The Clark Howard Podcast: Episode Summary - "Ask An Advisor With Wes Moss"

Release Date: March 18, 2025

In this compelling episode of The Clark Howard Podcast, host Clark Howard delves deep into the intricacies of personal finance with guest advisor Wes Moss and co-host Krista Dibias. Titled "Ask An Advisor With Wes Moss," the episode navigates through the turbulent waters of market volatility, investment strategies, retirement planning, and answers pressing listener questions. Below is a detailed summary capturing the essential discussions, insights, and conclusions drawn during the episode.

1. Navigating Market Volatility and Retirement Accounts

Krista Dibias opens the conversation by highlighting the recent volatility in the stock market and poses a crucial question about safeguarding retirement accounts amidst economic uncertainties.

Wes Moss responds by addressing the reality of increased trading activities within retirement accounts, citing an Empower report that notes a doubling of trading as investors shift from stocks to safer assets like stable value funds (Empower Report, [01:40]). He emphasizes that while turbidity like tariffs cannot be entirely "tariff-proofed," investors can adopt strategies to maintain the health of their retirement portfolios.

Notable Quote:

"The stock market is certainly not an escalator. It doesn't just go a little bit higher every day. We have fits and starts." – Wes Moss ([02:10])

2. The Impact of Tariffs and Economic Uncertainty

The discussion shifts to the persistent uncertainty caused by tariffs, which Wes refers to as "Tariff Terror 2025." He explains how ongoing tariff debates contribute to economic unpredictability, affecting consumer spending and employment rates.

Wes draws parallels with historical market behaviors, noting that periods of uncertainty often lead to market corrections. He reassures listeners that the "army of American productivity"—a metaphor for the hardworking U.S. workforce and corporate resilience—continues to drive economic growth despite challenges ([04:50]).

Notable Quote:

"No matter what problem of the day, year, week, decade gets thrown to companies, they figure out a way to cope with it, deal with it, and thrive no matter what." – Wes Moss ([06:20])

3. Strategies for Long-term Investing

Wes advocates for maintaining a long-term investment perspective, especially during market downturns. He underscores the importance of staying invested and not being swayed by "scare lines" that dominate media headlines.

He introduces the concept of "dry powder"—safety assets like bonds and money markets—that investors should maintain to buffer against market volatility. Wes suggests having three years' worth of necessary funds in dry powder to navigate potential bear markets effectively ([23:22]).

Notable Quote:

"You don't want the tax tail to wag the investment dog." – Wes Moss ([17:15])

4. Sector Weighting in Index Funds

Listener Tim from Florida raises a question about sector weighting in his 401k and the importance of balanced sector distribution.

Wes Moss explains that major indices like the S&P 500 are capitalization-weighted, meaning larger companies like Apple have a more significant impact on the index compared to companies like Home Depot. He suggests that investors consider equal-weighted indices or equal sector-weighted ETFs to achieve a more balanced sector distribution, which can mitigate the overexposure to dominant sectors like technology ([31:35]).

5. Municipal Bonds in Investment Portfolios

In response to Scott from New York's inquiry about municipal bonds, Wes provides a thorough overview of their benefits and risks. He highlights that municipal bonds are generally safe, especially those rated AA or AAA, and offer tax advantages by being exempt from federal and, if applicable, state income taxes.

Wes advises caution against over-concentrating in municipal bonds, recommending no more than 50% of the bond portfolio in in-state municipal bonds to maintain diversification and mitigate risk ([12:34]).

Notable Quote:

"Municipal bonds are backed by the credit of the state itself, making them a high-credit investment option." – Wes Moss ([13:55])

6. Listener Questions and Expert Answers

The episode features a segment where Wes and Krista address various listener questions, offering personalized financial advice.

a. Managing Unrealized Gains (Gene from Washington)

Gene's query revolves around handling significant unrealized gains amidst unemployment. Wes advises not to let taxes dictate investment decisions and suggests that Gene could realize gains without incurring taxes due to his low-income status this year. He emphasizes consulting a CPA for tailored tax strategies ([17:15]).

b. Early Retirement Planning with Rule of 55 (Tony from California)

Tony and his wife plan to retire early using the Rule of 55, allowing penalty-free withdrawals from their 403B accounts. Wes confirms the viability of this strategy for public educators and strongly recommends working with a CPA to navigate the tax complexities ([35:23]).

Notable Quote:

"AS long as you're judicious about what you're pulling out of the 403B to keep your tax bracket low, it can work." – Wes Moss ([38:51])

c. Rolling I Bonds into 529s (Molly from New York)

Molly seeks advice on transferring gifted I bonds into 529 college savings plans without triggering taxes. Wes explains the eligibility criteria and the process, advising Molly to cash in the bonds within 60 days and reinvest in a 529 plan, ensuring ownership requirements are met ([39:09]).

d. 401k Options and Fee Management (Jason from Oklahoma)

Jason inquires about switching his 401k investments to lower-fee options without incurring penalties. Wes reassures him that within a retirement plan, such changes can be made without tax implications, emphasizing that funds remain within the retirement account ([41:08]).

7. The Dry Powder Principle in Uncertain Markets

Reiterating the importance of the dry powder strategy, Wes elaborates on maintaining three years' worth of safety assets to provide financial stability during market downturns. He explains that these assets, typically bonds and money market funds, can offer protection and liquidity when stock markets falter, ensuring that investors do not need to liquidate their equities at inopportune times ([23:22]).

Notable Quote:

"Dry powder can be multiple things, but these are investments with a relative degree of safety." – Wes Moss ([30:33])

8. Conclusion

As the episode wraps up, Wes and Krista reinforce the importance of strategic financial planning amidst economic uncertainties. They encourage listeners to remain informed, maintain diversified portfolios, and seek professional advice when necessary. The conversation underscores that with prudent management and a focus on long-term goals, investors can navigate even the most turbulent markets successfully.

Closing Remark:

"If you have a question for Wes, you can go to clark.com/ask and pose a question to Clark or Wes there." – Krista Dibias ([42:42])

Key Takeaways:

• Stay Invested Long-term: Do not let short-term market volatility derail long-term investment strategies.

• Maintain Dry Powder: Keep a portion of your portfolio in safety assets to provide liquidity and protection during downturns.

• Understand Sector Weighting: Balanced sector allocation can reduce overexposure to dominant industries like technology.

• Leverage Tax-Advantaged Accounts: Utilize strategies like municipal bonds, Rule of 55, and 529 plans to optimize tax benefits.

• Seek Professional Advice: Consult CPAs and financial advisors to tailor strategies to individual financial situations.

Notable Quotes:

• "You don't want the tax tail to wag the investment dog." – Wes Moss ([17:15])

• "No matter what problem of the day, year, week, decade gets thrown to companies, they figure out a way to cope with it, deal with it, and thrive no matter what." – Wes Moss ([06:20])

• "Municipal bonds are backed by the credit of the state itself, making them a high-credit investment option." – Wes Moss ([13:55])

• "Dry powder can be multiple things, but these are investments with a relative degree of safety." – Wes Moss ([30:33])

This episode of The Clark Howard Podcast offers invaluable insights for investors and retirees alike, emphasizing the importance of adaptability, diversification, and professional guidance in achieving financial stability and growth.