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What Dentists Want to Know — Listener Q&A #7 – Episode 144

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You’ve seen the headlines: “Bull Market!” Or, “A Bear is lurking!” What do these two terms really mean for your investments? It’s time for another round of listener questions on this episode of Dentist Money™. Are we in a Bull market? How do you know it’s a Bear market? Reese and Ryan help define these overused terms, and show how a long- or short-term investment attitude really shapes the definition. And since they’re defining terms, they also discuss net worth, how it’s measured, and where you might expect yours to be at different points in your career. Finally, Reese and Ryan have a few thoughts on HSA strategies—and how that medical savings opportunity can fit into your retirement planning.

Podcast Transcript:

Reese Harper: Aloha, and welcome to the Dentist Money™ Show, where we help dentists make smart financial decisions. I just got back from Hawaii. My name is Reese Harper, and this is my trusty old co-host, Sir Ryan Isaac.

Ryan Isaac: You’re so calm today in your Hawaiian shirt, and post Hawaii vacation.

Reese Harper: We’re very relaxed. Shoutout to all of the people on the island of Hawaii today that are listening who have gone through a pretty horrendous recent hurricane. We did bring on a new guest onto our show. Q is now Tad, and Tad is a local expert from Hawaii, and flies over there almost every couple of weeks it seems like. I was able to visit his daughter on the island of Oahu and check out her awesome beach house, which was way cool.

Ryan Isaac: Nothing like living on the beach, I guess.

Tad: You’re wondering what I’m doing here.

Reese Harper: (laughs) Ryan and I are in awesome Hawaiian shirts, and we just feel like today is going to be a really relaxing conversation with our audience.

Ryan Isaac: I feel like mine is more Jimmy Buffett themed. I have some— what do I have on here? It’s like whiskey, and tequila—

Reese Harper: And a pile of shrimp cocktail.

Ryan Isaac: Oh, shrimp cocktail, and a Gibson SG guitar, which actually, my favorite guitar I ever had was my SG.

Reese Harper: Well, I’m excited for today’s episode, Ryan! Tell us about this connection between Hawaii and this podcast.

Ryan Isaac: (laughs), um, I don’t have one, okay? But here’s the shoutout. Thanks to everyone who submitted questions (laughs).

Reese Harper: It’s a Q&A Hawaii episode!

Ryan Isaac: Yeah, today is the Q&A episode. As a reminder, you can go to, click on the podcast tab, and then click the button “Submit a Question.” We got a lot of questions; we are not even able to cover them all on this one. So keep them coming! We’ll keep answering. The other invitation we wanted to extend everybody is we have a new Facebook group.

Reese Harper: Yeah, you just go to

Ryan Isaac: What’s happening in the group right now, Reese?

Reese Harper: The last couple of days, it has gone viral. There have been a lot of questions; the last few days, we have had questions about educational content. So, we have had book questions, we have had loan questions, we have had HSAs, and qualified plans, market timing, investments, 401k questions… it has been all over the board. So, any financial question you have, just go to and join the conversation.

Ryan Isaac: Wow, great intro. Alright, first question. This comes from Mona up in Canada. Shoutout Canada! Thank you for listening.

Reese Harper: Yes! Thank you, Mona. We have been making some inroads up there lately.

Ryan Isaac: We’re getting there. We’re getting there, eh? (laughs) did you get that?

Reese Harper: Yeah, I did. But that’s not the stereotype that they want to be labeled by. Like, everyone from Idaho isn’t a potato person. Only I am!
Ryan Isaac: Just 95% (laughs).

Reese Harper: No, just me!

Ryan Isaac: Oh, just you. Okay, that’s fine. So, a little bit longer of a question; it is more kind of some background. She was saying, “I was recently listening to an older podcast in which you guys were talking about very high net worth being a certain range.” What she took away was like, somewhere in the $10,000,000 range is what we were referring to as a high net worth, or as a very high net worth, and a high net worth is like in the $5,000,000 range. And she said her impression is that most dentists are able to easily reach that three to five net worth range, but few get above that. So she said, “I’m wondering, at what stage of a dental career is the average dentist in the three to five million net worth range?” She says, “my husband is a chiropractor, and I’m a dentist. Together, we have reached that midpoint, that three million point,” after sixteen years of practice for her and 22 for him. She says, “however, some of our colleagues, other providers, they still struggle with debt, spending, and they are nowhere even near this three to five range, even at the end of their career.” So she says, “I have no idea how other dentists are doing. I can’t tell by people’s extravagant spending if they are wealthy or just still in debt and enjoying a grand life. No one ever talks about this. I’m curious, what is the average midway point in a career with someone’s net worth?” Let’s give some feedback.

Reese Harper: Cool! I like this question. This is going to be fun.

Ryan Isaac: So, take it! In your Hawaiian shirt.

Reese Harper: I haven’t had a chance to think about it, so I am processing it right now!

Ryan Isaac: You and your palm leaves on a black background Hawaiian shirt. That is so good! That’s a good match for you.

Reese Harper: It’s got a low cut in the chest, so… you know.

Ryan Isaac: (laughs) hey, this might be the first episode where chest hair is making an appearance on the show.

Tad: Magnum PI, Tom Selleck.

Reese Harper: I like it. So, here is the way I would look at how to calculate what your net worth should be. I was talking about this— we we’re working on an education project in our office right now on how to make people not feel guilty and bad about money; we are trying to have a positive relationship with money. We want to like, make sure this isn’t a negative experience. And there is a couple of conferences I have been to lately where I can tell that most money feelings are quite negative. So, as you heard this question being read from Ryan, and you think about your own situation— in some cases, maybe there was a positive feeling, but many of you listening just even to that, of Ryan throwing numbers out there, you kind of maybe associated yourself to those numbers and said, “I’m not doing good,” or “I’m not a good money person, and I’m a failure”

Ryan Isaac: “I’m a failure.” And I would add that that sentiment is at every scale of the market, right?

Reese Harper: Yes! Yes. That is not unique to you.

Ryan Isaac: The guy with a $10,000,000 net worth and a huge income—

Reese Harper: Generally, on average, he still feels negatively about money.

Ryan Isaac: Some of his peers are twice his size, and so, the story goes on.

Reese Harper: There are just some subjects that, generally, there are negative associations with them. And you could think of some, right? And money just happens to be one of them. For most people, there is a negative association with it, no matter how much they earn. So, you can be happy and not have a really really high net worth. I think there is an important statistic that many of you have probably heard of that there are income levels that you sort of get happy around, and that is between $65,000 and $85,000 in a year. That, really, for most people, is the point where happiness starts to decline, you know, or stay static, or not increase beyond that point. And everyone listening to this podcast may not be at that level, but most dentists are, right? And you are well beyond that, and you won’t notice your happiness dramatically change no matter how much you make. But what will change— I think there is a difference between general happiness to like, survive, which is what these surveys usually measure, like an income level at survival, and then feeling strong. You might not be financially independent, like, to a point where work is optional, and you are not having to work anymore, but what does it mean to feel stable? What does it mean to feel comfortable to be able to spend a little more and not be worried about the future? And I think that is a measure of liquidity; I think that is having enough money to where you can look out for the next few years and say, “I’m okay.” Like, “if something happened to me, I have several years of liquidity piled up.” Not just assets, not just a practice that is highly levered that has some equity in it, not just real estate that has equity in it, but actual— either cash, or brokerage accounts, or mutual funds, or stocks, or ETFs that you can get at with no penalty and very little consequence. Having a fair amount of liquidity, I think, puts you in a next phase of— we’ll call it financial security instead of independence. You’re just secure now. And I think that is a meaningful goal for anyone to achieve. Now, that is the preface to my question, here.

Ryan Isaac: That’s a good preface, as far as prefaces go.

Reese Harper: But let’s say you have an income that— whatever your income is, I would say that early on in your career, it is not likely that your net worth will grow more than 40% of your income, or maybe 50% of your income. And what will happen is, see, some of your income is going to go to pay down debt, which grows your net worth, and some of it you can save, and some of it will grow a little bit. But if you are making let’s say $200,000 in a calendar year early on in your career, you probably won’t see your net worth grow by more than 70,000- 100,000. That would be pretty dang good!

Ryan Isaac: That would even be aggressive, because there is an income limit threshold where a savings rate of even 10% is hard to achieve if you are—yeah.

Reese Harper: You would be really hard-pressed to see your net worth increase 100,000 at the beginning of your career where you make 200. That would be a hard thing to do. You might increase it 50; it might be 40; it might be 60; it might be 70; it depends on how good your investments grew that year, right? But $100,000 growth off of your income would be a really good year. So just think about that for a starting point. As a percentage of my income, how much is my net worth increasing? And then, look at your current net worth– your current net worth is just all that you own minus all your debt—and say, “what’s that number? What’s my current net worth?” Well if you just started out, it’s zero. So, your net worth is only going to grow by a percentage of your income.

Ryan Isaac: Is it okay if it’s negative? Is that common?

Reese Harper: It’s okay if it’s negative, because you just moved into the less negative category.

Ryan Isaac: It’s still progress.

Reese Harper: As a percentage of your income, which is 30%, maybe, to 50%, you probably went that much less negative just by paying off your debt with extra money.

Ryan Isaac: That’s still in the right direction?

Reese Harper: Yep. And your net worth started to grow. But whatever your net worth is, it should grow. The net worth should grow too. Your net worth should not be stagnant. So, if you have a net worth of 500,000, the question is, how much could it grow in a year? Is it going to grow by 10%? That’s your house, your practice, your investments, and everything. Would it really grow by 10%? Well, probably not. Maybe your investments might, but your house probably won’t in every market, and your practice probably will some years, but not in every year. So, $500,000 times 10% is 50,000. So maybe your net worth would grow by 50,000 if you had a half million-dollar net worth. If you made 200,000, another 50,000- 100,000 of net worth growth from your income at best. So maybe your net worth would grow by 100,000- 150,000 a year. My point is, the bigger your net worth gets, the faster it will grow, because you have a bigger net worth that should be earning a return. Your house should be appreciating more; your practice should be growing more; your investment accounts will compound and grow a lot more. And in you’ll see this trend in your—I would say for me, it doesn’t have to do with age as much as it does income. Income will drive when your net worth—that is why Ryan and I are so particular about trying to focus on your practice and getting the right opportunity early in your career. Building your board of directors. Getting a good consultant, right? Getting the right team built around you. So, I would say that most people, if you say a $3,000,000- $5,000,000 net worth, it is going to be highly dependent on income. The average dentist income nationally is in the 200 range, and high 2s depending on the ADA’s most recent data, but if you are higher than that, then you could be looking at a $3,000,000- $5,000,000 net worth target at much earlier than the average person. But here’s what I will say: to reach that net worth level in your 40s would be a higher-than-average achievement for the average dentist, for sure. Any time in your 40s. In your 50s to achieve that would still be—early 50s, I think that would be an above-average achievement. And late in your 50s, I would say, starts to be more expected. And in your 60s, it definitely should be happening if that were your income level. But for me, that is not what the average net worth is of people at that age at all. That’s just what it could be if you earned the average income and you were smart with it.

Ryan Isaac: Had a 15%- 20% savings rate… yeah.

Reese Harper: Yeah! Like, didn’t lose money and didn’t make big mistakes with tax planning. And I think that’s the challenge is, why are dentists retiring on average at age 69? Because it’s not easy, even with an average income, to get to the kind of net worth that Mona was talking about. It’s not easy.

Ryan Isaac: Yeah. So, two other things come to mind too. I think that comparing ourselves to just static net worth numbers is not the whole story. So, we measure something called “total term,” which is taking that net worth but then dividing it by what someone spends in a year. So what is interesting is you could say, “oh, my 38-year-old colleague has a $5,000,000 net worth. That seems really high.” But if he spends a lot of money, his total term– which is that net worth divided by the spending– the output of that will tell you how many years he could actually survive on his net worth and current spending. That could be a very low number, you know? So I think, the other part of this equation that really is the whole determining factor in how financially healthy someone is and where they are going to end up is, what their spending is, and how that actually compares. Maybe you are better off at a $2,000,000 net worth than your colleague is at a $5,000,000 net worth, because you spend less money. You have a smaller need.

Reese Harper: Well, I was talking about this with one of our other team members yesterday who is David, our CTO, and he said—

Ryan Isaac: Shout out to Dave. He’s so smart!

Reese Harper: Shout out to Dave. He really is brilliant. He’s a good dude. What we were talking about is, like, in a lot of third-world countries, income is so much different than in the United States, but this framework that Ryan is talking about, this total term framework, it is very applicable across any income level. And really, to be—Ryan and I are less concerned about what someone’s net worth is. I was giving you the pragmatic, net worth, raw dollars kind of approach to this. But we care less about that as we do what percentage of your net worth do you spend every year, and that will tell us whether you are financially in a good position. Because someone whose net worth is 2,000,000, or barely gets to a million—and dentists generally have a higher net worth than the average person, because they spend more and they earn more. And so, you could be a dentist with a $5,000,000 net worth and have less happiness, less satisfaction, less longevity with that portfolio than a blue-collar who is below the average income level in the country who just spends a lower percentage of their 401k.

Ryan Isaac: Well for some context, let’s take a $3,000,000 net worth. What’s a sustainable amount of annual income you could take from that, assuming the $3,000,000 is usable, and we can get money from the whole thing?

Reese Harper: I’d feel really comfortable at $90,000. I’d feel uncomfortable at 120. I don’t know if I would feel uncomfortable, but I would feel—

Ryan Isaac: That would be like the top range where you would be like, “eh, we might start bleeding this thing down a little bit.

Reese Harper: Yeah. 90,000 off of 3,000,000, I’d feel okay, and 120 would put me at a—you know, I’m getting uncomfortable.

Ryan Isaac: If it’s 150, 180, 200, we’re like, “it’s gonna be gone.”

Reese Harper: I mean, nothing wrong with that. There is nothing wrong with depleting in your retirement savings and passing away with no money. Like, that’s a life well-lived. I mean, on the island of Hawaii, that is the life. And it is happening like none—

Ryan Isaac: I’m glad you’re bringing the deep expertise you have from the island of Hawaii (laughs).

Reese Harper: More than half of the population, like, they are thinking two weeks at a time. Wealth is not a goal, right? It’s just like, enjoying living.

Ryan Isaac: And dying with wealth, too. Yeah.

Reese Harper: And that’s fine! Like honestly, we’re not saying net worth and happiness are correlated, we’re saying they are not correlated in most cases, and that you have to have a low percentage—like, in order to be financially secure, though. I think there is a big difference between being financially secure and then being independently wealthy, where you never have to work again, and you never complete your portfolio.

Ryan Isaac: Well, there is an emotional difference between you ending work at—let’s call it 65, with a plan to deplete your money. You still might have 30 years ahead of you where the money can get depleted, and that is still very comfortable. But there is an emotional and mental difference between that and saying, “at 65, I can keep spending the way I want to spend, and I’m still going to die with $5,000,000 in the bank.” That’s different. You vacation different, you—

Reese Harper: Yeah. Or maybe another way to say it is, “I’m just gonna live on my interest. I’m just gonna live on the interest of my money, and I’m not gonna—I don’t have to worry about depleting it.” Or, “I’m gonna deplete it, but not very much.” And so what we are saying is on a $3,000,000 portfolio, 90,000 is about 3%, and 120,000 is about 4%.

Ryan Isaac: Which historically, for context, the 4% rule is kind of the argument in our industry of what is sustainable and not. Below it is sustainable, and above it is not.

Reese Harper: So, if you’re spending 5% of your net worth, or 6% of your net worth, then you are not going to live on the interest in that portfolio forever. You’ll deplete it. But that’s okay, I mean, you might be at a point in your life where you say, “look. I want to work until I’m 70. I’m going to spend 8% of my portfolio per year, and I only expect it to last for fifteen years, and that is what I choose to do, and that’s what I’m planning to do.” But I think even if you are in that situation, it’s nice to know that that is the case, and to be able to quantify it and say, “hey I know what I’m doing.” Because a problem I find is people spend 8% of their portfolio out of retirement every year, and they think that it’s going to last forever, because they were under the wrong impression about—

Ryan Isaac: What kind of returns you can get out of a portfolio you are living on currently. Which, the amount of risk you take in that is different than when you are not living on it. So, I think that is good context. If, say, there are two people with a $3,000,000 net worth, and one person is totally happy and able to live on 90 grand a year, that’s a wealthy person. And if the other person needs 200 grand a year out of that 3,000,000, they are going to struggle more

Reese Harper: And they’re going to be more frustrated, and not be as happy with their portfolio.

Ryan Isaac: More worried about it. Yeah.

Reese Harper: Okay! I think that is a good summary.

Ryan Isaac: Mona from Canada. Thank you!

Reese Harper: Thanks, Mona. That was a great question.

Ryan Isaac: Thanks for listening! That was really cool. The second one, here. This one is about HSAs. We were talking about this—again, go to Sign up for the free Facebook group; we do Q&As, and we have these discussions all the time. One of them that is active right now this week was about HSA strategy. We kind of posed a question, “who invests their HSAs? When do you know? What amount of money do you invest it?” That kind of stuff. So, this was a question that kind of came during this time frame. This is a GP named Jared in Tennessee. Shout out to Jared; thanks for listening. He says, “I want to know more amount HSA accounts. Should I be putting money in one as used for retirement, or to use for retirement? I know someone who is maxing out an HSA, paying all medical bills out of pocket, then keeping the receipts and cashing in when he needs money for a vacation. He is expecting to take all the money out after he is 65. Apparently, the penalty goes away.” So Jared is saying, should I just set up an HSA, use it for more, like, retirement funds, and then just pay some incidental medical expenses along the way out of pocket? Like, how do I know when to do that? How do I invest it? So, anyway…

Reese Harper: You respond to this. I rambled on the first one longer than I should have, and I will let you go ahead and tackle this one.

Ryan Isaac: Yeah. Well I mean, to be honest, I feel like wearing a Hawaiian shirt with like tequila and a guitar on it, I feel like an HSA expert right now. Like, I really feel empowered to give this answer (laughs).

Reese Harper: You have authority.

Ryan Isaac: I do have authority. Watch the YouTube video version of this, and you’ll see the authority; it’s implied. Well I was going to say, let’s cover a few basics. What is an HSA? What does that even mean? How does someone use it? So, an HSA is a health savings account. It is an account that you can put money into pre-tax—it’s kind of like an IRA or a 401k—so the money you put in there lowers your income, and it is a tax deduction.

Reese Harper: It’s called an above-the-line deduction. That is one of the best types of deductions too, because it is one that helps your income the most, okay? It helps your tax situation the most.

Ryan Isaac: Yeah. So, you can put money in the account. The limit this year was like $6,850, or $6,900 in some cases. You have to have an HSA-qualified plan, which usually means your deductibles are higher, your out-of-pocket expenses are higher, and then you can use one of these things. And so, you can put money in an HSA account; your bank has HSAs; your investment account custodian has HSA. You can invest the money just like a retirement plan.

Reese Harper: I wouldn’t skip over that too much, because one of the most common questions I get is, how do I set up an HSA, and can I invest it? I get that one a lot.

Ryan Isaac: That is why I want to keep this basic. Yeah, because like, I think there are more basic questions than high-level strategy that—

Reese Harper: Well let’s let you finish your thought, but I just want to interject that an example would be like– HSA Bank is a bank that just does HSA accounts. You can open an account and have the money just sit in a savings account there—

Ryan Isaac: And get a debit card, or a checking account kind of attached to it.

Reese Harper: Yeah, or you can connect it to an investment account. Like, HSA Bank has a contract with TD Ameritrade, and a few other investment options, so you can say, “I want my account to be invested.” It is a little trickier, because you have to actually like, invest the money, and then sell it to get it back into cash so you can actually spend it. You can’t spend investments. Investments are—you know, obviously something goes from money market to an investment, and then it comes back into money market, and then you can spend it. It is a little bit trickier, and we wouldn’t recommend doing that until you probably had—I would say, get a full year’s worth of your out-of-pocket maximum—

Ryan Isaac: Which is what?

Reese Harper: It depends on your health insurance plan, right?

Ryan Isaac: Yeah. That is going to be your deductible. It could be—well, usually, with an HSA-qualified plan, your deductible is going to be higher anyways. So, probably thousands.

Reese Harper: Can you tell people what the difference is between an HSA-qualified plan and not?

Ryan Isaac: Yeah, so that is your health insurance. So, an HSA-qualified plan is going to have a higher deductible. That is the amount of money you have to meet first before the insurance kicks any money. Usually, with these plans, it is in the thousands. I don’t think there are HSA-qualified plans where you have a $250 deductible. It is usually like 2,500 bucks or above or something like that.

Reese Harper: Yeah, there is a limit this year that I can’t quote off the top of my head, but the ACA defines the actual qualified amount of deductible. And I think it is not quite as high as two grand. I think it’s just under that.

Ryan Isaac: 1,500 bucks or something?

Reese Harper: But I was talking to someone yesterday who said, “my CPA told me not to do an HSA.” And that was what this dentist felt like he had heard. But after talking to him a little bit more through the forum, I think he didn’t actually qualify for one. I think his CPA might have said, “you don’t qualify for one.” Because he actually has like a $100 deductible.

Ryan Isaac: Yeah, “don’t do it buddy, because you can’t do it.”

Reese Harper: Yeah, he had a really low deductible. And he had some reason why he wanted a low deductible. He had a fair amount of medical procedures that he is waiting to have happen, and also some medications, and so, he didn’t qualify for one. So you’re making a good point, and a lot of people don’t realize that they can’t do it unless they have the proper health insurance.

Ryan Isaac: And a lot of times, the ones that will not qualify are usually like group health insurance. If you have really good group health insurance, maybe through a big company, they will have lower deductibles, because that is what people sometimes want. But what you are saying is, have the cash in there for at least how much your out-of-pocket maximum would be for one year. So if deductible is 2,500 bucks, you want at least that, and then once you hit that, you have what is called coinsurance. So, that means—and it could be as bad as 60/40 all the way up lo like 90/10—

Reese Harper: Yeah, where the insurance company only pays a percentage.

Ryan Isaac: And then you pay the other percentage, up to a maximum. So, the max can be 5,000, 10, 12, 15, or more. 20. There are family maximums…

Reese Harper: So, you just want to make sure that you know what your out-of-pocket maximum is. What that means is, the amount of money in a year that you are actually going to be on the hook for, worst-case scenario.

Ryan Isaac: Yeah. So if that is ten grand, don’t put your first ten grand of your HSA into like—the S&P 500 and then all of the sudden, we go through a 2008 and you have half of your money, and now you have a big medical expense, and you don’t have the money anymore.

Reese Harper: Yeah. Keep the cash in there, up your out-of-pocket max, and then start investing the difference. That might take you a couple of years of funding it. What about your point that the question was making? Like, should I spend the money on health insurance or not?

Ryan Isaac: Well, again, the forum has been really helpful, because we have been able to see—some people have different takes. So this take is like, someone is just trying to be a little strategic, here, saying, “I get the tax benefit of putting the money in the HSA, it is going to grow tax free—” and by that, what that means is the dividends and interest that might otherwise kick off inside of a brokerage account that you would be taxed on throughout the year, it’s not taxed. It’s like a Roth, or any other IRA account. It’s a small amount. So, we are not talking about like thousands of dollars in taxes, you know? If you have ten grand in your HSA, the dividends and interest, even if it is fully invested, it’s not going to be a huge amount. But that’s the slight advantage. So, this person is saying they have medical expenses, they use current after-tax dollars to pay the medical expenses and leave the HSA money to grow tax-free. That is all they are saying. My argument to—okay, well I’ll stop there. Another situation that came from the forums was, someone said, “yeah, I do this. I’ve been doing this for years. We’ve got quite a big HSA now. Got the deductions up front on my tax return. It’s grown tax free. I can pull it out in the future tax free. But I have very little medical expenses. Like, we don’t go to the hospital, we don’t have medications, we don’t see doctors regularly. So, anything we pay for is really incidental, and I pay for that out of pocket, and I just let my stuff grow.” I don’t know. Like, the limits are similar to a Roth IRA. So it kind of feels like you are getting the same type of advantage. And at 65, you can then pull out your HSA money for anything without getting the penalty. If you do it before that, there’s a 20% penalty.

Reese Harper: Instead of 10% that an IRA normally has, right?

Ryan Isaac: Yeah. So, the penalty goes away at 65, and then you still get it tax free if it is a qualified medical expense. Now, what is cool after 65 as well is you can use HSA money to pay for Medicare premiums. So, as health care gets expensive in the future, you can actually use it for Medicare premiums and other medical expenses. And anything else penalty free. So, some people are saying, “I don’t use my health insurance very often. I pay for incidental stuff with after-tax money, and I just let the stuff grow.” That kind of makes sense. What I actually have heard that I think is interesting is when someone has, you know, maybe significant medical expenses, and they are choosing to pay with after-tax dollars and let the HSA roll. For most dentists, it is going to be likely that the income you pay tax on today during the middle of your career, or peak of career, is going to be higher than the income you will pay tax on when you are done working. That is probably likely for most dentists. And so, any time you are deciding to pay money—like, pay tax on money now versus pay tax money later, you’re paying a higher tax rate, likely, than you will in the future. So, that would be my only argument against that is—

Reese Harper: Against letting your money stay in your account forever?

Ryan Isaac: If you have significant bills that you have to pay—you’re seeing a doctor regularly, you’re paying for medication regularly, you’re going through procedures—

Reese Harper: You’re having kids.

Ryan Isaac: Yeah. I would argue, well, use that money now when your tax rate is high as opposed to waiting to take the money in the future when your tax rate will probably be low.

Reese Harper: So I’m going to have to—you went through, like, HSA 107, or 900.

Ryan Isaac: It wasn’t 101, was it? It was like a 400-level class.

Reese Harper: Tad and I both are in Hawaiian shirts, and we are just like, “we don’t know what you’re talking about.

Ryan Isaac: I’m in a Hawa– oh, Jimmy Buffet shirt.

Reese Harper: Okay, so, just to recap here from a fifth-grade point of view—because that is how I feel today with my shirt on—

Ryan Isaac: (laughs) and it’s really baggy.

Reese Harper: Like you’re saying, there are kind of two arguments: I put the money in my HSA and I let it go forever, and eventually, down the road, I’ll take it out and do whatever I want with it, or pay for Medicare premiums, right? I’ll use it. The people that are making that argument are saying, “hey, it’s just like another IRA for me. I don’t pay tax on it.” It’s not like a Roth, it’s like a regular IRA, because you have to pay tax on it later.

Ryan Isaac: If it’s not medical expenses.

Reese Harper: Yes. If you want to go buy a boat with it in your retirement on the island of Oahu, then you’re going to have to pay taxes, okay? But you’re saying, if I spend the money today on my medical expenses, instead of doing that other plan that all these sophisticated guys are doing, it might be better off. Because if I’m in a 39% federal tax rate today, and my state charges me eight, and I have probably a Medicare surcharge or ACA tax, then I might be at 50% of my income today in taxes. I’m actually saving quite a bit by paying for medical expenses through my HSA. I’m saving 50 cents on the dollar! As opposed to paying 50% in tax, and then just paying with after-tax money. So, I’m saving 50% today, but in the future, I might only save 25%. You’re just saying, the tax rate makes a difference, and for most people, they might be 15% or 20% less in the future than they are now.

Ryan Isaac: Mhmm. Yeah. Bottom line: I’m a big fan of investing your HSA, and treating it like a retirement plan, if you have enough to cover maybe a year or two’s worth of deductibles, for sure, and out-of-pocket maximums. And then if you have, like you said, plenty of resources to take care of or handle anything—good emergency fund, good liquidity—yeah! Get the tax deduction, for sure; treat it like a retirement plan. I think that’s fair.

Reese Harper: Yeah. Alright, what’s the next question? We’ve only got one left!

Ryan Isaac: Ahh, so soon. Alright, this actually came from a conversation with a client, and I thought this was such a good question, because I think it is really common. So, the conversation was kind of like this. It was, “hey Ryan, from what I understand, we’re in the middle of a bull market, but, over the last six to seven months— basically 2018 through this point. January thru August, where we are at right now— my accounts have been flat or slightly down. How is that possible if we’re in a bull market?” And I thought this was a really good question, because I think there are—well we know there are huge misconceptions around terms in the financial industry that get thrown around. What does that even mean to be in a bull market? Does that mean that literally every day, every asset class goes straight up? It never dips. It never goes sideways. How does a bull market start? How does it end?

Reese Harper: (laughs) I had this exact conversation yesterday, too! That’s kind of interesting.

Ryan Isaac: And this isn’t throwing anyone under the bus. This isn’t judgmental, because I think this is a very good question.

Reese Harper: It’s a normal thing to feel right now. In this market right now, it’s a normal question to ask. Because all you’re hearing is, “ohhhh, this, like—”

Ryan Isaac: “Biggest bull market in history! The biggest gains we’ve ever seen! It’s the longest running thing.” Which, there are a lot of arguments against when this bull market even started really, and is it really the longest one. But the point was, if we’re in a bull market, how is it possible that accounts could even go down or sideways? How could they if we’re in a bull market? So…

Reese Harper: What did you talk to your client about?

Ryan Isaac: Well, I think the first thing is, let’s define what that even means. What a bull market even means. And I spent a little bit of time, because funnily enough, you can’t find a good consensus on what people agree on is a bull market. Right?

Reese Harper: Bulls and bears! I mean—I know what a bull is, and I know what a bear is…

Ryan Isaac: Have you ever tamed, or ridden, or played olé with a bull?

Reese Harper: I think if you have ever been to New York, and you have been able to see the bull, then you kind of—I mean, all you assume is, a bull market means things are going up. That’s the general public’s assumption. But that’s not—

Ryan Isaac: I read an article with a top smart guy at Betterment, and he was like, “yeah, that’s basically the definition. Stuff goes up.” I’m like (laughs) okay. So, over what period of time? A century? Because, we’ve been in a century-long bull market if that’s the case, you know?

Reese Harper: The history of the stock market is technically a bull market?

Ryan Isaac: We’ve never had a bear market (laughs). Ever. Yeah, exactly.

Reese Harper: Time frame is really the challenge of defining it.

Ryan Isaac: So, some people will say it just generally means things are going up. More technically, a pretty big consensus is it’s a 20% gain from any bottom after a 20% loss. So, a bear market is a 20% loss from a peak, and a bull market is a 20% gain from a trough. What’s funny, though, is if you go back to 2008, or 2009—Spring of 2009, in February—when the market bottomed, the period of time to get to a 20% gain from that bottom was like two months. So it’s like, “oh, we’re in a bull market,” two months later, after the biggest crash in our whole lifetimes, you know?

Reese Harper: Yeah. I think the challenge that I experienced during this same week was someone looking back over—this person has an account that is a mix between stocks and bonds, because—

Ryan Isaac: Which is common. Like, most people will have that.

Reese Harper: They are in retirement, alright? And this mix between stocks and bonds is the reason that they will be able to protect themselves during– what you’ll also hear from everyone is that everyone is worried about a bear market that is coming. Now, just so everyone knows, there is always a bear market looming, and it’s sad. Like, these last for years, people! We’re going to have a year or two of podcasts where we are going to be in a bear market like the whole time. And we’re all going to be freaking out together.

Ryan Isaac: Over the last hundred years, this is U.S. Market data: bear markets happen two-and-a-half times per decade, statistically.

Reese Harper: Yeah, I mean, the number of consecutive positive return years right now that have occurred since 2010, it has happened. There are higher periods of consecutive returns than what we are in right now, historically. But this is a really good period right now.

Ryan Isaac: So, here are some interesting arguments. Some people say—well that is what the news has been lately, “longest bull market.” Which, some of our psychological bias says, “well, it can’t last, so, it has to change soon,” right? But, if you go through some technical definitions, in 2011, the S&P dropped 21.6%. That would be officially a bear market. So you could say, the bull market started in ’09 and ended in ’11, but then started back up in ’11. In 2015, the Russell 2000 fell 25%. So you could say there were three bull markets! ’09 to ’11, ’11 to ’15, ’15 through ’18… we’ve been in three. And those have been punctuated by two bear markets! So it’s like, what is your definition, you know?

Reese Harper: If you just look at, like, January of this year. January of this year, the United States’ stock market—which, if you’re in a globally-diversified portfolio, this would only represent a portion of your stock returns, okay? The United States’ stock market, if we use the S&P 500 as our proxy, in January, it would have gone up 5.6. February, it was down 3.9. March, it was down 2.7. So basically, in the first three months of the year, we didn’t have any returns. But it went up five, down three, down two. Then, April was pretty much flat at .27. Then, May was up 2.16. June was pretty much flat at .4. And then July was up 3.6. Right now, you know, you’re at a date—we’re now in the positive territory of in the between 5% and 6% range—

Ryan Isaac: Can I jump in here really fast, too? See, here is another problem with things like this is, people shouldn’t own just the S&P 500. So, if you’re listening right now, and you have a globally-diversified portfolio that is U.S., and developed, and emerging, and maybe some real estate and some bonds, you can’t hear this statistic—what were you going to say year-to-date S&P is?

Reese Harper: It’s between 5% and 6%.

Ryan Isaac: So, someone might hear that and go, “Ryan, my count is flat right now,” or “it’s down 1%, but you just said the S&P is up 6. What’s going on?” And so, another distinction that we all have to make is, these are just some data based on indexes, but you probably don’t and you probably shouldn’t own just one single index with 100% of your portfolio. That shouldn’t even be the case.

Reese Harper: Yeah, it’s important to… like, if you take a look at Latin America, Brazil, Russia, India, China—that’s what we call the emerging countries—if we look at like year-to-date returns on emerging, do you have any guess what that would be? Do you have any guess on that?

Tad: Can I throw in one?

Reese Harper: Yeah, go ahead.

Tad: I’d guess down 12.

Reese Harper: Yeah, it’s a down. A down about 5 year-to-date. So, the United States is up. Latin America, Russia, India, China, Brazil, they are down.

Ryan Isaac: So if that is 10% of your portfolio, you’re catching some of that.

Reese Harper: You’re going to catch some of that. If you look at Europe, it’s going to be different, and depending on the year we look at this, or the month we look at that, Europe could be up 8% and Latin America could be down 4—

Ryan Isaac: Or how you own it! What if your U.S. exposure is just the S&P 500 index? Or what if it is a broad index with everything in the United States? Those would be different statistics too.

Reese Harper: We don’t want to confuse you, we’re just saying, look. When someone says the stock market, we have to define what we’re talking about. Are we talking about the United States? Are we talking about Latin America? Are we talking about Europe? Are we talking about Asia?

Ryan Isaac: Or one specific index that is just a part of a country.

Reese Harper: Or one index, or several? And then what percentage of each of them do you own? Because that will affect your returns. And then, do you have any bonds in your portfolio? And how are those mixed in? And so, there is no right answer to this, like, “this is the way to do it.” There are dumb ways to do it, for sure, and then there are increasingly better ways, but some of these are going to be preferences. Like, we have some clients that might have a strong preference to only own stocks in the United States, and we might say, “you know what? We believe that global diversification is a better approach, because there might be some periods of time where the United States doesn’t do well, and you want to make sure that—” from like 2000 to 2010, I mean, it was not a good time to own the United States. And Brazil, Russia, India, China, emerging countries, those were the places where you got all the growth! And so, stocks are important to own globally in our opinion, but some clients have strong preferences! Like, most Australian clients only want to own Australian equities. And we have talk about how that is home-country bias. But it is not necessarily completely wrong, it’s just that you are going to have one set of patterns by itself. And stocks generally over time—if you take enough of them—they have similar returns no matter what country or index you are looking at. They generally have similar returns in terms of the averages, but they just happen at different intervals. Be careful of what you tell yourself emotionally. Be careful what you tell yourself about your portfolio, because the truth is, you could be in a bull market, and the last five years could look really good, and you could be hearing something on tv like, “you’re in the biggest bull market in history,” and if you are an investor that started your portfolio investing experience in the month of February—

Ryan Isaac: Well, this wasn’t uncommon. How many new clients started investing for the first time at the beginning of this year?

Reese Harper: Let’s say February of this year was your first month. Well, you didn’t catch January’s return. January was the 5% month. You started in February, so you missed an entire 5% return. So, you got -3, -2 to start out. Then you were flat.

Ryan Isaac: Dig you out of that hole.
Reese Harper: Then you got +2 and +3. So if you started investing this year in February, you’re flat, or slightly down. But, if you started in January, you’re up 5% (laughs).

Ryan Isaac: If you just owned that.

Reese Harper: If you just owned that one index, and this was the only thing you bought, was this S&P 500, United States’ stock index.

Ryan Isaac: If you work with us, that is not how it happened (laughs).

Reese Harper: And what I’m saying is, man we give ourselves bad messages about our own experience. The client I talked to was like, “the S&P 500 is up—” he threw a number out—I think it was like 13% or 14%. And it’s actually up a little bit more than that over a twelve-month period right now. If you look back twelve months right now, we are probably up 15%-16%. Eh, probably 15% right now. And so, if you look at a fifteen-month period up 15%, this person was upset because they were only up like 9.5 out of a twelve-month period! And I’m like, well that’s because you’re not 100% in that one thing. Half of your account is in very conservative stuff making 2% a year! You know, because we are trying to protect you from losing money if this thing goes down. But the one thing that he did own was up of what he thought, right? He just didn’t actually look into his account and go, “ohh, so I am up 15 in the thing that’s up 15. But I’m not up 15 overall cuz I that’s not all I own.” You should have a good financial advisor, a fee-only fiduciary, who understands this stuff. They’re staying on top of it; you communicate with them during this time; in many cases, you should communicate regularly. Now, you have to be re-educated sometimes, or re-explained to.

Ryan Isaac: Well, these are fair questions. I mean, this whole thing—I guarantee a lot of people are wondering the same thing.

Reese Harper: You do worry sometimes about things, especially if we go through crazy periods of time. So what is really important is that you have someone you trust, you have a good relationship with them—

Ryan Isaac: And start the conversation nicely, and most advisors would love to have that conversation. Even if that is a legit worry. Even if you are really wondering, like, “does someone have access to take my money out?” Ask it nicely, and an advisor is going to love the opportunity to show you how—

Reese Harper: Oh, he loves to talk. Look at Ryan!

Ryan Isaac: Money is flowing, and—let me show you how trades work, and money comes in, and what do we buy, in happening markets, and what do you own… you know. Anyway.

Reese Harper: This is a great topic. So, thanks to the clients who asked these questions. Go to and ask some more this week!

Ryan Isaac: Yeah. Jump into the group. Ask some more. If you have a question you would like to address with one of our advisors one-on-one, go on our website and book a free consultation. It’s There’s a big button that says, “Book Free Consultation,” and you just set up an appointment at your convenience. One of our advisors will jump on the phone with you, and ask you some questions, and help you figure out what is going on. Thanks for listening today! This was a really laid-back, Hawaii feel. I feel like I’m on the beach!

Reese Harper: Aloha! Mahalo.

Ryan Isaac: Instead of “carry on!” Mahalo.

Reese Harper: Carry on!

Investing, Insurance, Tracking Progress

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