Podcast Title: The Clark Howard Podcast
Host: Clark Howard
Episode: Ask An Advisor With Wes Moss - Is It Ever Too Late To Save for Retirement? and Big Social Security Change for Millions
Release Date: January 28, 2025

Introduction

In this episode of The Clark Howard Podcast, host Krista Dibiaz engages in an insightful conversation with financial advisor Wes Moss on the show segment “Ask An Advisor.” The discussion centers around critical retirement planning questions, particularly addressing whether it’s ever too late to start saving for retirement and unveiling significant changes to Social Security that impact millions of Americans. The episode is rich with practical advice, real-life examples, and expert insights aimed at empowering listeners to take control of their financial futures.

Is It Ever Too Late to Start Saving for Retirement?

Wes Moss delves deep into the prevalent anxiety many Americans face regarding retirement savings, emphasizing that “it is never too late to start” (01:56). He acknowledges the common sentiment of never having saved enough, highlighting that even those nearing retirement age, such as the median savers in the 55-64 age bracket with approximately $185,000 saved, can still make meaningful progress.

Key Insights:

• Median Savings Statistics: Wes points out that for individuals aged 55-64, the median retirement savings is about $185,000, and for those aged 65-74, it's around $200,000. This means half of Americans in these age groups have less than these amounts, underscoring a widespread savings challenge.

• Case Study: Late Start Larry and Lisa: Wes shares the story of Larry and Lisa, who began saving for retirement in their late 40s with almost no prior savings. By maximizing their 401(k) contributions—$31,000 each annually with catch-up provisions—and investing additional after-tax funds, they amassed approximately $2 million over 15-20 years, even with a conservative 8% annual return (03:25).

  Wes Moss (01:56): “I have seen over and over and over again that it is never too late to start.”

• Compounding and Investment Growth: Emphasizing the power of compounding, Wes explains that disciplined saving and investing can significantly grow retirement funds over time, even for late starters. He notes that contributions combined with market growth rates of 7-10% can lead to substantial nest eggs (07:45).

• Practical Steps for Late Starters:

  • Maximize 401(k) contributions, especially utilizing catch-up contributions for those over 50.
  • Invest in diversified assets to harness market growth.
  • Consider future income streams like Social Security to supplement retirement savings.

Significant Changes to Social Security

The episode also covers a monumental shift in Social Security policies affecting approximately 3 million public sector workers, including teachers, nurses, firefighters, and police officers.

Wes Moss announces the passage of the Social Security Fairness Act, which eliminates two long-standing provisions:

1. Windfall Elimination Provision (WEP): Previously reduced Social Security benefits for individuals receiving a public sector pension, even if they contributed to Social Security through other employment.

   Wes Moss (25:32): “She’s now going to get that change for every month in 2024. So she’ll get five, 100 bucks times 12, she gets another six grand as a check. So now...”

2. Government Pension Offset (GPO): Reduced Social Security spousal benefits for those with a public pension, often resulting in significantly lower or zero benefits.

Key Highlights:

• Immediate Impact: Individuals like Carol and Lisa, who were adversely affected by WEP and GPO, will see their Social Security benefits increase. For instance, Carol’s Social Security is projected to rise from $400 to $900 monthly, and Lisa’s from $0 to $1,200 monthly, providing her with substantial additional income (25:32).

• Long-Term Benefits: The changes are expected to average an increase of $360 to $400 per month in Social Security benefits for those affected, enhancing their financial stability in retirement (26:51).

• Action Steps for Affected Individuals:

  • Contact Social Security to update and amend their benefits.
  • Reassess retirement plans in light of increased Social Security income.

  Wes Moss (26:52): “It’s a big deal. The estimated average is that, on average, people will get a 360... almost 400 bucks a month.”

Listener Questions and Expert Advice

Throughout the episode, Wes Moss addresses several listener-submitted questions, providing tailored advice on various financial topics.

1. When Do I Have Enough for Retirement?

Listener: Sean from California
Situation: 57 years old, $3.8 million saved, 100% invested in the S&P 500, plans to retire at 62.

Wes Moss's Advice:

• Assessment of Goals: Wes asserts that with $4 million saved, applying the 4% rule, Sean and his wife can withdraw $160,000 annually, supplemented by Social Security benefits, comfortably supporting their retirement needs (11:53).

• Investment Diversification: Recommends shifting from 100% equities to a more balanced portfolio (e.g., 60% stocks, 40% bonds) to mitigate risks, especially as retirement approaches to safeguard against market downturns (30:05).

  Wes Moss (27:37): “...most fiduciary advisors are governed by the SEC...”

2. Advice for Couples on Different Retirement Roads

Listener: Dan from Ohio
Situation: One spouse is a spender who doesn’t plan for retirement, and the other is lukewarm about saving.

Wes Moss's Advice:

• Financial Mediation: Encourages seeking help from a financial advisor or fiduciary who can act as a mediator to create a realistic and actionable retirement plan, fostering mutual commitment to saving (16:27).

• Behavioral Change: Emphasizes the importance of confronting the “ghost of Christmas Future” to visualize potential retirement challenges, motivating both spouses to prioritize saving (16:30).

  Wes Moss (17:05): “Never too late to be a happy retiree.”

3. Understanding Fiduciary Responsibility

Listener: Mr. Rfryz on YouTube
Question: What does fiduciary really mean in practice?

Wes Moss's Answer:

• Definition and Importance: Highlights that fiduciary advisors are legally and ethically bound to act in their clients' best interests, avoiding conflicts of interest that non-fiduciary advisors might have (27:09).

• Practical Implications: Explains the difference between fiduciary and non-fiduciary advisors, emphasizing that fiduciaries avoid commissions and prioritize the client’s financial well-being over personal gain (29:04).

  Wes Moss (28:14): “Most fiduciary advisors are governed by the SEC...”

4. Managing Inherited Stock Investments

Listener: Chris from Georgia
Situation: Inherited Home Depot stock for himself and his children, seeking advice on managing these assets.

Wes Moss's Advice:

• Diversification: Advises maintaining the inherited stock as long as it doesn’t exceed 10% of the portfolio, recommending diversification into broad market indexes to reduce risk (30:16).

• Long-Term Holding: Supports holding strong, reliable stocks like Home Depot for extended periods, given their potential for growth aligned with housing market trends (32:45).

  Wes Moss (32:45): “We just don’t have enough homes...they have to start being a little careful.”

5. Optimizing a Low-Balance Traditional IRA

Listener: Jose from Florida
Situation: 54 years old with a $10,000 traditional IRA, seeking investment advice.

Wes Moss's Advice:

• Investment Growth: Encourages moving beyond low-interest savings accounts to higher-yielding investments, such as diversified mutual funds or ETFs, to enhance growth potential (33:18).

• Continued Saving: Reinforces the theme that it’s never too late to build a retirement nest egg, even with modest annual contributions, leveraging compound interest to achieve financial flexibility in later years (35:03).

  Wes Moss (35:03): “Never too late to start saving, never too late to be a happy retiree.”

Major Takeaways

1. Never Too Late to Save: Regardless of age, starting to save and invest for retirement is crucial and can lead to substantial financial security with disciplined effort and strategic planning.

2. Power of Compounding: Consistent contributions and wise investments, even later in life, can significantly grow retirement savings through the magic of compound interest.

3. Social Security Enhancements: The elimination of WEP and GPO through the Social Security Fairness Act provides a substantial financial boost to public sector workers, improving their retirement income stability.

4. Fiduciary Duty Matters: Choosing a fiduciary financial advisor ensures that your best interests are prioritized, avoiding conflicts of interest inherent in non-fiduciary advisory roles.

5. Diversification is Key: Maintaining a diversified investment portfolio helps mitigate risks and ensures more stable growth, especially as one approaches retirement age.

6. Holistic Financial Planning: Incorporating various income streams, maximizing retirement account contributions, and enlisting professional advice are all integral to a robust retirement strategy.

Conclusion

This episode of The Clark Howard Podcast offers a wealth of information for listeners grappling with retirement planning questions. Wes Moss provides actionable advice, grounded in real-life examples and financial principles, reinforcing the message that with the right strategies and mindset, achieving a secure and fulfilling retirement is within reach. Whether you're just starting your savings journey or looking to optimize your current financial standing, the insights shared here are invaluable for navigating the complexities of retirement planning.

Notable Quotes:

• Wes Moss (01:56): “I think it is never too late to start.”

• Wes Moss (25:32): “It’s a big deal. The estimated average is that, on average, people will get a 360... almost 400 bucks a month.”

• Wes Moss (28:14): “Most fiduciary advisors are governed by the SEC...”

• Wes Moss (35:03): “Never too late to start saving, never too late to be a happy retiree.”