There are plenty of reasons why high earners might feel like not utilizing their retirement accounts. And some of those reasons might even be (somewhat) legit. But there are too many other reasons why stocking away money into your 401(k)s and 403(b)s and 457s is going to lead to long-term financial success. Let's talk about it more below in January's financial tip of the month.

ANNOUNCEMENTS

BOGO Free Online Course Sale – Start your year off right with a jump start on your financial education. With any online course purchase, get access to our CFE23 Course ($779 value), which includes 57+ hours of expert finance and wellness presentations and 22 hours of CME/CE credit, for FREE. Option to "gift a course" is available, and many are CME Eligible! Go to Course Sale

Expert Witness Startup School Enrolling Soon – Diversify your income using the skills you already have as a doctor. Prior students report earning $50,000–$100,000 in their first year as an Expert Witness. Enrollment opens January 14th, with a free masterclass on January 16th hosted by Dr. Gretchen Green. Learn More and Join the Waitlist

Have You Booked Your Hotel for WCICON25? – The discounted hotel block closes on January 27th! Staying on-site ensures you'll fully experience the Physician Wellness & Financial Literacy Conference, February 26th to March 1st, in San Antonio and make the best use of your CME dollars.

The resort, just a short ride from the airport and San Antonio's famous Riverwalk, offers amazing amenities. While the presentations are top-notch, the real magic happens after we wrap up by 4 pm Whether you're connecting with new friends, enjoying wellness activities, or simply relaxing, this conference is all about recharging while improving your financial and personal wellness. Register and Book Hotel

MARKET UPDATE

Data sources: Morningstar and SPGlobal

All hail the stock market! For the second straight year, the S&P gained about 23%. And that's even with a disappointing December for most stocks. Hopefully, even if you follow the what-goes-up-must-come-down philosophy, the stock market's success won't put you off investing even more in 2025. Even with the stock market hitting so many record highs in 2024, there's a good chance 2025 could be a great year for equities as well.
Dr. Jim Dahle (and others) continue to believe that holding international stocks is still a smart move, even though US stocks have easily outpaced those from the rest of the globe for the past several years. 2024 was no exception.
Despite a dreary December, gold and silver also had memorable years.
Our monthly headshake/eye-roll at Bitcoin: In March, it was up 12.51%. In April, it was down 15.22%. In May, it was up 14.35%. In June, it was down 11.28%. In July, it was up 8.79%. In August, it was down 10.04%. Then, it had back-to-back-to-back prosperous months before faltering back to earth in December. If you love volatility in your asset class, Bitcoin is exactly what you need!
Still, Bitcoin exceeded $100,000 in December. It's a major milestone that some believed would never happen (while some are still convinced it'll eventually go to $1 million).

REAL ESTATE OPPORTUNITIES

DLP Capital – An impact investment company focused on creating great returns for investors while doing good for the world. All funds are evergreen, invest in critical workforce housing, and pay preferred returns before DLP takes any management fee. $100K investment minimums are back for a limited time.

37th Parallel – A private multifamily acquisitions and asset management firm that provides a vertically integrated investment platform (funds and single-asset investments) for investors seeking tax-advantaged income and equity growth. Discounts are available for White Coat Investors.

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

FINANCE FUNDAMENTALS

How to Do a Backdoor Roth IRA

1. Contribute to a Traditional IRA
Make a $7,000 ($8,000 if 50+) non-deductible traditional IRA contribution.

2. Leave the Money in Cash
Leave the money in cash, a money market fund, or a settlement fund.

3. Convert the Traditional IRA to a Roth IRA
Convert the non-deductible traditional IRA to a Roth IRA by transferring the money from your traditional IRA into your Roth IRA at the same fund company.

4. Invest the Money
Select an investment for the money in your Roth IRA. If you already have a Roth investment, you can simply add to it.

5. Beware of the Pro-Rata Rule
Get rid of any other SEP-IRA, SIMPLE IRA, traditional IRA, or rollover IRA money you have.

6. Fill Out IRS Form 8606 Correctly
Don't forget to do it, or there is a penalty.

IRA contributions for a given tax year must take place between January 1 of the tax year and April 15 (even if you file an extension) of the following year.

Looking for a step-by-step guide? Use these tutorials for Vanguard, Fidelity, and Schwab.

BEST OF THE MONTH

Best of WCI

Beware! An HSA Is Great But ... – As WCI columnist Rikki Racela tells it, an HSA isn't all sunshine and lollipops.
Finding Contentedness – When you're set to retire (or when you're forced to do so), how will you handle the changes in your life? How will you find contentedness?
Why Do Some Doctors Get Declined for Disability Insurance? – This can be devastating for your peace of mind.
Strengthening Your Mental Health – There are no shortcuts to supporting your well-being. WCI columnist Julie Alonso writes about the strategies she's implemented to build her own wellness model.
10 Reasons You're Not Stupid for Paying Off Your Debt – You don't need to feel dumb or embarrassed about paying off your debt. Here's why it's actually a smart financial decision.
Pennies and the Backdoor Roth IRA – Over the years, we've gotten hundreds of questions about this topic. Here's the definitive answer.
Why Amortization Based Withdrawal (ABW) Works Better Than Safe Withdrawal Rates (SWR) – Even more content about the best way to spend in retirement to make sure you don't run out of money.
'How Much' Matters More Than 'What' in Investing – If you get the "How Much?" decisions right, then the "What?" decisions won't matter nearly as much.
10 Financial Baby Steps for White Coat Investors and How They'll Help You Reach Financial Freedom More Easily – A guest poster takes us through the steps that can make your journey easier.
Doctors Need to Budget, Too (With a Few Examples) – Just because you make a ton of money doesn't mean you should skip this financial step.

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.

#399 – 529s, UTMAs, and HSAs (Sponsored by SoFi)
#398 – Doctors on Disability and Why You Need Disability Insurance (Sponsored by SoFi)
#397 – Roth, Mega Backdoor Roth, Solo 401(k)s, and IRAs (Sponsored by SoFi)
#396 – Financial Planning for Special Needs Kids with Dr. Bryan Jepson (Sponsored by SoFi)

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

#203 – Intern Saves Up an Emergency Fund and Finance 101: Year-End Calculations (Sponsored by Resolve)
#202 – Radiologist Gets PSLF and Finance 101: Charitable Giving (Sponsored by WCI Surveys for Money)
#201 – Financial Planner Becomes a Millionaire and Finance 101: Overfunded 529 Accounts (Sponsored by Resolve)
#200 – Military Family Physician Takes the Fast Lane to Wealth and Finance 101: The Millionaire Fast Lane (Sponsored by CompHealth)
#199 – Nurse Practitioner Becomes a Millionaire by Doing Locums and Finance 101: Trading (Sponsored by CompHealth)

Best of the Web

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

TSP to Offer In Plan Conversions – Mega Backdoor Roth IRA coming soon for all you military docs deploying to combat zones.
Congress Considers Law to Increase Student Loan Payments – Republicans are going to control both houses of Congress and the White House. That's generally bad news for federal student loan borrowers. That doesn't mean this poorly thought-out bill will pass, though. Beats us how most docs would pay for med school with a $100,000 cap on student loans.
New Mexico Man Awarded $412 Million Medical Malpractice Payout – Kind of sad that the biggest judgment ever involved ED (yes that ED) rather than death. Like most of these crazy high awards, we're sure this one will be reduced dramatically on appeal, but it does make us all think about our asset protection plans for a few seconds, doesn't it?
The Hidden Fee Costing Doctors Millions Every Year – We've discussed this one on the podcast before. Our guest was quoted in this article.
GW Hospital Resident Doctors Secure Last Minute Tentative Deal to Avert Strike – Treat doctors like labor, and they'll act like labor. Expect to see more of this in the future.
ATM Investment Network Appears to Be Fraudulent – Sent to us by one of the investors, we're told a bunch of doctors were involved in this one. Lots of lessons to learn here.
Bogleheads University Videos Are Out – Jim doesn't look too bad considering he gave this presentation on asset protection only 5 weeks out from his fall. The rest of the conference can be found here. Thanks to Christine Benz, Mike Piper, and countless others for their hard work on it all.
The Vanguard Patent Is Over – Now lots more funds will offer ETF shares classes.
Court Halts BOI Reporting – And after all that effort we put in to tell you about it.
Qualified Charitable Distributions – Concerns for first-timers. Jim has been doing these for his parents for a few years, and Mike Piper gets it right.
Retire Without Regrets – There's more to retiring than money.

TIP OF THE MONTH

By Dr. Jim Dahle,
WCI Founder

Retirement accounts are awesome for several reasons.

They simplify your estate planning. They boost your asset protection. Most importantly, your money grows faster in retirement accounts. Any time you are thinking about not using them, you should step back and ponder your decision for a few minutes.

Sometimes people don't max out their retirement accounts because they just want to spend more money. That's fine, so long as they're saving enough to reach their goals. You better be sure you are, though. Maxing out your retirement accounts for at least the first few years of your career is almost surely the right long-term move.

Sometimes people opt to invest outside of a retirement account because they expect to retire early and they are worried about the Age 59 ½ rule. There are so many exceptions to that 10% penalty that I'm amazed anyone ever ends up paying it. I mean, one of the exceptions is early retirement via Substantially Equal Periodic Payments (SEPP). Health insurance is another exception. So is disability, domestic abuse, new baby, new home, terminal illness, and more. Besides, most people who are saving enough to retire before age 59 ½ can't put all their savings into retirement accounts anyway. They're forced to build a taxable account despite maxing out their retirement accounts every year.

Sometimes people opt to invest outside of a retirement account because they are worried about Required Minimum Distributions (RMDs) later in retirement. If ever there were a "rich-person problem," big RMDs would be it. But even if you actually have an RMD problem, the solution isn't to avoid retirement accounts. It's to do Roth contributions and Roth conversions. Roth IRAs don't have RMDs.

Sometimes people opt to invest outside of a retirement account because they want to invest in something they can't invest in, or invest in easily, in a retirement account. Keep in mind that self-directed IRAs and 401(k)s often can invest in a lot more than you think—including precious metals, cryptoassets, and real estate. For instance, Katie and I have private real estate debt funds in our 401(k)s. Many 401(k)s offer a "brokerage window" that dramatically increases the number of investment options. Besides, you might only be stuck in that 401(k) for a few years before you can roll it into an IRA or a solo 401(k) where you can get better options. When someone cites this as a reason to invest outside of a 401(k), I usually just ask them if they're sure. Often, as we dive into the details, they realize they have enough taxable money to make that investment and still leave their retirement accounts invested in more traditional assets. For example, I don't love seeing private equity real estate in retirement accounts due to Unrelated Business Income Tax and cash flow issues, but perhaps a 401(k) loan or a cash out refinance of another investment can facilitate a taxable real estate investment. I would encourage an investor to explore all pathways before preferentially investing outside retirement accounts.

For the last two decades, Katie and I have maxed out all of our available retirement accounts despite all of the above issues. Do the same and you're unlikely to regret it.

The White Coat Investor

Past Newsletters

December Newsletter – How Bad Is It to Own Individual TIPS in Taxable?
November Newsletter – Should the Election Results Change Your Financial Plan?
October Newsletter – The Costs of a Serious Accident
September Newsletter – Fiduciary Is a Spectrum: Why You Might Want to Get Advice from a Financially Independent Advisor
August Newsletter – Navigating the Financial World as a Validator

Click here for all past newsletters.