03.10.26 Ask An Advisor With Wes Moss

Summary

The Clark Howard Podcast

Episode: Ask An Advisor with Wes Moss

Date: March 10, 2026
Host: Krista Dibiaz
Guest Advisor: Wes Moss

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Episode Overview

This episode of The Clark Howard Podcast focuses on answering listener questions about investing—specifically international versus domestic stocks, the practicalities of rebalancing, interpreting retirement statistics, IRA strategies, and the all-important “rich ratio” for retirement readiness. Wes Moss offers insights grounded in behavioral finance and practical planning, guiding listeners through market trends, portfolio management, and key retirement principles. The tone remains conversational, encouraging both curiosity and critical thinking about financial decisions.

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Main Topics & Key Insights

1. International vs. Domestic Stocks: Is It Time to "Go Global"?

([00:49] – [10:05])

• Listener Concerns: More people are wondering whether to increase international stock allocations, given strong one-year performance.
• Market Performance Stats:
  • S&P 500: up ~16%
  • Broad international ETF: up ~36%
• Behavioral Caution:
  • Wes Moss: "We have a very pronounced behavioral idea when it comes to investing—that’s called recency bias." ([02:26])
  • Investors often chase recent winners, but markets rotate leadership. Just as small caps are catching up now, international is playing catch-up versus years of U.S. outperformance.
• U.S. Dollar & Reserve Status:
  • Media headlines (“Reign of the dollar is coming to an end”) have spurred some fear, but the global payment system is still deeply entrenched in the U.S. dollar (~60%).
  • Comparison with euro (~15%), yuan (~5%), yen/pound (~3% each). Digital currencies: negligible impact.
• Diversification Reminder:
  • U.S. multinational companies derive significant revenue overseas (e.g., McDonald’s, Apple, Intel, Nike, Procter & Gamble >50% non-U.S. revenue).
  • Owning large U.S. companies provides built-in diversification and a potential hedge if the dollar weakens.
• Actionable Takeaway:
  • “Before you get your U.S. stocks to try to have a larger portion in non-U.S. domiciled companies, take a look and just see what you own.” ([09:42])
  • Asset allocation, not chasing performance, should drive international exposure.

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2. Listener Q&A With Wes Moss

A. Rebalancing & “Glad I Missed Out Gladys”

([10:05] – [13:18])

• Question from Gary in Nevada:
  • Observing FOMO (Fear of Missing Out) investing vs. "Glad I Missed Out Gladys" who gravitates to prior losers, as happens in rebalancing.
• Wes’s Take:
  • Rebalancing essentially makes you "Gladys": buying more of what’s lagged, selling what’s run ahead.
  • Analogy: Not rebalancing is like “a frog boiling in water”—risk exposure rises subtly over time, potentially blowing up when markets turn.
  • Quote: “Rebalancing every year can help you avoid sequence of return risk…and avoid getting caught up in the equity storm.” ([12:45])

B. Misleading Retirement Statistics & Home Ownership

([13:18] – [17:19])

• Question from Steve in Wisconsin:
  • Questions about confusing statistics on average 401k balances and “40% of homes are owned outright.”
• Wes’s Response:
  • Account-level averages tell us little; what matters is net worth (inclusive of all accounts and home equity).
  • The 40% stat refers to individuals, not corporate owners.
  • Net Worth Benchmarks:
    • 1 in 3 U.S. households: $500k+
    • 1 in 5: $1M+
    • Top 10%: ~$1.9M+
    • Median: $192,000
  • Key Point: “Your overall net worth…that’s what matters.” ([16:00])

C. Non-Deductible IRA vs. Brokerage Account

([17:19] – [20:06])

• Question from Mike in Ohio:
  • Ineligible for Roth or deductible traditional IRA, uses non-deductible IRA. ChatGPT suggests brokerage account instead.
• Wes’s Advice:
  • Non-deductible IRAs are only worthwhile if quickly backdooring into a Roth; otherwise, they complicate taxes.
  • Brokerage accounts: lower long-term capital gains taxes, more flexibility.
  • Quote: "There’s tax efficiency in a regular brokerage account. There’s more simplicity..." ([18:50])

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3. The Retirement “Rich Ratio”—The Number That Still Matters

([22:54] – [28:55])

• Wes Moss:
  • The "rich ratio" = Have divided by Need (monthly net income / monthly expenses).

  • 1 = Financially rich; <1 = Financially strained, regardless of income.

  • Backpack of Rocks Analogy:
    • Every extra “rock” (debt, spending) in your retirement “backpack” makes the journey harder.
    • Lighten the load to improve your ratio.
    • Quote: "Rich isn’t about the income, it’s about the margin and the cushion, the safety." ([26:05])
  • Example Scenarios:
    • Tom: $12k need, $8k income → Ratio 0.67 (strain despite being “wealthy”)
    • Susan: $4k need, $5.6k income → Ratio 1.42 (cushion and comfort)
  • Advice: Focus on reducing fixed “needs” (especially mortgage) to increase margin.

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4. Additional Listener Questions

A. Calculating Net Worth & Including Pensions

([28:55] – [32:50])

• From Neil in California:
  • Retired firefighter with strong pension, low expenses, wants help calculating net worth and how to factor the pension.
• Wes’s Breakdown:
  • Net worth = assets – liabilities.
  • Pensions can be “capitalized” (e.g., annual income / expected return), treating the pension as a bond holding for allocation purposes.
  • Quote: “It would take a net worth of, call it $2 million, to be in the position that you’re in today.” ([32:30])
  • Neil’s “rich ratio” is very high: “Like three and a half or four. It's awesome.” ([32:46])

B. What To Do With a Failed Vacation Fund

([32:50] – [35:57])

• From Christopher in Oregon:
  • Saved $100k for a vacation house—unlikely to buy, mortgage on main at 3.65%, $80k balance.
• Wes’s Approach:
  • Rule of thumb: only use up to a third of liquid assets to pay off mortgage—but with stable employment (government), paying it off may be worthwhile: “I doubt you’ll be upset if you pay it off.”
• Krista: “Take that mortgage payment every month and put that somewhere else.” ([35:57])

C. Best Investments for a Young Saver

([36:00] – [37:34])

• From Timothy in Oregon:
  • 19-year-old daughter has $3,000 saved; can’t do monthly contributions, has a Vanguard account.
• Wes’s Recommendation:
  • All-equity, ultra-low-cost total stock market or S&P 500 index fund—total stock market preferable for someone young for added small-/mid-cap exposure.
  • Lump contributions as income allows is fine.
  • Krista: “Good for her for starting so young!”

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Notable Quotes & Memorable Moments

• Wes Moss [02:26]: “We have a very pronounced behavioral idea when it comes to investing—that’s called recency bias.”
• Wes Moss [09:42]: “Before you get your US stocks to try to have a larger portion in non US domiciled companies, take a look and just see what you own.”
• Wes Moss [12:45]: “Rebalancing every year can help you avoid sequence of return risk…and avoid getting caught up in the equity storm.”
• Wes Moss [16:00]: “Your overall net worth…that’s what matters.”
• Wes Moss [18:50]: “There’s tax efficiency in a regular brokerage account. There’s more simplicity in a brokerage account. And unless you’re trying to do a backdoor Roth...”
• Wes Moss [26:05]: "Rich isn’t about the income, it’s about the margin and the cushion, the safety.”
• Krista Dibiaz [27:50]: “Cushion is comfort, like you’re saying.”
• Wes Moss [32:46]: “So he’s got a rich ratio of like three and a half or four. It’s awesome.”

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Key Timestamps

• 00:49: Introduction to international vs. domestic investing
• 02:26: Recency bias and its danger for investors
• 05:59: U.S. dollar’s continued global dominance
• 09:42: Built-in international exposure through multinational U.S. stocks
• 10:05: Listener Q&A begins (FOMO, rebalancing)
• 12:45: Boiling frog analogy for risk creep
• 14:11: Retirement and home ownership statistics explained
• 17:48: Non-deductible IRA vs. brokerage—tax implications
• 22:54: The “rich ratio”—the ultimate retirement metric
• 27:50: Comfort, margin, and adjusting needs for retirement
• 28:55: Calculating net worth when you have a pension
• 32:50: What to do with a vacation fund you no longer plan to spend
• 36:20: Investment advice for a young saver (Vanguard index funds)

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Summary

This episode delivers a comprehensive walkthrough of current investing trends, portfolio management, and retirement readiness principles, with direct, relatable listener examples. Amidst evolving markets, Wes Moss returns to fundamentals—balance, diversification, and real-life ratios that determine true financial comfort. As always, listeners are encouraged to assess their own needs versus resources, rebalance accordingly, and focus not on fleeting trends, but lasting principles: “rich isn’t about income; it’s about having margin and cushion.”

Transcript

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[Krista Dibiaz]

Welcome to Ask an Advisor. This week's show I'm very excited about Wes. We've got some good questions for you. I'm Krista Dibiaz here with Wes Moss.

[Wes Moss]

You're Krista Dibiaz and I am Wes Moss. And I'm excited that you're excited for the show.

[Krista Dibiaz]

I am. Because first of all, the topics you're talking about, the first topic, a lot of questions come in about this international stocks versus domestic stocks. Is it time for us to load up on international stocks? You're going to answer that question for us and then you're going to answer some of the questions that came in from the listeners and viewers of this podcast. And you're also going to talk about the one retirement number that still matters this year. And I don't know what that is. So I'm excited to hear that.

[Wes Moss]

It's a rule of thumb ratio that is super important.

[Krista Dibiaz]

Okay. Awesome.

[Wes Moss]

Most of this is prompted by real life questions and real life concerns that I hear about whether I'm watching the financial media or getting feedback. Because all the questions we get, the awesome questions we get here that you all send in.

[Krista Dibiaz]

And curious Krista wants to know this, too. I really do.

[Wes Moss]

Curious Krista, good. I love that you're starting to use that a little bit because the questions are just, they are always making us think here on the show. So I love it and we appreciate them and we appreciate you listening. And this, this comes from not a direct question, but I can start to feel as tides are changing by the mentions of certain things that are happening in the news. And one recently is the mention of international, international, international. And part of the reason I am getting more and more questions about that and really when someone asks about, hey, how much do I have in international? I'd like to figure that out, they're really asking, shouldn't I have more international? And the reason is because over the past year, international stocks have done really, really well. Now they're definitely playing catch up over the last couple of years. But over the last year the s and P 500 is up, let's say roughly 16%. And international stocks, just a broad international ETF, it's 36%. This is a big difference. 20% win or 20% gap when it comes to international. And investors are starting to ask, hey, am I underweight international? Should I be shifting more to overseas? Is this the start of a new global investment regime? So it's certainly an important question to ask because if you think about it inside your 401 plan, you think about the choices. You've got us large cap and small mid and they've got international and usually you don't. You may have international options that are large, small growth value, but a lot of 401k plans are just an international index. So it is one of of a few important choices. But just a couple points of caution is that we do have what I would consider is a very pronounced behavioral idea when it comes to investing. That's called recency bias. It kind of says what it means, which is we think very quickly what is just done well or pretty recently. Is this going to continue to do well? We're great. We humans are so good at extrapolating. We are the best extrapolators. If something's going up by 2 per year, we think it's going to go up by 2 for every year. If something's outperforming by 20% a year, our brains are saying, well, it's going to. Isn't it going to continue? Of course it's going to continue. I want to make sure people don't get overly excited about international because of the recency of the rates of return. Leadership and reversion to the mean happens in markets and it's one of the few immutable rules around markets is that when you have one place that's led for too long, you have another place that starts to catch up. This last year is probably a good example of that. Small cap US stocks have done really well this year and have played catch up to large cap, which has been winning for a lot of years. It's somewhat of a reversion of the mean. International stocks have done well relative to us, but US has kind of crushed international stocks over the past three years and five years. So there's just some catch up happening here. And this goes back to why asset allocation is important. We don't know when that leadership necessarily turns out. But if you look back over the course of economic and market history, if an asset class has averaged 10% a year, but it's only averaged 4% a year for the last few, usually it's due for a catch up. We just don't know when the catch up typically rotates. We're seeing it now though. Then there's the worry. And this is the other fear that pushes these questions about international. Hey, do I need international? Not just because of the rate of return, but because of a story like this cover of Barron's story. Fairly recently, the reign of the dollar is coming to an end. What's that tell you? It tells you that, well, maybe I shouldn't just be in the US if our own very dollar has its reign has come to an end, do I want to be in the US Dollar? So then there's some fear pushing us towards international. Now I do think that we have seen the gist of this story is that central banks, so think about the Federal Reserve here in the US but in other countries, the European Central bank, the bank of Japan, Swish national bank, et cetera, they have huge amount of dollar reserves, US Dollars mostly in Treasuries. There's this thought that they've been dumping US Treasuries to buy gold. That's not true. They have just been adding less. And they've, the article used this. They kind of intimated US central banks have kind of been quiet, quietly quitting US dollar. So not just throwing it out and getting rid of it, just they're not adding, they're letting bonds mature and they're not buying as many Treasuries. So they're reducing their dollar reserves at least a little bit. And the US dollar is down relative to the other six major currencies by about 8% over the past 12 months. So there has been a shift. But it's not as though there's some global panic or collapse and every bank is getting out of the US Dollar for other currencies because the US Dollar is still, and this is where I think a really important way to think about the dollar relative to every other currency. Are we going to ever lose our reserve status for the dollar? Think of just the economic machine that is the global economy. It's hard to even know exactly what it the number is. Let's call it $100 trillion. It's just gargantuan. The US dollar and other dollar peg currencies are about 60% of all global commerce. So if you look at all the transactions money, all the, almost everything in the United States obviously is US dollar and we're a giant part of the global economy. International payments from country to country, buying countries, buying oil from other countries. 60% of global transactions in a year are $. Then you've got the euro which is roughly 15%. Then you've got the Chinese yuan at about 5% and then you have the Japanese yen at 3 and the British pound at 3. And then everything else is in the low single digits. And by the way, someone asked me the other day about Bitcoin digital currency. It doesn't even show up as a, it's not even a rounding error. It's a 0.001 when it comes to digital currency. So imagine how entrenched and large that system is that that has been using the dollar. And by the way, I remember 15 years ago I did a radio story about this and those numbers are almost exactly where they were 15 years ago. I remember thinking, wow, 60. It's just hard to unseat the dollar. And I've been looking at this over the last month. I remember. Well, it's really the same as I did a story on this 15 years ago. So I'm not worried about the US dollar losing its current, its reserve currency. Should you load up on international. I think that it should be part of a well diversified asset allocation. Also remember, and this is one of the reasons I've been biased towards US stocks is that 40% of the revenue generated from S&P 500 companies is from overseas. You have big companies like as an example, McDonald's, 60% of their revenue is from outside of the United States. Can you think of a more American brand? Apple over 50% of their revenue outside the US intel over 70%. Nike over 50%. Procter and Gamble, I think it was a very US centric company. 55% of revenue outside of the United States. So think about a company does business so it makes a sale that's €1,000 in another country. And then the US dollar weakens and that currency strengthens. When it gets converted back to the United States, what happens? You get more dollars. So there is a hedge to some extent against a declining dollar by owning global or multinational companies. So before you get your US stocks to try to have a larger portion in non US domiciled companies, take a look and just see what you own. If you own a bunch of large multinational companies, you're already getting at least a partial hedge against a weakening dollar because of global companies doing business all over the world.

[Krista Dibiaz]

Okay, let's take some of the questions that came in for you, Wes. This one's from Gary in Nevada. He says I've heard you say that FOMO Freddie will actually trail the market by piling into the prior year's hottest sector or strategy. My question is, have you ever looked at Glad I missed out Gladys. That is someone who piles into last year's losing sector or it seems like as a. At a lesser level, that is what I'm doing when I rebalance my portfolio.

[Wes Moss]

How cool is that? I love.

[Krista Dibiaz]

That was from Gary in Nevada.

[Wes Moss]

Gary, nice call. Gary on Glad I missed out Gladys. That's pretty cool. I love that he's taking this to a whole nother level. Why not? I think it's awesome and yeah, I hadn't really thought about that, but are there. That's what's happening when you're rebalancing and anytime you rebalance, what are you really doing? You're selling the asset class that did the best and you're buying the asset class that did the worst or did, let's say, less. Well, over time to some extent, if you're a Gladys and you're glad you missed out, this rebalancing almost forces you to buy something that hasn't done quite as well. We've had a lot of themes in the last couple weeks where we were seeing reversion to the mean. International has lagged and now it's doing better. Small caps have lagged, now it's doing better. It's really easy in a year where your small cap part of your portfolio didn't do all that well and you just shun it and you don't add to it, you don't rebalance more to it. So that the idea here, Gary, is that rebalancing automatically makes you kind of a Glad I missed out Gladys because then I can now buy more of something that did a little less well than something else or didn't do it did poorly. But I still want to own it and I want to add to that because it may, we may have a reversion to the mean. And that is the whole point of rebalancing. Rebalancing. Just think of it in an extreme case you have, you start retirement at 70% in stocks. You never rebalance. Well, let's say you're seven years before retirement and you really are comfortable only. Only owning about 70% in stocks and you then seven years later you retire and now your portfolio is 90% in stocks and you've quietly gotten more and more comfortable with that. It's like You've been a frog boiling in the water very slowly though, just the temperature just goes up and up and up and you don't really notice it and all of a sudden you retire and the water now starts to boil and the stock market goes down by 30% and you're not 70 anymore and you don't have a hedge of 30% in safety as almost everything's in stocks. So now you've just created, you've been hit by sequence of return risk and now when you really need the money and start withdrawing, you've gotten hit because you hadn't been rebalancing and now you've gotten caught up in the equity storm when really you didn't want to do that to begin with because you slowly the temperature rose and you got more and more and more comfortable rebalancing being a glad I missed out gladdy and recognizing that rebalancing every year can help you avoid it.

[Krista Dibiaz]

Steve in Wisconsin says when retirement statistics are shared, we often hear statements like the average person has X amount of dollars in their 401k. Isn't that potentially misleading? Many individuals have multiple 401k accounts from different employers and IRAs alongside their 401ks. So an account level average depending on necessarily reflect a person's total retirement savings. I'd be much more interested in the average total retirement savings per person regardless of how many accounts it's spread across. Similarly, we often Hear that roughly 40% of the population owns their home outright, which I do. That figure also seems misleading since it can include corporate owned homes or rental properties. What I'd like to understand is what percentage of owner occupied single family homes are owned free and clear. Thanks for all the insight you share. I really appreciate the thoughtful data driven discussions.

[Wes Moss]

Steve, you're right. Why does it matter If Americans have 2, 3, 4, 5? We had a question. I think last week somebody had seven different brokerage firms. So yeah, it doesn't matter. Those stats are really just for the media and they're just kind of interesting I guess. But it's really hard to aggregate and I've spent a lot of time trying to get to the bottom of these numbers and the Fed has the Survey of Consumer Finances and they do a pretty good job. But yeah, the average balance of a retirement plan probably tells us very little. So you're right. Let me come back to that though. The quick and easy answer on the homeowner part of this 40% outright. Does the corporately owned mess that number up? Remember those corporate owned homes are People are renting those. So the number of folks that have their mortgage paid off, that own their homes in America, these are humans, individuals, not companies or hedge funds. It's about 40%. So it is. That number is not skewed by the data of corporate ownership. As far as knowing what Americans really have, you've got to just look at the overall net worth. That's really the number that matters because it's some point your net worth can be either, even if it's not liquid, can be turned into an income stream or be liquidated. So it's really, I think that on a scale of 1 to 10, your retirement balance in XYZ Retirement Fund, it's like a 4 out of 10. Your net worth when it comes to your finances and getting into a green zone, like I talk about in the retire Sooner Method, Part 1 is about the money green zones we want to hit to be able to retire sooner. It's really about your overall net worth and savings and not just in a particular account. Here are the numbers though, for net worth. About 1 in 3 households in America have a net worth of 500k or more. About 1 in 5 households have a net worth of over 1 million. And again, this is including your property value, which is a huge chunk for a lot of people. Your home equity, the top 10% of households in America, that's the 90th percentile, starts at about 1.9 million, let's call it just shy of 2. So to be in the top 10% of households net worth is just shy of $2 million. Now the median household net worth, remember, just rely not taking the average here, just the Middle point is 192,000. That is the middle point of America for a large age range. So those are the numbers, by the way, the top 10%, if you're in the closer retirement age, 55 to 64 is closer to 3 million. So as we get older to be in that top 10% of net worth, it's a higher number. But you're right. Your net worth is your home equity. It's your savings, your taxable brokerage accounts, your retirement accounts, your Roth accounts, any sort of rental assets, commodity, everything minus liabilities. That's what matters.

[Krista Dibiaz]

Okay, and then Mike in Ohio sent this one in for you. Wes, My question probably falls into the good problems to have category. I'm ineligible for both Roth and a deductible traditional ira. So I've just been maxing out my non deductible traditional IRA contribution. I was playing with ChatGPT recently and it told me to stop doing this. ChatGPT recommended that I put the money in an ordinary brokerage fund as the tax treatment would be favorable. What are your thoughts? Thanks for all you and your team do.

[Wes Moss]

Hey Mike in Ohio, thanks for checking in with us here. Just us humans here on the Clark Howard Show. Ask an Advisor. Non deductible IRAs can be fine if you're doing a backdoor Roth. So if you're, if you're putting money into an after tax IRA or a non deductible IRA just to convert it quickly into a Roth, which would be a backdoor Roth conversion, then it is fine. But for the most part if you're doing non deductible IRAs, you're just creating a tax problem because you're paying taxes at your rate, then you're contributing, then you've got to keep track of your non deductible portion for the rest of your life, which makes your taxes really complicated. And that's an issue. The other thing is that you are trading, let's say you're paying 24% in taxes to now have your net amount to then get put into a non deductible ira. If you're just saving in a brokerage account. And again, this is about taxes today versus taxes tomorrow. For the vast majority of folks. You're pulling money out of that Iraq in a worst case scenario at a 15% tax or I'm sorry, out of a, out of a brokerage account because it's long term capital gain which is super favorable. Your dividends are at long term capital gain rates which for a lot of Americans is zero depending on your income. And for most Americans it'll, it'll go up into the 15% range for only a small portion of the ultra high earners. It can go up to the 20% long term capital gain rate. But we don't want to trade paying taxes at 25% and then knowing that in a brokerage account we can be pulling money out at 15 when in retirement we may be at an ordinary income rate that's at 24%. So there's tax efficiency in a regular brokerage account. There's more simplicity in a brokerage account. And unless you're trying to do a backdoor Roth. So I would say GPT was probably partially right, but I'm glad you checked with us mere mortals.

[Krista Dibiaz]

All right, we're going to take a quick break. We will be back with more of your questions and Wes is going to tell us the one retirement number that still really matters this year.

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[Don McDonald]

Is your financial advisor always legally required to put your interest first? If you don't know the answer, you need to listen to Talking Real Money. I'm Don McDonald. My co host Tom and I have spent decades helping everyday investors understand the truths Walking street would rather you never learn. We're consumer advocates, not industry cheerleaders. We believe in low cost, broad diversification and keeping things simple because complexity is how they pick your pocket. Plus, we answer listener questions on almost every episode, so bring yours. You're already a podcast listener, which means you're just a quick search away. Look up Talking Real Money or visit talkingrealmoney.com that's talking real money.com let us help you build a more secure future

[Wes Moss]

by Talking Real Money.

[Don McDonald]

Talking Real Money is an educational, podcast, hosts or affiliated with a registered investment advisor. For disclosures, visit talkingrealmoney.com this message is

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[Krista Dibiaz]

could have done better. Like cutting your own hair. Yikes. Or forgetting sunscreen so now you look like a tomato.

[Wes Moss]

Ouch.

[Krista Dibiaz]

Coulda done better. Same goes for where you invest. Level up and invest smarter with Schwab. Get market insights, education and human help

[Wes Moss]

when you need it.

[Krista Dibiaz]

Learn [e-mail]

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[Wes Moss]

more at applecard.com welcome back to Ask an Advisor. I'm Wes Moss here along with Krista Dibias, who is about to dive back into your bag of questions. But before we do that, we're going to talk about the rich ratio, the one retirement number that let's say still matters in 2026. The world's changed. The AI is shifting the ground under our feet. In so many industries we had, I think I originally wrote about this back in 2012. And since then we've had a global pandemic. We've had violent bear markets, we've had waves of economic stimulus, we've had austerity, we've inflation, the MAG7 tariff tantrum and tremors. And then of course back to where we are today, the nervousness around the whack, a mole market and AI and what it'll do for our future. So it's been a lot, but one thing that has not changed at all is the power of thinking about the rich ratio and really your comfortability around your have in retirement relative to your need in retirement. And if you think about retirement as this long journey and you've got to, you're just going, and it's an uphill, it's a slow uphill climb all the way and you've got a backpack on and you start picking up shiny rocks because they look good. You pick up little rocks and you put in the bag, you pick up maybe some bigger rocks because they look, they're awesome and you want to keep them for posterity. The next thing you know, you're way down the line. Then you've got this heavy backpack on, it's full of rocks. And those rocks are spending commitments. Those rocks are maybe debt. Those rocks are assets that create more taxes that you have to pay on. And what does it do? It makes that journey now harder relative to having a light backpack heading into retirement. And you can either drop some of the rocks and make things light or you can accept maybe what is a much longer, harder climb. And that's where the rich ratio comes in because it's a very simple way to think about what retirement's going to look like for you, which is have divided by need. And think of that you have is your total monthly net income after taxes. Your need is your monthly spending requirement. And if the rich ratio that you have is above one, I would say you are financially rich because Below one, you are financially strained regardless of what of how high the income is. And it works at every income tier. If you earn a million dollars a month, like curious Krista, you would still be poor if you needed $2 million per month.

[Krista Dibiaz]

Sure.

[Wes Moss]

You're curious about what it like to have a million dollars coming in a month though too.

[Krista Dibiaz]

That would be insane.

[Wes Moss]

Everything everyone's curious about that you can earn, let's say six grand a month after taxes and be financially rich if you only need four grand. And I see this all the time. And that's a comfortable human being. It's a comfortable human being. So rich isn't about the income. It's about the margin and the cushion, the safety.

[Krista Dibiaz]

So I love that. Rich isn't about the income, it's about the margin.

[Wes Moss]

Yeah, it's about the ratio. I think it matters as much today in 2026 or maybe even more in a scary, constantly changing world, this has not changed. It's the same. You don't need an enormous algorithm and code through artificial intelligence to figure this out. Tale of two retirees. Tom, he's got a $12,000 a month need. Social Security, 2,500, pension of 1500amonth and portfolio of 1.2 million. This guy's pretty wealthy. He needs 12 grand. Socials at 2,500, pension at 1500 in the portfolio. His income is only 8 grand a month. His need is 12. He's $4,000 underwater every single month. So it just keeps getting worse and worse and worse. His rich ratio would be 0.67. Way under 1%. Lifestyle is outpacing his income structure. And that is wealthy. Yeah, he's wealthy, but financially stable. No, not at all. Susan, on the other hand, in 2026 is more intentional, less rocks in her backpack. Monthly need of $4,000 now you may say in America, 4,000. Why I did that. Who can? Well, if you have no debt whatsoever, then I know many families that live on four or five grand a month. It's not as crazy as it sounds. Social Security coming at 2,200, a pension of 1,800 and a portfolio of $500,000. Not nearly as much as Tom, but her ratio or have coming in is 5,600amonth. Her need is 4. Rich ratio of 1.42%. She's got cushion. And cushion equals a lot of confidence and comfort. Confident, Krista, that's where you are.

[Krista Dibiaz]

Cushion is comfort. Like you're saying. So their needs are. So I guess the thing to really look at is are These, all these things, all these rocks really needs or are they wants. And if you can lower your needs, that's going to give you power in life.

[Wes Moss]

And that's why one of the financial green zones is getting rid of the mortgage. That's usually a top one or two need because you, once you have a mortgage, you need to continue to pay it off. Not only do you need housing, but they'll take the house away if you don't do it. So it's getting rid of that is creating, getting rid of one of the largest rocks.

[Krista Dibiaz]

Or if you have to make extreme changes, maybe you sell that house and you move to a place that's much more affordable and that would lower your quote unquote needs. Right.

[Wes Moss]

Depends on how much equity you have. Depends on where mortgage rates are, which by the way continue to have gotten a little bit better. So there's more to this, but I think we've got to run to questions here. But think about all the complexity in the world and then think about the simplicity of your rich ratio. You could calculate it in probably 30 seconds or a minute and it, it'll tell you how much cushion and margin you have.

[Krista Dibiaz]

Neil in California sent this question in for you. Wes. I'm a retired firefighter and My pension is $6,100 a month after taxes and medical insurance. It has a 3% cola. I'm 6 years old and my wife is 59. If I pass, my wife will continue getting our pension at the same rate. We're debt free and our monthly budget is $1,650. We have about $360,000 in investments and our emergency fund. I have a couple of questions. One, how do we calculate our net worth? And two, what would be the proper way to consider my pension as part of my portfolio and diversification?

[Wes Moss]

Firefighter Neil, thank you for your service and your bravery for probably a very long period of time. Because you have, I can tell you did this for a long time.

[Krista Dibiaz]

Yes.

[Wes Moss]

Because you've got a very serious pension and that's a JTWRS pension.

[Krista Dibiaz]

What's that?

[Wes Moss]

Joint with rights of survivorship. Because his wife will get the same amount for her life even if something happens.

[Krista Dibiaz]

That's great.

[Wes Moss]

And a 3% cola. And very likely if Neil worked outside of being a fighter fighter at some point or his wife did because of the new changes getting rid of the wep, the windfall elimination provision and the government pension offset, he may be able to get some decent Social Security too. But I don't know if he even needs it because $6,100 a month. So first of all, the simple answer to your net worth question is just assets minus liabilities. That's it. If you're investments are 360 and your home equity is 360, your net worth is 720. What is missed though, and this is a big variable for you guys, Neil, is the income. Now, your income stream doesn't technically count as net worth, but for you, it should count as your net worth because it's tremendous. And think of it this way, and you do need to calculate the size of it if it were an asset, so that you can better figure out your overall asset allocation. And the way to do that is essentially you're choosing a rate of return that you would need to get in order to get 60, $100 a month from a bond. So let's just pick 5%. So 60, $100 a month times 12 is $73,200 a year. That's what you're getting in income guaranteed for life. And it goes up by inflation divided by 5 or 5%, it would take you 1.46 million in a bond account to generate that 73 grand forever.

[Krista Dibiaz]

And actually that's, he said that's after taxes and expenses. Right?

[Wes Moss]

So, so we're even undercounting. So really, you, you already have about a million and a half dollars worth of what I would consider fixed income. So now I would say you've got your other three, $360,000. So you really have about $1,800,000. Think of it as $1.86 million to consider, $1.8 million to consider of your overall investment pie. So even if you had all $360k in stocks, because you have such a large portion of, in what I would consider more of a fixed asset, you would only have about 20% in stocks if that whole 360 was in equities. Because the other 80% of your investment pie is really that fixed account or stable income. That's how I would look at this. It would take a net worth of, call it $2 million to be in the position that you're in today. By the way, one thing we just casually skipped over is Neil's rich ratio through the roof. Because he has 6100amonth and he only needs 1650amonth.

[Krista Dibiaz]

Right.

[Wes Moss]

Means everything's paid for.

[Krista Dibiaz]

That's awesome.

[Wes Moss]

So he's got a rich ratio of like three and a half or four. It's awesome.

[Krista Dibiaz]

Okay, Christopher, in Oregon says my wife and I started using a side hustle to save for a vacation house. Starting in 2019, we've had the money set aside in a savings account that is now down to 3.39%. The fast increase in the price of vacation homes where we were looking along with the changes in short term rental laws there has pretty much put it out of reach. Now we have over $100,000 saved and our likelihood of purchasing that vacation home is very slim. We owe $80,000 on our current house at 3.65%.

[Apple Card Announcer]

How much?

[Wes Moss]

I'm sorry, how much?

[Krista Dibiaz]

80,000.

[Wes Moss]

80,000.

[Krista Dibiaz]

At this point, do you think we should just pay off our current mortgage? Should we just tackle some of it? If the housing market dips where we want to buy, it might be back on the radar, but it seems unlikely. The side hustle isn't making as much, but our regular W2 jobs are fine. I'm a federal worker with 12% going into my TSP and we both have fully funded Roth IRAs. We have no other debt. About three months of savings separate from the vacation home account with a very little likelihood of any reduced income. I don't know the best way to utilize this extra money and it seems like it's not doing enough in a savings account. Thanks for your valued opinion, Christopher.

[Wes Moss]

In Oregon. So plan A was to buy the rental property and you've saved a bunch of money to do it and now the rental market is out of reach and you don't, and you don't want to do that. So now it's plan B. It's like, okay, what do I do with this money I've saved? So that's kind of a good problem to have. And they have 80,000 left on the mortgage. My rule of thumb on getting rid of the mortgage is a third or less of your after tax money. Pay off the mortgage. Now, 80 divided by 100 is not a third that it would take 80% of your 100 to do that. So it kind of violates the 1/3 mortgage payoff rule. But you also said you have three months worth of emergency savings. You've been funding at 12% the thrift savings plan for a long time. It sounds like you have other savings here, Christopher. It depends on your liquidity. I'd love to see you just pay off the mortgage. You're not going to be displeased by doing that. The other thing here is I think, I bet you have stable income because you're in thrift savings plan. So maybe it's A government employee.

[Krista Dibiaz]

It is. And he said it's very unlikely that they'll have reduced income in the future.

[Wes Moss]

Okay, so you have a really steady income. Your income is more like a bond versus a stock, Christopher. So I would say you could be in the camp where you have a high probability of keeping your job, very stable income and they would violate my 1/3 rule probably, I don't know, some of your other after tax assets. If you have more after tax assets, non IRA money, then maybe it makes this even easier. But I guess I would lean towards getting rid of that mortgage if you're in a position to do it now. Worst case scenario, your home is totally paid off. And if you really had an emergency, how do you get to some money? You could always have a home equity line as a cushion, which you probably won't ever need. I doubt you'll be upset if you pay it off. Use that money to pay off the

[Krista Dibiaz]

mortgage and then take that mortgage payment every month and put that somewhere.

[Wes Moss]

Put it right back in.

[Krista Dibiaz]

All right. Timothy, also in Oregon, says my 19 year old daughter has already saved $3,000. She works most of her hours during college summer break, but she doesn't make money every month, so monthly contributions aren't possible. What would be the best investment with Vanguard for her? She already has a Vanguard account established.

[Wes Moss]

Timothy in Oregon, when you're thinking about a young person, that can be all equities. The big firms like a Vanguard or really any of the big brokerage firms, they all have ultra, ultra, ultra low cost S&P 500 funds, options and then total stock market options. Both are fine.

[Krista Dibiaz]

I have to assume this is a Roth IRA too, don't you think?

[Wes Moss]

Yeah, I think she's.

[Krista Dibiaz]

Because of the income.

[Wes Moss]

I thought it was Roth and it's fine that the income is lumpy. Yeah, it's in a perfect world, we're putting a little bit of money in every single month. But it's still fine to contribute when you get it or when you have it. The consideration for somebody really young like that would just be, do you just do the S&P 500 or do you do a total total stock market? The S&P 500 is all 100% large cap. A total stock market fund, index fund is going to be more like 80% ultra large cap, which means you have another 20% in small and mid. And I like that, particularly for somebody really young. Regardless of what brokerage firm you're with, you're going to have probably those two options. And I would lean more towards total stock market for somebody this young, even more so than the S&P 500. But I think you would be in good shape with either.

[Krista Dibiaz]

Good for her for starting segment too. Well, that's going to do it for us this week on Ask an Advisor. I hope you heard something that made a difference in your life or you can share with someone else. You know, we hope you have a great rest of your day and we will be back with a new episode next week.