Episode Summary: The Clark Howard Podcast – March 25, 2025

In this enlightening episode of The Clark Howard Podcast, host Clark Howard welcomes financial advisor Wes Moss to delve into critical aspects of personal finance, focusing on saving strategies for retirement and the evolving nature of risk tolerance over time. The episode, titled "Ask An Advisor With Wes Moss", provides listeners with actionable insights and expert advice on navigating complex financial decisions.

1. The Secret to Saving More for Retirement

Krista Dibiaz opens the conversation by highlighting Wes Moss's expertise in helping individuals save more effectively for retirement. Wes Moss introduces the concept of psychological tricks that can enhance saving habits, emphasizing the difficulty many face in visualizing and planning for the distant future.

Key Insights:

• Visualization Techniques: Moss references a study by Indiana University and UCLA researchers, revealing that when participants were prompted to "picture your future self in 2035," they increased their long-term savings by an average of 14% ([02:15]).

  "Picture your future self in 2035 and now adjust what you think you should be saving for your future self." – Wes Moss [02:15]

• Going Home Effect: Moss explains the psychological phenomenon where familiar scenarios reduce uncertainty and promote rational decision-making. This effect can be leveraged to encourage more disciplined saving behaviors.

• Retire Without Regrets Study: Citing a Harvard study, Moss notes that retirees who actively planned their post-retirement life using tools like colored pencil roadmaps reported higher satisfaction levels.

Conclusion: Visualization and proactive planning are powerful tools that can significantly enhance one's ability to save for retirement, turning abstract future goals into tangible plans.

2. Understanding Risk Tolerance and Its Evolution

The discussion shifts to risk tolerance, where Moss presents empirical data and personal observations on how individuals' comfort with investment risk changes as they age.

Key Insights:

• Risk Tolerance Heat Map: Moss refers to a JP Morgan publication featuring a heat map that illustrates how risk tolerance typically shifts over a person's lifespan. Notably, individuals in their 30s often display a conservative leaning due to limited investment history, while those around 55 exhibit peak risk tolerance before gradually becoming more conservative approaching retirement ([14:46]).

  "As you get closer to retirement, you start thinking, wait a minute, I'm not going to get a paycheck anymore. So I really can't have my entire portfolio go down by 20 or 30% if I'm all totally invested in stocks." – Wes Moss [15:10]

• Investment Phases:

  • Early Career (20s-40s): Emphasis on high equity exposure (up to 90-100% in stocks) to capitalize on long-term growth.
  • Mid Career (40s-60s): Gradual introduction of safety assets, adjusting to a more balanced portfolio (25-30% in bonds).
  • Pre-Retirement (60s and beyond): Significant shift towards conservative investments to preserve capital and ensure income stability.

• 4% Withdrawal Rule vs. 6% Pension Rule: Moss clarifies the distinct applications of these rules, noting that the 4% rule accounts for inflation and focuses on personal savings longevity, whereas the 6% rule pertains to fixed pension incomes without inflation adjustments ([13:22]).

Conclusion: Understanding and adapting one's risk tolerance over time is essential for maintaining a balanced and resilient investment portfolio that aligns with evolving financial needs and retirement objectives.

3. Listener Questions and Expert Advice

The episode features a series of listener questions, each addressed with thoughtful and personalized financial advice from Wes Moss.

a. Javier from Colorado: Strategy for Three Years of Dry Powder ([06:51])

Question: At 71 years old, Javier seeks strategies to manage three years' worth of liquid assets ("dry powder") while maintaining investment safety.

Advice:

• Diversification of Safe Assets: Moss recommends seeding dry powder with intermediate to short-term bonds, CDs, and high-quality US bonds rather than high-yield or junk bonds, which carry higher risks.

  "The dry powder could have a lot of different components to it and to me that all counts." – Wes Moss [07:15]

• Time Horizon Consideration: Ensuring that the selected assets align with the short-term liquidity needs without exposing Javier to significant market volatility.

b. Jeff from Georgia: Roth vs. Traditional 403(b) Decisions ([08:22])

Question: At 44, Jeff contemplates allocating his consistent 15% contributions between Roth and Traditional 403(b) accounts and seeks guidance on optimizing for tax benefits.

Advice:

• Tax Bracket Evaluation: Moss advises assessing current versus expected future tax brackets. If Jeff is in a high tax bracket now and anticipates a lower one in retirement, Traditional contributions may be more advantageous.

  "If you're in a high bracket and when in retirement you're only going to be in the 15% bracket, then I lean towards keeping traditional 403 contributions." – Wes Moss [10:23]

• Balanced Approach: Suggests potentially splitting contributions to benefit from both pre-tax and post-tax advantages, providing flexibility in retirement.

c. Steve from Minnesota: Withdrawal Rate Confusion ([12:40])

Question: Steve seeks clarification on the discrepancy between the 4% withdrawal rule for personal savings and the 6% rule for pension buyouts.

Advice:

• Inflation Consideration: Moss explains that the 4% rule incorporates inflation adjustments, making it suitable for personal portfolios, whereas the 6% rule applies to fixed pension incomes without such adjustments.

  "The 4% rule accounts for inflation. The 6% rule is not your money. It’s the pension promising to pay you." – Wes Moss [13:22]

d. Bonnie from Ohio: Using HELOC vs. 401(k) for Retirement Funding ([25:30])

Question: Bonnie, at 64, asks whether to utilize a Home Equity Line of Credit (HELOC) to bridge income gaps until Social Security benefits commence, or to draw from her 401(k).

Advice:

• Cost-Benefit Analysis: Moss weighs the high interest rate of the HELOC against the potential tax implications and growth of 401(k) funds.

  "I don't love when the payback phase comes because I feel like it could get you into a tax vortex of pulling a bunch of money out of the retirement account." – Wes Moss [26:56]

• Recommendation: Cautious use of HELOC is acknowledged as a viable strategy, but advises minimizing reliance on it to avoid excessive interest costs and tax complications.

e. Caroline from South Carolina: IRA Account Security ([29:31])

Question: Caroline is concerned about the security of her IRA accounts, which are held at the same brokerage as her checking account, fearing potential cyberattacks.

Advice:

• Cybersecurity Measures: Moss reassures that major brokerage firms implement robust cybersecurity protocols, including two-factor authentication and continuous monitoring.

  "It's two-factor authentication. It's checking your accounts on a regular basis to make sure nothing's happening that's out of the ordinary." – Wes Moss [29:48]

• Personal Vigilance: Emphasizes the importance of strong, unique passwords and regular account reviews over dispersing accounts across multiple institutions.

f. Gail from Vermont: Dividend Stocks vs. Equity Index Funds ([31:11])

Question: Gail expresses concern over YouTube channels promoting high monthly income streams from dividend stocks and seeks clarity on their viability compared to traditional equity index funds.

Advice:

• Realistic Expectations: Moss cautions against expecting abnormally high returns from dividend stocks, noting that yields above 4% often come with increased risk.

  "If there's anything that's 10% rate of return in income, that's something that usually doesn't last." – Wes Moss [31:54]

• Dividend Quality: Recommends focusing on dividend yields in the 2-4% range, which are more sustainable and indicative of stable, mature companies.

4. Final Thoughts and Encouragement

As the episode concludes, Krista Dibiaz and Wes Moss encourage listeners to continue submitting their financial questions to further enrich the community's understanding and management of personal finances.

"Keep them coming clark.com ask and we will be back next week." – Krista Dibiaz [35:57]

Wes Moss reiterates the importance of informed decision-making and adapting financial strategies to align with individual life stages and goals.

Takeaways

• Visualization and proactive planning are crucial for effective retirement savings.
• Risk tolerance evolves with age, necessitating adjustments in investment portfolios.
• Personalized financial advice can significantly impact the management of assets and retirement strategies.
• Cybersecurity measures are paramount, but can be effectively managed without overly complicating account structures.
• Dividend investing requires a balanced approach to ensure sustainability and mitigate risks.

This episode of The Clark Howard Podcast offers a wealth of knowledge for listeners seeking to optimize their financial strategies and secure a stable and fulfilling retirement.