03.03.2026 Ask An Advisor With Wes Moss

Summary

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The Clark Howard Podcast

Episode: Ask An Advisor With Wes Moss

Date: March 3, 2026

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Episode Overview

This episode of The Clark Howard Podcast features special guest Wes Moss answering listener questions on personal finance, investment strategies, and retirement planning. Together, Clark and Wes dig into real-world scenarios, covering topics like dollar cost averaging vs. lump sum investments, what to do with an inheritance, consolidating retirement accounts, and why it’s never too late to start saving for retirement. With their trademark practical and reassuring approach, they demystify complex decisions and encourage ongoing participation over chasing perfection.

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Key Discussion Points & Insights

1. Travel Plans Gone Awry: Using a Travel Agent

[01:26 - 02:54]

• Wes shares a personal experience where a family trip to Puerto Vallarta was abruptly canceled due to flight issues and chaos in airline travel.
• He credits using a trusted travel agent for making planning and refunds much easier.
• Notable Quote:
  “The very day we had to cancel… we got our money back for the hotel, which I was very relieved about.” — Wes Moss [02:38]

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2. Investing: Dollar Cost Averaging vs. Lump Sum ("Cannonball")

[03:04 - 10:33]

• Wes uses a vivid analogy of jumping into cold Lake Michigan—wading in vs. cannonballing—and applies it to investing strategies.

• Dollar Cost Averaging (DCA): Most savers already practice this via regular 401(k) contributions, which helps reduce the emotional ups and downs of investing.

  • DCA is psychologically easier and helps people stay invested over market cycles.

• Lump Sum Investing (Cannonball): Historical data shows lump sum investing usually outperforms, but it’s harder emotionally.

  • Psychological mismatch often occurs when people see new money differently than old investments, but reframing the time horizon helps.
  • “Participation over perfection” is Wes's investment mantra.

• Notable Quotes:

  • “Most Americans are already DCA because if you have a 401k plan, you're contributing. God willing, you are already dollar cost averaging. ...And it's one of the reasons that 401s and retirement accounts...work so, so well.” — Wes Moss [05:10]
  • “The cannonball approach when it comes to investing historically wins because markets tend to go up over time. You are two thirds of the time, so more than half of the time historically you are better off having just cannonballed in.” — Wes Moss [07:03]
  • “Participation over perfection... It's not about being perfect. It's about participating.” — Wes Moss [10:08]

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3. Ask An Advisor: Listener Questions

a. Inheritance Decision: Pay Off Mortgage or Invest?

[10:33 - 13:39]

• Listener Cody: Has $85,000 inheritance, low-rate mortgage, no debt except the house.
• Wes highlights the psychological and financial benefits of paying off a mortgage, despite the math sometimes favoring investing.
  • “There is something very powerful about getting rid of the mortgage. ...I have never had one person come back to me and say, ‘Wes, I wish I had not paid off that mortgage.’” — Wes Moss [13:30]
• Clark suggests once the mortgage is gone, the previous housing payment can be redirected to investing via DCA.

b. Early Retirement & Income Calculators

[13:39 - 15:43]

• Listener Greg: Struggles with what to enter as income for healthcare subsidy calculators if retired early with only assets, not income.
• Wes clarifies that eligibility for government health care subsidies is based on income, not assets.
  • “So from everything I know, when it comes to those healthcare supplements from healthcare.gov, doesn't matter what your assets are, it matters what your income is.” — Wes Moss [14:59]

c. Consolidating Multiple Retirement Accounts

[15:43 - 18:04]

• Listener Kyle: Multiple accounts across providers due to job changes.
• Wes emphasizes simplicity and the importance of consolidating accounts when possible for easier management and reduced risk of losing track of funds.
  • “I'm a big believer... just pick one and have an IRA there. ...So yes, I would be a believer that the consolidation into as few retirement accounts as you can do, the better.” — Wes Moss [17:42]

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4. It’s Never Too Late: The Math of Catch-up Retirement Saving

[22:07 - 29:09]

• Wes tackles retirement savings psychology, debunking media headlines like “The average American has less than $1,000 saved for retirement.”
• Explains the difference between median and average savings, with more encouraging numbers for active savers.
• Offers detailed math showing how late starters (“Late Start Larry & Lisa”) in their 50s still have a viable path to a healthy retirement by maxing out contributions and staying invested.
  • At age 52, even starting with $50,000, max contributions and prudent investing could yield $1.4 million by retirement.
• Encourages participation and taking action, rather than being paralyzed by late starts or daunting headlines.
  • “It is about participation over perfection… It’s never too late. ...Late start Larry and Lisa can still turn it around.” — Wes Moss [27:27 & 28:42]

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5. More Listener Questions

a. Switching to Roth 401(k) at Age 60?

[29:09 - 32:18]

• Listener Lisa: 60 years old, considering switching from pre-tax 401(k) to Roth contributions, living in a high-tax state.
• Wes advises that adding Roth optionality, even late, doesn’t muddy the waters but increases flexibility for future withdrawals.
  • Suggests Roth contributions make sense at her income/tax bracket, and tax-diversifying is valuable for retirement distributions.
  • “When you’re doing distributions, you’re just looking at the menu of your options—brokerage, Roth, traditional—and you want to pick both for the short term today and the long term.” — Wes Moss [30:52]

b. Covered Call ETFs in Retirement Portfolios

[32:18 - 34:54]

• Listener Wayne: Should covered call income ETFs supplement or replace the bond allocation for retirees?
• Wes explains that covered call ETFs produce attractive income but are not a true bond substitute; they are riskier than bonds but less volatile than all-stock portfolios.
  • “I do like these covered call strategies... but they are not a substitute for bonds.” — Wes Moss [33:26]
  • Advocates for multi-asset class portfolios in retirement, using covered call ETFs as one piece.

c. Diversification Beyond Index Funds

[34:54 - 38:41]

• Listener Cory: 40 years old, considering expanding beyond pure stock index funds.
• Wes supports 100% stock allocation at this age and risk tolerance, but highlights benefits (particularly behavioral) of asset allocation and gradual diversification into other classes (international, small caps, commodities, real estate) over time.
  • “Think of asset allocation not just about maxing out your rate of return. It’s creating a portfolio you can be comfortable with that helps the behavioral side of investing.” — Wes Moss [37:35]
  • “Over the long run, having a multi-pillared foundation really helps.” — Wes Moss [38:24]

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Memorable Moments & Quotes

• “Participation over perfection.” — Wes Moss [10:08 / recurring theme]
• “Never… have I had a single client come back and say, ‘I wish I hadn’t paid off that mortgage.’” — Wes Moss [13:30]
• “It is about participation over perfection… Late start Larry and Lisa can still turn it around.” — Wes Moss [28:42]
• “When you’re doing distributions, you’re just looking at the menu of your options—brokerage, Roth, traditional—and you want to pick... the most tax-efficient.” — Wes Moss [30:52]

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Timestamps for Key Segments

• 01:26 – Travel agent for canceled trips & easy refunds
• 03:04 – Dollar cost averaging vs. lump sum investing: the “cannonball” analogy
• 10:33 – Listener questions begin: inheritance vs. investing vs. mortgage
• 13:39 – Income calculators for early retirees
• 15:43 – Retirement account consolidation
• 22:07 – “Never too late” catch-up savings math
• 29:09 – Roth 401(k) at age 60 & high-tax states
• 32:18 – Covered call ETFs: risks, rewards, and portfolio fit
• 34:54 – Expanding diversification/asset allocation for aggressive investors

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Tone & Language

• Clark and Wes keep the conversation upbeat, friendly, and accessible, using practical analogies and real listener questions to make complex financial topics understandable and actionable.
• The show’s discussion repeatedly reassures listeners that no matter their starting point, action and steady participation matter most for building wealth and financial freedom.

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Conclusion

This episode encourages listeners to focus on steady participation rather than perfect timing and shows how both new and seasoned savers can improve their paths to financial security. Through relatable anecdotes and step-by-step answers to diverse listener questions, Clark and Wes deliver practical advice that demystifies personal finance and makes financial empowerment achievable for all.

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Transcript

[Sponsor/Announcer]

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[Clark Howard]

Welcome to Ask an Advisor to this week's show. Wes Moss.

[Wes Moss]

Hey Kristen bbi.

[Clark Howard]

You're supposed to be headed off right now to a place you're now not going to right for your kids.

[Wes Moss]

There's so much chaos in the world. We were supposed to be on a flight to Puerto Vallarta and the plane before us got turned around mid air. Wow. Imagine.

[Clark Howard]

Oh my God.

[Wes Moss]

So you're flying from Atlanta to Mexico and halfway there they turn around the plane and then there's been a bunch of cancellations ever since. So yeah, talk about a last minute scramble on what to do next.

[Clark Howard]

But yeah, well, you know, sometimes you have to cancel. Did you get your money back?

[Wes Moss]

This is, I haven't used an agent for a whole lot of trips, but I did for this one because it was, I tried to do it on my own and it was complicated to figure out and I really, there were a lot of moving parts so I wanted, I used an agent that I've known for a long time, did a trip for us. I think it was for my wife's 30th birthday, so it was A long time ago. We went to Italy a long time ago. And I'm really glad I did. A, it was, it made the whole experience and planning a lot easier. And B, the very day we had to cancel. So the very day we got our money back.

[Clark Howard]

Wow.

[Wes Moss]

For the hotel, which I was. And then I know, I know a lot of other families are still struggling with that, haven't heard back, don't know if they're going to get money back. Looking at the contract, what counts as a cancellation. So we got lucky for sure.

[Clark Howard]

All right.

[Wes Moss]

Clark would be proud.

[Clark Howard]

Clark would be proud. You know, you could have used him to help plan it, but you would have been probably not as happy with the accommodation.

[Wes Moss]

Maybe that is the case. That is maybe true.

[Clark Howard]

So today on this episode, the good old standard dollar cost averaging, you're going to talk about that, right?

[Wes Moss]

I'm going to talk about this dollar cost average for the win, why it works so well. And really maybe the downside to it, too. It's not always the best way to do it, but it's really important to think through.

[Clark Howard]

And then you might be listening and feeling like, wow, all these people have been saving for so long. Some of the questions we get, what if I haven't saved enough and I'm feeling pinched and under the gun, Is it too late?

[Wes Moss]

And look, this is, most of America is way behind on the savings curve. And it is interesting. We do get questions here on the Clark Howard Show. Ask an advisor about net worth, how much the average person has saved. And there are constantly stories of the media about the median number of what people have saved, the average number. But it is never too late. What I have learned, and I've seen it in real life many times, it's not easy to do, but it is never, it's almost never too late to start. And I also think it's never too late to be a happy retiree. And I'll talk about some of those numbers.

[Clark Howard]

Awesome. And we'll get to your questions as well. If you have a question, you can go to clark.com ask and let us know if it's for Wes or for Clark.

[Wes Moss]

So think about this. I think about the springtime and really and I go to Michigan. I try to spend some time. My wife's family's from Michigan. So we've gone there every summer forever, over 20 years. And even in the summer, when it's, let's say, June or July, the water still has not warmed up. So I think of myself standing at the edge of there's A cool dog park where we go and it's, it leads into Lake Michigan or you can kind of just jump in all at once. And I always think about, you know, that it may be warm, but you don't know fully the temperature of the water. So you don't know whether you're just going to wade in or you're going to jump in. The. That goes through my mind when we're thinking about those approaches to get in the lake. When it comes to investing, do I wade into the water or do I cannonball into the water? Either way you get into the water, either way you get invested. Whether you're dollar cost averaging in or you just do it all at once. One, the cannonball approach is the rip the band aid off. There's a lot of pain or a lot of uncertainty right out of the gate and then it's over. And then you adjust and you're good, you're kind of on the journey and the waiting, which we've all probably waited as well in it, is a much longer process. It takes you a couple of minutes, you slowly suffer from the cold water adjustment, but eventually you're in and you've gotten to the same place. And I think it's the same way. When you're thinking about money, do you invest money all at once or do you systematically do it over time? When it comes to dollar cost averaging or thinking about putting any, it doesn't matter the amount of money. It could be $10,000, it could be a million dollars over the course of time, spread out over six months, 12 months or even longer. First, I think it's good to remember most Americans are already DCA because most Americans, if you have a 401k plan, you're contributing, God willing, you are already dollar cost averaging. You're doing a little bit every single month. And it's one of the reasons that 401 s and retirement accounts at work work so, so well, because psychologically it's a little easier to be dollar cost averaging your way in.

[Clark Howard]

That's how millionaires are made, right? Most of them.

[Wes Moss]

So market's up, you're investing. Markets down, you're investing sideways and boring, you're still investing. And it's a wonderful way to limit the dramatic nature of putting your money to work, knowing that it can be up or down. And that's the hard part about investing, is worrying about it being down. So in that case, it seems to be really easy. It's like, oh, I get a portion of a paycheck, it's going in. But when it comes to a lump sum, that's when our psychology changes. Maybe it's an inheritance or a business sale or a big bonus and then you have cash now sitting on the sideline. So what gets us invested? Think of it this way. The cannonball approach when it comes to investing historically wins because markets tend to go up over time. You are two thirds of the time, so more than half of the time historically you are better off having just cannonballed in. You get a hundred thousand dollar bonus or inheritance and you're thinking oh, should I dollar cost average this in the cannonball approach actually does better most of the time, but it's a little harder to do. Part of this is that we end up with, I think of it as a psychologically mismatched timeline issue or crisis. Because if you've been saving in your 401k for 10 years or 20 years, you may have 200,000 already invested or 300 or $500 million and you're okay with that. But now that you've got this new money and I've got this now $100,000 to make up a purchase in markets over time it creates this new psychological timeline mismatch when really you're already invested. So why, why wouldn't you just continue?

[Clark Howard]

Right? But if you cannonball, you're like, and then you have a market drop the next day, it just makes you feel sick to your stomach, right?

[Wes Moss]

Maybe. But what if you're already over time?

[Clark Howard]

It'll be okay. I know.

[Wes Moss]

What if you're already invested, right. So how do you from a behavioral investing and so much of investing is about our behavior and our psychology. We can look back at historically and says, oh well, the cannonball approach works better most of the time still doesn't feel like it's the right thing to do. I think of the silly Putty analogy is that you start with your timeline and it's just this timeline and it's a one year short term horizon and we can take the silly Putty and we can stretch it out and that's really what we want to do mentally with our time horizon. When it comes to any time we're investing, it's that we get money quickly. We for some reason think it's got a short horizon. We've got to teach ourselves to then stretch that out and say, well I've got a long horizon for all my other money. Well, this should be the same thing here on a newfound chunk of money. So we stretch out that silly Putty, we Stretch out our timeline, and I think that really helps. On the other hand, Krista, waiting can make sense because it reduces your regret risk. It keeps you moving, at least it keeps you doing something. And I think it solves the psychologically mismatched timeline crisis. So to me, they both work. This goes back to one of my core principles when it comes to investing, which is participation over perfection. We think about, we want to. It would be so nice to always be putting new money to work when the market is down 10 or 20%. That's a perfect way to do it. The reality is, first of all, that's impossible to do over and over and over again perfectly. And really where we see people really build wealth, it's not about being perfect. It's about participating and getting money to work and being invested for 5 and 10 and 20 and 30 years over time. And that's really what wins. So cannonball works better historically, but the DCA or weighed in approach when it comes to putting new money to work is perfectly fine with me because at least it gets us participating.

[Clark Howard]

All right, we are going to go to your questions now. This one came in from Cody in Georgia. I recently received a small inheritance of about $85,000. And I'm trying to figure out what the wise thing is to do with the money. I have no debt except the house and I've already put 15% of her household income into retirement. This amount is enough for me to pay off my house, but I have historically low interest rates. I'm not sure that's the best option. I could invest in a rental property, but now it's not the best time to find good deals. And I'm also a little nervous about investing in the stock market with a big chunk rather than dollar cost averaging. Any advice would be greatly appreciated.

[Wes Moss]

Did Cody give us how much is left on the house? Does he say how much debt was on the house?

[Clark Howard]

No, it just says that this could pay it off.

[Wes Moss]

It could pay it off. Okay, Cody, you've got this really low mortgage rate and that would inform you to say, look, if you're making 6 or 8% in the market, do you really want to pay off a 3% mortgage? And you're suffering from what we all suffer with as investors, which is the, the worry of the everything. Highs issue, stock market's high, real estate prices are high. That means it's hard to buy rental property. It is one of those periods of time where it doesn't feel great to be investing anywhere. Does it ever feel great, Krista, when the market's down 20%, people think it's going down 40%. So that doesn't feel good either. So it never really feels like a great time to get going. But there is a lot of power, Cody, on not having a mortgage. It is one of the key fundamental, I think of the happy retiree in America and the retire sooner method that I think through every time I help someone plan. And the retire sooner method. One of the big pieces of it is the financial side getting to these financial green zones. One of those green zones, Cody, is no mortgage. So even though you get this super low rate, there is something very powerful about getting rid of the mortgage. So, yeah, you're not, you're avoiding a 3.2% interest rate which is not that high. And yes, you should be making more in the market than that 3.25% over time. But the psychological benefits, in my opinion outweigh. Plus, we don't know what the market's gonna do over the next year or two. We don't know what rental prices are gonna do. So my gut is that, and particularly if you use this math, if you can pay this new 85,000 that came in, it's a complete no brainer. If it's a third or less of your after tax money you could utilize to get rid of the mortgage. That I'd say anybody should do that all day long, every day.

[Clark Howard]

Then you can take your mortgage payment and invest that in the market with dollar cost average.

[Wes Moss]

Absolutely. If in your case it's half the money or even a bigger chunk of the money, as long as you have other after tax money, then I think you're still fine. But I lean towards Coti using that inheritance to get rid of the mortgage. I don't know. I have never had one person come back to me and say, wes, I wish I had not paid off that mortgage.

[Clark Howard]

Okay. Greg in California says, hi, Wes. You recently talked about a calculator and indicated it was applicable to early retirees. If I am an early retiree, I'll have zero income. What am I supposed to put in the income box? I seriously doubt I'd be eligible for subsidies with nearly $3 million in my accounts and there's no box for assets. But I don't know what my income should be for the calculator. I searched around, I could not find a calculator that asks for your assets. Can you guide us on how this calculator applies to early retirees? And do you know of one that includes the assets, by the way? I don't plan on pulling from my retirement accounts until after I reach full retirement. I would live off of my brokerage accounts and cash.

[Wes Moss]

We were talking about the income calculator in an earlier episode on health care subsidies. KFF so when you're looking at what kind of supplement you should get or not, when it comes to health care, one thing matters. It's your income. It actually is not your assets has nothing to do with your assets. Now your assets, if they're producing taxable income, then that counts. But hypothetical situation, $3 million in a retirement account, no money in an after tax account and you haven't started Social Security and you haven't started a pension. What do you put down in the income box when the calculator is looking to say, well I need your income so I can see if you get a supplement or not? The answer is zero. Greg, you have no social, no wage income, no taxable dividends and everything's in an ira and you're way before the RMD age. Your income is zero. And that is actually a good example of managing what your taxes are. It's not just about your assets, it's about how you're managing those assets. So from everything I know, when it comes to those healthcare supplements from healthcare.gov doesn't matter what your assets are, it matters what your income is. And if you're not producing any wages or taxable distributions and you're not taking money out of an Iraq, income is zero.

[Clark Howard]

Kyle in Georgia says I'm 39 years old and married with three children. My wife and I are both working full time in the medical field as nurses. I've moved around multiple employers over my career to date and as such have multiple retirement accounts. The accounts are at the following providers. Ascensus, Fidelity, Orbit, which is a North Carolina state retirement account, Voya and both my wife and I currently are with Transamerica are 403 Roths and 403s. We also have a personal brokerage account and Roth IRA at Schwab. What would be your recommendation with all of these accounts? Do we consolidate all of the old accounts into an IRA at Schwab to be under one roof or do we just let them stay where they are as each has performed significantly?

[Wes Moss]

Well Kyle, Census, Fidelity, Orbit, Voyage, Transamerica, Schwab I think I missed one. So that's look sounds like you have seven different Roku and then you've got your work. So maybe that's the seventh one you get your current plan. This is a great question because financial Planning. One of my big core principles of retirement planning and investing is to make things simple. As simple as you can. Because none of it's simple. None of it is. You've got a million options to invest in. You could be in a hundred different brokerage firms and banks. You could have multiple different kinds of accounts. 401K, 403 Roth 401K. Roth 401 just continues on. So it's your job, Kyle, for yourself make it as simple as it can be. Not to mention you don't want to lose track of one of these. So yes, I'm a big believer is particularly of this many brokerage firms just pick one and have an IRA there. And as long as you can do a tax free rollover into one area that is better than let's say the old plans and let's say it's cheaper, you have more options. Which is very likely true if you're leaving behind some old retirement plans. And you've got to do that analysis too. But even if it were equal in a Fidelity or Schwab, you'd want to consolidate to one just so you can have your eye on the ball. So yes, I would be a believer that the consolidation into is few few retirement accounts as you can do the better.

[Clark Howard]

Okay, we're going to take a quick break and we'll come back with more of your questions. And you're going to talk about why it's never too late to be a happy retiree.

[Wes Moss]

That's right.

[Sponsor/Announcer]

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[Wes Moss]

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[Sponsor/Announcer]

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[Wes Moss]

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[Wes Moss]

Welcome back to Ask an Advisor. I'm Wes Moss here on the Clark Howard Show. Chris Adibias here joining me. And we're talking about it that it's never too late to be a happy retiree. Yeah, never too late to start saving.

[Clark Howard]

Panicked right now, listening, thinking I don't have enough. You know, they hear these big numbers from some of the people who write in, and not everyone has done that. And so what do you do?

[Wes Moss]

Well, and here's another story that grabbed my attention. It was a new study that came out. Here's a headline, which is an alarming headline. It says, the average American has less than $1,000 saved for retirement. Whoa. That got my attention. Here's the important point that is true. That is a real number. The average American is less than $1,000 saved in retirement. But there's also some math involved that makes it misleading. It is misleading. But guess what? Again, it is true. So it's not wrong. It's just a little, it's, I'd say, somewhat misleading. But it also tells a real story of what's happening in America. That $955 comes from looking at a median retirement savings for all workers in America from age 21 to 64. And the way median works is that we line everybody up in a line and you pick the middle point. It's not the average, not the mean. Mean. And average is different. Median is the middle point. So, yes, you can say, yeah, that's the average American. And the middle person in that line of everyone from that age range is $955. Now, the reason it is so low is that there's a huge part of that line that has zero. And you've got to count all those zeros until you get to somebody who has a dollar and then two dollars and you get up to $955. So a lot of people don't have anything at all saved. If you just look at the numbers and say for those who do have something saved. So we're not starting with everyone with a zero. But if you have at least a dollar saved, the median jumps dramatically. But it's still, it's $40,000. And you've got young people that haven't started saving. They haven't had a lot of time. These are people in their early 20s. So the median, if you look at Anyone who does have at least some savings is $40,000. So that's a slightly better picture. You switch from median to average, where we're just taking the average of this group. It's different way to look at the math. Then it goes to $93,000. So now we're starting a little bit more of an encouraging picture. And among workers who have at least some retirement savings, so you're not counting people with zero, the average climbs closer to $179,000. Now we're making some progress. So yes, under a thousand bucks, that headline, it's technically correct, but it's also incomplete. But there is some real truth to it, which is there are a lot of people who haven't gotten started and I think about like calm, late, late start. Larry and Lisa semi based on a true story here. And I've seen this happen over, over time. They're 52. Their kids are now just out of the house. They're raising a bunch of kids and that's super expensive. And they had to get them through college and for decades that all of their money went to raising a family like a lot of Americans. And they didn't really have much to put away. They certainly weren't aggressive savers. They're 52 and they have $50,000. Okay, is it too late? They're in their 50s. Is it too late for them to save for retirement? The answer is it's not. Because in 2026, if you're under 50 now, you can save $24,500 in a 401. If you, if you're 50 plus, that's another. It's add another eight grand. Now you're at $32,500. That's a lot of money. Then they're both working. So you've got $32,500 times two. That's $65,000 combined. 401. Now let's assume they save another $10,000 in a brokerage account. Now you're at $75,000 a year. I know that's a ton of savings. But they're also earning more than they've ever earned because they've been working now for 30 years. Take that 75 a year at a 7% rate of return. And by the time they're 65, that's close to a million four. All of a sudden they're gonna go from very little saved. If they were to do this for a full decade at a 7% rate of return. Actually, no, it's not. It's More than a full decade getting to 65, which is still not a crazy. That's still a relatively normal age to be able to retire. They can get to a million four, a million five, depending on how markets do. So it's not too late for late start Larry and late start Lisa. Now imagine you start doing this a little earlier. And imagine you start doing this at 40. Now you're looking at a lower amount. You're able to save in the 401 max, it's 24 5. But if you did that at a 7% return, then in about 19 or 20 years you would end up in the seven figure range. So you'd get to a million bucks by the time you are call it 59 or 60, even with a lower contribution limit. Remember 24, that's thousand 500 relative to what they're doing at $75,000 a year. So the math can work. It's just gonna take some time. Now here's the other thing. You look back over the last 15 years, the market's been really strong. The average rate of return for the s and P500 is around 12%. So if you'd been just one person at 24,500 for 15 years and got 12%, you'd be at a million bucks. So Larry and Lisa together now can save a bunch. They can go from very little to a million and a half dollars by the time they're 65. And a single investor at 24,5 at a 7% rate of return gets to a million bucks in about 19 years. If you had have the tailwind of a market like we have had, doesn't mean it's going to continue at 12% a year. You would have gotten there in about 15 years. So it's never too late. We've talked about this a little bit here on today's episode. It is about participation over perfection. Yeah, it'd be great if we had 12% a year. Also works pretty well at 7% a year. It's about participating over a decade plus late start. Larry and Lisa can still turn it around save. But saving is not enough. It's got to be invested. So saving first, investing too. And then think about those future income streams like social that'll add to their investment withdrawal over time. Seen a lot of folks very little in their early 50s. Plenty of money to retire in their mid-60s.

[Clark Howard]

Okay, well, this was not from late start Lisa, but this is from Lisa in California. She did not get a late start. She said, the majority of my retirement savings is in a Schwab traditional 401k with no company match. I have two additional Schwab accounts, a personal brokerage and a Roth IRA. Our work 401k plan has just been modified, allowing the option of my 2026 401k deferrals to go into a Roth. I'm 60 years old, earning 114,000 per year and plan to retire in the next 18 months with only a short time left to make my 2016 contributions to my Roth. Should I bother by 2026? I don't know if I said that. Should I bother or should I just continue to make the pre tax? Keep in mind I live in a high tax income tax state traditional contributions. I feel like starting so late in the game with the work Roth contributions that the waters will just be muddled muddied with both types of contributions. What do you think, Lisa?

[Wes Moss]

That's an interesting way to think about it. You've got a couple different accounts and you've got wait a minute, I have this regular 401k, maybe that gets rolled to an IRA and, and then you have a brokerage account and then or two brokerage accounts and then you have a Roth. Does that muddy the waters in practicality? Not at all. Because when I'm thinking about when someone says to me I need $50,000 out of my accounts to build a sunroom as an example, it gives you optionality and it doesn't make it more complicated. It takes a little more thinking of where we should pull money from. But the Roth gives you that optionality to say, you know, I don't want to take 50,000 from the IRA because it's going to increase my taxes and my brokerage accounts have a whole bunch of unrealized gains. I don't want to sell stock. So maybe the Roth in that particular moment could be the account you pull from. It's really I think of it when you're doing distributions, you're just looking at the menu of your options brokerage Roth traditional and you want to pick both for the short term today and the long term. What's the most tax efficient way or account to pull from. So I don't think that it confuses you. It'll actually give you optionality tax optionality, which is what you want in retirement. Lisa and because you are in a high tax state at 114 a year, you're probably right around the 24 marginal bracket if you're single here. And my rule of thumb on Roth 401k versus traditional $24,000 bracket or lower, you want Roth 401k. If you're above that and let's say you're in the 32 bracket or 35, then you maybe want to continue to weigh or Lean Traditional 401K. But I think you're in the spot where the Roth 401k may make the most sense. And I wouldn't worry that you're 60 because you're going to be getting to choose to use that money over the hopefully God will in the next several decades.

[Clark Howard]

Wayne in Illinois sent this one in. My husband's mother's financial advisor has been talking about something called covered call income ETFs and has been recommending them for her because they supposedly pay out a sizable income so that she wouldn't have to flat out sell her investments as she draws funds for her own retirement. As we're nearing our own retirement, we are wondering what you think about these and if they ever make sense in one's portfolio because they pay income, can they ever make sense to complement or even substitute the bond portion of our portfolio? Thanks, Wayne.

[Wes Moss]

Anything that's covered calls, think of that as a basket of stocks. And with those stocks, the manager these are managed, by the way, think of it like a mutual fund. But now we have managed ETFs as well. What's happening is that they are selling, the managers are selling calls on the individual stocks that are within that portfolio. And that income, that option income gets paid out to you after their expenses, etc. And you'll see a lot of these covered call ETFs paying out 7, 8, even 9%. So you think to yourself, wow, that sounds awesome as a replacement for bonds. The reality is they are not a replacement for bonds. It doesn't mean though, they're not a good idea. I do like these covered call strategies. I like them when they're really diversified within the etf. So a lot of different equity positions, they're bringing in option premium by selling calls so you get some cash in. But what does that do? It limits your upside of the stocks. So if you look at a lot of These covered call ETFs relative to the market, let's say the market's over the last five years up 90%. Your covered call ETF may be up 50 or 60%. That's counting the income that's, that's counting the option premium that you're receiving. So not a substitute for bonds, so they're more aggressive or let's say they're quote riskier than bonds, but they should be slightly less risky than an all stock portfolio. It dampens the volatility. You get more income, but you're also trading at your upside by virtue of selling these calls which are options. And I think that they are a very much can be a part of a diversified multi. What I would consider and I like it to do it this way. Multi asset class income portfolio for retirement.

[Clark Howard]

Cory in Minnesota says I'm 40 years old and well on track to retire early. But I plan on working another 15 to 20 years. When it comes to investment strategy, I'm very aggressive. 100% of my retirement accounts are in broad index funds like the S&P 500 index and, and total stock market index. I know I'm already well diversified, but I wonder if I would benefit from having some of my money in other things like commodities or real estate. Would I benefit from any from this additional diversification or am I already sufficiently diversified with just the stock funds?

[Wes Moss]

Corey, you're 40 and you're pretty much 100% stocks, but you still have a 15 to 20 year time horizon. And that's. I think that's totally appropriate if you can handle the ups and downs of the market, which it sounds like you can. There's nothing wrong with 100% stock portfolio because total market indices will give you great diversification. What you're asking about is the next layer of diversification or the cousin to diversification which is asset allocation. You've got really one asset class, probably US Stocks. That's great. But if you are now going to start thinking about asset allocation, you would be adding small cap stocks and mid cap stocks and international stocks and commodities and real estate and some of these other areas. Maybe not bonds yet because you're still too young to do that, but there are a lot of other pieces of the equation or that you could add to your pie to give you many different asset classes. And I do like that over time. Now that goes from diversification to even more diversification which is asset allocation. And you may say to me, Wes, sometimes isn't there something called diversification? And the answer is from a total rate of return standpoint, let's just say stocks. US large cap stocks over the next 10 years they are the best performing asset class relative to gold, commodities, alternative income, bonds, international, etc. Private equity. So anything you do that's not US large cap stocks in a portfolio would technically bring down your rate, your assumed rate of return. Right. Stocks averaged 15 and just one slice of the pie averaged 5. Then your total return might be 14 or 13 or 12. And then do you look around, you say, well, isn't that just a worse ification?

[Clark Howard]

Oh my gosh, Financial advisor humor. I love it.

[Wes Moss]

I don't even know if that is humor.

[Clark Howard]

I like it. It made me laugh.

[Wes Moss]

It is the thought of, hey, I've got all this, this diversification, but really just made my returns worse. Think of asset allocation though, not just about your maxing out your rate of return. It is creating a portfolio, Corey, that you can really be comfortable with. That helps your the behavioral side of investing. It helps you keep participating, which has kind of been a little bit of a theme here today in the long marathon that is investing. And as particularly as you get older and very much so once you get into retirement or the distribution phase when you're pulling money out of these accounts, I think it does make sense to start thinking about adding some of these other areas and do that over the next many years because I'm a big believer that the benefits of asset allocation and to me the psychological benefits of having a multi pillared foundation as opposed to one really, really helps over the long run. So yes, I would be thinking about starting to add some things over time

[Clark Howard]

by listening and watching this podcast. You are participating in your financial future and we appreciate it so much. That's it for us this week on Ask an Advisor. We'll be back next week with a free fresh episode for you. And Clark will be back tomorrow. Please share this with a friend if you learned something today. We really appreciate every single one of you that tunes in and watches and listens.

[Wes Moss]

Thank you.