Getting Your Work Benefits Right

INTRODUCTION

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.

Dr. Jim Dahle:
This is White Coat Investor podcast number 437.

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Okay. I was supposed to tell you about all kinds of fun things today. But first, what I want to tell you about is my doctor's appointment this morning. I met with my endocrinologist. I've got this adrenal incidentaloma they found when they did a bunch of scans on me for my trauma a year ago. I've been getting follow-up scans to make sure this thing doesn't change. And it's not changing. My labs are fine and all that.

But it was a fun discussion. This doc, she was a little bit younger than me. And I said, I'm working about halftime. She knew I was a doc. I work about halftime. And then I got to record some podcasts later today. And she's like, “Oh, tell me about your podcast.” Well, it is always fun to tell a doctor about the White Coat Investor podcast. I don't think there's a lot of doctors out there younger than me that have never heard about it. And indeed, she recognized, oh yeah, I've seen that all over social media or whatever. She did know about the White Coat Investor, but it never connected that it had anything to do with her patients. And that was a lot of fun. And I'm grateful for her care.

I'm also grateful for telemedicine. We had like a six minute appointment, which is great. Six minute appointment from my home. Awesome. I'm not paying for her time or much less my time at her clinic. I'm paying for her expertise. And I was more than willing to do that. So, big fan of telemedicine, big fan of endocrinologists. Thanks everybody out there for what you do.

Okay. Speaking of women, women physicians, we got a cool event coming up. It's not just for women physicians, but it is only for women. It's the Financially Empowered Women, the FEW. We're having another live event. It's September 22nd. And I think this podcast drops on the 18th. So, if you're listening to this the day it drops, something like four days from now. September 22nd, that's Monday, 06:00 P.M. Mountain.

We're having Elisa Chiang presenting. She's a doc. She's a life coach. She was a WCICON speaker last year. She talks about growing your wealthy mindset. But the topic for this is going to be wealth and women deconstructing social narratives for financial empowerment. You can sign up at whitecoatinvestor.com/few.

It's totally free, like 98% of what we do here at White Coat Investor. This is totally free to you, but you're going to discover where your money beliefs really come from, how they shape your decisions today. You're going to uncover the hidden history of women's financial rights and what it means for you now.

They're going to dive into the gender pay gap, especially among physicians, break down the money messages that society pushes on men versus women, and learn some practical ways to reframe your money thoughts and step into financial empowerment. And we're totally into that at White Coat Investor.

I don't care if you're a man or a woman or a doc or not a doc, we want you financially empowered. But this particular event is just for the financially empowered women. So sign up for that, whitecoatinvestor.com/few.

All right. Let's get into your questions. This is your podcast. Leave us questions, go to the Speak Pipe, whitecoatinvestor.com/speakpipe. We'll try to get them answered. Most of them I can answer just off the top of my head. Sometimes I got to do a little bit of research and I'm a little bit worried about this next one that I might have to do a little bit of research. So let's take a listen.

EMPLOYEE STOCK OWNERSHIP PLANS

Speaker:
Hey, Dr. Dahle. Thanks for all you do. Just had a question about employee stock ownership plans. Have you heard of any private practices transitioning into an ESOP and have they been successful?

Our group, which is a private practice, has recently transitioned into one and so far it has not been very beneficial to any of the employees or the doctors that currently work with them. It's causing a lot of the doctors to be concerned and several are considering leaving the practice due to the financial state of matters. Can you shed any light on this? Thank you.

Dr. Jim Dahle:
Well, this is interesting. Typically when I think about ESOPs, employee stock ownership plans, I'm thinking you work for Facebook or some other big corporation, some big publicly traded company, not necessarily a physician practice.

I'm in an employee stock ownership plan. These come from section 401(a). So it's a qualified plan. It's a defined contribution plan. That's a stock bonus plan or a stock bonus money purchase plan. If you ask the IRS, they'll tell you that's what it is. It must be designed to invest primarily in qualifying employer securities.

So what that typically means is stock. It's stock options or the stock itself is probably more commonly that you put money into this thing and you get a little better deal on your company stock than you otherwise would if you were just buying it on the open marketplace. And then maybe you're required to hold onto it for a year or 10 years or until you separate from the job or whatever.

The real risk with these things, of course, has always been that your whole 401(k) ends up full of your own company's stock. That's obviously very risky. If your company goes bankrupt, your 401(k) is wiped out and you lose your job at the same time. This is the classic Enron problem for those of you that are older. Those of you who are younger have no idea what Enron is, but Enron is a company that went bankrupt 20 or 25 years ago, spectacularly a big company due to some fraud being perpetuated by the C-suite folks. And it really hurt a lot of their employees pretty badly.

That's the risk. So, the advice with regard to these things is, yeah, if they're going to give you some free stuff or a super great discount on the stock, then take it, but get rid of it as soon as you can and diversify your portfolio. Don't have all your money tied up in your employer stock.

But this caller seems to be saying there's some sort of an employee stock ownership plan for the practice and that nobody's happy with it. And I don't know what to make of that. I don't have the details of it and diving into the details might give us a little better view into it.

But here's the deal. If they're requiring you to pay into it, well, you can just say no, right? Or maybe not. Maybe they don't let you work there unless you pay into it. I don't know. But you need to do the minimum. If it doesn't seem like a good deal, put as little in there as you can. If it seems like an okay deal, they're giving you a great deal on ownership, then go ahead and buy some, but divest yourself of it as soon as you can, because you don't want your investments and your job all tied up in one corporation.

I'd be pretty careful with that, but I just don't have enough information about your situation to know what you ought to do in this situation. But if it's really a bad deal for all the docs, well, why don't all the docs get together and start talking with management about why they have this terrible deal put in place?

If it's not good for anybody, but the person arranging the deal, maybe it's time to end it. But I think you just need a lot more detail about exactly how it's working. Maybe you're getting ownership in a bigger company, not just the practice, a bigger company that happens to own your practice. I don't know.

But if the company is not doing well, owning a stock is not going to do well. There's no doubt about that. So if they give you an awesome discount on it or they're just giving the stock to you, of course, take it, but get rid of it as soon as you can. You don't want to have a huge chunk of your portfolio tied up in your own company. My guideline would be something like 5% or less of your portfolio ought to be in your own company.

But it sounds like you just got to get some more information about how this plan works. And if it's really terrible, start talking to people about maybe ending it, especially if it's not that big of a practice.

QUOTE OF THE DAY

Our quote of the day today comes from Ben Graham. Those of you who don't know who Ben Graham is, Warren Buffett considers him to be his teacher. And so, Ben hasn't been alive for quite a while now, but he said in one of his books, “The individual investor should act consistently as an investor and not as a speculator.”

What he meant by that is to buy productive assets with an expected positive return and a gap between how it looks like it's going to perform and the minimum it could perform and still be a reasonable investment for you. It's worthwhile reading Ben's books. Jason Zweig did the foreword on one of the more famous ones, but lots of the teachings in there are still classic teachings on how to invest as a value investor.

All right. Our next question is talking about work benefits. Let's take a listen.

HOW TO BEST PAY EMPLOYER OFFERED LONG TERM DISABILITY PREMIUMS

Speaker 2:
I'm signing up for benefits for my first job at a fellowship. And one of the benefits is $15,000 a month of long-term disability paid for by the employer. I'm given the option to either pay the taxes on the benefit or taxes on the premium. And I know you've talked before about using pre versus post-tax money to pay the premium, but this is a little bit different. I was hoping to get your thoughts on which option might be the best option for most people to use.

Dr. Jim Dahle:
Wow. I love it. I love that they're giving you the choice. I don't think that's the case most of the time. I don't think most people signing up for a group disability insurance plan have that choice typically because it's a deduction to the employer. It's taxable income on the benefits to the employee.

But it sounds like you're paying some money for it. Maybe you're a part owner. I don't know exactly what your employment situation there is. And so, you have this choice. And I love that you have the choice because I would have loved to have the choice. I never had the choice throughout my career. I had an individual disability insurance plan that I bought myself, had nothing to do with my employer, and I was paid for with after-tax dollars. And so, all the benefits would be after-tax.

That's good and bad. The bad is I never made a claim on it. And so, all that expense every year, thousands of dollars, whatever it was, I always paid for it after-tax money. It would have been much more beneficial to pay for it with pre-tax money.

The upside, if I had ever become disabled, at least while I had the policy in place, is I would have gotten a little bit more of a benefit. I think the most I had from that policy was $7,500. I had a policy through my employer. I think that was also after-tax. I think that was $10,000. I think that's the most disability insurance I ever had. And both of them would have been after-tax. Obviously, that goes a lot further.

But I've thought about this a lot over the years. If I had the choice, I would probably pay for it pre-tax. As long as I could get as much as I needed pre-tax, I would probably pay for it pre-tax. Because yeah, lots of docs get disabled, and it depends on who you ask exactly what the percentage is. It might be as high as one out of four. For general Americans, one out of four before age 65 will have some sort of disability. Maybe it's one out of seven, something like that. But it's relatively high. But most people still don't become disabled. And so, most of the time, you're going to come out ahead paying for that with pre-tax dollars. And if there's any benefit, you get pre-tax.

But here's the other reason why that wouldn't be so bad, even if you got disabled. Well, you're going to be in a much lower tax bracket. Your income is going to be significantly lower living on disability insurance than it would be with whatever you're making before, because these never replace more than about 60% of your income.

And given the progressive nature of our tax code, I think that's okay to deal with. Guaranteed tax break up front, and tax is probably not that bad on the backside. I think if I had the choice, that's probably what I'd choose. But it's up to you. If you want to maximize the benefit you'd get if you got disabled, obviously pay with after-tax money, get the benefits after tax. But I think it's reasonable for people to do either in your situation. So, good luck with your decision, and hopefully that helps you to think about it and decide what you want to do.

WHAT IS A SPDA AND IS IT WORTH HAVING?

Andrew:
Jim, thanks for being such a reliable source of sound financial information. I was talking to a financial consultant about increasing my bond-like holdings as I may retire in the next five years. He mentioned an insurance product, an SPDA, which I take to mean a single premium deferred annuity.

On the Fidelity website, you go to Products, then Fixed Income Bonds and CDs, then Deferred Fixed Annuities to find these things. They are state-specific with slightly better rates than treasuries. They're being presented as a savings vehicle that you just get your principal and interest back after the five-year or whatever the length of your guaranteed interest period is.

But the annuities that I know of and that you often talk about, like SPIA's, are quite different products. This is a Fidelity item, so I doubt it is a pig in a poke. But I was wondering what you thought about them or what you know about them and what you thought about them as a fixed income instrument.

Dr. Jim Dahle:
Great question, Andrew. First of all, not everything gets sold at Fidelity or you can buy at Fidelity is necessarily a good investment. That goes for Vanguard, too. It goes for Charles Schwab and certainly goes for lots of other places. So, don't assume just because it's somehow attached to Fidelity that it's awesome. That's not necessarily the case.

Let's talk about annuities. An annuity is an insurance product. It's got this insurance wrapper around it and it can have all kinds of things inside it. That insurance wrapper can have all kinds of special features on it.

In fact, lots of annuities are just super complicated. They're really hard to understand. That's one of the beefs I have with annuities, is not only are they a commissioned product often designed to be sold and not bought, but they're often so frigging complicated that nobody can understand what's going on with them.

That's one of the beautiful things about a pure annuity, the single premium immediate annuity, a SPIA. You buy one of these things and you know what you're buying. You're turning over a lump sum of cash to an insurance company.

In exchange for that, they will pay you a fixed amount every month until you die. Pretty straightforward deal. You die next month, they made out like a bandit. If you don't die for 50 years, you made out like a bandit. That's just the way these things work. It's a chance for you to insure against longevity, if you will, and put a floor underneath your retirement income.

It's a very safe income product. Think of it not necessarily as an investment, but more of a way to spend your money. The returns on it are similar to what you'd get from high quality bonds. That's the classic annuity. If you understand what that is, you understand what an annuity is, but there's lots of variations on the theme.

Now, one of the common annuities that a lot of people think is not too bad is called a multi-year guaranteed annuity or a MYGA. Maybe that's what this thing is. As you describe it, that's what it sounds like. What this is, is it's the annuity industry's answer to CDs, Certificates of Deposit that you'd buy at a bank.

The downside to a CD, aside from you got to go to a bank to buy them, you can buy them at a brokerage too. But the downside of a CD is it pays you interest. Whether you want the interest or not, it pays you interest and you have to pay taxes on that interest as it goes. Then when it's up, you got to buy a new one. If it pays all the interest at the end, well, you got to pay taxes on that.

Well, the beautiful thing about these MYGAs, these multi-year guaranteed annuities, is you get this guaranteed rate on them like you do with the CD, but it doesn't pay you out the income as it goes along. Nor if you roll it into another annuity, when the term ends, one year, two years, five years, eight years, whatever, you don't pay taxes on it then either. You don't pay taxes until you want to take the money out and spend it.

Just take advantage of that feature of an annuity where it's tax deferred growth. That's a cool feature of it and why some people look at it and go, “Well, that's more attractive to me right now. I want a very safe and CD-like investment, but I'm in a high tax bracket now. I might not be a little bit later, and I'd rather defer the taxes for a few years until this thing pays out.” I think that's what you're describing.

There's another reasonable type of annuity to buy. It's usually called a DIA, a deferred income annuity or delayed income annuity, depends on who you ask. This is basically longevity insurance. It pays you nothing in the year you buy it, unlike a SPIA. It might not pay you for a while, might not pay you for five years, 10 years or 20 years, but when it does start paying you, it pays a lot because it had all that time to grow in a tax deferred way.

For a bunch of people who bought it to die. And because of that, that means those who are still alive after 10 or 20 years or whatever, it can pay more to them. The yield on this thing might be 30 or 40% a year of what you put in there originally.

It's longevity insurance. If you live a long time and inflation has gone crazy, well, it's going to pay you a whole bunch of money starting when you turn 85 or 90 or 95 or whatever. It's longevity insurance. That might be what you're talking about as well, but I don't think so. I think you're talking about more of a MYGA kind of product.

The key to all these annuities is you have to understand what you're buying and you have to want what it is they're offering. If that's not the case, don't buy it. It's okay to use bonds. It's okay to use CDs if you want. It makes sense as you're approaching retirement in the first few years of retirement to reduce your sequence of returns risk with a little bit more safe investments. That makes sense.

Whether you want to do that with traditional investments like bonds or a bond fund or a tips ladder or I bonds or those sorts of things, or whether you want to do it with an insurance product like a SPIA or a MYGA or whatever is really up to you, but it's not unreasonable to look at and to do. Just make sure you understand what you're buying, understand the downsides, understand how it's taxed, understand worst case scenario of what can happen, and you may be very happy with what you're buying.

INTERVIEW WITH DON WENNER OF DLP CAPITAL

All right, I'm going to bring one of my friends on here and one of the sponsors for this podcast and the White Coat investor in general, Don Wenner with Dream Live Prosper Capital or DLP Capital. They've been sponsoring us for a long time. I've been investing with them for a long time.

They often come to WCICON and sponsor there. Often the first day, well, the day before really, the day we have just an evening opening reception for the conference. They often put on an event, talk about how to build your legacy and those sorts of things.

If you're interested in that sort of thing, feel free to come early to WCICON. They're doing it again next year in Las Vegas, but we're going to talk with Don for a few minutes about the real estate environment these days as well as DLP in particular.

My guest today on the White Coat Investor podcast is Don Wenner, principal CEO, founder of DLP Capital as Dream Live Prosper Capital. He's been sponsoring the White Coat Investor now for years and also manages some of my money. Don, welcome to the podcast.

Don Wenner:
Thank you, Jim. Pleasure.

Dr. Jim Dahle:
Let's talk a little bit about why DLP is unique and perhaps the most significant is your commitment to your mission. You are not just investing money for people like me and other White Coat Investors. You are trying to accomplish something that I think is noteworthy and worth a great deal of time and effort. Tell us about what you're doing.

Don Wenner:
Thank you, Jim. DLP, which stands for as you said, Dream Live Prosper, our purpose is to transform lives through the building of thriving communities. The most applicable and obvious meaning of that is the physical housing communities that we invest in. We'll talk about that we want to build thriving communities where people are, we call living fully, where there are opportunities for both success in their lives and significance helping others.

But we also invest heavily in building a thriving community within our employee base, within our 3,500 family investor base, and then with the sponsor, developer, builder, operator space of those we deploy our money with, housing developers, builders, operators. We take a very, as you said, mission-driven approach to really bringing, creating as much impact as we can in the lives of those we do business with.

Dr. Jim Dahle:
Yeah, it's pretty awesome what you're creating there. And you mentioned your investor community, 3,500 plus investors. I think 800 plus of those are White Coat Investors.

Don Wenner:
They are.

Dr. Jim Dahle:
You've been trusted by a great deal of our community. I think a lot of that comes down to the integrity people see in you and in your team and in the mission you're trying to accomplish. Yes, people want to do well, but they also enjoy doing good while they're doing well. So, tell us what's unique about DLP as an investing firm compared to some of the other private real estate funds out there.

Don Wenner:
Yeah, thanks, Jim. I think the first thing I'd say that's unique is, let's say first is the purpose, the mission we just talked about. And second is that we chose early on in our journeys. We're on year 19 now, early on our journey to run private investment funds and to do so in evergreen structures, which provide flexibility to you as investor, liquidity to you as investor, but give us the ability to maximize each investment and not be under the timing of a traditional closed-ended fund, which is how most real estate fund managers operate.

The decision to be structured that way was one of the biggest decisions we made and has changed the position we're in, especially through times of volatility. And then I'd say that the next really neat part about our business is that we've put a tremendous amount of focus around building what we call an extraordinary organization.

I've written a couple of books on this topic, Building an Elite Career. It's actually sitting right over my shoulder, Building an Elite Career, and writing the book right now called Building an Extraordinary Organization. And we built this discipline system we call the elite execution system. How do you scale a high growth, high profit business? How do you set clear strategy, execute on that strategy, solve problems and drive clear communication? When in our case, we've grown by about 50% a year for 19 years in a row.

That system we've built is built around people. It's built around developing and retaining the best leaders. And it's allowed us to execute at a really high level and generally really, really consistent. As you said in our recent conversation, almost boring performance and how consistent it's been.

What's really unique is not only do we do that in our business and our company, but we help the organizations we deploy our money with do the same, increasing their performance, increasing their growth, decreasing our risk, which brings me to the final note, which is the majority of our investments we make, even though we are a direct developer, builder, operator of housing communities, we own 23,000 housing units today. We deploy the majority of our money as a partner and a lender to other developers, builders and operators with all of their capital in subordinate to our capital, further reducing our risk, further increasing the consistency of our returns.

Dr. Jim Dahle:
Yeah, I'd add a few things to that. You actually send your K-1s out on time, for instance. Your accounting team deserves some kudos for this. I've been involved in a lot of these investments and most of them do not send a K-1 out in early or mid-March. Most of them don't even make the April 15th deadline.

Don Wenner:
To that point, yeah, we've never missed a deadline. We have a 35-person accounting team. So, unlike a lot of real estate syndicators, small managers, it's really a small group of people and then we're hiring third parties. We have a total of 800 people executing on our strategy every day, including 35 accountants. We've never not gotten our K-1s out on time. We've never not gotten a distribution out on time. We pay out our distributions every month. We pay them out before we earn our management fee. We pay out preferred returns, which is quite unique. We distribute our reporting, our distributions, our returns, our tax forms all on time consistently, almost boringly, as you have said, but that boringness is quite unique.

Dr. Jim Dahle:
Yeah. And highly desirable to this investor and hopefully many others. Give us a brief description of the four DLP capital funds that are available to invest in.

Don Wenner:
Yeah, thanks, Jim. What they all have in common is they're all evergreen, meaning they're open-ended, meaning we expect to run these funds five years from now, 10 years from now, 20 years from now, but you don't have to be a part of the fund all that time.

All of them are investing in housing that's affordable for working families. That's our mandate to our funds, our all-impact funds, that that's what they do. They all pay out a preferred return to investors before we earn any returns, including any management fees.

With all of them, you can invest qualified and non-qualified money, so retirement money and otherwise. You can invest through Schwab and Fidelity and self-directed IRAs. All of them have all that in common. All of them provide liquidity, but each one invests in housing that's affordable for working families slightly different and then have slightly different characteristics for you.

The first is the DLP Lending Fund. That fund makes first-position mortgages to professional, full-time developers, builders, and operators of housing communities. We've made over 4,000 loans in this fund. We've never written off a dollar of interest or principal on a single loan. We've generated double-digit returns, annual returns, distributed monthly, two distributions a month, a preferred return of 8% paid out on the first of every month, and then all the additional profits paid out the middle of every month with 90-day liquidity.

That's the DLP Lending Fund. Very easy, first-position mortgages, similar to a bank. We own actually a bank outside of this, so we understand the banking space well. This is a non-bank, but doing loans very similar to that of a bank, but able to generate double-digit returns net to you as an investor.

Then we have the DLP Preferred Credit Fund, which is our other lending fund. That fund has a 9% preferred return, so 1% higher, has a 1% higher target return. Everything else in terms of liquidity and distributions is all the same as the lending fund. We've never even had a delinquency in this fund.

And then we have two equity funds, the DLP Housing Fund, which owns existing housing communities. We own 13,241 rental units in that fund today at an average rent of about $1,300 a month. We've generated 17.4% net returns to investors with monthly distributions, annual liquidity, and to date, all of the income sheltered from tax while you're invested.

And then finally, we have the DLP Building Community Fund, which invests equity in building brand new housing communities that are affordable for working families. That is an 11% to 13% return target. We're north of 12% net to investors, and those returns actually should only get better. And I could certainly explain more why that is with an 8% preferred return and annual liquidity building brand new affordable housing communities.

Dr. Jim Dahle:
Very cool. Now this year, people are seeing some volatility in the publicly traded markets. The last couple of years, the S&P 500 has gone up 25% plus. In 2025, people aren't quite seeing that sort of a situation and there's a little bit more interest in other investments such as real estate.

What would you say to somebody who's disappointed with the volatility they're seeing in the public markets and what would you say to them about considering some private investments, considering putting some portion of their money into real estate?

Don Wenner:
Yeah, I'd say the great thing about real estate investing, generally speaking, especially private investments is consistency. If you look at the last 40 years, 50 years, probably the last 100 years, but the charts I look at are usually the last 40, 50 years. Rent has gone up almost every year the last 40, 50 years.

Regardless of the volatility, regardless of where in a time of inflation or rarely a time of deflation, regardless of interest rates, regardless of all the noise in the markets, rents continue to go up. And that's fundamentally what drives up the increase of value.

Housing less affordable for working families has been an undersupply virtually at all points in our history. Better consistency, in short, less volatility, less worrying about the day-to-days and the value of your investments.

I've had the great joy over the last few weeks of hearing from lots of our investors saying how glad they are to be invested in our funds and not worrying about, some of them, for any of their investments, but at least their investments with us, what's going on in the news and in the markets.

All that is important to everybody when you're a part of the economy, but less important and has had very little effect on our ability to generate regular, consistent distributions and double-digit returns net to investors. I would just say, considering taking some of the money that's in public markets and putting it in a place where you're going to have more consistency, less volatility, better distribution, but still retain, in our case, good liquidity can be a great alternative to the public markets.

Dr. Jim Dahle:
All right. Well, Don, thank you for your time. Thank you for being willing to come on the podcast. For those looking for more information about investing with DLP, go to whitecoatinvestor.com/dlp. And again, appreciate your time, Don.

Don Wenner:
Thank you, Jim, appreciate it.

Dr. Jim Dahle:
Okay, I hope you enjoyed that interview. It's always great to chat with Don. And as I've gotten to know him better and his family over the years, really a pretty spectacular person.

All right, we got a question that's not terribly unrelated to that interview. This one comes in on the Speak Pipe about private real estate funds.

PRIVATE REAL ESTATE FUNDS

Speaker 4:
Hello, I had a question regarding the money used for private real estate investments. I'm an early career doctor, two and a half million in assets, mostly in index funds. I've ventured into private real estate funds for the last year or so, and have money in a few different funds.

Regarding the money used for these investments, I have been parking the amount required in a high-yield savings until the capital call. I recently thought of just continuing to invest in the market in a standard fashion in whatever funds are close to being due for the fund, just selling whatever index funds are just over 12 months old to cover the amount due.

Given that I've typically been doing about a fund or two a year, I figure that on average, this seems like a better move than having that amount of money parked in a high-yield savings account waiting for the capital call.

Obviously, there would be a small risk of needing to sell in a downturn, but I would figure that on average, one would be better off with the money in the market. Does this sound reasonable to you?

Dr. Jim Dahle:
Good question. I think you understand the issues involved very well. Sometimes when you commit to a fund, they don't want your money for a little while. It's not unusual for you to have to wait 30 or 60 or 90 days before they call your capital. And the reason they're doing that is because they figure the money's better sitting in your account earning interest for you than sitting in their account earning interest for them.

It's nice of them to do this. This is a good practice for the investor. I don't complain about this whatsoever. If you can't put my money to work right away, well, I'll just leave it working for me in my account until you're ready for it and then we'll wire it over. This is not a bad thing and this is pretty typical. Lots of funds do this. There's a delay in between when you commit to the fund and when you got to have the money.

The downside, of course, if you leave the money fully invested is that a worldwide pandemic starts or the Fed raises interest rates 4% in a few months or the entire global financial system melts down and you've got this commitment to invest the money and now you only have 60% of the money you thought you were going to have and you can't make up the difference from your earnings or some other investment without selling low.

I don't typically invest the money for this relatively short period. I know I need a fixed sum of money. I know I need it sometime between 30 and 90 days from now. So I leave it in cash.

Now, I don't use a high yield savings account these days because I've found money market funds tend to pay more right now. That wasn't the case three years ago. Three years ago, a high yield savings account paid more than a money market fund. But right now, money market funds are paying more. So, that's where my cash sits. I think at Vanguard it's paying 4.1% or 4.2% or something right now. And you also have the option to use a municipal or tax-free money market fund if you like.

And so, that's typically where my cash sits that I know I'm going to have to use to pay a tax bill coming up next quarter or to meet a capital call for a private real estate fund. That's where I sit the money. And I console myself with, hey, you're making 4%. It's way better than a few years ago when you were making 1% on your cash.

Is there some cash drag there? Yes, it's not for very long and it's not very bad these days. I just leave it in cash. But if you really wanted to, you can invest it into some sort of real estate-like fund. You can invest it into VNQ, which is Vanguard's real estate ETF or some other real estate-like fund if you wanted to. But I think I just leave it in cash. These capital calls are typically not that far away from the time when you're going to need the money. So, I hope that's helpful to you.

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Keep your head up, keep your shoulders back. You've got this. We're here to help. Thanks for being a member of the White Coat Investor community.

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.

INTRODUCTION

This is the White Coat Investor podcast Milestones to Millionaire – Celebrating stories of success along the journey to financial freedom.

Dr. Jim Dahle:
This is Milestones to Millionaire podcast number 240 – Hematologist pays off student loans in less than five years.

Southern Impression Homes takes owning rental property to the next level with their innovative 2.0 approach, focusing solely on turnkey new construction investment properties. Single-family homes, duplexes, and quads in high-growth markets of Florida.

They handle every aspect of the process with expertise and efficiency, including financing, insurance, and property management. To learn more about Build to Rent, visit whitecoatinvestor.com/southernimpressionhomes or call 904-831-8058.

All right, we got a FEW event coming up. This podcast drops on the 15th. The event is on the 22nd. It's next Monday, 06:00 P.M. Mountain. Sign up, whitecoatinvestor.com/few. Elisa Chiang's coming on. She's a doc, a life coach. She's been a WCICON speaker. She is at growyourwealthymindset.com.

But she's going to be talking about wealth and women, deconstructing social narratives for financial empowerment. She's going to talk about discovering where your money beliefs really come from, how they shape your decisions today. She's going to uncover the hidden history of women's financial rights, what it means for you now. Talk about the gender pay gap, especially among docs. Break down the money messages that society pushes on men versus women. And help you learn some practical ways to reframe your money thoughts and step into financial empowerment.

Again, you can sign up for that at whitecoatinvestor.com/few. In case it's not obvious, this one's for the women out there. It's run by the women at White Coat Investor. I'm not even involved in this at all, other than telling you about it at the podcast. But these events have been spectacular, very well received, and will be a great use of your time. Again, September 22nd, 06:00 P.M. Mountain.

Okay, we've got a great interview today. Our doc is a pulmonologist who didn't do everything exactly right, and yet is still having a great deal of financial success. And I think there's a lot of lessons to learn there. We'll talk more after the break. We're also going to talk a little bit about paying for school.

INTERVIEW

Our guest today on the Milestones to Millionaire podcast is Todd. Todd, welcome to the podcast.

Todd:
Thank you for having me, Dr. Dahle. I’m excited to be here.

Dr. Jim Dahle:
Let's have you introduce yourself a little bit to the audience. Tell us what you do for a living, how far you are out of training, what part of the country you're in.

Todd:
Sounds great. My name is Todd Gandy. I'm a pulmonary and critical care physician in the Southeast region, which is my home. After training, I came back home to be close to family, but also for purposes to some extent of geographic arbitrage. I graduated medical school in 2013. I did three years in internal medicine. I did stay on for one year of chief residency year, and then did three years in fellowship, pulmonary and critical care fellowship. I've been in practice now for five years. I came into practice right in the heart of COVID-19 pandemic in 2020.

Dr. Jim Dahle:
Welcome to the ICU, right?

Todd:
That's right. It was a good time to be thrown to the wolves in a sense, but I think looking back, I was very fortunate to experience that because it really got me off the ground running at the start of my career.

Dr. Jim Dahle:
Well, tell us what you've accomplished in the last five years, what we're celebrating today.

Todd:
Celebrating today, paying off my student loans, $297,000 in student loan debt. Coming into residency and fellowship, I originally didn't have really a great plan for that. It was more an income-based repayment plan that I didn't know a whole lot about. I knew I worked for a nonprofit system, and so started off with those payments initially.

About halfway through residency and through the start of fellowship, I got buried. We had a child. Life comes at you fast. And I actually went into what I considered financial hardships, wasn't making any payments on those for some time, and I think fell into the trap of, “They'll take care of themselves with time.”

Once I got into my attending role about five years ago, because I didn't have a great plan for those loans, I refinanced at a low interest rate with a private company and committed to paying them off in full. The first three years were just standard payments, and when I didn't see that premium shrink too much over the first three years, I finally said, “I got to do something about this”, and I made a goal to pay them off by my 40th birthday. And here I am actually having just turned 39, achieved that goal a year early, and very excited to have done that.

Dr. Jim Dahle:
Very cool. Well, my notes say it was $297,316.11. Is that the most it ever was? Was that at some point during training that it peaked at that level? Or was that the amount you owed when you came out of school?

Todd:
That's the amount I owed when I came out of school. Truthfully, I don't really know what they peaked at. That was part of the ignorance is bliss kind of approach. That might have been the peak. They might have creeped over $300,000. For a while, I didn't look at them. And even once I got into my attending role and refinanced, I was making the payments.

But out of sight, out of mind, wasn't looking at them. Until really I dove headfirst into a lot of your podcasts and what the White Coat Investor teaches. I started really prioritizing personal finance and started looking at them regularly. And again, when that premium wasn't shrinking, I wasn't happy and I decided to reset my goals.

Dr. Jim Dahle:
Yeah, a balance doesn't move that much, especially if you've set up a plan that's 10 years or 20 years or something like that. It's mostly interest those first few years, isn't it?

Todd:
Absolutely. It was a 20-year plan. And as the family grew and lifestyle creep grew, all of those things, I just didn't like the path I was on and knew I had to do something different.

Dr. Jim Dahle:
What was the change? Do you remember? Was it gradual or was there one day where you're like, “I got to learn how this stuff works?”

Todd:
I think I did kind of have an aha moment at some point. I can't say exactly when that was. I know a lot of us who listen and read your material, listen to your podcast, go on the website, feel similar. It was simply just starting to read about this and educating myself and really mastering the concept of financial independence. For the longest time, I thought life was you get a job at 25, you work for 40 years, you retire at 65, and you spend a lot in between.

The whole concept of financial independence, sadly, was relatively foreign to me. And once I started listening to your podcast, to and from work, 10 minutes a day, I started to realize, “Hey, this might be for me. I can really take the reins on what the future looks like for me and my family. I just need to educate myself and do the basics. Pay down bad debt, start saving, and living intentionally.”

Dr. Jim Dahle:
Yeah, very cool. Well, 10 minutes a day of podcast is a pretty nice commute, I think. That's another benefit of geographic arbitrage that maybe doesn't get sung as often as maybe it should, right? It's better than sitting in traffic in LA for two hours each way going to work, for sure.

Todd:
Yeah, absolutely. I think I'm very fortunate to have a short drive into work. And when we take on new colleagues, I'm an advocate for living where I live. I think a short commute is very important. I hear on the radio every day, the average American spends $5,000 a year in gas. I can't imagine I come anywhere close to that. I have a six or seven-year-old car, and I've got 60,000 miles on it. 10,000 miles a year, I'm not doing a whole lot of driving.

Dr. Jim Dahle:
Now, it sounds like you got married at some point during your training. It sounds like that was before this financial awakening for you. The two of you at some point had to have a discussion about what you were going to do with your money. Tell me about that first discussion.

Todd:
Yeah, I don't think it was as formal as maybe it should be or could have been. It's still a work in progress. I got married after my intern year. After one year of residency, I got married. Maybe four years later, we had a child. But it was just gradual learning and teaching along the way. I'd talk with my wife about what I've learned through your podcast and other financial resources. And she'd take some of it in. She'd ask some good questions.

But we still really haven't had a formal sit-down discussion about all of our financial goals and financial philosophy as much as we could or should. But yeah, it's still very much a work in progress. But fortunately, I think we come from a very similar upbringing background, have very similar principles. We're just lucky to be in a good working relationship.

Dr. Jim Dahle:
Yeah, for sure. Give us a sense. What intensivists in the Southeast make these days when they're working full-time?

Todd:
I think going back to geographic arbitrage in general, physician pay in the Southeast is pretty good. The cost of living, some of the best in the country. I spent my whole life in the Carolinas. Coming out of fellowship, I'd say our total household income was around $450,000. That's grown. I looked up on my tax returns from last year. We were $638,000. Anywhere from $450,000 to close to $650,000 has been our income range.

The majority of that, my income, but I would say over the last couple of years, the majority of the growth has actually been my wife's income. Over the last five years, she's grown into a high-income worker as well, which has been beneficial for the family and the household. Are we going to grow much beyond $650,000? I'm not sure. We might be approaching our ceiling. But yeah, I'd say that's the range we've had since coming out of fellowship.

Dr. Jim Dahle:
Yeah, not a bad ceiling to have though, right?

Todd:
That's right.

Dr. Jim Dahle:
With both of you working, what have you decided to do as far as child care and balancing all these household responsibilities? What have you outsourced? And how are you taking care of those kids when you're both at work?

Todd:
Yeah, we talk a lot on here about living like a resident. We try to do that to some extent and limit our expenses. But in regards to child care and now school, my oldest child's in first grade. I have a six-year-old, four-year-old and two-year-old. First grader and two in daycare or preschool, as we like to call it. And my first grader is in private school.

Our total educational costs, I would say, are probably close to $50,000 a year for those three kids. We just factor that into our budget and working to plan for the future. We do have 529 accounts we've opened for each that have gone to about $20,000 for each kid. I'm hoping to get those to $50,000 or $60,000 before tapping those out.

That's child care. Being close to family is helpful. We don't have to pay a whole lot for babysitters or when we go out of town on vacation for the weekend, we're fortunate to have grandparents nearby who can help us out.

Dr. Jim Dahle:
Very cool. Now, I often tell people, you don't want to have student loans still when you're more than five years out of training. Do you agree with that? Are you glad to be rid of them within five years?

Todd:
Yeah, I'd absolutely agree with it. I encourage a lot of my friends to kind of rethink their approach. It's funny, I talk to people in medicine who are earning a lot more than I am and they'll say, “Oh yeah, my financial guy just says to not worry about those, keep making minimum payments and they'll take care of themselves.” Or others who are just sticking to the 15 to 20 year plan, some who have had success in PSLF approach.

But I think for me, absolutely, it worked. I think getting dead off my shoulders as much as possible is good. Looking back, one of the mistakes certainly was just accepting the status quo and taking bad advice. I can think back to what we had in medical school, a financial advisor who was hired by the medical school who very much feels like looking back, his only job was to help us figure out how to get as much loan money as we could and how to do that back.

And so, I was fortunate to come out of undergrad without any student loan debt. All my debt was taken on in medical school. But I could have been a little more frugal in hindsight. I probably could have stuck to a PSLF plan if I had been a little bit better educated. All of my employers throughout my time in residency and fellowship and now as an attending have been nonprofit organization. But despite that, I don't regret anything I did in terms of resetting these goals, setting a timeline to get them off my back within five years and actually achieving that goal a year early.

Dr. Jim Dahle:
Yeah, what's the biggest check you ever wrote to your lender? Do you remember?

Todd:
It was the last check I wrote. Over the first three years of repaying student loans, I think the premium came down by about $57,000. Balance when I paid it off was $230,000, $240,000 that I had saved up over the course of two and a half years. One check, it was just a few clicks online. It didn't feel quite the same, but it was nice to see that number disappear.

I got to give credit to a friend of mine. I can recall a conversation I had at dinner one night. He's a single guy, also a physician, but not married, no children, pretty financially savvy. And we started talking some about finances. He said, “What are you doing in terms of a taxable brokerage account?” I said, “I don't have one. I didn't know how to open one. I thought it was going to be too time consuming to make it happen.” But he was like, “Well, at the very least, you need to take what you got in savings and put it in a money market account.”

The next day I opened up a taxable brokerage account with Charles Schwab, opened up a money market account and just put $50,000 in there. And a couple months later, I saw a number grow. And that was nice. Instead of just seeing a number shrink, I was very accustomed to putting my paycheck in savings every month and then spending it down. Repeating the process and really never seen a number grow. That was very helpful.

And then I started investing that money. And that Schwab account is what I used to pay off my student loans. It was about 50% in the end. 50% of the cash I used to pay off those loans were in a money market account. And the other 50% were in index funds and even some stocks that I had picked.

Dr. Jim Dahle:
Now somewhere out there, there's an MS4 or a PGY1. Listening to this going, “I don't know much about my student loans. I don't know if I'm ever going to be rid of these things.” What advice do you have for that person?

Todd:
Yeah, I would say first and foremost, don't just ignore them. I got bad advice in medical school and through residency from older doctors who said, “Well, you're going to have high loans. It's okay. You're going to be a high earner. You'll just pay on them into perpetuity. But your income will take care of it.”

I think that is not a way to live with intention. So, educate yourself on your options. And at the end of the day, whether you use some sort of PSLF program or refinance and are determined to pay off the premium in full, I think you should always be setting aside money intentionally to pay off those loans.

Dr. Jim Dahle:
Well, congratulations, Todd. You've accomplished no small feat. Nearly $300,000 in student loans you've paid off in about four years, it sounds like. It's pretty awesome. Well done. You should be proud of yourself. What's next for you? What's your next financial goal you're working on?

Todd:
Well, I guess we technically could celebrate another one. Our net worth is over a million dollars. I calculated it this morning. It's actually close to $1.4 million when I include about $500,000 in home equity. I guess reaching that second million dollar mark is a goal, maybe $5 million by 50 and financial independence by the mid-50s.

Dr. Jim Dahle:
Yeah, very awesome. Well, you'll find that the second million goes a lot faster than the first one.

Todd:
I believe that. I'm seeing it kind of play out right now in person. Short-term goals, I recently purchased Fire Your Financial Advisor through your company. I'm about halfway through that course. I'm going to have my wife sit down and take the course as well to formalize a written financial plan. Sadly, we don't have one of those quite yet, but we're working on it.

And then beyond that, my wife very likely will be transitioning out of her work role in the next year or two. And I'm hoping to get into real estate. She's interested in becoming a real estate professional status. And so, we might be looking into your real estate course once we get all the way through Fire Your Financial Advisor.

Dr. Jim Dahle:
Very cool. Well, congratulations to both of you on your success. Well done. I'm looking forward to following along with your success as the years come by. Thank you for being willing to come on the podcast and sharing your story with others. Hopefully inspire them to do the same.

Todd:
Thanks very much, Dr. Dahle. It's kind of surreal getting to talk to you after hearing you so much on the podcast. Absolutely a pleasure to come on and talk with you. And thanks for all you do for our community.

You're always making sure to thank us for the work we do in the hospital. I want to make sure we thank you for what you're doing here in terms of financial education. A lot of it's pretty basic stuff. But as you know, a lot of us out there don't know our basics quite yet. Champions are masters of the basics and you've really helped me master the basics.

Dr. Jim Dahle:
Okay. I hope you enjoyed that interview. I like doing interviews like that where people reveal that they're not perfect. The truth is the high income you earn as a doc allows you to make all kinds of mistakes and still be okay. So, do not beat yourself up that you've made some financial mistakes in your past.

All of us have made some financial mistakes in the past. I've talked about some of the ones I made. Thankfully, I made most of mine very early on with very small amounts of money. But I own some crummy whole life insurance as a medical student. I went to a fee-based, not a fee-only advisor and got some lousy advice, quite honestly. I wasn't paying very much for it, but it wasn't even worth what I was paying for it.

I've made mistakes just like Todd's made mistakes. I talked with him after we stopped recording. I'm like, man, “How much regret do you have about not going for public service loan forgiveness?” And he has a little bit, but not a lot because he likes taking control of the situation. He had some doubts about whether it was going to work out for him.

But the truth is once you put a plan together, whether that plan's going for public service loan forgiveness, whether that plan is paying off your student loans, all you got to do is work the plan. And the plan works fine. He was making plenty of money. Paying off that amount of student loans was very doable on his income. And he did that. And now his student loans are gone just as though they had been forgiven via public service loan forgiveness.

The truth is now that he's figured out this financial literacy thing, he's going to become a gazillionaire. Go down the road, project this out, five, 10, 20 years. He's going to have millions and millions of dollars. Is the $300,000 that he paid off in student loans rather than getting a freebie from the taxpayer via PSLF really going to matter? No, it's not. What matters is that he got that high income by finishing his training and working hard and that he's now managing it well. He's managing it intentionally. Is he becoming financially, more financially literate every month? Absolutely he is. And that pays great dividends when you make $400,000 and $500,000 and $600,000 a year.

I think that's the lesson to take away from this. Not to go, “Oh, I would have done it a little bit differently if I was doing it.” Well, maybe you would have. And maybe you would have optimized it slightly better. But the truth is we only got to get the big stuff right. We don't have to get everything right. We've already got a high income.

Most Americans have an income problem. You don't have an income problem if you're like most docs. Your problem is just learning to manage that income to take that high income and turn it into a high net worth. High Earner, Not Rich Yet or HENRY. And that's what a lot of you are.

I don't want you to be that for long. I want you to be a high earner that is rich. Because when you are wealthy, when you're financially comfortable, when you don't have financial worries, you don't have to spend as much time trying to make payroll and trying to make payments. You can instead put that focus on making a real difference in the world. Whether that's in your practice, whether that's in your community involvement, whether that's in your family, whether that's in treating your own burnout, whatever it takes. I just think you're going to be better off that way.

FINANCE 101: PAYING FOR SCHOOL

All right, I promised you at the beginning that we're going to talk a little bit about paying for school. And I'm not talking about your school. We spend lots of time talking about that on this podcast. Whether that's borrowing some money and going for public service loan forgiveness or whether that's signing a contract for an MD, PhD or an HPSP or with the National Health Service Corps or Indian Health Services, whether that's your parents being wealthy and helping you pay for it, that's water under the bridge. I'm talking about your kids now.

There's really four pillars to paying for school. We're talking about college for the most part here. The first one is school selection. This is probably the most important one. School's a little bit like a wedding. College is like a wedding in that it costs what you're willing to pay. You can go to a very inexpensive school.

The least expensive one around here is a community college. You live at home. You pay almost nothing in tuition. And you can come out with very little money having been spent to get that education. Even some of the state schools around here and one of the private schools around here is very inexpensive, four-figure tuition bill every year.

Basically they're cheap enough that you could work your way through college. If you work hard while you're in school, you work hard in the summers, you could work your way through and be totally debt-free.

On the other hand, there are undergraduate institutions in this country that are $100,000 a year. You could borrow $400,000 just to get an undergraduate degree in art history, underwater basket weaving, whatever. Something that's not going to pay you anywhere near that amount of money. So, school selection matters.

And then after that, you have the parental savings, okay? What you're saving up before junior start school. Typically that's done in the 529 plan these days. 529 plan, you don't get a tax break when the money goes in. You might get a state tax break, but usually you don't get a federal tax break. And sometimes you don't even get a state tax break. Then it grows in a tax-protected way.

And when you pull it out, as long as you spend it on legitimate educational expenses, which doesn't include transportation, by the way, it comes out tax-free. So, it's kind of like a Roth IRA for education. Great way to save for college. Okay, that's pillar number two. First one's school selection. Second one's parental savings.

The third pillar is parental cashflow. You don't actually have to save the whole cost of the education up before they start. I don't know where this idea comes and people end up with these $600,000 529s. I don't know where they think their kids go into school, but you don't have to save it all up in advance. You can cashflow something.

Junior is no longer in the house eating all your food? Well, that just freed up $250 a month that you can go toward helping junior pay for college. And typical doctors, you're making pretty good money. You're making $20,000 or $30,000 or $40,000 a month, $50,000 a month. Yeah, some of that can go toward paying for college with your cashflow.

And then the fourth pillar is your child's contribution. That might be scholarships. It might be some of their savings. It might be them working during school or during the summers, them making a contribution to their own education. Those are the four pillars of paying for school.

And you notice there's not one that's called student loans. I don't think the children of doctors ought to be borrowing money at least for their undergraduate education. It's just too easy to get that for too low of a price that if you're saddling your kid with $150,000 in student loans for an undergraduate education, I think you're doing them a disservice. I don't think that's the right way for the top 1% or 2% or 3% in our country to be treating their kids.

So, try to get them through undergrad without any student loans at all. Now, if they go to dental school, maybe that's not going to happen. They go to medical school, maybe that's not going to happen. Maybe there's going to be some borrowed money at that point. And you can talk with them about how you're going to manage that. Keep it to an amount that's very reasonable given their expected future income and they can get public service loan forgiveness for some of that, or they can just refinance it, pay it back. Same thing we talk about on this podcast all the time for those high earners.

But use those four pillars to pay for school in order to get them through undergraduate without debt. For a lot of us, that wasn't possible for us. This is a chance to change our family tree and get them a little bit of a headstart into their life. So, hopefully they can pass that forward to your grandkids and great-grandkids and great-great-grandkids and really change the way your family does education going forward.

My daughter is being dropped off on the day we're recording this. We're recording this in late August. She's being dropped off at college. Number two is going to college. Half our kids are now out of the house and it was very interesting. She's got a good 529 that we saved up far more money than she's going to need for an undergraduate education at her chosen institution. She's there on a full tuition scholarship anyway.

But the funny part about it is my wife took her out last week to get a computer for her. And she's going into mechanical engineering. So, she needs a relatively high-powered computer. It's basically like a gaming laptop. And she's like, “Oh, I thought this was going to be a gift from you guys.” She didn't think she was going to have to use her 529 money to pay for this. I'm like, “Do you have any idea how much money is in your 529? That was the gift.”

But it's fun to see that my kids in some ways are just as cheap as I am. And what you teach your kids about finances maybe matters more than how much money you give them. Don't leave it to the world to teach them how finances work. Teach your own kids financial literacy. The stuff you're learning, pass it along to them. You'd be amazed what a difference it makes when you leave home already understanding how investing works, how insurance works, how college works, how careers work.

Talk with your kids about this stuff. There's no reason that we have to have financially illiterate people who are 20 and 30 and 40 years old in our country. It's a huge blessing to be financially literate from the very beginning of your life. So, pass that legacy on to your kids.

SPONSOR

Our sponsor for this episode is Southern Impression Homes. They take owning rental property to the next level with their innovative 2.0 approach. They focus solely on turnkey new construction investment properties. There are single family homes, duplexes, and quads in high growth markets of Florida.

And as a turnkey provider, they handle every aspect of the process with expertise and efficiency, including financing, insurance, and property management. You can learn more about build to rent, direct ownership, but with turnkey management properties by going to whitecoatinvestor.com/southernimpressionhomes or by picking up your phone and calling 904-831-8058.

All right, I hope you enjoyed the episode. We're grateful to have you here. Without you, it's not much of a podcast. We'd love to have you on here. You can apply at whitecoatinvestor.com/milestones.

Till next time, keep your head up, shoulders back. You've got this. We're here to help. See you next time on the Milestones to Millionaire podcast.

DISCLAIMER

The hosts of the White Coat Investor are not licensed accountants, attorneys, or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.