By Jim Dahle, WCI Founder

You likely make more money than almost everyone else in your life. Your friends outside of medicine thought you were rich as soon as you started residency, despite the negative net worth. Your family doesn't understand why you're still stressed. And when you try to bring up money with colleagues, it either feels awkward or turns into a competition about who's more underwater. So, most doctors just stop talking about it.

Avoiding money conversations has a real cost. Per a Medscape survey from a few years ago, more than 24% of doctors in their 60s still haven't hit a $1 million net worth, despite decades of high income. Your paychecks may be large, but that doesn't mean you know what to do with them.

Taking control of your financial life gives you options. It's what lets you work on your own terms, drop a night of call, cut back on shifts, and spend more time on what actually makes you happy—in your career and outside of it. When you're not stressed about money, you show up better everywhere else.

The Fastest Way to Change Your Financial Trajectory

I've watched three days at The Physician Wellness & Financial Literacy Conference do more for someone's financial future than the 10 years before it. While sitting at the conference this past year, I realized that I have really been underselling WCICON. I apologize for that and resolve not to do it anymore. It really is a FANTASTIC conference. I'm biased, of course, but it's the best medical conference I've ever been to or even heard about. Every year, high-income professionals and many of their spouses dedicate three days to improving both their financial lives and their personal wellness, alongside hundreds of others working through the same questions. If a three-day event could dramatically change your financial future, shouldn't you make time for it?

Dr. Jordan Read described the conference better than I could: “WCICON was the bridge I needed between understanding the concepts of financial literacy and actionable steps toward putting those concepts into a real life plan, with the help of experienced professionals and colleagues to support and guide you one step at a time.” Dr. Mancuso called it a combination of “reflective soul-searching and an actual working meeting,” one that leaves you with a concrete to-do list instead of good intentions.

My favorite part of the whole event, every single year, is standing around in the hallway between sessions hearing what's actually going on in your life. I love hearing about your triumphs and your challenges. A significant portion of the content on this blog, on our podcasts, and on our social media feeds is created primarily due to those interactions.

Dr. Olcott went home last year and ran the numbers on a home renovation, and she said it completely changed her mindset about what she and her husband could freely spend every month without guilt. Don Grace, PA-C, told us his end-of-career net worth could “very literally be worth millions more based on principles he learned at the conference.”

Brian Barlow, who attended alongside his emergency physician spouse Lauren, put it simply: “You can't put a price on financial clarity and peace of mind, and WCICON allows you to achieve that.” And Dr. Mullen called WCICON a “high-yield, no-nonsense conference where physicians learn how to build wealth, avoid the mistakes everyone else makes, and align their money with the life they actually want, surrounded by people doing the same thing.”

We hear almost endless versions of this after each conference, and it’s the reason we keep doing this even though putting on a conference is by far the most stressful and financially risky thing WCI does. It has been life-changing for thousands who have attended and could be for you, too.

The Sessions Worth Clearing Your Calendar For

We had over 240 applications submitted to speak at WCICON27, so narrowing it down to just 35 presentations was quite the task. But we did it, and it feels like it's going to be our strongest year yet.

You'll get help refining your written financial plan, including a deep dive workshop where Dr. Tyler Scott and The White Coat Planning team will walk you through effective cash flow planning. You'll learn how to actually turn your 401(k) and other accounts into retirement income, which is a completely different skill than stuffing money into them. We'll have a few sessions on taxes this year—from entity structure for you “1099s” out there to tax-efficient drawdown planning if you've already built significant wealth—aimed at getting you to stop letting the tax tail wag the investing dog. We've also got sessions on protecting what you've built: disability insurance, estate planning, trusts, and contract negotiation.

We'll have a real focus this year on burnout and boundaries, including how to cut back your hours on your own terms instead of waiting until burnout makes that decision for you, and some genuinely practical sessions on using AI to get your charting done faster. Since your finances don't exist separately from the rest of your life, we've also got sessions about talking to your kids about money, planning an inheritance, and getting your marriage aligned instead of running two separate financial plans under one roof.

And for those of you thinking about your practice itself, there are sessions on running things leaner, making telemedicine actually work, and navigating litigation risk. We'll also present a session on longevity and healthspan, which is a reminder that your retirement savings only matters if you're still around and well enough to spend it.

Introducing WICCON27 Keynote Speakers

We're especially excited about our keynote lineup this year. We’re thrilled to welcome Dr. Saundra Dalton-Smith to the WCICON27 keynote stage for the first time. An internist and work-life integration researcher, Dr. Dalton-Smith has spent her career helping high achievers recognize that rest isn’t a reward for finishing the work; it’s the foundation for doing it well.

Her bestselling book, Sacred Rest: Recover Your Life, Renew Your Energy, Restore Your Sanity, turns her 7 Types of Rest Framework™ into practical insight for overcoming burnout and reclaiming your best life. As a physician, author, and mother, Dr. Dalton-Smith knows firsthand what it’s like to feel overwhelmed and exhausted, and she brings real, actionable strategies for getting back to a life that feels sustainable.

Rick Ferri, CFA, is back with us, too. A pioneer of low-cost, index-based investing, Rick has spent over 40 years as a financial advisor—first as one of the earliest Wall Street brokers to champion index funds over high-fee sales culture. Later, he founded his own advisory firm focused solely on low-cost investment principles, which grew to manage over $1.5 billion in client assets before he stepped away in 2017.

Rick is the author of seven books on investing and the creator of Core-4 Portfolios, where he offers free, simple portfolio models to help everyday investors build wealth without unnecessary complexity. If you've ever wondered how to simplify your portfolio and stop second-guessing your investment strategy, this is a session you won't want to miss.

I'll be doing my closing keynote alongside Dr. Tyler Scott, digging into what actually moves the needle in your financial lives. Tyler is a public-health-dentist-turned-certified-financial-planner living in Salt Lake City. After reading The White Coat Investor in the months following dental school, he discovered a passion for personal finance. He spent a decade practicing as a public health dentist in underserved communities before pursuing this passion full-time and transitioning to a career in financial planning.

Today, Tyler serves as President of Financial Planning at White Coat Planning, a new financial advisory firm rooted in the principles of The White Coat Investor, where he’s dedicated to bringing the vision of the ideal financial planning firm to life.

Invest in Yourself Today

Early bird registration is open until September 22, and before the deadline, you can save $300 off your in-person registration. If your spouse wants to come, they get an additional 20% off their own registration. It's fun seeing more and more couples come together each year, because we know financial plans are most successful when made together.

Most of you can pay for this out of your CME funds. If you're self-employed, you can write off the whole trip. I say this every year we do this conference, and I mean it every time: this might be the one CME conference where what you learn is worth more to your net worth than it is to your actual medical career.

We're at the Rosen Shingle Creek in Orlando, February 24-27, 2027. It's less than 15 minutes from SeaWorld, Universal Studios, and Disney World, so if the timing works for a family trip, bring them along and let them enjoy the pools and the sun while you learn. It's a great place to take action to improve your financial life and unwind, whether you're flying solo or bringing the whole family. Everything gets recorded, too, so if you skip a session to relax, you'll still have lifetime access to watch it later.

We end days early on purpose, so you've got plenty of time left to actually have fun, relax, and get some much-needed rest. It is a wellness conference after all. You're supposed to go home less burned out than you came! Whether you love pickleball, golf, and morning runs, or if you're more of a happy hour, dinner, and yoga person, there's something built in for you. Nobody's forcing you to choose between learning and relaxing while you're here.

We know your time and your CME dollars are limited, and deciding where to spend them isn't easy. But almost everyone who has actually been to this conference tells their colleagues to go year after year, and the ones who haven't yet attended are also usually the same ones still trying to figure out their financial questions alone.

The Bottom Line

We didn't go into medicine to get rich. For most of us, the calling to help others has been part of who we are for as long as we can remember, but physicians earn a high income for a reason. You don't need to apologize for that. The high income alone doesn't guarantee financial success, and you've worked too hard and sacrificed too much to let financial stress define your life. People come to the Physician Wellness & Financial Literacy Conference feeling overwhelmed, burned out, and uncertain about their future. They leave with clarity, new friends, and clear next steps.

I can’t wait to talk with you in Orlando.

Any questions about the conference? Post them below!

The post This Might Be the Best Financial Decision You Make This Year appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

By Jim Dahle, WCI Founder

Retirement is classically divided into three stages based on the activity level of the retiree:

1. The go-go years
2. The slow-go years
3. The no-go years

Financially speaking, people tend to spend more during the go-go years (often on travel) and the no-go years (often on medical and long-term care expenses) than on the slow-go years—thus, the classic “retirement smile.” However, you will probably do a better job with your financial planning—and particularly your tax planning during retirement—if you divide retirement planning into six stages. In this post, we'll define and describe those six periods and list strategies to consider during each stage.

#1 Early Retirement

Many people never experience this stage at all. It typically requires you to retire by your early to mid 50s at the latest. The start of this stage is when you quit working, or at least dramatically cut back on how much work you do. I'm not going to be the Internet Retirement Police and tell you that you can't work in retirement, but the onset of this stage is classically when you stop working. The stage ends when you can access your 401(k)s (at age 55 and separated from the employer) and/or IRAs (at age 59 1/2) without penalty.

During these years, retirees tend to have a relatively low tax bill. They no longer have all that earned income and don't have to pay any payroll taxes at all. They typically live off dividends (often taxed at qualified dividend rates), a few capital gains taxes (typically long-term gains on relatively high-basis shares), or rents mostly or completely covered by depreciation losses. However, deferred compensation plans, particularly non-governmental (tax-exempt) 457(b) plans, often play an important part in creating spendable income. 457(b) money is not subject to age 55/59 1/2 rules and, in the case of a non-governmental 457(b), isn't technically your money yet. It should be spent first. It's great early retirement money.

The primary financial strategies in early retirement are doing Roth conversions for yourself or heirs to spend later and keeping taxable income low enough to maximize the Affordable Care Act (ACA) subsidies for health insurance purchased on the government exchange. Sequence of Returns Risk (SORR) management is also paramount.

#2 Retirement Account Eligibility

The next phase of retirement begins typically at age 59 1/2, although it may occur as early as age 55 if you leave money in a 401(k) instead of rolling it into an IRA. You can now access your retirement account money without paying any penalties. (Note: some five-year rules might have an effect on this.) In this phase, you can spend Roth money tax- and penalty-free, and you can spend tax-deferred money penalty-free. Typically, these are also go-go years, so maximizing how much you can spend may be pretty important to you.

While Roth conversions and ACA subsidy maximization still matter, your tax bill is often a little higher than during early retirement. Your entire tax-deferred withdrawal is now taxable. Taxable assets you sell now have lower basis, and less of your investment property rents may be covered by depreciation. Spending down your nest egg, perhaps even at a rate greater than 4%, is often reasonable to further delay claiming Social Security.

• 4 Easy Retirement Withdrawal Plans
• How to Spend Your Nest Egg — Probability vs. Safety First

#3 Medicare Eligibility

At age 65, you can apply for Medicare. It's important to realize Medicare is not free, although the cost of health insurance is typically lower on Medicare than most other insurance plans. You don't have to worry about that ACA subsidy, but replacing that anxiety will be worries about the Income Related Monthly Adjustment Amount (IRMAA), essentially an extra tax on high earners to access Medicare. Strategies to minimize that are essentially the same as those to maximize the ACA subsidy, keeping taxable income low. In this stage, most wise retirees are still not taking Social Security, so Roth conversions may still be an attractive option.

#4 Social Security

The Social Security stage begins no later than age 70. Delaying Social Security beyond age 70 has no benefit, although it often makes sense to delay until 70, at least for the higher earner in a couple. This maximizes your guaranteed, inflation-adjusted income floor. Theoretically, this stage could begin at 67 or even prior to the Medicare eligibility stage if you claim Social Security at 62. This stage often means the end of the obvious Roth conversion years. Eighty-five percent of Social Security income is likely to be taxable for WCIers, and that will fill up significant portions of the lower tax brackets, making Roth conversions much less attractive. However, you may also decrease the withdrawal rate from your nest egg. Not only does Social Security replace that, but moving into your 70s may also mean the onset of the slow-go years when less income is needed.

If you are charitably inclined, this stage does include the onset of Qualified Charitable Distribution (QCD) eligibility at age 70 1/2. If you are eligible, this is the best way to give to charity. You can give to charity with pre-tax dollars, reduce current and future RMDs (see next stage), and still claim the standard deduction. This stage is also often a time when people consider Single Premium Immediate Annuities (SPIAs) to raise their floor of guaranteed income.

#5 Required Minimum Distributions

Required Minimum Distributions (RMDs) begin at age 73-75 (75 for those born in 1960 or later). While some people have ridiculous fears about RMDs, those in the know recognize that a high RMD, like a high income during your earning years, is a great problem to have. An RMD is just an acknowledgement that you have maxed out the tax and asset protection benefits the government offered you on your tax-deferred accounts decades ago. You now have to give the government its portion of your tax-deferred accounts that you have been investing on its behalf for decades and reinvest your portion of the account in your taxable account. Better yet, spend your portion.

If your investments have done well or you have spent very conservatively, your tax bill is likely quite a bit higher during this stage of retirement. In a few cases, you might even have a higher marginal tax rate in this stage than you had during your earning years. That might mean larger IRMAA payments, too. Too late now for the real solution to that problem (Roth contributions and conversions), but you can minimize your taxes (and IRMAA) by carefully balancing withdrawals from your tax-deferred accounts beyond the RMDs with Roth withdrawals.

Long-term care dilemmas often show up in this stage for married couples where one spouse with extensive costs can leave the other impoverished. Either purchase some sort of insurance coverage, or make sure you are wealthy enough to self-insure this risk.

• Helping Natural Savers to Spend During Retirement
• Fear of the Decumulation Stage in Retirement
• Here’s How Much the Man Who Invented the 4% Rule Actually Spends in Retirement (Spoiler: It’s More Than 4%)

#6 Widowhood

If you thought things got bad tax-wise during the RMD phase, you haven't seen anything yet.

In most couples, both partners don't die at the same time. Since women live longer and are often younger than their husbands at marriage, widowhood is much more common than widowerhood, although this can obviously go both ways. This usually occurs during no-go or at least slow-go years, but the tax bill often goes up dramatically once it does. You are no longer using the Married Filing Jointly tax brackets. You have to use the single brackets.

At $200,000 of taxable income in 2026, that means a 32% instead of a 22% marginal tax rate. At $90,000, it's 22% instead of 12%. That's a big difference ($9,000-$20,000 per year). Taxable income will likely fall with the loss of Social Security, pension, and SPIA income, but the drop in after-tax income may be even more severe. Expenses do fall, but sometimes not by very much. Divorce gives you half as much income and assets to maintain your household, and it is obviously much more severe financially than widowhood. But widowhood can still be pretty bad.

The primary financial concern in this stage is the remaining spouse running out of money before running out of life, but financial competency and estate planning issues are also paramount.

What do you think about the six stages of retirement? What other considerations belong in each stage? If you're retired, what stage are you in now?

The post The 6 Financial Stages of Retirement appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

By Jim Dahle, WCI Founder

I confess that I play favorites. Back in 2005, when I finally started figuring out what the heck I was doing with my four-figure investment portfolio, the first mutual fund I ever purchased without the “assistance” of a commissioned salesperson masquerading as an advisor was the Vanguard Total Stock Market Index Fund (TSM). It is still my favorite mutual fund, and I suspect I will own it until the day I die.

In fact, at 25% of my current retirement asset allocation, TSM is my largest investment holding, and it may always remain so. It (or a similar fund from Fidelity) is our only HSA investment and plays a large role in my children's Roth IRAs (Target Retirement 2060) and UGMAs (TSM and Total International Stock Market Index Fund). I have owned it via three different brokerages and have owned all three “retail” share classes (Investor in my Vanguard individual 401(k), Admiral in Vanguard Roth IRAs, and the ETF in my Schwab 401(k) and Fidelity HSA.

We spend a lot of time on this website talking about “alternative” investments, real estate, factors, and all kinds of fancy stuff. Today, let's go back to basics and talk about eight reasons why TSM is such an awesome mutual fund.

The Vanguard Total Stock Market Index Fund (TSM)

#1 Awesome Long-Term Performance

I don't select mutual funds based on past performance. There is a very good reason why all mutual fund prospectuses must tell you that past performance is no indicator of future performance. But the process I use to select mutual funds leads to excellent long-term performance, the only kind I actually care about. What is the track record of TSM? Let's take a look (most of the data in this post is from June 30, 2026). Let's start with a quick look at Vanguard's list of mutual funds.

We see that VTSAX has already made nearly 10% in 2026, but that column is almost irrelevant. Let's move a little more to the right. We see that it made 23.15% in the past 12 months, 12.23% from 2021-2025, and 15.03% from 2016 to 2025. The Admiral share class started in 2000, near the beginning of the tech stock bust. So, even including most of TWO of the worst bear markets the US has ever seen (during the dot.com bust of 2000-2002 and during the Great Recession of 2007-2009), it still made 9.11%.

The Investor share class opened in 1992, 34 years ago. Its annualized return over the last 10 years is 14.92%, and it has returned nearly 11% per year since inception.

If you can't retire on returns of 14.92% per year, you have a savings problem, not an investing problem. But even so, absolute performance isn't everything. It is also important to consider relative performance. I mean, other mutual funds exist. Let's see how TSM did against its peers.

Morningstar is the world's preeminent authority on comparing mutual funds. Here's what it has to say about this fund in 2026:

Due to the run-up in large growth tech stocks over the last few years, this is about as bad as this chart has looked in the 20 years I've been investing in it, but even so, it has beaten more than 2 out of 3 funds in its category over any time period between 1 and 15 years. It would be higher for longer time periods. Back in 2017, that chart looked like this:

The relevant line here is: “rank in category.” While over the previous year it was only 20, over the prior 15 years it was 12. Meaning it beat nearly nine out of 10 mutual funds. Not bad considering its “know nothing” strategy.

#2 It Isn't Going Anywhere

At this point, a few of you are thinking, “I don't want to invest in TSM if some other funds are beating it over pretty long periods of time. I want to invest in one of the funds that beat TSM.” Aside from the folly of taking a gamble on something you only have a tiny chance of doing (although there are ways to increase that percentage, such as only choosing low-cost actively managed funds), the real issue is that those “rank in category” numbers don't include all the funds that closed over those long time periods. That is not an insignificant number of mutual funds, and it introduces “survivor bias” into the data. Morningstar had this to say in 2016 about survivor bias specifically when discussing TSM:

“After adjusting for survivorship bias, the relative performance of existing funds looks better . . . Low-cost, broad-market, cap-weighted index funds, like Vanguard Total Stock Market Index and SPY, have a better chance of surviving than their actively managed counterparts. Over the 20-year period, only 34% of active large-blend share classes survived, while 55% of index fund share classes survived. Consequently, their relative performance is better than many investors realize.

It's weird to think that 45% of index funds disappeared, but I guess that's what happens when you open an index fund, charge 0.9% a year for it, and hope enough financially illiterate people invest in it.

• 10 Reasons I Invest in Index Funds
• How Do You Evaluate and Compare Mutual Funds and Exchange Traded Funds?

#3 It Is Super-Tax Efficient

But wait, there's more. Many investors are investing in taxable accounts, where tax-efficiency matters. TSM, by virtue of its strategy (which can be found in the prospectus) . . .

. . . is inherently extremely tax-efficient. You should not be surprised that when you adjust the data for taxes, TSM looks even better than its peers. The chart below is about 10 years old, but it still makes a good point.

As you can see, at the 10- and 15-year mark, TSM was beating 93%-94% of its peers, almost 19 out of 20. Now, imagine adjusting that for survivorship bias and running the numbers out to 30-60 years, your likely investing career length. Still want to take a bet on choosing a fund that will beat it? I wouldn't. One of the reasons TSM is so tax-efficient is that it can use its unique ETF share class structure to flush appreciated shares (with their associated capital gains) out of the fund. But the main reason is its low, low turnover. Since it just buys all the stocks, those stocks never leave the index. There just isn't any rapid-fire buying and selling, like you'd see in an actively managed fund (and to a lesser extent, in an index fund that only covers a small portion of the market).

An updated view (2026) of a similar chart shows higher returns and thus higher tax costs, but it is still a very tax-efficient investment.

Morningstar now reports it like this:

Meaning the fund return is reduced by 0.33% per year due to taxes, and the average fund in the category has its return reduced by almost four times as much.

#4 No Tracking Error

Investing isn't all about logic. It is also about behavior and discipline. One of the hardest things for investors to do is to stick with their portfolio through the good times and the bad. That is especially hard when their portfolio deviates significantly from that of their peers and the overall US market, which is reported on a daily basis in numerous sources—print, TV, and online.

That deviation is called tracking error. Guess what? TSM essentially doesn't have any tracking error. Tracking error is MEASURED from TSM. That helps the investor to stay the course.

#5 Super Diversified

Diversification protects you from what you don't know. If you were omniscient, you would simply pick the stock that is going to go up the most and leverage up as much as you possibly could. But you're not, so you don't. Instead, the smart move is to diversify.

Is TSM a diversified fund? Do skiers love powder?

The number of stocks held by TSM? It's 3,531. That's a lot of companies. What's going to happen to your investment if a couple of them go out of business this year? You're not even going to notice (unless the two that go bankrupt are Nvidia and Apple). Why only own some of the stocks when you can own all the stocks? Lots of people, including Warren Buffett, like the S&P 500 index fund. Sure, I guess 500 stocks is pretty diversified. But it seems downright silly when compared to 3,531 stocks.

#6 Economies of Scale

TSM is huge. How huge? In total net assets, it's at $2.3 trillion. By comparison, that's larger than the GDP of 47 of the states in this country. Larger than Spain's GDP. When you have more than $2 trillion, you can benefit from some sweet economies of scale. You get great prices on your trades. People come to you (and pay you) when they want to borrow shares. You can get expense ratios down into the single digits. Admiral shares are four basis points and ETF shares are three basis points.

What does that mean? That means for every $1,000 you have invested in the fund, the fund spends only a few cents on its expenses. It is essentially free. You can own the equivalent of every publicly traded company in the most economically successful country in the world and buy and sell it online in 10 seconds—all basically for free.

Now, there are some “me too” funds out there. Schwab has a TSM fund (three basis points for the ETF). So does Fidelity (1.5 basis points and even zero basis points) and iShares (three basis points). Is it worth it to go to these other funds to save 1-2 basis points? I don't think so, but all of these funds are excellent investments.

• Managers Don’t Beat Markets (Why Index Funds Are the Best Way to Invest in the Stock Market)
• The Truths About Index Fund Investing (According to Vanguard)

#7 No Manager Risk

One of my favorite aspects of TSM is that it is an index fund. That means low costs and excellent long-term returns, but it also means that I can “set it and forget it.” While there is a manager for this fund and he has a team and there is a bit of an art to running an index fund well, it's still basically all done by a computer, and that computer isn't going to retire, get dumb, or get unlucky. I don't have to watch it, check on it, benchmark it, or anything. I certainly don't have to worry about whether the manager has “lost their touch” or become senile. Why run a risk that isn't necessary?

In fact, as we updated this post, I learned that Gerard O'Reilly, who managed this fund for many years, died this summer. I met him at a conference not long ago, and I was hoping to get him on the podcast. Our condolences to his family, and may he rest in peace. But there's a reason his death didn't bother fund investors or spawn hundreds of articles like Warren Buffett's retirement. He has helped to create something that doesn't require him to be successful. Hopefully Buffett has, too, but I guess time will tell. There's just a lot more uncertainty for Berkshire Hathaway investors than for TSM investors.

#8 Widely Acknowledged to Be Smart

Every investment authority who is worth listening to acknowledges that a low-cost, broadly diversified index fund like TSM is a great way to invest.

Warren Buffett:

“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.”

Allan Roth:

“The S&P 500 fund is a great way for investors to harness the return that capitalism has to give. In fact, I think it's better than 99.9% of mutual funds out there. A total stock market fund is just slightly superior.”

Jack Bogle: 

“The index fund is a sensible, serviceable method for obtaining the market's rate of return with absolutely no effort and minimal expense. Index funds eliminate the risks of individual stocks, market sectors and manager selection, leaving only stock market risk.” Jack noted multiple times in his life that TSM was also his favorite mutual fund, despite being most famous for the Vanguard 500 Index Fund.

Jonathan Clements:

“Santa Claus and the Easter Bunny should take a few pointers from the mutual fund industry. All three are trying to pull off elaborate hoaxes. But while Santa and the bunny suffer the derision of 8-year olds everywhere, actively managed stock funds still have an ardent following among otherwise clear-thinking adults. This continued loyalty amazes me. Reams of statistics prove that most of the fund industry’s stock pickers fail to beat the market.”

Jeremy Siegel:

“There is a crucially important difference about playing the game of investing compared to virtually any other activity. Most of us have no chance of being as good as the average in any pursuit where others practice and hone skills for many, many hours. But we can be as good as the average investor in the stock market with no practice at all.”

William Bernstein:

“An index fund dooms you to mediocrity? Absolutely not: It virtually guarantees you superior performance.”

Taylor Larimore (whose favorite fund is also TSM):

“Index investing is an investment strategy that Walter Mitty would love. It takes very little investment knowledge, no skill, practically no time or effort, and outperforms about 80% of all investors. It allows you to spend your time working, playing, or doing anything else while your nest egg compounds on autopilot. It's about as difficult as breathing and about as time consuming as going to a fast food restaurant once a year.”

I think you can now see why the Vanguard Total Stock Market Index Fund is my favorite mutual fund and my largest individual holding.

What do you think? Do you own TSM? Why or why not? What part has it played in building your wealth?

[This updated post was originally published in 2017.]

The post My Favorite Mutual Fund appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

By Jim Dahle, WCI Founder

I got chewed out recently by a WCI Forum member for never explicitly telling him he could become an independent contractor, form a C Corp, and put all his money into a cash balance plan until we ran this post about an emergency doc retiring with $27 million after living like a resident for 40 years. My initial reaction was, “What percentage of WCIers do you think a post like that would apply to?”

Nevertheless, maybe it's time to run a post demonstrating how those who are tax-phobic can avoid paying much in taxes at all.

Tax Phobia

Tax phobia is actually a bit of a problem among personal finance enthusiasts. Some people hate paying taxes so much they would rather have less money themselves than give any to the government. Before we get into this list to really help the tax-phobics among us, I just want to point out that, in general, you should care more about how much you have left AFTER paying taxes than how much you actually pay in taxes. Besides, not EVERYTHING the government does is bad. Surely you agree with something about how they use your tax money. Just pretend your taxes only go toward those things.

9 Ways to Dramatically Lower Your Tax Bill

OK, let's get into the list. Note that I don't recommend everything on this list. I might not recommend ANYTHING on this list. The downsides of dramatically lowering your tax bill often (usually?) outweigh the upsides.

#1 Tax Evasion

The US tax system is mostly run on the honor system. They ask you to calculate your tax bill and pay it. There are a few minor checks on the system, but the number of places you can cheat—and cheat big—on your taxes is legion, especially if you're self-employed. I think cheating on your taxes means you're a scumbag, but you can dramatically lower your tax bill by doing so. Few taxpayers ever face a real audit, and the trend over the last few years has been to cut IRS funding, even though increasing the number of auditors might be the best way to improve our nation's finances and reduce the tax bill for honest taxpayers. Potential jail time for tax evasion is a pretty big downside, though, but maybe not as big as having to look yourself in the mirror every morning.

#2 Quit Working

The real problem resulting in you having to pay income taxes is that you have income. I say this only partly in jest. The truth is that if you don't have income, you don't have to pay income taxes. Whether you're moving back in with mom and dad or becoming a stay-at-home spouse or living off savings or living in a cardboard box beneath the aqueduct, this is one way to dramatically lower your tax bill. The downsides of this technique seem obvious.

• Avoid Tax Derangement Syndrome
• Do You Need a ‘Tax Strategist?’

#3 Retire

For most people, retirement, especially early retirement, dramatically lowers their tax bill. Remember, income is taxed. But not all income is taxed the same. You have to pay payroll taxes (Social Security and Medicare) on earned income but not on unearned income. Plus, the 0% qualified dividends and long-term capital gains bracket is huge ($98,900 MFJ [2026 — visit our annual numbers page to get the most up-to-date figures]). And that's in addition to the standard deduction ($32,200 and higher for seniors). You could have >$130,000 to spend and still pay $0 in taxes. And that doesn't even include basis. I mean, if you sell high-basis shares you've owned for at least a year, you could potentially spend a million dollars without paying any taxes.

Carried forward losses (from tax-loss harvesting) can make this sort of thing even more powerful. Maybe you could generate $400,000 in gains but could offset them with capital losses to still result in no tax bill. Real estate investments can work similarly, as equity real estate income is often “covered” by depreciation. Even if you're already eligible for Social Security, no more than 85% of that is taxable, no matter how high your income—some (very low-income) recipients don't pay tax at all on Social Security.

Despite the bizarre RMD fear you sometimes see, retiring is one of the best ways to dramatically lower your tax bill. The downside? Well, it takes money to retire well, and lots of people don't have much money. Plus, it can be tough to maintain purpose in your life (although some may see lowering their tax bill as much as possible as their purpose in life).

#4 Real Estate Professional Status

Speaking of real estate, here's another cool method to dramatically lower your tax bill. If you (or your spouse) qualify as a real estate professional, you can use real estate losses (typically just “paper” depreciation losses) to offset your earned income. Real Estate Professional Status (REPS) requires that you:

1. Work at least 750 hours in real estate and
2. Work more hours in real estate than all other professional activities

This doesn't work so well if you're also trying to hold down a career as a doctor or similar high-income professional. Are you going to work 1,500 hours as a doctor and then 1,600 hours in real estate “on the side?” How much do you hate your life? REPS is usually either applied by the doctor's spouse, by a doctor transitioning into retirement on a portfolio of direct real estate, or by a doctor transitioning into a career as, you guessed it, a real estate professional.

The downside? Did you catch the part about 750 hours? That's four-plus months of full-time work.

#5 Short-Term Rental Loophole

There is a workaround, though. Short-term rentals (think VRBO or Airbnb) with an average occupancy of less than seven days are an exception to the 750-hour rule. With short-term rentals, you can use passive losses against ordinary income with as few as 100 hours of work during the year. That's much more doable for a full-time doc. You can basically buy short-term rentals instead of paying taxes for a while (or indefinitely). You don't have to leave them as short-term rentals forever either.

I'm still convinced that building a small (five- or 10-door) short-term rental empire is the fastest reproducible pathway out of medicine for burned-out docs, and part of that is the tax benefit. Is there a downside? Sure. You have to go into the “hotel business,” at least for a while, and maybe that's not how you want to spend your life.

#6 Give to Charity

While this usually isn't a method to get your taxable income to zero (unless you gave everything to charity the year before and quit working), it can help one to dramatically lower their tax bill. You can donate up to 60% of your adjusted gross income (30% if donating something other than cash, like appreciated shares) and get a deduction for it. Given our progressive tax system, that could drop your tax bill far more than 60%. In fact, if combined with some other techniques on this list, it could get you to a $0 tax bill. The downside? Well, you don't come out ahead giving all your money away to charity. Your tax savings are less than what you gave.

• 10 Ways to Avoid (or at Least Delay) Capital Gains Taxes
• Tax Policies: Enjoy Them But Also Reform the Right Ones

#7 Save (It All) for Retirement

Tax-deferred retirement accounts are often a physician's biggest tax break. In 2026, $72,000 can be contributed to a 401(k) (if the plan allows). It's even more if you're 50+. That can dramatically reduce the tax bill. But it gets really impressive when a defined benefit/cash balance plan gets involved. The older you are and the shorter the period you fund the plan, the more you can contribute. And if you form a C Corp as an independent contractor and employ only your spouse, you can as much as double those contributions. The WCIer we mentioned earlier deferred the majority of his $450,000-ish income into a CBP for a decade and eventually retired with $27 million.

This isn't so nuts. Plenty of WCIers have contributed $100,000-$300,000 a year into their CBPs. The downside? Aside from the fact that this particular doc lived like a resident for 40 years, he had to deal with a $16 million IRA in retirement. Those are some big RMDs. Even Qualified Charitable Distributions (QCDs) aren't big enough to get rid of those. So, the price of a low tax bill during your earnings years may become a big tax bill in your retirement years if you're not careful about balancing it all out using Roth contributions and conversions or, heaven forbid, spending (or giving) some of it along the way.

#8 Move

The tax bill between geographic areas can be HIGHLY variable, especially when you include state income taxes and property taxes. State governments need some sort of income to function, but that number apparently varies dramatically. The state income tax bracket for an $800,000 earner ($1.5 million MFJ) is 12.3% in California but 0% in Nevada, Texas, Florida, Washington, Alaska, Wyoming, Tennessee, New Hampshire, and South Dakota. Could be worse. New York City residents pay local income tax (3%+) in addition to state income tax, although New York state brackets are not nearly as progressive as those in California.

Don't forget those property tax bills either. The average property tax bill in San Francisco is $8,400 but only $2,000 in Las Vegas. My point is that moving often dramatically lowers your tax bill. After all, $50,000 in saved taxes invested for 30 years at 8% adds up to $5.6 million. The downside? Las Vegas isn't San Francisco. Especially in July.

#9 Get Married (to a Non-Earner) and Have Kids

You've probably heard about the “marriage tax penalty.” That mostly only applies to couples where both spouses work. Having a stay-at-home spouse is a definite tax savings since you get to use the Married Filing Jointly tax brackets instead of the much more progressive single tax brackets. For those who aren't high earners, having a few kids often lowers your tax bill, too. The downside? I can't think of a worse reason to get married and have kids than just to save on your tax bill.

You can dramatically lower your tax bill. The downsides outweigh the upsides for most of us, but if you're very tax-phobic, you could possibly optimize this aspect of your financial life much more than you thought.

What do you think? How far would you go to lower your tax bill? Which of these techniques have you used, and to what extreme? 

The post Some Extreme Ways to Dramatically Reduce Your Tax Bill appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

By Dhruv Bansal, Guest Writer

My father was a gastroenterologist, and while he spent years becoming an expert in medicine, it did not make him an expert in finance. The demands of his practice left little time to become one, and many physicians often face the same mismatch: deep knowledge in one demanding field absorbing all the spare hours required to master another.

While doctors can earn substantial incomes, that income is usually tied directly to their time, their most scarce resource. More income often means more patients, more procedures, more calls, or more years spent working at the same pace. But this does not have to be the case.

Over time, the right financial strategy can start to separate wealth from labor. It can turn today’s income into assets that compound independently, bringing physicians closer to the point where their asset growth is less dependent on another hour in the clinic or operating room. Financial independence changes the bargain by creating the option to practice on your own terms, reduce your workload, or step away entirely.

We work with doctors every day who have started to include Bitcoin as a key asset in accelerating their transition to financial independence. Its fixed supply, global liquidity, direct-ownership model, and historical appreciation are all characteristics that differ from institutionally held traditional assets in meaningful ways. Like most assets, future returns are uncertain, but Bitcoin's potential to compound over time, coupled with its inflation resistance, explains why physicians are growing more curious about it.

As unique and interesting as Bitcoin is, it also brings unfamiliar responsibilities involving custody, security, and key management, along with overlap into areas that resemble traditional assets like taxes, estate planning, and inheritance (but with important Bitcoin-specific nuances that are critical to get right). Handled poorly, those responsibilities can put the wealth—and the freedom it was meant to create—at risk.

Physicians Already Understand the Value of Continuity

Which patient is more likely to have better long-term outcomes: one whose physician knows their history and monitors changes over time, or one whose care is fragmented across providers who each see only part of the picture?

Physicians already understand why continuity of care matters. Clinical context accumulates across every visit and decision. A physician who understands the full history can distinguish a new problem from an established pattern. They can recognize subtle changes and apply broad medical knowledge to one particular patient.

The same principle applies when working with Bitcoin.

Decisions cannot be made in isolation. Considerations such as allocation, custody, taxes, estate planning, inheritance, and liquidity all interact, and each depends on assumptions set elsewhere in the portfolio. There are many ways in which using Bitcoin as part of a broader strategy to convert earned income into long-term financial independence behaves similarly to the rest of your investments.

Where Bitcoin begins to differ is in how it is actually held. Unlike traditional assets, where custody and administration are largely abstracted away, Bitcoin forces these decisions into the foreground. Ownership structure, security model, key management, recovery design, and tax treatment are not separate choices in practice. They function as a single system, where a decision that appears sound on its own can still create constraints around access, transferability, or inheritance later on.
Those consequences often remain hidden during the early years. They tend to surface when a withdrawal becomes necessary, ownership must transfer, or the original setup no longer matches a physician’s life stages and financial goals.

Because of that delay, the impact is often not felt at the moment of decision. It appears later, when flexibility is already constrained and the original assumptions no longer fit the situation.

Ideally, Bitcoin strategy can be considered within a broader financial life that already includes traditional investments, tax planning, liquidity needs, estate considerations, and long-term goals. However, because Bitcoin is still a young asset class, these elements often must be managed in separate accounts and through different advisors, which makes coordination across them especially important. The way an investor connects these pieces ultimately determines how safely and successfully Bitcoin can be put to work.

There are many ways in which Bitcoin does not operate according to the familiar financial structure. It is a bearer asset, meaning control is determined by possession of the relevant keys rather than a contractual claim against an institution. The assumptions physicians bring from traditional finance, therefore, do not map cleanly onto how direct Bitcoin ownership actually works.

That broader context shows up most clearly in the custody layer, where Bitcoin is actually held and where the difference between early convenience and long-term structure becomes unavoidable. Often physicians enter the Bitcoin world through familiar consumer platforms like Coinbase because they simplify the first purchase, but what gets you started there does not necessarily get you to long-term financial independence. And where you keep Bitcoin ultimately matters as much as how you buy it.

As holdings grow and Bitcoin becomes more meaningful within a physician’s financial strategy, the way it is held—and whether there is access to an expert who understands both the asset and the broader financial picture—begins to have a major impact on outcomes. Custody decisions shape not only security, but also taxes, inheritance planning, and the ability to transfer or access wealth in the future. What initially felt simple begins to carry more weight, and the custody model becomes central to the strategy rather than an operational afterthought.

• Top 7 Uses for Bitcoin
• Trump Will Allow You to Add Crypto to Your 401(k)

Choose the Model Whose Tradeoffs Fit Your Life

There are multiple, fundamentally different ways to hold Bitcoin, each of which shifts control, responsibility, and risk in distinct and meaningful ways.

These decisions are path-dependent, where early convenience can limit later flexibility across custody, tax, and inheritance. The right model depends on how much time you can devote to managing Bitcoin, how much direct control you want, and how much responsibility you are prepared to carry.

Here are some things to ask yourself when evaluating options for Bitcoin care:

• What exactly do I own through this model?
• Who has the authority to move my Bitcoin?
• How would I recover access after something goes wrong?

The common models answer those questions in different ways:

• Exchange custody: Buying and selling is simple, and recovery feels familiar. The exchange holds the keys, so you do not directly hold your Bitcoin. Access depends on the exchange’s security, solvency, policies, and estate process. This creates counterparty risk, where one institution ultimately controls all movement of the Bitcoin. Failures like FTX illustrate what that risk can look like.
• Spot Bitcoin exchange traded funds (ETFs): Bitcoin ETFs provide familiar brokerage access without private key management. You own shares that track Bitcoin’s price rather than Bitcoin itself, meaning you do not hold or control the underlying asset. As a result, you miss many of Bitcoin’s core properties, including direct ownership, self-custody, and the ability to move or secure the asset independently. Convenience comes with sponsor fees; tracking differences; and reliance on the fund sponsor, custodian, and brokerage. The SEC’s investor bulletin outlines the structure in detail. The risk is concentration within the fund structure, where custody and access depend on a small set of financial institutions.
• Singlesig self-custody: You control Bitcoin directly without intermediaries. Setup can be straightforward, and technical help is available. You own the asset outright, but you are also the single point of failure. One private key controls everything, so the loss of that key without a usable backup means permanent loss. Security, recovery, and inheritance planning sit entirely with you. The risk is concentration: a single key determines all access.
• Multisig and collaborative custody: Multisig spreads signing authority across multiple keys, and collaborative custody distributes those keys across independent parties. In a 2-of-3 Unchained vault, for example, you hold two keys and Unchained holds one, and any two are required to move funds. No single key, person, or institution can move or lose the Bitcoin on its own. This removes single points of failure across devices, third parties, and even individual access. You retain unilateral recovery without relying on Unchained, while Unchained can support recovery if needed. Through inheritance design, a key can also be assigned to a family member, allowing succession without introducing custodial risk. This structure adds resilience across custody, recovery, and inheritance while still allowing a trusted partner to support setup, maintenance, and planning without ever taking full control.

What Happens to Your Bitcoin When You Can’t Manage It Anymore?

When taking all of these models into consideration, the primary design principle is to avoid concentrating risk in any single point of failure, whether that is a provider, a device, or even the individual managing the Bitcoin. By distributing control across multiple keys and parties, the system reduces dependence on any one person or institution, remaining available or reliable over time, so that access and inheritance remain possible even as circumstances change.

This becomes especially important when considering how next of kin would actually navigate the system if needed.

Continuity asks a simple question: if you were unavailable, could a designated person identify what exists, understand who has authority, locate a safe starting point, and assemble the information needed to begin recovery? In practice, that question often exposes ordinary weaknesses long before an emergency occurs. A missing key, an unavailable signer, a single point of failure, an undocumented step, or critical knowledge that exists only in one person’s memory can all become decisive obstacles.

Legal authority and technical access solve different problems. Estate documents may authorize an executor who has no practical way to initiate recovery. A person with a private key may have technical access without legal authority to act. A workable system aligns the owner, the documents, the key structure, the people involved, and the records required to make recovery possible.

This is where a multisignature model with a human-in-the-loop design becomes useful. It distributes control so no single failure is decisive, while still keeping the system understandable enough that another qualified person can step in when needed. For physicians, this structure mirrors the way they already think about care: redundancy where it matters, clear roles, and systems that remain interpretable under stress.

The Unchained Way is built around that principle. Multisignature custody provides the technical foundation, while a coordinated human process ensures that setup, maintenance, recovery planning, and inheritance are not left to chance. The result is a system designed to remain functional during normal conditions and also in the moments when clarity and continuity matter most.

Your successor does not need to become a Bitcoin expert. That person needs awareness, authority, a safe first step, and someone to contact when the process exceeds their expertise.

Build Your Bitcoin Strategy in 6 Steps

1. List every Bitcoin position. Include each wallet, exchange account, fund, IRA, trust, or business holding. Note who legally owns it, what type of exposure it is, why it exists, and when it was last reviewed. Keep this separate from any private keys or passwords.
2. Identify who controls access. Map who can move or authorize each position. Note where recovery instructions begin, where records are stored, and whether someone else could act if needed.
3. Test what happens if something fails. Ask what breaks if a key, device, person, location, or institution becomes unavailable. Treat any single point of failure as a priority if its loss would matter in practice.
4. Align control with inheritance. Decide who can act if you cannot and who should ultimately receive each position. Confirm with an estate attorney that legal documents and technical recovery plans match and do not conflict.
5. Run a dry test. Ask the designated person to find the starting instructions and describe the first step they would take. The goal is to surface gaps, not expose sensitive information.
6. Fix the biggest gap first. Assign ownership and a deadline to the next improvement before adding anything new. Revisit the plan after major life or financial changes such as marriage, divorce, relocation, retirement, or a change in custody structure.

You can work through these steps with the free Physician’s Bitcoin Continuity Worksheet. It includes a position inventory, dependency stress test, inheritance-readiness checklist, successor walkthrough, and priority-action plan.

• Why I Am Winning with Crypto
• A Neurologist’s Road to Becoming a Bitcoin Maximalist

Make Bitcoin Part of Your Plan, Not Your Second Profession

If Bitcoin is part of how you are pursuing greater financial independence, the way you buy, hold, and eventually transfer it should be deliberate. It should not depend on scattered online research, one person’s memory, or a support team learning your situation during an emergency.

Financial independence is about gaining more control over your time. Direct Bitcoin ownership is about gaining more control over your wealth. The right expert relationship should support both.

You take care of your patients. We’ll help you take care of your Bitcoin.

How do you hold your cryptocurrency? Do you have any trepidation in your process? In what other ways do you keep your cryptocurrency safe?

[EDITOR'S NOTE: Many thanks to Unchained and Dhruv Bansal, one of our Platinum Level (contributing $8,000+) Sponsors for the WCI Medical School Scholarship. This is the second of our three scholarship-sponsored posts for 2026. Thank you for supporting those who support this site and especially the scholarship. All proceeds go to the scholarship winners.]

Disclosure: I’m the co-founder of Unchained, which offers collaborative custody, Bitcoin IRA, and inheritance services discussed in this article. This article is educational and isn't individualized investment, tax, or legal advice.

The post You’re Already a Physician; Bitcoin Doesn’t Need to Be Your Second Profession appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

Today, we answer questions about 529 plans, including how much to save, tax-free growth, withdrawals, Roth IRA rollovers, and what to do with an overfunded account. We also dive into more complicated college funding strategies involving appreciated investments, the kiddie tax, and the 0% capital gains bracket.

Understanding 529s

A 529 is a tax-advantaged education savings account named after Section 529 of the Internal Revenue Code. Unlike older Coverdell Education Savings Accounts, 529s generally allow much larger contributions, and they may offer a state income tax deduction or credit. Each state sponsors at least one plan, and those plans compete on fees, investment options, and features. In many cases, it makes sense to use your own state's plan, at least up to the amount that qualifies for a state tax benefit. The money can be used for qualified education expenses, including college, graduate or professional school, vocational education, and certain K-12 expenses.

The biggest benefit of a 529 is tax-protected growth. You may receive a state tax break when contributing, and qualified withdrawals are tax-free. Those benefits become especially valuable when money has decades to compound. Even if college is approaching, it may still make sense to run contributions through a 529 to capture an available state tax benefit. If the account ends up overfunded, there are several options, including changing the beneficiary to another eligible family member. Money could even remain invested for a future grandchild, potentially adding decades of additional tax-free compounding. However, deliberately overfunding a 529 by a huge amount usually does not make sense. Nonqualified withdrawals can result in ordinary income taxes on the earnings plus a penalty, so 529s are best used for money ultimately intended for education.

Using a 529 once college begins is also relatively straightforward. Withdraw money to cover a qualified expense, keep documentation showing what the money paid for, and save those records in case the IRS ever asks for them. For example, you can reimburse a student for qualified tuition, rent, or other eligible expenses and then withdraw the corresponding amount from the 529. The important part is maintaining receipts and matching withdrawals with qualified expenses. With low-cost investment options, potential state tax benefits, tax-free growth, and considerable flexibility around beneficiaries, 529s remain one of the best tools available for families who know they will be paying education expenses.

• 3 Reasons Why You Can Take More Risk with a 529
• 529 Plans: How Much to Save and What They Can Be Used For

529 to Roth IRA Rollover Rules and Limits

“I have only one child so far. I've been contributing to the 529 for the past couple of years since the birth of the child. I know you can transfer up to $35,000 from a 529 that's been open for at least 15 years to the Roth IRA. My question is: after 15 years, can you transfer $35,000 to one child's Roth IRA, change the beneficiary to someone else (another child, niece, nephew, or even self or spouse), and make another transfer of $35,000 to the Roth IRA? Or is the Roth IRA transfer limited to once per account, regardless of beneficiary change? If it is limited to once only, is it possible to roll over the remaining funds to another account to be transferred to the grandkids, so they can also have an option to transfer to the Roth IRA in the future? What are the other details to consider regarding this $35,000 Roth IRA transfer limit?”

The key question is whether you can roll $35,000 from a 529 into one beneficiary's Roth IRA, change the 529 beneficiary, and then make another $35,000 rollover for the new beneficiary without waiting another 15 years. The rules are not entirely clear on that point, and the IRS has not provided enough guidance to confidently say that changing beneficiaries preserves the original 15-year holding period. The safer approach is to assume that a beneficiary change or new account could affect or restart that clock rather than building a college savings strategy around an uncertain interpretation.

A simpler solution is to open a separate 529 for each child rather than trying to use one account for multiple beneficiaries. Each account can establish its own 15-year history, and money can generally be moved between eligible family members' 529s if one child ends up with too much and another needs more. This adds very little complexity and avoids relying on unclear rules about whether changing beneficiaries allows another $35,000 Roth IRA rollover. The 529-to-Roth provision is useful as an escape valve for modestly overfunded accounts, but it should not be the primary reason to intentionally overfund a 529.

For money that remains after a child finishes their education, another option is to change the beneficiary to a future grandchild. There can be gift tax implications when moving a 529 beneficiary down a generation, so it may make sense to make that change sooner rather than later, before the account grows substantially. Doing so may also start the 15-year clock for the grandchild if the IRS ultimately determines that a beneficiary change restarts the holding period. The broader lesson is not to over-optimize around the $35,000 Roth IRA rollover. Use separate 529s for separate children, save an appropriate amount for education, and view the Roth rollover and beneficiary-change provisions as useful flexibility if money is left over.

• 529 Insanity
• How Much Should You Sacrifice to Pay for Your Child’s Medical School Education?
• Despite Our Student Loan Debt, Here’s How We’re Filling Our Kids’ 529s

Spending from a 529 While Continuing to Contribute

“Our older child is entering as a freshman at an out-of-state four-year institution next month. Time has come to make the first payment on tuition. We've been saving in the 529 since she was born. Our diligence in the stock market has paid off. We have enough money to cover the cost of her attendance for all four years of the institution that she's chosen. At this point, we will likely overshoot by about $25,000.

But who knows what additional expense may arise between now and May 2030? Additionally, she has an inkling for a graduate professional school, potentially the all-expensive dental school. While she'd try to come back to North Carolina for such, there's no telling where four years in the dental admissions process will have her land. We have the cash flow now to continue putting the same amount of money into our 529 for this next four years that we have for some time now: $15,000 per year. I've read that there are some pitfalls when it comes to spending the 529. There's mention of not using a December withdrawal to pay a January tuition bill.”

You can continue contributing to a 529 while simultaneously taking withdrawals to pay for college. There is no general age limit that prevents contributions once a child turns 18, and depending on your state's rules, you may still qualify for a state tax deduction or credit on those contributions. It is worth checking your specific state rules. When taking withdrawals, keeping qualified expenses and withdrawals in the same calendar year can simplify recordkeeping, although there may be more flexibility around expenses such as a January tuition bill paid near the end of December. Regardless, keep receipts and documentation showing that withdrawals were used for qualified education expenses.

The bigger issue for someone who already has enough saved to cover four years of college is whether continuing to contribute will unnecessarily overfund the 529. There are several ways to deal with leftover money, including up to $35,000 of eligible 529-to-Roth IRA rollovers, changing the beneficiary to a sibling or future grandchild, or eventually taking a nonqualified withdrawal and paying ordinary income tax and a penalty on the earnings portion. But you're not required to keep putting additional savings into the 529. You could instead invest the money in your own taxable brokerage account, where it remains available for graduate or dental school, a future down payment, retirement, or an inheritance. You could also give the money directly to an adult child to invest, potentially lowering the tax burden but giving up control of the money.

The goal is to balance the valuable tax-free growth of a 529 against the risk of putting too much money into an account primarily designed for education. If you are confident additional money will eventually be spent on qualified education, continuing to use the 529 can make sense. If undergraduate education is already fully funded and graduate school is uncertain, a taxable account and future cash flow provide more flexibility. College may also cost considerably less than the maximum amount families sometimes plan for, so there is little reason to fund a 529 as though every child will attend the most expensive undergraduate and professional schools available. Save enough to meet your education goals, take advantage of the 529's tax benefits when appropriate, and remember that taxable investments and ongoing cash flow can always make up a shortfall later.

To learn more from this episode, read the WCI podcast transcript below.

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Milestones to Millionaire

#289 — $10 Million Net Worth as a Pharmacist

Today, we talk with a retired pharmacist who built a $10 million net worth through decades of living below her means, consistent investing, and thoughtful real estate purchases. Her story shows how being disciplined, staying invested through market downturns, and giving compounding time to work can create substantial wealth.

To learn more from this episode, read the Milestones to Millionaire transcript below.

Sponsor: Resolve

Financial Boot Camp Podcast

Financial Boot Camp is our new 101 podcast. Whether you need to learn about disability insurance, the best way to negotiate a physician contract, or how to do a Backdoor Roth IRA, the Financial Boot Camp Podcast will cover all the basics. Every Tuesday, we publish an episode of this series that’s designed to get you comfortable with financial terms and concepts that you need to know as you begin your journey to financial freedom. You can also find an episode at the end of every Milestones to Millionaire podcast. This podcast will help get you up to speed and on your way in no time.

Employer-Provided Disability Insurance

Group disability insurance can be an affordable and convenient way to get coverage, but the lower price often comes with important tradeoffs. Group policies generally have a weaker definition of disability—which can make it more difficult to qualify for benefits when the cause of disability is less clear, such as chronic back pain, anxiety, depression, or a head injury without an obvious radiological finding. They may also reduce benefits if you receive workers compensation or Social Security disability benefits, and some may even offset benefits from individual disability policies. Group policies are typically not portable either, meaning you may lose your coverage when you change jobs and have to purchase a more expensive individual policy later in life, potentially after developing medical conditions that make coverage more difficult to obtain.

Individual disability policies generally offer stronger protections. They are more likely to be noncancelable. They can include cost-of-living adjustment riders to help benefits keep pace with inflation, and they may provide better coverage for mental and nervous disorders. Individual policies also give you stronger legal rights because you own the policy rather than your employer. There can be significant tax differences as well. Employer-paid group disability premiums are generally deductible to the employer, which typically means benefits received by the employee are taxable. When you purchase an individual policy with after-tax dollars, the disability benefits are generally received tax-free.

That does not mean group disability insurance is always a bad choice. Group policies can be significantly cheaper. They often require little or no medical underwriting, and they may provide coverage for someone who has medical conditions or dangerous hobbies that would result in exclusions on an individual policy. They can also make sense if you expect to remain with the same employer for your entire career. Many physicians ultimately choose to mix and match coverage, using an individual policy for its stronger disability definition and portability while supplementing it with less expensive group coverage. The key is understanding exactly what each policy covers, what it excludes, how benefits may be offset, and whether the coverage will actually protect your income when you need it most.

To learn more about investment glide paths, read the Financial Boot Camp transcript below.

WCI Podcast Transcript

Milestones to Millionaire Transcript

Financial Boot Camp Podcast

The post What Doctors Need to Know About 529 Plans appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

By Rikki Racela, WCI Columnist

Nothing causes more consternation on the WCI website and its readers than the Backdoor Roth IRA. Dr. Jim Dahle has complained for years about how many ways phenomenally intelligent people can come up with new ways to screw up this process. It seems pretty easy: contribute to a traditional IRA, wait for the money to settle, and then convert that money into a Roth IRA. Easy peasy. Or is it?

One of WCI’s longest posts on the WCI Forum is in regard to botching this maneuver. What if I have a few pennies in the traditional IRA after conversion? What if it’s a few hundred bucks? Wait, I contributed in December but didn’t do the conversion to Roth until January—am I screwed? Yada, yada, yada, and so on and so forth.

All this angst led me to the question of how the heck did it come to this in the first place? Why is the front door locked to high-income investors? What follows is a little history on the Roth IRA, when the backdoor was left open for us, and why the government has us do this process.

The Roth IRA Origin

The Roth IRA was created through the effort of its namesake, Sen. William Roth of Delaware, through the Taxpayer Relief Act of 1997. Up until that point, only medium- to high-income earners were incentivized to save for retirement, given that traditional IRA contributions are tax-deductible at higher-income tax brackets compared to the lower-income tax brackets of their retirement years. However, lower-income earners who were in lower tax brackets during their working years were barely paying any taxes, if at all, on their income, and so they weren’t incentivized to save for retirement in a traditional IRA.

With the advent of the Roth IRA, lower earners could pass up the tax deduction now and never pay tax on that money again. What a great deal! Because of this revolutionary concept, the Roth IRA was initially nicknamed the “American Dream IRA.”

Initially, Roth IRAs were available to anyone who met certain eligibility requirements, regardless of income. And boy, was it popular. Contributions to IRAs jumped from 4.1 million people to 7.1 million people when the Roth was introduced. Many of these new IRA contributions were actually coming from high-income earners, causing some concern that many of the rich would be taking advantage of this opportunity to dodge a significant amount of future tax (think Peter Thiel).

As a result, Congress introduced income limits for Roth IRA contributions under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The limits prevented high-income earners from contributing directly to Roth IRAs, which stand even today. Congress was hoping these income limits would ensure that the tax benefits of Roth IRAs were targeted at middle- and lower-income workers, rather than high-income earners who already had the benefit of traditional retirement savings. At that time, these limits would phase out starting at $95,000-$110,000 filing single, $150,000-$160,000 Married Filing Jointly. They have increased with inflation up to the income limits we see today. In 2026, the limits are $153,000-$168,000 for single and $242,000-$252,000 for MFJ [visit our annual numbers page to get the most up-to-date figures].

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Enter the Backdoor

After the income limits were set in place in 2001, many high-income earners lobbied to bring back their ability to utilize the tax advantages of the Roth IRA. This was enabled by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). This law eliminated the income limitations on MFJ and single filers that previously restricted Roth IRA conversions, effective in 2010. Now, high-income earners could convert any amount of traditional IRA money into Roth and pay ordinary income tax on that money.

It seems at first glance that Congress did an amicable gesture in allowing their high income-earning constituents access to the Roth. But notice that you have to pay tax on the conversion of money you had originally taken as a tax deduction. That’s right, the government gets a revenue bump by doing this, so the government’s intentions were not entirely altruistic. Also notice that it took five years after the TIRPA passed for income limits on Roth conversions to be removed. What's up with that? Had Congress gone completely mad, and just wanted to make things that much more complicated?

This might be diving into the weeds, but yes, Congress’ true intention wasn’t to allow the Backdoor Roth (for which you don’t pay any tax, given the money is a non-deductible contribution that you are converting) but rather to create revenue from originally tax-deductible contributions to offset the tax losses the government would suffer from tax breaks outlined elsewhere in the TIPRA.

According to an article in the journal Yale Law & Policy Review titled, “Slam the Door: Why Congress Should End the Backdoor Roth IRA,” TIPRA wanted to extend reduced capital gains and dividends tax rates, resulting in long-term budget deficits. Under Senate rules, you can’t run a deficit on a reconciliation bill without a 60-vote override, which the Senate Republicans did not have at the time. So, the income limitation on Roth conversions was removed as a source of revenue to balance out that deficit, and voila, the Backdoor Roth was born.

But why wait five years to remove the income restrictions on Roth conversions? Why not remove them immediately and get the tax revenue without delay? Well, these Roth conversions among the high earners were predicted to only bring in revenue for the first five years of existence. After five years, the ability to do Roth conversions among high-income earners was actually projected to produce a deficit. Kind of makes sense when you think about it, as the government would have taxed the money in traditional IRAs eventually in the form of RMDs. Allowing for conversions among high earners only accelerates paying tax sooner on their traditional IRA money to avoid a larger RMD tax bill later. Since the Congressional Budget Office uses a 10-year projection for any tax law that goes into effect, the income restrictions being lifted were delayed by five years so the budget would only see the positive tax revenue with the TIPRA, and not the negative tax revenue in the later five years. Obviously, this worked as TIPRA was passed without any budget hiccups, and now there are no income restrictions on doing Roth conversions.

Whew, that is confusing! And amid all this confusion was an unintentional loophole that was created that's now known as the Backdoor Roth strategy. For the uninitiated, the Backdoor Roth involves a legal workaround to the income limits on direct Roth IRA contributions. There is no income limit to make a non tax-deductible contribution to a traditional IRA. Once you do that, you convert that non tax-deductible contribution in the traditional IRA into your Roth IRA and BAM! Now you have money in your Roth IRA, as if you had just contributed directly to it. The Backdoor Roth IRA takes advantage of the rules governing traditional IRAs and Roth IRAs to create a loophole that allows high earners to contribute to a Roth IRA indirectly.

A Little (a Lot of) Controversy

Although the Backdoor Roth IRA is entirely legal, its legality has been questioned regarding violating the Step Transaction Doctrine, a judicial doctrine that considers a series of events in combination and considers its outcome as if the outcome came from a single event. It was designed to prevent tax loopholes, such as what seems to be occurring with the Backdoor Roth. According to a Kitces.com article, the Step Transaction Doctrine would examine the overall result of the transaction—that dollars went from a taxable account and ended up in a Roth. It would not care and would ignore that the taxpayer contributed to a traditional IRA first because the sole purpose of that traditional IRA contribution was to get it into a Roth IRA.

It would seem that the Backdoor Roth would fall prey to this doctrine, and it has been recognized as a problem by many in the financial industry. However, Michael Kitces wrote, “In the end, the contribute-and-then-convert strategy is not expressly prohibited by the tax code, but the IRS does have the right to tax a transaction according to its true economic reality.” Years passed, and the IRS never called people out on utilizing the Backdoor Roth. The 2018 Tax Cuts and Jobs Act (TCJA) essentially gave its blessing on the Backdoor Roth, stating in Footnote 268:

268: Although an individual with AGI exceeding certain limits is not permitted to make a contribution directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA, as discussed below.

Despite the TCJA blessing, it has drawn some attention from policymakers. In recent years, there has been talk of closing the Backdoor Roth loophole. Some lawmakers have argued that the strategy disproportionately benefits the wealthy, allowing them to take advantage of tax-free growth in a way that middle- and lower-income individuals cannot. They cite the aforementioned Peter Thiel, whose Roth IRA totals around $5 billion.

Despite these concerns, the Backdoor Roth IRA remains alive and well, and I’m not so sure that the government is really losing out on much money as the initial projections with the TIPRA suggested. Without any data, the government might actually be making a profit. As we publish this, Jim’s How to Do Backdoor Roth IRA tutorial has more than 3,600 comments. Many of those comments involve screwups, including being subject to the pro rata rule, reporting Form 8606 incorrectly, and other mishaps that end up paying more money to the government. If the government were to close the back door, it might be eliminating an unprojected source of income when the original TIPRA was passed.

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The Bottom Line

The Backdoor Roth IRA is a critical strategy for high-income earners to access the tax advantages of a Roth IRA despite the income limits imposed on direct contributions. It was born out of our government's need to access revenue faster that was locked in our traditional IRAs. It's ironic that our government’s lack of delayed gratification is responsible for the existence of the Backdoor Roth, where individuals who practice delayed gratification benefit most from the Roth.

But for governments, like individuals, delayed gratification is a hard practice. Regardless of its unintentional existence and continued controversy, the Backdoor Roth has become a cornerstone of retirement planning for high-income earners and WCIers. It remains a valuable tool for individuals to diversify the taxation of their retirement income, enabling a more successful and happier retirement.

What do you think of the Backdoor Roth? Have you made mistakes before? Are you as annoyed as everybody else that you can’t just contribute directly? Are you surprised by the government bureaucracy that resulted in the Backdoor Roth?

The post Why the Front Door Is Locked: The Origins of the Backdoor Roth IRA appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.