White Coat Investor Book summarized

[drmka26]

Just finished reading the book. Its mind-blowingly amazing. I took notes on what I thought to be the most important info that I was not aware of:

“Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family.” – Kofi Annan

 

• Most disability policies should be purchased as a resident or young attending physician


• Disability insurance cost should not be higher than $1,200-2,000 a year.


• Disability purchase should include: cost of living riders, future purchase option riders and residual disability riders.

 

• Stock = share of a company


• Bond = loan to a company or a gov.


• Mutual fund = group of investors pool money to buy different stocks, bonds or properties

 

• Index funds outperform the vast majority of actively managed mutual funds


• 403(b) = max $18,500 can be pre-tax or post-tax (your choice)
  
  
  
  • Pre-tax, you pay taxes on it and the profits upon withdrawal at retirement
  
  
  • Post-tax, you never pay taxes on it, no matter how much it grows
  
  
  
  


• 457(b) = max $18,500 can be pre-tax only
  
  
  
  • Pre-tax, you pay taxes on it and the profits upon withdrawal at retirement
  
  
  
  


• You can do both 403(b) and 457(b)


• Benefit of doing pre-tax is to lower taxable income for now

 

• Health savings account (HSA) = “Stealth IRA” = $3,300 max per year = is pre-tax
  
  
  
  • Can be invested in anything
  
  
  • Money grows in a tax protected manner as long as its spent on healthcare
  
  
  • Keep records of all receipts for approved healthcare expenses throughout lifetime. No rule that says you have to pull money out of HSA at the same year you incur healthcare expense.
  
  
  • If you use it for non-healthcare related = then have to pay taxes on it
  
  
  
  

 

• “A wise investor will take advantage of lower long-term capital gains tax-rates” What is this??

 

• Best mutual funds are sold as “no-load” funds through companies Vanguard, DFA, Bridgeway, Fidelity, T. Rowe Price. Advisors don’t tell you about these because these are not commission based. Ask for them.

 

• Don’t ever get a financial advisor that is commission based.


• Get “fee-only” advisor
  
  
  
  • Not the same as “fee-based.” Fee-based charge a fee AND commission.
  
  
  
  


• Fee-only

1) some charge hourly fee

2) some charge annual retainer fee

3) some charge percentage of your assets under management (AUM)

4) some charge a combination of the above 3

 

• Split up the two functions: financial planning and asset management, even if you get them from same person
  
  
  
  • Financial planning = hourly fee, flat annual fee or single flat fee for putting together a plan. Don’t pay more than $200-$400 per hour.
  
  
  • Asset management = flat annual fee (although AUM is acceptable as long as its not too high). Don’t pay for asset management more than $1000-$5000 a year.
    
    
    
    • AUM fee should not exceed 1% MAX
    
    
    
    
  
  
  
  

 

• Ask for “institutional investment” – these are investments only available via a company or an advisor.

 

• Advisor must have
  
  
  
  • fee-only
  
  
  • gray-hair (at least 10-years of experience giving advice and managing assets)
  
  
  • knowledge of his limitations (knows when to hire an attorney etc)
  
  
  • physician-specific financial planning
  
  
  • access to institutional funds
  
  
  
  


• Advisor must be
  
  
  
  • Chartered Financial Analyst (CFA) or
  
  
  • Certified Financial Planner
  
  
  
  

[Peds]

drmka26 wrote:

“A wise investor will take advantage of lower long-term capital gains tax-rates” What is this??

Click to expand...

if you hold a security for longer than a year and sell it for a gain you pay taxes at the LTCG rate (0,15, 20+) vs marginal tax bracket.

[jfoxcpacfp]

Nice summary! I am surprised at the recommendation that LTDI should cost only $1,200k - $2k/yr. The cost is so dependent on need, profession, earnings, group benefits available, etc., not to mention inflation. Did WCI really say that?

[Bmac]

drmka26 wrote:

Just finished reading the book. Its mind-blowingly amazing. I took notes on what I thought to be the most important info that I was not aware of:

“Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family.” – Kofi Annan

 

• Most disability policies should be purchased as a resident or young attending physician


• Disability insurance cost should not be higher than $1,200-2,000 a year.


• Disability purchase should include: cost of living riders, future purchase option riders and residual disability riders.

 

• Stock = share of a company


• Bond = loan to a company or a gov.


• Mutual fund = group of investors pool money to buy different stocks, bonds or properties

 

• Index funds outperform the vast majority of actively managed mutual funds


• 403(b) = max $18,500 can be pre-tax or post-tax (your choice)
  
  
  
  • Pre-tax, you pay taxes on it and the profits upon withdrawal at retirement
  
  
  • Post-tax, you never pay taxes on it, no matter how much it grows
  
  
  
  


• 457(b) = max $18,500 can be pre-tax only
  
  
  
  • Pre-tax, you pay taxes on it and the profits upon withdrawal at retirement
  
  
  
  


• You can do both 403(b) and 457(b)


• Benefit of doing pre-tax is to lower taxable income for now

 

• Health savings account (HSA) = “Stealth IRA” = $3,300 max per year = is pre-tax
  
  
  
  • Can be invested in anything
  
  
  • Money grows in a tax protected manner as long as its spent on healthcare
  
  
  • Keep records of all receipts for approved healthcare expenses throughout lifetime. No rule that says you have to pull money out of HSA at the same year you incur healthcare expense.
  
  
  • If you use it for non-healthcare related = then have to pay taxes on it
  
  
  
  

 

• “A wise investor will take advantage of lower long-term capital gains tax-rates” What is this??

 

• Best mutual funds are sold as “no-load” funds through companies Vanguard, DFA, Bridgeway, Fidelity, T. Rowe Price. Advisors don’t tell you about these because these are not commission based. Ask for them.

 

• Don’t ever get a financial advisor that is commission based.


• Get “fee-only” advisor
  
  
  
  • Not the same as “fee-based.” Fee-based charge a fee AND commission.
  
  
  
  


• Fee-only

1) some charge hourly fee

2) some charge annual retainer fee

3) some charge percentage of your assets under management (AUM)

4) some charge a combination of the above 3

 

• Split up the two functions: financial planning and asset management, even if you get them from same person
  
  
  
  • Financial planning = hourly fee, flat annual fee or single flat fee for putting together a plan. Don’t pay more than $200-$400 per hour.
  
  
  • Asset management = flat annual fee (although AUM is acceptable as long as its not too high). Don’t pay for asset management more than $1000-$5000 a year.
    
    
    
    • AUM fee should not exceed 1% MAX
    
    
    
    
  
  
  
  

 

• Ask for “institutional investment” – these are investments only available via a company or an advisor.

 

• Advisor must have
  
  
  
  • fee-only
  
  
  • gray-hair (at least 10-years of experience giving advice and managing assets)
  
  
  • knowledge of his limitations (knows when to hire an attorney etc)
  
  
  • physician-specific financial planning
  
  
  • access to institutional funds
  
  
  
  


• Advisor must be
  
  
  
  • Chartered Financial Analyst (CFA) or
  
  
  • Certified Financial Planner
  
  
  
  

Click to expand...

Nice summary. I think WCI would much prefer to have people actually buy his book. Lol.

[MaxPower]

Yeah I agree. Mine costs $660 per month for a $17,000/month benefit for an own occupation policy through Principal.

[Hatton]

Gray hair??  Most female advisors will fix this.

My disability insurance cost much more than that also.

[WCInovice]

I have a $16,000/month benefit through Guardian with CoL and catastrophic long term care rider and I pay around $550/month for that.

I shopped around and saw nothing as low at $2k/year.

I bought the policy as a very healthy, low BMI, no significant family history, etc 30 year old in a non- procedure based specialty.

[Seabass]

That is a lot of disability insurance.
I guess I’m underinsured in that arena.

146/Mo guardian policy picked up last year of fellowship without a medical exam
5k/mo after tax benefit

That supplements the hospital employee policy which I know can be flawed with own occupation stuff as well as social security benefit.

But figure if I’m so hurt I can’t work I don’t expect to be rich.

I probably would’ve gotten more insurance if not for a major injury affecting my insurability that last year but probably not 16 k worth.

[Seabass]

Maybe a worth a new thread topic.

[WCInovice]

Agree it’s a lot.

I know I’m over insured but I’m a big time worrier (wife calls me a “fatalist”), so it’s part of the “personal” finance side for me that helps me sleep at night.

I have three young kids and a stay at home spouse, so for me personally I choose to have that policy as well as 5 mil in term life (though I joke I may be worth more dead than alive).

I do hope to cut back on these once I’ve saved up a larger nest egg.

[drmka26]

Peds wrote:

drmka26 wrote:

“A wise investor will take advantage of lower long-term capital gains tax-rates” What is this?? 

Click to expand…

if you hold a security for longer than a year and sell it for a gain you pay taxes at the LTCG rate (0,15, 20+) vs marginal tax bracket.

Click to expand...

I'm a newbie in the world of finance. What is a 'security'? what is the difference between LTCG rate and marginal tax bracket?

[Zaphod]

My disability policies are also about 500/month and somewhere a hair over 15k/month. This has to cover regular bills and any medical expenses you may have ongoing from whatever event caused the disability. Its a good bit less than take home pay all said and done and it still worries me its too low. Not about being rich but about not have to drastically change, or just move out of your house, etc...

Last month a co-resident of mine that hadnt increased their policy up to their new salary (according to other co-resident admonishing them months prior) was unfortunately paralyzed, a c7 fracture. It can happen. Its worth it. There will be life long medical costs of course.

[jfoxcpacfp]

Zaphod wrote:

Last month a co-resident of mine that hadnt increased their policy up to their new salary (according to other co-resident admonishing them months prior) was unfortunately paralyzed, a c7 fracture. It can happen. Its worth it. There will be life long medical costs of course.

Click to expand...

Oh that is so so distressing, so very sorry for them. Just cannot imagine - life is so very fragile and fleeting and it just doesn’t sink in until hearing something like this.

[Molecularblonde]

That’s a wonderful review.

You remind me of myself. When I took the WCI I dictated every word that Jim said and put it into reference binders. I know that when people take his course, many individuals tend to just watch him speak over and over, or listen to it as a kind of podcast. But I learn better with notes in front of me. And because I’m so new at this,  I had to write down everything!

Thanks for sharing this with others.

[jfoxcpacfp]

drmka26 wrote:

Peds wrote:

drmka26 wrote:

“A wise investor will take advantage of lower long-term capital gains tax-rates” What is this??

Click to expand…

if you hold a security for longer than a year and sell it for a gain you pay taxes at the LTCG rate (0,15, 20+) vs marginal tax bracket.

Click to expand…

I’m a newbie in the world of finance. What is a ‘security’? what is the difference between LTCG rate and marginal tax bracket?

Click to expand...

A security is another word for a share(s) of stock. Stocks are simply partial ownership in businesses that have chosen to be publicly traded. Iow, as companies grow ever larger, the owner(s) typically cannot afford the costs of ever-increasing multiples of growth. Owners also want experienced minds on board to help make complicated decisions about growth. As a result, they sell off part of the company to the public (like you and me) to raise “capital” (money) where they end up being traded (bought and sold) on a stock exchange where any old person can buy and sell the shares of the stock. That is what I mean by “publicly traded”. I am really oversimplifying. You would do well to read a basic investing book such as The Intelligent Investor (Graham).

I’m about to fall asleep - can someone else take the LTCG question?