← 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 podcast is sponsored by Bob Baiani at Protuity. He's 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 to get this critical insurance in place, contact bob@whitecoatinvestor.com Protuity today you can email infoprotuity.com or you can call 973-771-9100. Okay, save the date to join us for the Physician Wellness and Financial Literacy conference in Orlando, February 24th through 27th, 2027. Okay, this is WC Icon, right? You get CME credit for it. You get continuing Dental education credit for it. And the early bird registration opens on September 1st, so in just a few weeks when you can get the best possible price. Okay? The conference, as I said, is eligible for CME and dental ce. But more importantly, it's a great way to use your funds to make a major impact on on your life. We focus on two things at this conference. One, physician wellness, Dr. Wellness. You know, the truth is you don't even have to be a doctor and need this stuff in your life. And second, financial literacy. So about half the conference is on burnout prevention, burnout treatment, having a better life. And half the conference is on getting your financial ducks in a row. And there is stuff there for people at the beginning of their career, middle career, end of their career, retirees. There's stuff for everybody throughout their career. And we just get awesome, awesome reviews about this conference. You know, a recent one said I felt included and sincerely welcomed by all speakers and other attendees alike. There's a sense of camaraderie that I had not felt at any other conference. I'm not surprised. That's the way it feels every time I go there. And honestly, you know, this last year when I was there, I was sitting there going, I'm really underselling this thing. This is an awesome experience. It's nothing like other medical conferences in all the right ways. And the speakers are available for your questions and to experience the conference alongside you. So whether you're gearing up for retirement or you're in the thick of the accumulation phase or just trying to get a handle on your finances. WC Icon 27 brings together physicians, trusted financial professionals, and wellness experts ready to answer your specific questions and help you take your next best steps. Go to whitecoatinvestor.com WCICON you can sign up starting September 1st, so be aware it's coming. We've got some great keynotes this year. Obviously I'm going to give some keynotes. I've wrangled in Tyler Scott, who's been on this podcast before, to help me with one of those keynotes. And we've got Sandra Dalton Smith coming, Rick Ferris coming back. He hasn't been there since 2020, so it's great to have him. We're going to have a great time. Bytecodeinvestor.com WCICON okay, before we get into our already planned content, I told Megan we needed to talk for a few minutes about private student loans. We're recording this on July 9th. So obbba one big beautiful bill act has basically been in effect as far as the student loan changes go for just over a week now. And for those who aren't aware, first years now have to take out some private student loans, at least if they need to borrow more than $50,000 per year. That's probably the biggest change is this cap on borrowing for medical or dental school. But I am hearing from all kinds of people in the white coat investor community about these dilemmas the students are having and I want to hear about more dilemmas. I want to see how many of these issues that you guys are facing that we can help you to solve. And so let me give you a few examples. I got an email from a fourth year who is at a Caribbean school and she thinks she can finish up in just over a semester. She already owes $520,000 and for whatever reason is not going to be able to borrow any more in federal loans. For whatever reason she could get federal loans for her schooling up until this point. So she's got $520,000 in federal loans and she was wondering whether it was still worth it to finish school knowing she was going to have to borrow a little more than a semester's worth of money, something like 50 something thousand dollars in private loans and it was going to be at a double digit interest rate. And of course she needs to finish school right at this point. She's too far along and most importantly she needs to match. She needs to get through residency in good standing and get the average or better job in her specialty and work full time for a few years and most of her loans are still going to qualify for pslf, which was her original plan. But she's obviously going to have to pay some of them off, which is not that hard to do if you will live like a resident. If you can learn to manage money and you can get through the medical pipeline and get a job and work full time at it, it still makes sense to borrow money to go to school. And maybe not if you're going to get a puppetry degree or basket weaving degree or something, but for medicine it still makes sense. Doctors are still earning on average 375,000 dol. You can pay off a lot of student loans with $375,000 per year. So I encouraged her to go ahead and borrow that money. Obviously borrow as little as she has to to get through school. But that she's right. It does make sense to finish up at this point, not drop out of school. You know, I talked with another medical student, this one just finished her first year and she is at a new school. It's a new do school. And so they don't qualify for federal loans. So she had to borrow for last year all private loans. She's thinking for this year, halfway through the school's probably going to qualify to get federal loans. Maybe by the end of her second year is going to qualify for federal loans. But she's like the first years in that a cap is going to apply when that happens. So she's going to have a substantial portion of private loans. And so she was shopping around and I was asking her what rates are you getting? And a lot of them were double digit rates. They're not getting these loans all the time for just 8%. And so I encourage her to shop with some of the white coat investor partners. And I showed her the link to those guys and you can find that@whitecoatinvestor.com loans and to see what they would offer. And I want her to let me know what they're offering. I'm not getting enough feedback from you guys about these partners. They're the best people we can find to get you private student loans. But if everybody's getting 11 and 12 and 13% loans, I want to know about it so I can tell you that that's what you should expect when you go there. If on the other hand you're getting 5% and 8% loans, well that's even better. Right? And I've heard of people getting better loans than they can get as far as the interest rates go, than federal Loans and I've certainly heard about people getting worse interest rates than that. So I want to know what your experience is. So give me feedback, see what you're hearing. You can email editorwhitecoatinvestor.com and let us know how that's going. Another person I heard from by email and this was a doc email and on behalf of a soon to be med student, it was going to be an Ms. One was being told that she could not get loans without a cosigner, including from some of our partners. And so if you're running into that, I want to hear about that as well. And we'll see what we can do to help with that. I mean, obviously becoming a doc is still a pretty good bet. They ought to take you up on it without requiring a cosigner. If you can avoid co signing for student loans, I think that's a really good idea. I think it's a bad idea to co sign for somebody else's student loans because heaven forbid the student die and you're stuck with the loans, right? This is not a good thing. So I'm hoping that all of you are able to get the private loans that you need without having to get a cosigner. But if you're all running into that issue, I want to hear about it, see if we can do something about it to help that. If it's only some of you, I want to figure out why some of you are being asked to have a cosigner and some of you aren't. Whether it's credit score or credit history or, or what school you're at or what it is exactly to try to sort that out and get this information out there. This is like a whole new world. For 20 years all doctors have done is borrow in federal loans. And now like back when I was in school, people are starting to use private loans again and we all need to navigate this space together. I also got a question recently and this applies to Ms. 2s, 3s and 4s with grad plus loans. There are some people looking at a strategy where they basically get out of in school deferment. That's the default, right? If you're in school that you go into deferment and your loans, you don't have to make payments on them. So that part's great. The downside is, unlike in residency, when you're in the new RAP program or in the old SAVE program, for instance, your loans weren't growing, there was no interest, basically that was causing them to grow. And in fact, under the wrap program, your balance actually goes down by 50 bucks a month. But some people are looking to do that while they're in school. You can only do this if you're an Ms. 2 through 4. And you can only do it with your grad plus loans, but you can apparently get out of being in school deferment. And then you gotta make payments, obviously, but the payments should be pretty darn low, you know, 100 bucks or less. And they count, if you're employed full time, they count toward pslf. And the more important thing is your loans aren't growing because you're now in the wrap program. And so they're actually going down by $50 every month rather than increasing like most of your student loans do during school. So keep all this in mind. There's a lot of change right now, a lot of flux right now in the private student loan. And I need your information to help serve you as best we can. We have got some partners that are doing private school student loans that can help you. If you go to whitecoatinvestor.com loans, you'll be able to apply with them. Apply with all four of them. I think that's how many we have right now. And we're going to add more as we can. And if you find one that's really great, let us know. We'll reach out to them and see if we can get them on that list. But I want to know what kind of loans you're getting, what kind of terms you're getting, and how that experience is so we can make it as good as possible for you. It's obviously a relatively new product line for us. Now. People are doing private loans again, but it's not that dissimilar from the refinancing market that we've been working with these lenders on for the last 13 or 14 years. Okay, let's get into your questions now. And we're trying to make a little bit of a change on the podcast in that we're trying to not only take your questions off the speak pipe, you can leave those@whitecoatinvestor.com speakpipe, but also questions off the Reddit and out of the Facebook group and out of the WCI forum and off Instagram and all these other places that we see questions in the white coat investor community. So we're going to mix it up a little bit. But our first question today comes from the speed pipe. It's from Pedro. Let's listen.
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Hi, this is Pedro from Tampa I sent you an email before with this question. I really enjoyed the answer, but I thought it would be a nice discussion for a podcast too. My question is for financial independence and early retirement calculation. How do you take into account rental properties that are cash flowing evergreen real estate funds and passive real estate syndications to plan for retirement? Thank you.
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Okay, great question. And a lot of people have this question, right, because they've heard of the 4% guideline. They've heard that you need 25x your assets to support you for at least 30 plus years. And they wonder, well, is this different for real estate investments? Well, I think there's two ways to look at it. The first one is don't treat them any differently. Treat it like everything else. Just take the value, you know, take your equity, probably not the value of the property, you know, but take it minus the cost of any leverage you have on it, any mortgage you have on it, and just add it into the portfolio, right? And so if you've got $5 million total, including all your stocks and bonds and, you know, REITs and, you know, and your properties you have, that's $5 million total. Well, you can take out a couple hundred thousand dollars a year, however that may come out of the portfolio. That's about how much you can spend. And look at it that way. Just treat it like everything else. I think that's a very reasonable way to do it. That' of the way we mostly do it. Another approach you can take is kind of the income approach. For example, if you were getting Social Security and you needed $200,000 a year to live on, and Social Security provided you $50,000 per year, well, you would say, well, I only need whatever that works out to be. $3.25 million, the math in my head, to provide the other $150,000. And so that would be what you. It's probably $3,075,000,000. So that's how much I need to provide the other $150,000 a year that I'm going to need from my portfolio to have $200,000 to spend. The problem is real estate income is not as guaranteed as Social Security income. It's probably not even as guaranteed as pension income or a single premium immediate annuity, a pension that you buy from an insurance company income. So you probably ought to discount it somewhat. How much do you discount it? Well, depends on how much risk is being taken there. But it seems like a reasonable figure might be 25%. So if you're getting $100,000 of income from your real estate portfolio? Well, maybe you just count that as $75,000 of income when doing your calculations to account for the fact that maybe one year you might have to replace a roof or you might have a few more months of vacancy than you counted into your income. I think if you take your best every year from your real estate property and assume that's the income that it's going to provide for you, I think you're likely to maybe overestimate it a little bit and get into trouble. The other thing to keep in mind is sometimes that income goes down significantly. For example, one of my real estate debt funds recently decided to make some changes in there. They had about five of their 90 loans where they're having issues with getting paid for them. They're basically foreclosing on the properties. And for those properties in the fund, they basically become an equity investment, not a debt investment. And while we're better off as the debt investors there than the old equity investors, all of whom were wiped out on those properties as they were foreclosed on, the truth is that that income is not 100% stable and guaranteed. I think that fund, instead of having an 8 or 9 or 10% return like is typical for it, is probably going to have a 4% return this year and maybe only an 8% return next year. And so it's not guaranteed it can go down substantially. And if there were 10 properties that went bad, maybe it'd be a 0% return instead of a 4% return. And so you got to account for that. And I think that's a little bit hard to do. Obviously you can spend more than just your income when it comes to a typical portfolio with stocks and bonds and real estate. But if you're going to treat your real estate income as something separate from the rest of the portfolio, make sure you discount it somewhat when you're calculating to make sure you have enough to retire. Okay, our next question comes off the White Coat investor forum, and if you've never been there, you should check it out. You can find it at forum.whitecoatinvestor.com but here is the question. I wonder if you can help me with a second opinion as I think about revising our family's financial plan in the context of the historic stock market run. Briefly, we are a two dog couple, both about 40 years old, with about $2,500,000 in investable assets. Nice work. 40 years old and already $2,500,000 in portfolio. You're crushing it. Okay, medium cost of Living area, annual income a bit more than $500,000. Pre tax savings rate 30% to 40%. All right, well, that explains why they've got $2,500,000 already. Multiple young kids. We both like our jobs and my partner has gone part time, not unusual at all. I like my job enough to stay full time and plan to work for many decades more. First made our financial plan in 2016 with an assist from the white coat investor books. The plan over the last 10 years was very simple, aligned to the vanguard glide path to talking about the target retirement funds. Not think about it much. We're roughly 90% equities and 10% bonds. About $900,000 is in tax deferred, $400,000 in Roth and the rest in taxable now that the stock market run has helped us reach the coast. Fire realm host fire is basically when you don't have to save anything else. You just have to keep working for your living expenses and eventually in five or 10 or 20 years or whatever, you'll have enough to retire completely. I am wondering whether we should consider a more conservative plan for the next decade. I ran some simulations and such a plan could protect us a bit more in the coming decades. If the market does poorly, we would sacrifice some upside, but that is probably fine, right? We don't have burning desire to be a DECA millionaire family. We're planning to give away most of our savings anyway. Okay, tough question, right? When do you change your asset allocation, this mix of your investments? When do you change your investing plan? Well, what I would encourage you to do is make sure you're making changes based on your life rather than the markets. Okay? I don't like seeing people making changes because they think the stock market is going to go down or based on some vague feeling they have that value stocks are going to outperform growth stocks or this sort of market timing kind of stuff. But when your need, your ability and your desire to take risk change, it can make sense to change your mix of investments. And typically what that means as you go through life is you become less aggressive. And some people write that into their plan originally that at 40 years old they're going to go from 9010 to 80, 20, and at 45 they're going to go to 70, 30, and at 50 they're going to go to 60, 40 or whatever. Right? You can put that all in advance if you want. If you don't, then you have a dilemma like this where you're like, oh, when do I change? How Do I change? And Katie and I have had this dilemma over the years of do we change our portfolio, which essentially is 60% stocks, 20% real estate and 20% bonds. That's basically been our portfolio for two plus decades. Because every time we go, well, we have less need to take risk. Now we also go, but we also have more ability to take risk now. And how those cancel out we've never been able to really figure out. So we just stick with something we know that we can tolerate in a nasty market downturn like 2008. Now, obviously, if we have another one of those, we're going to lose a whole lot more money. And we lost in 2008. In 2008, I lost about $77,000. It was a big chunk of our savings, but it wasn't that much actual money. We'd lose far more money now if we had 2008 happen again. One of my investments, I think the Vanguard REIT index dropped 78% peak to trough in 2008. 2009 downturn, the overall stock market was down 40%. Something. And we have sometimes like 2022 when both stocks and bonds go down. We have sometimes like 2020, when a global pandemic just has a severe decline and bounced back way faster than most of us ever expected it to do. So these bad times are coming. You definitely want to have a portfolio that you can tolerate the losses of, because you will have losses if you've only been investing a few years. And the fact that these guys are only 40 makes me think, well, they've never really had a lot of nasty bear markets. I mean, 2020 and 2022, but nothing like 2008, nothing like 2000 to 2002, certainly nothing like the stagflation of the 70s, certainly nothing like the Great Depression. Maybe they won't be able to tolerate the sort of declines they're going to see with a 9010 portfolio. So you need to be thinking about that and have your plan in place. And when your life changes, you get some huge inheritance or something. It's okay to change your mix of investments, but do it because your circumstances have changed. Your need, your ability, your desire to take risk is not the same as it was a few years ago. Not just because the stock market went up a whole bunch. Now, maybe coincidentally, it also happens to be at a time when the stock market went up a whole bunch. And that's fine. That often happens. Lots of people feel like they have enough to retire after three great stock market years as opposed to after 2000 or 2002. Maybe they don't feel like they have a great amount to retire or but the truth is because as the market goes up, future returns, you know, expected returns go down a little bit. As the market goes down, future expected returns go up a little bit. It's probably all the same whether you retire at the bottom bear market or at the top of a bull market. It's probably about the same long term. All right, so good question. Lots of discussion that was had on the white coat investor forum on that topic and what a great place to be, right? 40 year old $2.5 million. One of you is already part time. The world is your oyster. This is where I'm trying to get white coat investors to be. Most of you should be multimillionaires by mid career, certainly millionaires by mid career, multimillionaires by the time you retire. This stuff is not that hard to do. You don't have to save 30 to 40% of your income. You do have to save something like 20%. 20% of your gross needs to be going toward retirement. I'm not counting saving for college. I'm not counting saving up a down payment for your dream home. I'm not counting saving for your Porsche for retirement. 20% ish. If you save 40% ish, well you tend to get there a lot faster. That's the way it works. Thanks for what you're doing out there. It is not easy work and if no one's told you, thank you today. Let me be the first okay, this question comes in via email. I like this question. I've written a blog post recently on this question. The topic is helping fund a child's first home. Longtime listener, I'm a 60 year old retired physician with more money than we will likely need for ourselves. Congratulations. Great place to be where I hope most white coat investors land. Probably already covered but would like to read or listen to a podcast about the ways and advantages disadvantages of helping to finance a child's first home. I find it to be much more complicated and a bigger issue among the folks I'm around. Many of our high net worth friends have approached this question in different ways. In one scenario is the parents have chosen to purchase their kids homes. This seems to be laden with multiple risks and potential problems. At least one pays rent back to the parents. The other may at times one of the kids utilities were shut off because the kid didn't realize they needed to be paid or that there was even a mailbox where the disconnect notices were being sent. I have another set of friends who have gifted a down payment so the child could reach 20%. This does bring in gift tax issues, but in the long run probably not a big deal. Another set of friends have extended a personal loan which again has its own issues. Not sure how the IRS applicable federal rate works, but would love an explanation. It seems to me that now for that pile of money, you're receiving a significant discount on any return but taking on all the risk. I'm sure you can look at it as an investment in real estate and your kid's future, but you have given up a certain degree of control and taken on added risk that you may not have otherwise in a housing market you may be unfamiliar with. Another friend is setting up a family offset mortgage doesn't sound like a bad option, but uncertain about all the nuances. Lastly, I have a relative who thought it was a good idea to put his child's name on the title of his home, unfortunately prior to him passing. Yeah, that's a bad idea. I'm sure there are other ways people have approached this issue. My guess is given the high net worth of your audience, there are plenty of others who are considering financing a child's home or gifting the home money to do so. Okay, so to answer this question, I want to turn to a blog post I wrote, I don't know, sometime last year and published November 11, 2025 titled how to Help youp Child Buy a Home. Yes, the truth is, most of the questions you have out there in white coat investor land already have a blog post written about them answering your question. And this one does as well. And the truth is that years ago, parents worried about the rapidly escalating cost of a college education. So parents started saving like crazy. And they started to, you know, and the government came out with educational savings accounts. Could these coverdell accounts and later 529s to help parents to do it. And then they started financing college in weird ways and it just became this big issue. Well, nowadays the truth is it's relatively easy to send a kid to college compared to getting them into a home later. Right? The age of first home purchase has climbed from 31 a couple of decades ago to now something that's almost 40, right? Because it's just expensive. It's the housing crisis, right? Even here in Salt Lake City, which has never been considered a high cost of living area, maybe a medium cost of living area, but it's starting to feel like it. You know, the median cost of a house here is now almost $600,000. Meanwhile, the median household income in my county is under $100,000. Right. 6X. That's not affordable. Right. So the median household income around here cannot be by the median house. And I think that's the case in most places around the country, especially with mortgages in the 6% range. So you've got a number of possible ways that you can help your children get into a house. So let me go through these and we'll talk briefly about the pluses and minuses. The first one is to invite them into your home. Yeah, they can live in the basement. This is a very commonly used method is to let your child live with you. College students, college graduates, maybe even after they're married, maybe even after they have a kid or two, they move in and live with you while saving up for their own home or down payment or whatever. I mean, they could theoretically stay there forever and maybe as you have long term care needs, they can help care for you. And then they inherit the house when you die. Right. This happens a lot in lots of countries in Japan or Europe. It's not unusual at all for multiple generations to live together and then the younger generation eventually inherits the house. So that's one option. Obviously a second option is just leave them your home. It's very tax efficient because they get the step up in basis at death. If you own it, they don't own it the whole time until you're dead. Then they get a step up in basis of death. The downside is most inheritances are received around age 60 and that's an awfully long time to wait to own your own home. But the price is right and it's very tax efficient. So it does have its pluses and minuses. A third method is to co sign for their mortgage. I don't like this method. Katie's parents co signed for our first mortgage. Thankfully they never got burned by that because we made all the mortgage payments ourselves. But basically, if you need a cosigner, what that tells me is you can't afford the home. And indeed we couldn't afford that home. We shouldn't have bought it. And we didn't make money on it. We owned it for four years, we bought it for 80, we sold it for $83,000. It was a little condo close to my medical school. But when you include a couple of months of vacancy after we move out and you include the transaction costs, we didn't come out ahead buying that home. We should have never bought it. And the Fact that we needed a co signer should have been a sign that we never should have bought it. So not a big fan of co signing for a mortgage. When it really stinks though is when things go badly. When your kid stops paying the mortgage, you're on the hook, your credit score is going to tank, you'll end up in court, especially if you don't start paying the mortgage on their behalf. And now everybody has a foreclosure on their record. And now you got to sit across the Thanksgiving table, you know, Thanksgiving dinner table owing them money. It's just not a good idea. Don't co sign mortgages. That's not a great way to help them into a home. Okay, the fourth option is just buy them a home, right? If you're going to give them money when you die, why don't you give them money now? Right? Die with zero suggests that surveys say most people would prefer to get their inheritance between age 25 and 35. Well, that's home buying age, right? When you're buying your first home. So instead of leaving them millions later, maybe you leave them half a million at 32 and they buy a house with it. So that is an option. You can buy them a house? Yes. If you give them more than $19,000 per person, right. You can actually give $76,000. If you and your spouse each give $19,000 to your child and your child's spouse, you can give them $76,000 without having to fill out a gift tax return. But if you give more than that, you are going to be having to file a gift tax return and using up some of your exemption. That's probably not a big deal for a married couple. Right now the exemption is $30 million plus and indexed to inflation. So that's totally reasonable thing to do to burn some of that earlier in life, especially for a good cause like this. There's a lot of different ways you can do it. One of the smarter ways tax wise might be to give them appreciated shares, right? Shares that you've owned for at least a year or more than a year rather, and they're in a lower tax bracket than you are. Maybe they're in the 0% capital gains bracket, right? So you can give them these shares, they sell them with no tax consequences and use them to buy a house. That could be a pretty slick way of doing it. You could also form an LLC that buys the house and gift them shares of an LLC every year. It's a little more complicated, but you might be able to avoid Having to file a gift tax return, doing that. Another option for gifting is to just do it years in advance, right? You could use a trust. Maybe you start funding this trust when the kid's 16 years old, and then when they're 30, there's enough in there that they can now buy a house with it. Right? But you never had to file a gift tax return because you put it in the trust gradually over the years. So that might be a way that you could do it. Another option is to take advantage of the IRA penalty exceptions, right? One of these is a first time home, right? You can always take contributions out of a Roth IRA, but for the earnings, you can take up to $10,000 of earnings out penalty free. And of course, it's a Roth ira, so it's tax free as well. And they can use that to buy a first time home. It doesn't have to be your first time home. It can be your kid's first time home, no problem. So that's an option. And probably not enough to buy a whole house there, but maybe if you got a lot of principal in the Roth IRA, you can. And of course, if you're already 59 and a half, you can take whatever you want out of there tax free and penalty free. Okay? So the fifth option for helping them into a home is to help them with the down payment. And I think a lot of white coat investors do this. There's a lot of different ways you can do it. You can give them an outright gift, right? They're buying a $500,000 home, you can give them $100,000. And it has the same issues with gift taxes. Of course, if you're given more than $76,000 from one couple to another. But that's one way to do it, is just outright gift it. And that's how I prefer to help people when I give money. I tell them there are no strings attached. You don't have to tell us how you use it. We don't even want to know how you use it. This is not a loan, et cetera, It's a gift. And the beautiful thing about that is it has very clear expectations up front. Everybody knows what it is, nobody gets upset about it. And if they want to gift it to somebody else the next day, they're welcome to do that. It's their money. So that's one option. Another option is you could do a match. Maybe this reduces what the millionaire next door calls the economic outpatient care problem, where adults who get help from their parents maybe aren't as motivated to, to save and invest and earn, et cetera. So you offer them a match, right? Maybe for every dollar they save up for their home down payment, you give them a dollar to match it, right? Or you could match it two to one or four to one or five to one or whatever, right. If they save up $20,000, you give them $80,000, whatever. And you could do it like match style and motivate them to earn and save their own money toward their house. Another option is to give them a loan and then slowly forgive it. This has the same effect in the long run as a gift, but might have a little bit better tax consequences for you to do that. You don't have to pay any capital gains when you sell the assets for the money you give them, maybe, and they still end up getting the gift. Be aware when you set up any sort of a loan, whether it's a mortgage or some sort of a loan for them, that there are applicable federal rates. The IRS requires you to charge them interest. You can forgive the interest if you want, but if that's more than the gift tax exemption amount, you have to file a gift tax return. And if I look at this, this was back in October 2025, but the long term rates, the applicable federal rate back then was 4.73% annually. And so that's what you'd have to charge them. Right? And if you don't, it's considered a gift. And the gift tax rules will apply. So you can give your family member a better interest rate than the bank will give them. 4.7%, it's 6.3%, but it's not dramatically better. And then each year you could forgive it using the gift tax exclusion amount. Okay, here's another option. You can use 529money to help them buy a house. What do I mean by that? Well, you can't actually buy a house using 529 money because mortgage payments are not an approved expense. But the parent can buy the home and the child can pay the parent rent using 529 money. And then at the end of college, the home equity that's generated by this process can be gifted to the child. Now, obviously, the downsides are all the same as just gifting them the money in the first place. Plus you get this additional complexity. But it's possible you get a little more money out of overfunded 529s tax free. This way, be sure you're not charging more rent than the school's cost of attendance figures. Okay, another option, loaning them the down payment. Right. Maybe a parent has enough money to loan them the down payment, but not enough to gift it to them. Obviously, you have to still charge them interest at the applicable afr. And the downside is many lenders do not allow for borrowed funds to count as a down payment. So even if you gift them the down payment, it's best to do it a few months in advance so the lender doesn't ask too many questions about that and doesn't find out where that down payment really came from. Because if they find out that money's really a loan, the lender's going to charge you a higher interest rate for the mortgage. Plus they're going to charge private mortgage insurance. Maybe they won't give the mortgage at all. So it's not a matter of just getting out there a few months in advance fraudulently. But you also need to, to keep in mind the ways this is going to change your relationship when they owe you money. Okay? The next option is to be their mortgage lender, to not have them go to a bank at all, but for you to lend them all the money for their house. And boy, I hate this option. I hate the idea of kids owing their parents money. I just don't think it's great. If you do choose to do this, make sure you formalize the agreement and the documents and that you pay taxes on the interest you're earning. Treat it like a real loan. Both parties need to do that. Here's another cool thing that I learned about not that long ago called a family offset mortgage. Okay? And this is sometimes called a parent offset mortgage. Basically, the kid's mortgage is linked to a special bank account with the parent's cash in it. So the cash functionally reduces the mortgage amount, lowering the loan to value ratio. And that means the kid borrows less for a home and has a lower monthly payment. So here's how it works. Let's say it's an $800,000 home. You put $200,000 into the special linked account. The kid now has a $600,000 mortgage, right? So it reduces their monthly payments or the term on the loan, and there's no gift made. And sometimes the account still allows the parent to access some of their savings. But there are downsides, right? The parent is not paid interest for their savings. There's serious opportunity costs there. The interest rate on the loan probably isn't that great. And these aren't really all that widely available. Mainly, though, you're just losing the opportunity Cost. And that money, instead of that money earning you whatever 10% return in the stock market, it's now earning you not. It's just offsetting your kid's mortgage. Okay, and now we're down to the 10th option, which I think is the worst option, which is to put your kid's name on the title of your home. And this means when you die, the home becomes your kids, Right? Great. Well, what's the downside? The downside is you just lost the step up in basis of death. So let's say you bought the home for $200,000. By the time you die, it's worth $600,000. If you had just left it to them in their will, they, you know, the IRS would assume that they paid 600,000 for it and they could sell it right after you die and pay no taxes on those $400,000 in gains by putting them on the title of the home they don't get to step up in basis. And now they owe capital gains tax on $400,000 in gains that took place over your entire lifetime. So don't do that. That's a lousy option. And in fact, if I had to rank these options from best to worst, I'd probably put them in this. Using a trust to gift them down payment or the entire home. Inviting them into your home for a defined period of time to save up for their home. Leave them to your home if they're still struggling with buying one in their late career. Use a match for their down payment savings. Give them an outright gift for their down payment. Possibly using appreciated shares. This co ownership thing via an LLC with regular to find gifts of equity to the kid, the family offset mortgage. A slowly forgiven loan to the down payment or the entire home. Using Roth IRA money as a gift or a loan Being a long term mortgage lender for part or all of the entire Home using 529Money Co signing for the loan and then the last one is putting their name on your title. So I don't like much beyond the first three or four or five options there. But it's your life, it's a free country. You can do whatever you want to do. We're probably just going to use money that we already have in a trust which is part of their inheritance to help them to buy homes when it comes time to do so. Right now the way their inheritance is set up is they get a third at 40, a third at 50 and a third at 60. You know, after reading and applying die with zero in our lives we may lower those ages a little bit and try to get them money a little bit sooner in their lives. And maybe part of that's going to be a down payment, you know, 25 or 30 or 35 or something like that. But we're still batting it around. I understand the dilemma. There really is a housing crisis out there and this is a big deal for a lot of wealthy parents that are planning to leave their kids money anyway. So be careful with it. Okay, let's do our quote of the day. This one comes from Chris Brogan who says the gold isn't more money. The goal is living your life on your own terms. Don't forget, money's a tool. Right? Okay, our next question comes from an Instagram post about deciding whether to be a one or a two income household. And I'm just going to preface this by saying this is a very, very individual decision that every family has to make and it's a very personal decision. And you may decide it one way for a year and change it to another way a year after that, and five years after that change it again. And that's all. Okay, Right. Here are some things to think about while making this decision. You lose some things when you go from a two income household to a one income household, you lose income. You lose the most highly taxed income though, right? Because you're still filing taxes, married, filing jointly. And so you're losing income at the highest marginal tax rate, which if you're, you know, one of use a highly paid doc, that might be the highest tax rate, might be 37% federal plus 5 or even 10% state. It's not insignificant. So maybe you're only losing half the income you think you're losing. If you pay tithing on income as well, that's another 10%, maybe you're saving more than half. And so there can be substantial savings. And this particularly kicks in if the spouse that's leaving the workforce is the lower paid spouse. Our classic example in residency, we had our first child after my intern year and we looked at the price of childcare and Katie was teaching, you know, teachers, not exactly a highly paid, you know, profession. And we would have, you know, she, we ran the numbers and figured out she'd be getting paid like $2 an hour to teach. By the time we paid for childcare and all the other expenses of her working, including the additional tax burden, the commuting burden and all that, it was like $2 an hour. And we looked at each other and said it's not worth it to me to work for $2 an hour. So she stayed home with her first child and that was great for lots of reasons including she was able to help watch one of my co residents kids at times because they, you know, in that couple, he was the resident, she was an ICU nurse. And so they often had these night shifts, evening shifts where it's impossible to get childcare. And Katie was able to help with that because, hey, it's no big deal. She's already watching a kid that age. What's one more? And so she did that and I think we actually got a little bit of income from that, which was good. But mostly it was just a way to really help somebody else out that really could use it. And so it worked out very well for us. And probably for most of the next ten years or so. Katie was a stay at home parent. We lived on one income. I went in the military, obviously I got deployed from time to time. We really needed somebody at home. We had young kids and one of us was in on the far side of the planet. And so it was really hard to hold down a career at that point. But we got all kinds of benefits from doing it too. Yes, there's a cost. We lost that income. Maybe you lose some 401 contributions, the employer match, future Social Security benefits, all kinds of things besides just the paycheck, but you also gain all kinds of things. We were able to specialize. I was able to specialize in the career in providing for our families. And that not only as the years went on, not only allowed me to be successful in my physician career and to make partner in emergency medicine group, but to start the White Coat investor. Right, which in the long run has had a lot of financial benefits for our family because we specialize. Meanwhile, Katie picked up all these awesome skills that I'm still not even close to being good at. You know, her ability to manage, you know, our household and you know, she's a far better spender than I am not. I'm not talking she spends more money. I'm saying she's much smarter about the way she spends money and planning trips and vacations and taking care of the household and getting the kids where they need to go and carrying that mental load of knowing who needs to be where, when, which is not insignificant if you've tried to do this. It's a lot harder than it looks. And so we were able to specialize for about 10 years. And then she started working at White Coat Investor and a few years later she ran for office. And so now she's gone all the time. She's doing all kinds of meetings. She's got meetings in the evenings, she's got meetings in the morning, she's got all these things she does. I think today. She's meeting with a governor or something today. So she's having that opportunity to have a career and to be out there in the community making a difference. And yet for those really critical financial years and those really critical child raising years, we benefited from having a one income household. And so there are obviously benefits both ways. Now one of the downsides of doing that sort of thing, particularly for somebody that's like a physician or a dentist or something like that, is it's really hard to go back, right? Imagine you don't practice at all for five years and then you try to get a job. The jobs you're going to be allowed to do are going to be fairly limited because people are going to go, well, what are we going to send you to residency again? What are we going to have somebody supervise you for six months? That's hard to do. Possible, but hard to do. So in a lot of ways, stepping out completely has serious career implications. Even just going to part time for a few years has serious career implications. Your next job interview might be someone asking you how much money were you making at your last job? And if you can't dodge the question, which you probably should, it's going to look like they don't have to pay you all that much in order to get you. And so it might be a little harder to negotiate it when you go back to full time work. It's interesting, I saw a study recently about docs who were no longer practicing and the reasons why. And it was very interesting because, yeah, some people, it was financial reasons why they weren't practicing, they had enough money or they got an inheritance or whatever. But the vast majority were no longer practicing because they were taking care of family, whether that was their parents, whether that was children. That was the reason why these docs were no longer practicing. In fact, in this survey of docs that had left medicine, 11% of them never practiced after residency. These are docs who did college med school, completed residency, presumably in good standing for most of them, I would assume, and then never practiced after that. And so it does happen, happens all the time. There are lots of different reasons why a family or individual might choose to do that, but there are definitely financial ramifications of doing so. So run the numbers, talk about your values and figure out what the right Answer is for you recognizing that sometimes the change is fairly permanent. A lot of times it is not. Now, obviously the lower earning spouse staying home usually works out best financially, but not necessarily for every household. Sometimes it makes more sense for the higher earner to stay home. Now, some people worry about some specific issues, so let's talk about those. Okay, here's one. What financial protections should the lower earning or stay at home spouse have in place and how do you address the power imbalance in money and time? Well, first of all, I think the financial protections. We're talking about life insurance here, right? Because the economic value of a stay at home spouse is not insignificant. Think about if you continue doing your career after your stay at home sponsorship spouse died, what you'd have to pay for that they're doing now, right? There's probably some childcare costs, there's some home maintenance costs, there's shopping and meal preparation and, you know, laundry and home maintenance and all this stuff that the stay at home spouse is doing that you have to pay for. So it's not a bad idea to have a life insurance policy on them as well. You know, at least a few hundred thousand dollars in term life insurance until those kids are old enough that they'd be able to, you know, function reasonably well as latchkey kids. So consider that. Now this other question. How do you address the power imbalance in money and time? I think that's more a relationship issue than it is a financial issue. Just because one spouse is not working does not mean they're not contributing to the family and contributing equally to the family. Both of these jobs have value. Your value is not defined by your paycheck. I would hope. Most families, whether they're two earners or one earners, are managing money together. It's not his money and her money or his money and his money or her money and her money or anything like that. It's our money, it's our expenses, it's our debt, it's our investments, it's our earnings and you manage it together. When you do that, I think the power imbalance in money goes away completely. Is there a power imbalance in time? I guess so, but you work that out, you negotiate it like everything else in your relationship. Now how do you decide if it's worth it? Well, you sit down, you run the numbers and you talk about your values and you don't put an economic price on the work of the stay at home spouse. I think that's kind of ridiculous. Obviously they're going to provide value, right? You're saving childcare and you're saving cooking and cleaning and home maintenance and these sorts of things. Maybe the stay at home spouse is managing the finances. Maybe the stay at home spouse is balancing the checkbook. Maybe there's all these things they're doing, but I wouldn't try to put a price on it. Manage your money together, then you don't have to put a price on it. Hopefully that's helpful and we address that in the sensitive way that it should be addressed. Okay, this podcast has gone long enough, so let's start wrapping it up. This particular podcast was sponsored by Bob Bayani at Protuity. A listener sent us this review. Bob has been absolutely terrific to work with. He's always quickly and clearly communicated with me by both email and or telephone, with the responses to my inquiries usually come in the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications and underwriting process in a clear and professional manner. Contact Bob by emailing infoorotuity.com or by calling 973-771-9100. You can also go to whitecoatinvestor.com Protuity that's P R O-T U I T Y and get your disability insurance in place today. All right. Don't forget about that early bird pricing for WC Icon tickets go on sale on September 1st. Go to whitecodeinvestor.com WCicon to get that. Thanks for leaving 5 star reviews and telling your friends about the podcast. It really helps spread the word. A recent one came in from Woof755 who said Essential Financial Podcast Dr. Dali has been looking out for docs for well over a decade and provides evidence based influence free advice in order to help docs get their finances in line. Absolutely essential. Listen. Five stars. Thanks so much for sharing that. All right, keep your head up, your shoulders back. You've got this. We're all here to help you. There's a whole White Coat Investor community behind you. Let's help us all do this right and get our financial ducks in a row so we can concentrate on what really matters in life. See you next time on the 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.