‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

There was an article written recently that was picked up and sent to hundreds of thousands of physicians. The article wasn't great but the title (arguing that a Roth IRA is a bad investment) was terrible. We've gotten this article sent to us so many times this week that it has to be rebutted. Let's talk about it below in December's financial tip of the month.

ANNOUNCEMENTS

	Dedicate Time to Invest in Yourself – Prioritize your financial well-being and take steps towards the life you envisioned at the Physician Wellness & Financial Literacy Conference. Join the White Coat Investor community in Orlando on February 5-8, 2024. See WCICON24 Details and Register Today
	Avoid Costly Contract Mistakes – Too many physicians end up with poor contracts and when the job doesn't work out, they end up saddled with heavy costs, burdensome non-compete agreements, and unfair treatment. Spending a few hundred bucks upfront to get the contract reviewed by a professional is well worth it. Learn More About Professional Contract Review Services
	Optimize Your Credit Card Benefits – Choosing the right cards allows you to maximize convenience while saving money, earning free travel, and getting cash back. Just don't carry a balance on them! See the Best Credit Cards for Doctors
	Learn the Basics of Real Estate Investing – Join Dr. Dahle for a free masterclass where you'll learn how to incorporate real estate into your portfolio, five must-know calculations, and how real estate can reduce your taxes. Enroll in Free Masterclass

MARKET UPDATE

Data sources: Morningstar and SPGlobal

Staying the course was sure rewarded this month and this year. If you didn't bail out of stocks last year, you're up almost 20% year to date (and 9% in November)!
Tilters (to international, small, value, real estate, etc) weren't rewarded nearly as much, but still had a good month and a good year.
Those who bailed out of the bond market after a disastrous 2022 have been punished as bonds have had solid if not spectacular returns.
Few asset classes are down year to date, all of which have unique risks.
The Bitcoin faithful had another good month and a spectacular year, even if they're still a long way from recovering from a disastrous 2021-2022.
Cash is up to a yield of 5.3%, rewarding savers as rising interest rates continue to punish borrowers.

REAL ESTATE OPPORTUNITIES

Wellings Capital – Helping accredited investors passively grow and protect their wealth with a diversified portfolio of carefully vetted recession-resistant commercial assets, such as self-storage, mobile home parks, and RV parks. Accepting new investors with a $50,000 minimum.

Southern Impression Homes – Focused on new construction homes in desirable Florida neighborhoods that are designed to maximize landlord profit and minimize tenant turnover and maintenance costs. Its system provides full service, including acquisition, building, construction, property management, and ongoing client support and education.

Mortar Group – A vertically integrated investment manager specializing in secure multifamily real estate in prime New York niche neighborhoods. Preferred by investors seeking high yields but steady returns, Mortar offers a unique solution in the alternative investments market

Please consider these introductions and be sure to do your due diligence prior to investing in any real estate investment opportunity.

FINANCE FUNDAMENTALS

End of the Year Financial Checklist

	Complete Backdoor Roth IRA and Mega Backdoor Roth IRA
	Make Retirement Account Contributions and Perform Roth Conversions
	Max Out Other Accounts
	Use Flexible Spending Account Money
	Check Insurance Coverage
	Give to Charity
	Spend CME Money
	Reach Your Savings Goal
	Check Credit Report
	Accelerate (Front-Load) Your Expenses and Delay (Back-Load) Your Income
	Review Withholdings
	Calculate Q4 Estimated Tax Payment
	Prepare to Frontload Investment Accounts
	Ready Tax Paperwork
	Tax-Loss Harvest
	Update Your Spreadsheets with Net Worth, Savings Rate, and ROI
For more details on these steps head to the full End of Year Financial Checklist.

BEST OF THE MONTH

Best of WCI

Unlocking the Secrets of Yale's Investment Success for Physicians – Yale's enormous endowment is one of the best-performing investment portfolios in higher education. Can you use the same strategy for yourself? This guest post drew some surprising controversy.
Investing in Farmland – Even if your portfolio consists of relatively boring stocks, bonds, and real estate, some investors have decided to add farmland to their portfolios. Their arguments can be fairly convincing.
Mint Is Going Extinct – Which Personal Finance and Budgeting App Should You Use Now? – The Mint budgeting and personal finance app is going away. Here's why that's disappointing—and what you should do next.
Why American 'White Coat Investors' Should Count Their Blessings – WCI columnist Francis Bayes grew up in an East Asian country, and he lays out his case for why American white coat investors should be thankful.
Justifying and Cash-Flowing a 'Selective Extravagance' – New WCI columnist Julie Alonso threw (and cash-flowed) a lavish $50,000-plus celebration weekend for her family. Here's how she kept it within her budget. (It wasn't easy.)
Young Investors Are Engaging in 'Soft Life' – Is It a Healthy Attitude or Could It End in Financial Disaster? – Baby Boomers and Gen Z feel differently about saving, spending, and thinking about retirement. Like, really, really differently.
The Benefits of High Rates on Cash – High interest rates aren't great for everyone. But it sure is nice to finally feel like you're not being punished if you're a relatively debt-averse net saver.
59 ½ Rule – How to Get to Your Money Before 'Retirement Age' – This is a good one for the FIRE community. Some people might worry about the Age 59 ½ rule. But it's not difficult to get around, once you read the rules.
WCI Travel Club: Meaningful Trips to Half Dome, Thailand, and Alaska – Introducing a new occasional series on WCI where writers and readers discuss their trips around the globe and describe the financial and life lessons they learned.
How to Think About Risk and Why It's So Hard to Quantify – In researching equities, the returns are easily found. Not so for risk metrics. So, how can investors think about risk to make good decisions?
Discounts for Doctors and Healthcare Workers in 2023 – Want discounts for doctors and other healthcare workers? Here's a list of companies offering appreciation for all you do.

New Podcast Episodes

Be sure to check out The White Coat Investor Podcast if you haven't yet. 30,000 to 40,000 are listening to every episode. If you'd like to leave a question to be answered on the podcast, record it here.

#339 – Dave Ramsey Gives Poor Advice to Unmatched Doc (Sponsored by SoFi)
#338 – Is It Ever a Good Idea to Over Fund a Roth IRA? (Sponsored by CompHealth)
#337 – Entrepreneurship and Angel Investing (Sponsored by Pattern)
#336 – Asset Protection in Real Estate Investing (Sponsored by Laurel Road )

The Milestones to Millionaire Podcast has short episodes celebrating your accomplishments.

#139 – Academic Pulmonologist Hits Half Million Dollar Net Worth and Finance 101: Financial Advisors (Sponsored by WCI Monthly Newsletter)
#138 – Doc Helps Change His 401(k) Plan and Finance 101: Tax Brackets (Sponsored by SI Homes)
#137 – Roadie Becomes a Millionaire and Finance 101: Retirement Accounts for the Self Employed (Sponsored by WCI Mortgage Recommended List)
#136 – Cutting Back to Full Time and Finance 101: Home Buying (Sponsored by WCI Insurance List)

The Passive Income MD Podcast

#186 – 3 Tough Moments I'm So Grateful For
#184 – Overcome Your Fears by Visualizing Success

Best of the Web

Every month we recommend (about) 10 articles from across the web. Thank you to those who send us suggested articles.

After a $1.8 Billion Verdict, the Clock Is Ticking on the 6% Real Estate Commission – Realtors got whacked in court, but will anything really change? We hope so.
My Worst Investment Ever – Jim was featured on The Worst Investment Ever podcast, which is kind of a fun approach. There were a few choices, but he went with whole life insurance.
Why Doctors in America Earn So Much – This is an Economist article, but Doximity paid for you to get past the firewall. We thought that was really nice of them.
We Need to Talk About Your Retirement "Spending" – Christine Benz argues that big inheritances can be a sign of poor planning.
To Make Health Care Cheaper, Make It More Expensive – Paying doctors less may be penny-wise and pound-foolish.
Why Long-Term Care Insurance Falls Short for So Many – Our hope is that all white coat investors can be wealthy enough to self-insure this risk, but that's not going to work for everyone. Better to fix this flawed product.
The Worst Financial Gifts to Give to Your Kids – Jim was on another podcast recently discussing this topic. No, whole life insurance is not the only thing on the list.
The Psychology of Frugality When You No Longer Need to Be Frugal – A great Bogleheads forum thread worth perusing if you're one of many WCIers in this position.
How Much is a 3% Mortgage Worth – Lots of people making weird life decisions to not lose their low mortgage rate. Best to inject some data into the discussion. 3% and 7% are very different numbers. All of a sudden all those warnings you've heard for years about debt apply again.
Has IBM Built the Next Generation 401(k) Plan? – We think it's awesome and really any organization could do it.
Avoid Getting Caught Up in Big Market Delusions: The Case Study of Electric Vehicles – The current AI craze feels similar and the crypto market has followed this pattern several times already.
16 Important Lessons Learned from a Parent with Dementia – Jim saw an elderly patient in the ED recently for stress related symptoms. The main source of stress? Two bad financial decisions: Buying an annuity designed to be sold and "lending" a massive sum of money to a family member. He spent more time giving financial advice than medical advice! At any rate, have a plan to deal with your own financial senility because it happens to almost everyone eventually.
Asset Allocation Isn't Magic – Not a flashy title, but you'll stress less about your asset allocation after you read this.
Can Money Buy Happiness? – 60% of Americans say $1.2 million would do it. Since the average American net worth is just < $750K, we suspect many Americans actually would be happier with $1.2 million!

TIP OF THE MONTH

By Dr. James M. Dahle,
WCI Founder

There was an article written recently by a fellow named Derek Sall who founded a website called Life and My Finances. Its editorial team consists of five people who look to be in their 20s with the title "financial writer." It's kind of a typical for-profit affiliate marketing website. Its content appears to be directed at people looking for credit cards and bank accounts. It is certainly NOT written with a target audience of physicians and other high earners in mind. However, somehow this article was picked up by Doximity and sent out via its periodic financial content email newsletter which often features articles from The White Coat Investor and others.

The article was titled "Why a Roth IRA Is a Bad Idea (Yes, You Can Lose Money)." The introduction was just as click-baity:

"I lost nearly $400,000 to a Roth. It's not just me. The average person is losing $163,000. Nearly everyone says a Roth IRA is a great investment. Nearly everyone is wrong."

There are so many problems with that introduction that it's hard to know where to start. First of all, a Roth IRA is not an investment at all; it's an account. And it's hard for me to take seriously anyone who doesn't know the difference. Think of investing accounts as types of luggage and investments as clothes. Any piece of clothing can go into any type of luggage. Well, investing accounts don't lose money other than perhaps to fees. It's the investments inside of them that can lose money.

A Roth IRA by itself cannot ever be a "good idea" or a "bad idea." It is only a good idea or a bad idea in comparison to something else. For example, when saving for retirement and in comparison to a taxable account or a non-deductible IRA, a Roth IRA is pretty much always the better option—at least in the long run. However, for a low earner who can actually deduct IRA contributions (which includes almost nobody in the audience to which Doximity sent this article), it's entirely possible that a traditional IRA is a better option for their retirement savings than a Roth IRA. For most of us in our peak earnings years, it makes sense to defer taxes rather than pay them up front, which is what is done with Roth contributions.

Shortly into the article, the author rapidly flips from talking about IRAs to 401(k)s. While the logic and tax treatment may be similar in the author's financial situation, they are different things and get different tax treatment for many people (such as high earners). If you can't tell them apart, you really shouldn't be writing about them for large audiences. Frankly, if it took you 13 years from the time you started a financial blog until you realized that tax-deferred contributions are the way to go during peak earnings years, I'm not sure I want to take your advice anyway.

However, the main point of the article (which has nothing to do with the title and intro) is ABSOLUTELY CORRECT. That point is that "most people should make tax-deferred contributions to their 401(k), not Roth contributions." The amazing thing here is that most people (92% according to the article) THINK they should be making Roth contributions when actually only about 9% (according to the survey cited in the article) should be. Dave Ramsey isn't helping here since he is pretty much an "All Roth, All the Time" kind of guy. If you've listened to him for very long, you'll know he doesn't do nuance very well.

There's a chart in the article that is even dumber than the prose. It talks about WHO is in that 9%. Does it mention high earners who can't deduct a traditional IRA contribution? Nope. It says the following people are in that 9%:

Under 33 years old (almost irrelevant, more time does slightly tilt the calculation toward Roth for those maxing out accounts)
Contribute more than $5,000 a year (irrelevant)
Plan to withdraw $100,000 or more in retirement (irrelevant)

The Roth vs tax-deferred decision is a complex one, no doubt. The first question one should ask is whether you even have both options. For most WCIers, a tax-deferred contribution to a traditional IRA is not even an option. Clearly, the Roth IRA (likely via the Backdoor Roth IRA process) is better than a non-deductible IRA contribution. Many people don't have a Roth option in their 401(k), 401(a), 403(b), or 457(b). For them, it's an easy decision to go with the tax-deferred option. When I was in the military, there was no Roth TSP. So, I made tax-deferred contributions. However, if both options are available, the main factor determining which is the better option for you is to compare your marginal tax rate now to the rate at which you will withdraw money from that account. That involves a lot of unknowns, which is why this is a difficult decision and why many people choose to just split the difference.

Derek doubles down on his argument later and says that a Roth IRA is worth it for only 0.2% of the population. He says the 9% figure came from a survey of people who were entirely too optimistic about their future finances. Then, he goes on to argue that this is all some conspiracy by the government to get more tax money now instead of later. I don't really put much stock into conspiracy theories, especially those involving the government. Mostly because I've worked in government. Conspiracy theorists ascribe way too much competence to "shady government officials." Just watch Congress for a while and your estimate of the likelihood of those people running an effective long-term conspiracy will go way down. I used to watch a bunch of government workers try to day trade their TSP. It would have been hilarious if it wasn't so sad.

At any rate, I hate this article and the message it is sending out there (Roth contributions are wicked, always stay away), even if the message actually in the article is basically correct—that those in their peak earnings years should generally prefer tax-deferred retirement accounts and lots of people don't realize this. He even eventually gets the reasoning right:

Most people will earn less in retirement than they do today.
You'll be paying a higher tax rate now than you will in retirement.
Many retirees today pay nearly nothing in taxes.

I just wish he had done it in the much less flashy manner in which Harry Sit made this same argument many years ago in his recently updated article "The Case Against the Roth 401(k)." Too bad Derek didn't read that article when it came out in 2008. He would have saved a lot of money.

Lesson for WCIers from this debacle?

Read more than the title of an article.
Recognize that most financial information out there is not written specifically for you, even if Doximity sends it to you.
You better have a good reason to make Roth contributions when tax-deferred contributions are an option.
Keeping doing your Backdoor Roth IRA each year.

The White Coat Investor

Past Newsletters

November Newsletter - The Role of Your Investment Oversight Committee
October Newsletter - Overcoming Paralysis by Analysis Is Harder Than I Thought
September Newsletter - 6 Lessons Learned While Climbing Half Dome
August Newsletter – How to Stay Rich
July Newsletter – The 'Guaranteed' Path to Physician Wealth and the 5 Ways to Fall Off It