MtoM #282: How a Health Scare Changed This Doctor's View on Money

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This is the White Coat Investor Podcast, Milestones to Millionaire celebrating stories of success along the journey to financial freedom.

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Welcome back to the Milestones to Millionaire podcast where we feature you and your stories and your successes and use them to inspire others to do the same. You can sign up to be a guest on this show@whitecoatinvestor.com Milestones. This podcast is sponsored by Bob Bayani at Protuity. He's an independent provider of disability insurance planning solutions to the medical community in every state and a longtime White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or just get this critical insurance in place, contact bob@whitecoatinvestor.com Protuity. You can do that today or you can just email infoprotuity.com or you can just pick up your phone and call 973-771-9100. Okay, I think this drops like the first week of July. Well, that's a big change for medical students. Really, the change is only for first year medical students. But the one big beautiful bill act, OBBBA or OBA that was passed last July changed the landscape for medical student borrowing. Okay, so new students are now capped on their federal student loans of $50,000 per year, $200,000 total. So what does that mean? That means most indebted students are going to need some private loans to pay for medical school. Right? You're going to take your first 50 as federal loans so you can benefit from the IDR program, so you can potentially get public service loan forgiveness, but the rest is going to come out as private loans. And you know, some people are like, ah, this guy has fallen. This is terrible. This is the way it was 20 years ago, right? There used to be a limit on how much you could take in federal student loans. Then that limit went away for a decade or two and, and now only us old people remember when medical students had private loans. It wasn't that long ago, but it is the case again. And so we're trying to help you with this because it's so new. We've launched a new resource list to make this easier. You'll find vetted private student loans, loan companies there, and two bonuses you're not going to get anywhere else. First one is you're going to get cash back from some of the lenders themselves. Literally, you take out the loan and they'll give you some cash, which is helpful. You can use it to maybe Borrow less or pay for your other expenses, et cetera. It's a nice bonus. It's a better deal than you can get going directly to the lenders to go through the links on the White Coat Investor site. And the second thing is, we're going to give you free access to the fire your financial advisor student version of our bestselling flagship course. This is for medical students who are just starting their financial journey. You can upgrade it to the resident version, the attending version later, but you're going to get those bonuses by going through our links. And, of course, you're helping to support the White Coat Investor at the same time. Go toWhite Coat Investor.com loan. Get more information about this. If you're in that category, second, third, fourth years, you should still be taking out federal loans you're grandfathered in. But this is for the first years that find themselves. Ah, I got to take out some private loans, whether that's $5,000 or whether that's another $50,000. Let's make sure we can get you the best possible deal we can on those private loans. And then, of course, going forward, as the years go on, you're going to refinance those early and often. All right, we've got a great guest today, a repeat guest. Let's get them on the line. We have a repeat guest today on the Milestones to Millionaire podcast. Tyson, welcome back to the podcast.

C

Thanks, Jim. It's great to be a repeat customer.

B

Yeah. So we had you on episode 109. That's gotta be four years ago, almost where you paid off your student loans. Congratulations on that again. But here we are with another milestone. Tell us what you've accomplished.

C

Yeah, it's been a crazy four years, but my wife and I have reached a million dollars in investable assets.

B

You're millionaires. Congratulations. That's awesome. And probably more than millionaires, since we're just talking about the investable assets. That's great. Okay. Remind people what you do for a living, maybe what your spouse does, what part of the country you're in and how many years out you are now.

C

Yep. So I'm a geriatrician at the University of Colorado. I'm the associate program director for the fellowship. When I was a guest previously, I was a geriatrician still, but at the University of North Texas, teaching at my medical school. And I am now eight years out of training. My wife is a NICU nurse, and she has been rotating days and nights like crazy whenever we make our moves. So I'm very Appreciative of her support through this journey.

B

Okay, so the markets have been a bit of a tailwind for you the last few years, so that's helped. But you don't get to a million dollars just from a tailwind on. On money you had saved in a year or two as a geriatrician. So give us a sense of what your combined income has been since you got out of training.

C

Yep. I graduated fellowship 2018, signed my first contract for $205,000 and thought I was really making it big. And now working in academics, I'm up to 230 a year. My wife, her pay is variable because she's a shift worker, but usually around now, pretty stable, around $100,000 a year.

B

Okay, so you guys basically make $300,000 a year for the last eight years or so. Okay, tell us about your net worth in total. What are your assets in besides just the investments?

C

Assets are mostly just house and investments. Housing has also been a bit of a tailwind recently, as you know, but moving from Texas to Colorado, the price difference was quite shocking.

B

Yeah, Denver has the same problem Salt Lake has. It's. You're like, wait, this is a moderate cost of living and it's still less than the Bay Area. But you start wondering where your kids are going to live. For sure you do.

C

Well, I should say you might. We don't have kids, so it's not an issue for us.

B

Yeah, yeah, exactly. Okay. All right, well, so tell us how you did this. Tell us the story.

C

Yeah, you know, it started in 2018 with paying down loans aggressively and starting a little bit of a retirement account for myself. My wife started work in 2010 as a nurse and she set aside some in her employer retirement accounts, but mostly we used her salary to fund medical school and that's how we only graduated with $120,000 in debt. And since 2018, paid off loans, it was about four years ago. Have really started to invest heavily in all my employer sponsored retirement accounts. Had to break it up into sections. In Texas I did have a pension that was really hard to leave. And here in Colorado, they have since removed the pension for the medical employees that are our state employees. There's still plenty of pensions out there for state employees in Colorado, but now I save in my 401A, 403B, 457 and we saving her 401K and then our HSA as well. So trying to get all our pre tax deductions taken care of and really have kind of hit it Hard the past few years.

B

Well, given your income and how many retirement accounts you have available to you, I'm assuming all of your retirement savings is in retirement accounts. Is that true?

C

Yes, that's true. I have some or we have some in a brokerage account that you know, if I have a bonus for the year or for the six months based on my RVUs and we know we're not going to have a large expenditure, I'll move it into a money market account in case we have some upcoming expenses or into a long term investment account.

B

And how have you decided the most difficult question in personal finance? How much to put in tax deferred and how much to put in Roth.

C

That has been tricky, I will say for me, I don't want to say I'm a low earner, but being on the lower earning end of the spectrum for a physician, it is much easier for me to fill all my accounts tax deferred rather than in Roth. So when I just think of the raw numbers and how I feel psychologically applying that, I tend to do everything tax deferred and then just do my Roth IRA once a year.

B

Yeah. Well, putting all that into tax deferred, given your income, I'll bet that's substantially lowering your tax bill.

C

Yes.

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Do you have any idea about how much you pay in federal taxes a year?

C

The one thing I don't do on my own is file my own taxes. And my CPA sent me our summary this year and it was about 15%.

B

15%? Yeah. Cause you're getting the biggest tax break available to most physicians, which is to pour money into those tax deferred accounts. Okay, so what do you invest in? What are the investments look like inside those accounts?

C

Well, I wish I could say they're exciting. I'm looking at my Excel spreadsheet right here and they are split between my equities, large cap, international and small cap. And then I try to keep about 10% bonds, but with the growth of the equity market in the past few years, I need to rebalance because I'm at about 7% bonds right now.

B

Yeah. So a few boring index funds.

C

Yes.

B

Yeah, it's amazing. And now you're a millionaire. All you did is just pour money into your retirement accounts and invest it in boring index funds. And here you are a millionaire. You're not even 10 years out of training and it basically took you the same amount of time it did for me. Supposedly not a high income specialty, but a moderate income specialty. And you got there just as quickly through your Discipline. So well done there. Okay, so tell us how you did it. I mean, there's lots of docs out there. You look at surveys, net worth surveys, and 25% of docs in their 60s are not millionaires. And here you are eight years out of training, you're already a millionaire. What did you do differently that those docs didn't do?

C

I think we were very intentional. I do have a core belief, if you will, of you can change what you can measure or what you measure. And so I think one of the most important things from a financial standpoint that we can measure is our net worth. And so with that and understanding how to grow net worth, you know, just simple discipline with margin over time, just trying to stay disciplined and contributing to investment accounts even when times are hard or when times are good, and then maintaining that margin, so saving more than we spend and then just giving it that time. The time is the part of the equation that I am understanding better and better, I think.

B

And what do you think your savings rate's been the last year or two or three?

C

I would say it's been between 33 to 40%. And again, that's variable, depending on my wife's shifts and the amount when she's on night shift, the differential that she gets. And we have a little bit more take home to spend when she's. When she's on nights. But I don't enjoy that. I would much rather her be working days.

B

Yeah, okay, but you're saving quite a bit of money. I mean, this is part of your success is, yes, you're not making a gazillion dollars, but a whole bunch of what you are making is going toward your investments, and that's partly why they're growing so rapidly. Okay, you guys have had a little bit of a challenge the last year or so. Do you want to talk any about that and how that's affected your financial plan or. Or how your financial plan has helped you deal with that?

C

Yeah, that's. It is something I do want to be sure to share because I think it's important being a geriatrician. You know, I work with a lot of people towards the end of their life, and I get to hear reflections on life lived and experiences and kind of the joys and the. And the downsides of having a long life. And this year, my wife, my partner, was diagnosed with an ovarian tumor. Fortunately, it turned out to be a mucinous borderline ovarian tumor. And a borderline tumor. I'm not a gynecologist I'm not a gynecologic oncologist, but it is less risky than a malignant cancer, still has a chance of recurrence and still has a chance of turning malignant if it does recur. But this major health condition really shifted my mental state when it came to money. So for some background, my partner and I met in high school, got married right out of College and in 2020 was our 10 year anniversary. Of course we didn't do anything big in 2020. I don't think anybody did anything big besides work. And think about COVID In 2015 it was our or 2025 is our 15 year anniversary and we had just moved to Colorado or back to Colorado. So this year after this major health condition, I've been able to look at spending a little bit more freely and had some psychological freedom when it comes to spending. And as a part of our major move back to Colorado, one of her caveats was that she wanted to have a place to sit outside in our backyard. And so we're doing a major home renovation this year too. So all that to say in my ips I did not have a reason to look back at it with a major illness. And so after we had this major illness I've since gone back and revised my IPS for reasons to revise it. And that does include a major life limiting or life threatening illness. So that I keep in mind the overall goal of this money is not to just have it and hoard it. It's to enjoy life in the day to day and enjoy life in the year to year that we have.

B

Do you think you've shifted your balance of how much you save for future you versus spend on current you now?

C

I don't think we've actually shifted. I haven't changed any of my contributions, but the spending comes easier, a little

B

bit easier to spend money now than it used to be. Do you find yourself doing more satisficing than optimizing?

C

Oh, for sure, for sure. I really like those terms by the way I use them. I teach the residents and fellows and I do think I very much used to be an optimizer and now would call myself a satisficer of if it gets me 90% of the way there, then I'm going to be happy with that because the 10% that we have could really bring extra joy.

B

Well, having a million dollars saved for retirement at such a young age, I mean that's going to double probably a couple more times while you're working. I don't know that you're necessarily at what we'd call coast fire yet at this point, but it's certainly a great start to retirement savings and maybe gives you a chance to take your foot a little bit off the gas pedal and start going. Well, what other financial goals do I have? You mentioned sitting outside, which is much more pleasant in Colorado than Texas as I recall. Less bugs, less humidity, et cetera. Maybe more impressive views depending on where you're at in Colorado. But do you feel like you're now focused more on these shorter term goals and longer term goals?

C

Yeah, yeah. You know, writing a plan. I had a plan for retirement and what that would look like. And being a geriatrician, you know, my expectation was that I would not outlive my partner. And so I wanted to have enough in retirement that she would be well taken care of. I still have that goal, that's still a long term goal. But this event this past year has really shifted that and made life a little bit more exciting in the short term. Because I look at these short term goals, like this renovation that we have coming, it's going to help both of us, I think, enjoy what I like to call the small life, the day to day life. Wake up, go to work, come home and we can all get really caught in that grind. But how do I intentionally enjoy my small life, my day to day life?

B

Now there's somebody out there that is like you were four years ago, eight years ago, whatever, they're a geriatrician or a pediatrician or preventive medicine doc, or a family practice, whatever, relatively low paid specialty. And they want to be where you are, they want to be a millionaire. They want to have all these options you have and this financial freedom you have. What advice do you have for them?

C

I'll start out by saying a million dollars is achievable. I grew up in a public school teacher household and my dad would take me to McDonald's when my mom was tutoring early in the morning. And I remember the million dollar Monopoly game and I got Park Place once and I was so excited because I thought this is how we become millionaires.

B

Seven year old me, nobody told you there were 10,000 park places and only two Broadway, right?

C

I had the park place. Exactly. But it's achievable. You just write down your goals, your net worth measure and then you can change that, you can change what you measure. So I would just encourage everyone to be active in their planning.

B

Very cool. Good advice. Well, congratulations to you on your success. I'M sorry for what you've had to deal with more recently. We're grateful for you coming back on the Milestones to Millionaire podcast and give us an update as you reach your next milestone.

C

Absolutely. Thanks, Jim.

B

All right. I hope you enjoyed that interview. It's always nice to have some longitudinal follow up with the people who have been on the podcast. I know a lot of you are in specialties, not like me, in emergency medicine, where you don't necessarily want to see any patients more than once and you get to follow up with patients all the time as they go throughout their lives. I don't get that as often, but I do occasionally here at the White Coat Investor. Maybe it's an email somebody sends 10 years later after I originally answered a question for them back in 2016 or something, and they just let me know how things are going. It's really gratifying to hear how successful you all have been out there, as well as how you've been able to overcome some of the challenges you've faced. So congratulations to all of you who've been here long term. It's a wonderful community, the White Coat investors, and however you choose to interact with it, whether it's just listening to the podcast or whether you're also in our online communities or you come to our conference or something like that, it's wonderful to build these relationships with you over time. And yes, there's a lot of you. And it's hard for me to remember names and faces, always has been. It's even harder since I whacked my head in the Tetons a couple years ago. But it's very gratifying and really keeps us all going knowing that we're helping real people out there like you. The match is a contribution made to your 401 or similar retirement account, like a 403 from your employer, and it is often contingent on you putting some money into the retirement account. The idea is that the employer is trying to encourage you to save for your own retirement by giving you a little bit of extra money if you will do so. However, it becomes very complicated sometimes and it's hard to understand the language that the employers are using for this benefit. For example, something that might be typical is that the employer will match 50% of the first 6% that you put into your 401. Well, what does that mean exactly with 6% of what? 50% of what? Well, often what they're saying is that they're talking about 6% of your salary. So let's say that if you make $300,000 per year and you put in 6% of that, or a total of $18,000, the employer will give you 50% of what you put in or $9,000. So if you put in $18,000, the employer puts in 9. Now there's a total of $27,000 in the account. $9,000 is the match. And the most common vesting plan, meaning when the money becomes yours for this match is immediately. But there are other vesting plans, right? Sometimes you have to stay with the employer for perhaps as long as five years to actually be vested in the employer's contribution to the plan. So you should pay attention to that as well. When you're reading your 401 plan document, what is the match? How is it calculated? When does it become your money? And if it's not clear from the 401 plan document which HR is required to give you if you ask for it, just go into HR and start asking these questions. What does that mean? 50% of what? 6% of what? When am I vested in the match? And make sure you understand how the plan works. This is a really important part of saving for retirement. For lots of docs and other high income professionals, a big chunk of your retirement savings is often in these employer plans. So you need to understand how they work. It should be a pretty high priority when it comes to saving for retirement. Not only is the money in that 401 or other retirement plan protected from taxation as it grows, but it's protected from your creditors too. If you for some crazy reason are one of the very rare docs that gets sued for above policy limits and that's not reduced on appeal and you have to declare bankruptcy, you get to keep the Money in your 401. So that's a great reason. Or that's to put your first dollars that you're saving for retirement into an employer provided plan like that. Okay. Keep in mind that you can put in more money than the amount they will match most of the time. For example, in 2026 you're allowed if you're under 50 to contribute $24,500 into your 401 or 403 as an employee contribution. Now the match doesn't count toward that. It's above and beyond that, the total of your contributions and the employer contributions has a higher number, something upwards now of $70,000. And keep in mind that those numbers change every year. They tend to be indexed to inflation. So you should go to our numbers page. Whitecoatinvestor.com numbers where you can see a current listing of all the annual contribution limits and those sorts of numbers because they do change every year and that makes every piece of content we make every year where we mention these numbers be out of date within one year. So check that for the current year to know the exact amount that you can contribute. I do this all the time. If I have to look something up, I quickly google it or pull up that numbers page and just make sure I'm using the right number because it does change so frequently. Many employer 401 s do not allow you to to put in as much as the IRS would allow to be put into the 401. And that's a result of some non discrimination testing that 401 and similar plans have to pass. Basically all the benefits of these retirement accounts cannot go to just the highly compensated employees like the docs. And if it turns out too many of them are going there, the employer has to pay penalties. Now all the penalties are additional contributions into the retirement accounts of the non highly compensated employees. It's not some terrible thing, but lots of employers don't want to pay those and so they limit how much the highly compensated employees can put into the plans to an amount less than what the IRS would actually allow. Keep that in mind if you're starting your own 401, your own practice, or if you're a, you know, a sole proprietor and you're the only person working for your company, you can set up solo 401ks that allow you to put more money in than lots of employers would allow you to put in. Now you're the source of the match of course, when you're also the employer. But it is nice to be able to get more money into that tax protected and asset protected account. I hope that helps you understand how employer matches work into your retirement accounts. This podcast was sponsored by Bob Baiani at Protuity. A listener sent us this review. Bob has been absolutely terrific to work with. He's always quickly and clearly communicated with me by both email and or telephone with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications and underwriting process in a clear and professional manner. You can contact Bob by calling 973-771-9100, emailing info@protuity.com or just going to whitecoatinvestor.com Protuity all right. Hope you enjoyed the podcast. We'll see you next time on the Milestones to Millionaire podcast. Until then, keep your head up, your shoulders back. You've got this. Let's get going toward your next milestone. See you next time.

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