders on the list. Go with the one offering the lowest interest rate and the best terms you can find that list whitecoatinvestor.com loan all right, next question comes from Andy Jim,
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thanks for all the good information and advice that you've given me over the years in your blog. My question is about having multiple solo 401s. I have a 401k from a former employer that is held at a place that has limited options for my retirement funds. I was wanting to move that 401k to a local establishment with wider investment options and low fees. I trust the local place and it holds the Roth IRAs for me and my wife. The local establishment first thought was to place the rollover in an IRA, but since it's a sizable 401k it would eliminate the backdoor Roth I do every year due to the pro rata rule. I was an independent contractor for a few years and still have some 1099 income so they thought a solo 401k could be started there and I transfer my old employer's 401k to that. But I already have a solo 401 that I started during my full time 1099 job that is at Fidelity and I want to keep those funds there. Can you have two solo 401s for this situation? I could contribute to one of them for my very part time 1099 income, but I'm not sure as I am a full time time w2 employee with a new company now and probably maxing out their pre tax 401k contributions.
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Thank you. Okay, a few comments. First of all, you're allowed to be a white coat investor even if you don't do a backdoor Roth IRA every year. Okay. You don't have to do incredible gymnastics in order to do that, right? It's not a huge contribution. You can probably still do a spousal one if you want. It's not the end of the world if you invest in taxable instead of a backdoor Roth ira. So don't feel like you got to do anything, anything too crazy just to be able to do that every year. But that said, what would I do in this situation? I just roll the employer's 401 into your solo 401 that you already have. You're still eligible for it. You're still earning 1099 money, that is you're still self employed, that is you still have a business. And that business can have a solo 401. Now remember, when you have an employer 401 and a solo 401 that they share the employee contributions, right? For someone under 50, that's $24,500 in 2026, they share that. But the total contribution to the account, the 415c limit, the $72,000 limit, they each get their own. So you can make contributions to two different 401s during the year and have two separate 415c limits. Now you might have to make employer contributions to your Solo 401 or after tax employee contributions, aka mega backdoor, Roth IRA contributions to that Solo 401. If you've used your entire employee contribution in the employer's ERISA 401. But you can do that. But as far as rolling money in, if you've got the Solo 401, it almost surely allows you to roll money into it. So I don't know why you wouldn't roll money into it, why you need to start a new one, I have no idea. Unless you want this guy to manage it. I never really understood this concept of investment management, right? Where you have some professional manage some of your money, but you manage some of your money. This doesn't make any sense to me. If you're competent to manage your own investments, half of your own investments, you're competent to manage all of your investments. If you're not competent to manage half of your investments, why isn't that guy being hired to manage those as well? I don't know if people are trying to save AUM fees or what. Or part of the issue might be that a lot of financial planners aren't set up to deal with assets held away in a good way. And oftentimes that's your 401k is what it is, your 403 or your 457 or whatever. And in those situations, those financial planners, those financial advisors need to get on the ball, okay? They need to figure out a way to deal with held away assets. And what we decided to do at White Coat Planning is to simply have the planner go in basically with you and show you exactly what trades to make in there so that all the money is managed as one big account. And I think that's the smart way to do it, rather than saying, all right, you do the 401. We're just going to do the IRA and your taxable account. That's goofy to me. If your planner hasn't figured out how to do that, maybe you ought to consider getting a new financial planner. But that's the solution I would do. I wouldn't have two solo 401s. But your question. So that's answering the question you should have asked, which is, what should you do? The question you did ask is, can you have multiple solo 401s? And I think the answer is, yes, you can. They share the same contribution limit. I don't see a big advantage to having multiple solo 401s. I think it adds complexity to your life that you don't need or want. But can you? Yes, you can. You are allowed to do so. If you go through the IRS regulations, your business is allowed to have, you know, I guess you could have six 401s if you wanted to, but they're, you know, they're all sharing the same contribution limit. So there's no real advantage to having more than one. All right, our next question comes from Mike.
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Hey, Jim. This is Mike from Philadelphia. I'm an orthodontist, and as a practice owner, I was thinking about how we take profits from the business and we're either going to reinvest it in the business or take it as a dividend. Taking it as a dividend, you're obviously paying taxes on that. And then let's say investing in the stock market through a taxable brokerage account. So as an alternative to that, could it be advantageous to instead open a business brokerage account and invest into the market that way? I'm thinking this could potentially save on taxes and possibly have some asset protection benefits as well. But I don't know if I'm missing something or just kind of overthinking. Overcomplicating it. I'm just curious to hear your thoughts. Thanks for all. You do have a great day.
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Okay. Great question, Mike. You are definitely overcomplicating things. And no, there probably is not an asset protection benefit, and no, there's probably not a tax benefit, to answer your question. But we got to dive into more details. What you did not tell me is what the practice business entity is. I don't know if this is a sole Proprietorship or a partnership or an S corporation, AKA a corporation that has made an S election or a C corporation. Or maybe it's an LLC filing as a sole provider partnership, S Corp or C Corp. I don't know what your business entity structure is, but you do. And so I guess I got to answer the question. No matter what the entity structure is, most practices are some sort of a pass through entity. Most of them are either an LLC filing as a sole proprietorship or partnership or they are an S corporation or an LLC filing as an S corporation. Those are pass through entities. So whatever profits that the business makes, you got to pay taxes on in the year you made them. Okay. Just because you set up a business brokerage account for some bizarre reason, I can't figure out quite why you'd want to do that. Just because you set that up doesn't mean you don't pay taxes on those profits. Okay, so you still would, right? If you reinvest 100,000 of your profits into this business brokerage account, guess what? You're still paying taxes personally on those profits this year. Now, if it's a C corporation, the taxation works differently. A C corporation is not a pass through entity. It pays taxes at its own level. If it has profits, it pays taxes on it. And then when it distributes a dividend, that's a deduction to the C corporation. And of course the dividend is taxable to you, hopefully at qualified dividend rates. But maybe not. But most people aren't running a C corporation for their medical or dental or orthodontic practice. They're just not running, running a C corp for it. If you are, then you could consider doing this. But the truth is you're going to pay tax, you're going to get double taxed, really in a lot of ways. You're going to pay taxes at the corporate tax rate, which is 21%, and then you're going to pay taxes on the dividend when it comes to you. And if you're a successful orthodontist, that's probably 23.8% federal. You add those two together and you're up in the 45% range or so. Right. That's not awesome. Better to just have the profits be paid to you and have you pay taxes at your tax rate. 32, 35, 37%, whatever it is, and just invest it on your own outside the business. The other thing you bring up is like an asset protection thing. I don't think putting the profits in your practice is really protecting them. From the main source of your creditors, which is your practice. Right. So I've never heard of a doctor that was able to protect their assets because they said, oh no, no, I left that money in the practice. Well, they're probably suing your practice too, right? Not just you personally, but your practice too. So I don't think there's really any real asset protection benefit to doing that. And in fact, leaving that money in your business exposes it to the creditors of the business. Right? The whole reason you formed an LLC or an S corp was if that business gets sued, you just give them everything the business owns, declare bankruptcy and keep your personal assets. Now, that doesn't work for malpractice. Malpractice is always personal. But if there was a business deal that went sour or something and you ended up getting sued for it, well, at least all you would lose was the business if it's an LLC or a corporation. And if that's the case, why would you want to have any additional assets in that business? So it seems like it'd be worse asset protection to me than it would be if you just got that money out of the business and into your personal account where it's only exposed to your personal creditors, including malpractice creditors. So probably a bad idea. If you're a C corporation, you can consider it, but it's probably still a bad idea even as a C corporation, if the business does not need the money, get it out of the business. The business does need the money. You probably don't want it invested in stocks or something like that anyway. You probably want it earning a decent yield on cash. You can open a business brokerage account and just keep it in a money market fund or some sort of high yield savings account. That's often harder to find as a business than it is as a person. But if you need the cash in the business model, make a little interest on it while you're there. But you want it to be a pretty safe investment if it's going to be in the business long term. You got to start asking yourself, maybe I don't want it in the business. Don't you think? Okay. This podcast was sponsored by Bob Baiani at Protuity. One listener sent us this review. Bob has been absolutely terrific to work with. Bob has always quickly and clearly communicated with me by both email and or telephone, with responses to my inquiries usually come in the same day. I have somewhat of a unique situation and Bob's been able to help explain the implications and underwriting process in a clear and professional manner. Contact bob@whitecoatinvestor.com Protuity. You can email infoprotuity. You can also call 973-771-9100 and get your disability insurance in place today. All right, don't forget about our private medical school loans partners. If you need private medical school loans, this is probably just for the first years this year. I think the second, third and fourth years are grandfathered in. But guess what? You can only borrow $50,000 in federal loans this year if you're a first year. And if that's not covering everything you need it to cover, you're going to need some private loans. You can get those by going to whitecodeinvestor.com loan. Some of our lenders will give you cash back if you get a loan through that link. We get paid obviously, right? This is how we make payroll. But we're going to give you a free copy of Buyer Financial Advisor, the student version of the course, to help you get started on your financial literacy journey right away. Just for going through those links, it doesn't cost you any more and in fact you get a little extra benefit by going through them. So thank you for supporting the White Coat Investor by doing that. Also, thanks for those of you who have been leaving five star reviews and telling friends about the podcast. A recent one said the Finance Guide for high income earners. Dr. Dali is able to guide new higher earners through their financial journey in a way that is honest, simple and practical. He shows you that taking control of your own finances is empowering and simple. Such guidance is often overlooked by parents in school. This podcast is informative and valuable for new higher individuals families. 5 stars. Thanks for sharing that. It does help get the word out. All right, it's summertime. I hope you have a great summer planned. If not, plan something great this summer. I don't care if you're still in residency or you're starting an internship in a few weeks. Plan something cool this summer. Have some fun and maybe share it in one of our White Coat Investor online communities, the Subreddit, the Facebook group, the WCI Forum, or the Few group. Keep your head up, your shoulders back. You've got this. We're here to help. See you next time on the White Coat Investor Podcast.
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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.