The Clark Howard Podcast
Episode: 02.18.25 – Ask An Advisor With Wes Moss
Release Date: February 18, 2025
Host/Author: Clark Howard
Featuring: Wes Moss and Krista Dibiaz

Overview

In this insightful episode of The Clark Howard Podcast, Clark Howard teams up with financial advisor Wes Moss and co-host Krista Dibiaz for the popular segment, Ask An Advisor. Listeners are treated to a wealth of financial wisdom, ranging from the rising number of millionaires in America to nuanced retirement planning and investment strategies. The episode weaves through comprehensive discussions, practical advice, and real-life listener questions, making it an invaluable resource for anyone seeking to enhance their financial well-being.

Becoming a Millionaire: Trends and Traits

Wes Moss opens the discussion by exploring the increasing number of millionaires in the United States. Referencing recent data from the Federal Reserve’s consumer surveys and a Wall Street Journal article, Wes highlights that there are now approximately 16 million millionaires, accounting for about 12% of the population. He emphasizes that this surge is not necessarily due to individuals having millions in liquid assets but rather an overall net worth surpassing the million-dollar mark.

Key Insights:

• Income Levels: Most new millionaires earn between $150,000 to $250,000 annually, showcasing that achieving millionaire status doesn't require ultra-high incomes.

• Investment Strategies: A significant factor contributing to their net worth growth is effective stock market investments and homeownership. Between 2019 and 2022, median net worth among these individuals surged by 69%, closely mirroring the S&P 500’s 64% return during the same period.

• Homeownership: With 87% of this group owning their homes, rising real estate values have played a crucial role in wealth accumulation.

• Age and Education: Individuals aged 55 to 64 make up 21% of this millionaire cohort, doubling their representation compared to earlier years. Additionally, having a college degree is strongly correlated with attaining millionaire status.

Notable Quote:

"The average net worth family in America is a million bucks." – Wes Moss [02:46]

Listener Questions and Expert Advice

1. Holly from Arizona: Inheritance and Financial Planning

Question: Holly is expecting to inherit $1 to $2 million and seeks guidance on assembling a financial team to manage this influx, particularly for her children’s education funds.

Advice from Wes Moss:

• Establish a Team: Wes suggests a structured approach:
  • Certified Financial Planner (CFP): Acts as the quarterback, orchestrating the financial strategy.
  • Certified Public Accountant (CPA): Handles tax matters.
  • Estate Planning Attorney: Manages legal estate transitions.
  • Special Teams: For Holly’s situation, a probate attorney in Arizona is recommended to navigate the complexities of wealth transfer and ensure all documentation is in order.

Notable Quote:

"The greatest enemies of the equity investor are expenses and emotions." – Wes Moss [30:50]

2. Alex from Michigan: Fixed Income vs. Money Market Investments

Question: Alex is contemplating shifting his fixed income bonds to money markets or CDs to avoid volatility, seeking faster compounding for his 40% bond allocation.

Advice from Wes Moss:

• Historical Performance: Bonds have historically outperformed cash over extended periods, despite short-term volatility. Wes advises against moving entirely to money markets, emphasizing that bonds provide a buffer against inflation and contribute to portfolio balance.

• Strategic Allocation: Maintain a diversified portfolio that includes both bonds and stocks to harness the benefits of both asset classes over time.

Notable Quote:

"Statistically, over time, bonds have way outperformed Cash." – Wes Moss [14:38]

3. Michelle from New Jersey: Retirement Savings and Tax Concerns

Question: At 63 years old, Michelle is withdrawing from her retirement savings to cover monthly expenses, despite saving aggressively. She’s concerned about the sustainability and tax implications of her strategy.

Advice from Wes Moss:

• Adjust Contributions: Recommend reducing the 401(k) contribution rate to ensure her take-home pay covers essential expenses, thereby eliminating the need to dip into retirement funds prematurely.

• Maximize Employer Match: Ensure Michelle is fully capitalizing on any employer-matched retirement contributions before adjusting her savings rate.

Notable Quote:

"Don't create this tax vortex loop because you're already probably getting your free money match." – Wes Moss [20:34]

4. Patrick from Illinois: Robo Advisors and Cash Allocation

Question: Patrick is dissatisfied with his Schwab Intelligent Portfolio, which holds 6-7% in cash, hindering his compounding efforts. He’s considering switching to another robo advisor.

Advice from Wes Moss:

• In-Kind Transfers: Switching robo advisors can trigger tax events due to selling assets. Wes advises maintaining investment accounts within the same tax structure (e.g., Roth IRA) to mitigate tax implications.

• Evaluate Alternatives: While exploring other robo advisors like Wealthfront, Betterment, or Vanguard, be cautious of potential fees and investment strategies that might not align with Patrick’s goals.

Notable Quote:

"No Robo is perfect." – Wes Moss [34:36]

5. Bob from Florida: Securing Brokerage Accounts

Question: Bob is concerned about the security of his Fidelity Brokerage account containing $500,000 and is considering spreading his investments across Vanguard and Schwab for added protection.

Advice from Wes Moss:

• In-Kind Transfers: Moving funds to multiple institutions can be done without triggering taxable events by transferring assets “in kind.”

• Security Practices: Emphasize the importance of dual-factor authentication and vigilance against phishing attempts rather than merely spreading assets across institutions.

• Risks vs. Benefits: Highlight that diversification across platforms may not significantly enhance security and can complicate account management.

Notable Quote:

"The greatest enemy of the equity investor are expenses and emotions." – Wes Moss [30:50]

Lessons from John Bogle: Investing Principles

Towards the end of the episode, Wes Moss delves into the legacy of John Bogle, founder of Vanguard, sharing three pivotal lessons that have shaped modern investing:

1. Be an Investor, Not a Speculator:

   • Long-Term Horizon: Bogle advocated for a minimum investment horizon of 10 years, discouraging short-term market speculations.
   • Compounding Benefits: Staying invested ensures participation in the market’s overall growth, avoiding the pitfalls of missing critical market upswing days.

   Notable Statistic:

   "If you miss the five days [of best returns], it drops your rate of return by 21%." – Wes Moss [30:51]

2. Control Expenses and Emotions:

   • Low-Cost Investing: Emphasize minimizing investment fees through index funds and ETFs.
   • Emotional Discipline: Maintain a steady investment strategy despite market volatility, avoiding decisions driven by fear or greed.

   Notable Quote:

   "The greatest enemies of the equity investor are expenses and emotions." – Wes Moss [30:50]

3. Avoid the Dream of a Perfect Plan:

   • Practical Planning: Focus on creating and adhering to a solid, adaptable financial plan rather than striving for unattainable perfection.
   • Adaptability: Recognize that financial plans need to evolve with changing circumstances and market conditions.

   Notable Quote:

   "The greatest enemy of a good plan is the dream of a perfect plan." – Wes Moss [30:51]

Wes underscores the enduring relevance of Bogle’s principles, asserting that disciplined, low-cost, and emotion-controlled investing strategies remain foundational to achieving financial success.

Closing Remarks

Krista Dibiaz and Wes Moss wrap up the episode by reiterating the importance of vigilance in financial planning and investment strategies. They encourage listeners to remain proactive, seek professional advice when necessary, and adhere to time-tested financial principles to secure their financial futures.

Krista’s Final Thoughts:

"We are not going for perfection. It makes me think about how each of us, I mean, I imagine, I don't know if you've ever, you've ever had a bad something you invested in that was unwise or you made an emotional decision. I know Clark has talked about he's made some unwise investments in his past that taught him. I definitely have. And so we all have made mistakes or maybe you've gone in and out of the market or tried to time it. That's just clean slate it. Nobody's perfect. And then we just all need to look at that 10 plus year horizon." – Krista Dibiaz [32:36]

Wes’s Parting Advice:

"The greatest enemies of the equity investor are expenses and emotions." – Wes Moss [30:50]

Key Takeaways

• Consistent Saving and Investing: Building wealth requires disciplined saving and strategic investing, focusing on long-term growth rather than short-term gains.

• Diversification and Security: While spreading investments across platforms can mitigate certain risks, maintaining robust security practices is paramount.

• Cost Management: Controlling investment expenses through low-cost funds is crucial for maximizing returns over time.

• Professional Guidance: As financial situations become more complex, assembling a team of trusted advisors—including CFPs, CPAs, and estate planning attorneys—can provide invaluable support.

For more personalized advice and to submit your own financial questions, visit www.clark.com/askclark.

This summary encapsulates the key discussions and insights from the episode, providing a comprehensive guide for listeners seeking to enhance their financial literacy and strategies.