06.16.26 Ask An Advisor With Wes Moss

Summary

The Clark Howard Podcast – Ask An Advisor with Wes Moss

Episode Date: June 16, 2026
Host: Krista Dibiaz
Guest Advisor: Wes Moss

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Episode Overview

This episode explores the crucial distinction between getting wealthy and staying wealthy, especially in an era of high-profile IPOs and sudden fortunes. Wes Moss and Krista Dibiaz dive deep into how emotional behavior shapes investing success, answer listener retirement and tax strategy questions, and reveal what Wes calls “the ultimate dividend” of financial planning. The episode is packed with practical advice for listeners at all stages of wealth-building, with concrete portfolio and retirement guidance.

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Key Discussion Points and Insights

1. The Hype and Reality of Recent IPO Wealth (01:39–06:59)

• IPO Mania: Wes highlights the current wave of IPOs (SpaceX, OpenAI, Anthropic) and the FOMO (fear of missing out) it generates as thousands become instant millionaires.
  • “It’s something like 4,000, depending on what company, 4, 5, 6,000 millionaires being created almost overnight. At least it seems like it’s overnight.” (02:09 — Wes Moss)
• The Rarity of Overnight Wealth: Wes stresses that this affects only a tiny fraction of people, even if media coverage makes it feel ubiquitous.
  • “It’s really only 0.01% of the workforce that’s having one of these major IPO events and getting wealthy. So it’s 0.01% of folks. Even though it seems like it’s everybody…” (04:17 — Wes Moss)
• Paths to Wealth: Nearly everyone achieves wealth through consistent savings and compounding, not through windfalls.
• Psychology of Investing: The emotional pull to chase fast profits can upend prudent long-term strategies, especially among those in or nearing retirement.

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2. Getting Wealthy vs. Staying Wealthy (04:43–06:59)

• Age & Risk: Aggressive investing is most justified during the asset accumulation phase (20s–50s). As people approach retirement, the strategy must take a turn toward wealth preservation and balance.
  • “Getting wealthy and staying wealthy are two very different things.” (01:21 — Wes Moss)
• Wealth Preservation: Retirement-age investors face unique risks. Maintaining a balanced portfolio is crucial for resilience against market downturns while still staying ahead of inflation.
• Emotional Pitfalls: Don’t let IPO headlines tempt you into outsized risk as your financial life transitions from accumulation to distribution.

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3. The Psychology/Behavioral Side of Investing (06:59–08:20)

• Emotional Dominance: Wes estimates that two-thirds of successful investing is emotional/behavioral — reframing expectations, addressing fears, and building confidence.
  • “A third of investing is the number side ... the other two thirds is the reframing, which is the emotional and behavioral side of investing… it’s the most important piece of the equation.” (07:05 — Wes Moss)
• Retirement Happiness: Beyond numbers, happiness in retirement is tied to purpose and proactive pursuit of interests ("core pursuits").
  • “Step two in the Retire Sooner Method is about creating your purpose because you’re not going to find it. It’s not going to just land in your lap one day…” (08:53 — Wes Moss)

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4. Listener Q&A Highlights

Q1: Lump Sum or Pension? Social Security Timing (09:11–13:27)

• Chris (Georgia): Age 60, soon retiring, with a mix of pre-tax 401k, pension eligibility, and questions on Social Security timing.
• Key Advice: If longevity runs in the family and you project living into your 90s, waiting to draw on pension and Social Security usually pays off. Wes uses “8%+ pension test” to compare lump sums vs. monthly benefits, leaning towards monthly in this case. Only use investments for bridging the income gap, but avoid depleting liquidity.
  • “If you told me that you were definitely going to live to 90 or beyond, the simple answer is wait on all these things…” (10:13 — Wes Moss)

Q2: Roth Conversions and Tax-Planning (13:27–16:50)

• Mark (Georgia): Net worth $7 million—real estate and IRAs, considering Roth conversions for his heirs.
• Key Advice: Converting now at the 24% rate is reasonable if you value heirs’ future tax flexibility. The “tiebreaker is: are you ok paying the taxes for your heirs?” Wes generally thinks tax rates won’t rise sharply and estate tax isn’t a concern at Mark’s level, but if you value Roth assets for heirs, it makes sense.
  • “If you’re okay with that and paying a little bit more tax today, then you’re a great candidate for the Roth conversion.” (16:30 — Wes Moss)

Q3: Portfolio Rebalancing without Tax Penalties (16:50–19:05)

• Todd (Iowa): Age 56, wants to rebalance a mostly tax-sheltered portfolio.
• Key Advice: In tax-qualified accounts (401k, IRA, Roth), you are free to rebalance without incurring immediate tax. Look for cash-like funds within 401k options for safe holdings.
  • “You’re totally fine to rebalance within the retirement accounts and you don’t have to worry about taxes.” (17:36 — Wes Moss)

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5. The Ultimate Dividend (21:23–25:40)

• What is the “Ultimate Dividend”? Wes’s take: The ultimate dividend from investing isn’t from any stock or bond — it’s freedom and autonomy.
  • “My favorite dividend that gets paid by stocks? Buy stocks. It’s freedom. Oh, freedom is the ultimate dividend.” (21:33 — Wes Moss)
• Freedom Defined: Autonomy and the ability to live on your own terms is the goal of good financial planning.
  • “The ultimate happiness elixir for humans is autonomy and freedom, which leads to the most sense of contentment…” (21:47 — Wes Moss)
• ‘Green Zones’ of Wealth: Wes highlights three financial “green zones” for freedom: $1 million in liquid assets, $100,000 of income, and a paid off mortgage.

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6. More Listener Q&A

Q4: Young Investor with Cash—Where to Invest? (25:40–28:13)

• Tyler (California): Age 28, $70k in cash, saving for a house, maxing HSA, already investing in 401k.
• Key Advice: Max Roth IRA contributions; don't fret about accessibility—contributions can always be withdrawn. Remaining funds should go in broad-market ETFs. Because of Tyler’s youth and long time horizon, he’s in the “get wealthy” aggressive investing phase.
  • “Don’t be nervous about putting money to the Roth. Don’t be nervous about that because it’s the ultimate accessible account that also of course grows tax free.” (26:34 — Wes Moss)

Q5: Equity Indexed Annuity for Bonds? (28:13–32:01)

• Gary (NC/Indiana): Asked about an advisor’s recommendation to use an equity-indexed annuity for the bond portion of his portfolio.
• Key Advice: Wes cautions skepticism. The “no downside/7.5% upside” pitch hides complexities and likely low, variable returns due to monthly caps and bond-based investments. He dislikes the lack of diversification compared to bond funds.
  • “When you’re buying an index annuity, you’re essentially buying a bond because it’s just the company that you’re buying it from and their claims paying ability.” (30:27 — Wes Moss)
• Fiduciary Note: Krista and Wes warn about dual-role advisors, reminding listeners to check if their advisor acts as a fiduciary at all times or only when not selling insurance products.

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Notable Quotes & Memorable Moments

• On IPO Wealth
  “There’s a growing sense of FOMO because you hear and read these stories... you start to think these people are getting wealthy almost overnight. The natural human reaction is to feel like you’ve missed out.”
  — Wes Moss (03:01)

• On Investment Psychology
  “The other two thirds is the reframing, which is the emotional and behavioral side of investing… it’s the most important piece of the equation.”
  — Wes Moss (07:05)

• On the Ultimate Dividend
  “My favorite dividend that gets paid by stocks? It’s freedom. Oh, freedom is the ultimate dividend.”
  — Wes Moss (21:33)

• On Retirement Purpose
  “Step two in the Retire Sooner Method is about creating your purpose—because you’re not going to find it. It’s not going to just land in your lap one day.”
  — Wes Moss (08:53)

• On Roth IRAs for Young Investors
  “Don’t be nervous about putting money to the Roth… it’s the ultimate accessible account that grows tax-free.”
  — Wes Moss (26:34)

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Timestamps for Key Segments

• IPO Mania and Path to Wealth: 01:39–06:59
• Investment Psychology: 06:59–08:20
• Listener: Lump Sum vs. Pension: 09:11–13:27
• Listener: Roth Conversions: 13:27–16:50
• Listener: Portfolio Balancing Without Taxes: 16:50–19:05
• Ultimate Dividend Discussion: 21:23–25:40
• Listener: Young Investor Cash Allocation: 25:40–28:13
• Listener: Equity Indexed Annuity: 28:13–32:01

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Takeaways

• Distinguish between strategies for accumulating versus preserving wealth.
• Don’t let IPO headlines and FOMO push you into rash investment decisions.
• Behavioral and emotional factors are critical to investment success.
• Consider longevity, liquidity, and heirs in Social Security and Roth conversion decisions.
• Roth IRAs provide unique flexibility for young and first-time home-buying investors.
• Be wary of products like indexed annuities that often promise more than they deliver and question dual-role “fiduciaries.”
• The ultimate goal: Achieve financial freedom and autonomy, not just amass assets.

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For more advice or to submit questions, visit: wesmoss.com/ask

Transcript

[Narrator/Announcer]

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[Wes Moss]

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[Krista Dibiaz]

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[Krista Dibiaz]

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[Krista Dibiaz]

Welcome to Ask an Advisor, where we go deeper on all things investing and help you with your money. I'm Krista Dibiaz here with Westmoss. Yes, Mr. Westmoss. And today we are going to talk about how getting wealthy and staying wealthy are not.

[Wes Moss]

Well, those are two totally separate things, Right? Two totally separate things.

[Krista Dibiaz]

Right. And then later you gave me a tease and I don't really know what you're going to talk about, but the ultimate dividend.

[Wes Moss]

The ultimate dividend.

[Krista Dibiaz]

Ultimate dividend. And of course, we have lots of questions to get to.

[Wes Moss]

Let's go all of them.

[Krista Dibiaz]

Okay.

[Wes Moss]

This is a world right now that is very focused on brand new explosive wealth because of all the IPOs, the Space X IPO, the potential OpenAI and then anthropic IPO. And if you start reading the numbers, these have been private companies, so people have this stock and they technically do have the net worth to some extent, but it's totally illiquid and it's on a statement somewhere and it's not all that tradable. It is a little bit. But when companies go public and you have private shares, they all of a sudden show up in your brokerage account. So the amount of millionaires that are being created over the course of the next, let's call it the back half of 2026 is pretty astounding number. It's something like 4,000, depending on what company. You're looking at. 4, 5, 6,000 millionaires being created almost overnight. At least it seems like it's overnight. Even Though some of these companies have been. SpaceX has been around for over 20 years now. The artificial intelligence companies have been around for, for much shorter period of time. But there is a growing sense of FOMO out there because you hear and read these stories almost every single day. I get hit with a couple of these stories. There's a 400 millionaire plus people being created from some of these IPOs. So you start to think that these people are getting wealthy really almost overnight. The natural human reaction is to feel like you've missed out.

[Krista Dibiaz]

Sure.

[Wes Moss]

And you should participate and you should participate in a big way. The amount of calls I've been getting about these IPOs is off the charts. And it makes sense that some of these have been over subscribed. So for every one share available for people or five people want it. So you can imagine that supply demand dynamic. But for me, what I've been seeing and feeling is just this pressure of, oh, I want to be part of this, I want to participate. Now, I think there's a little bit of novelty effect in some of these because they're popular companies that get talked about a lot. So there's a little bit of novelty. When I say novelty, I mean sometimes people want to just own shares in their hometown baseball team or football team if they happen to be public. So and that's possible, but usually that's more for novelty and feeling like you're part of something as opposed to your actual retirement plan. But getting wealthy and staying wealthy are two very different things. To get wealthy, there's two real paths to that. One, for the vast majority of people, really, 99.9% of folks is about diligent savings, is about investing and letting money compound. We see what seems to be a big number of people. When you do the math, it's really only 0.01% of the workforce that's having one of these major IPO events and getting wealthy. So it's 0.01% of folks. Even though it seems like it's everybody,

[Krista Dibiaz]

you're saying there's a chance.

[Wes Moss]

And that's what's so amazing about investing. It's is that there is always a chance, Krista.

[Krista Dibiaz]

Right.

[Wes Moss]

It's never. There are very few absolutes. It's always, well, it's possible. But for the vast majority of folks, if you're in your 20s, into your mid-50s, you're still getting wealthy and you're growing your assets and you can take on some real risk and you have time to recover and you do want to lean towards in my opinion, more volatile assets, because those volatile assets take typically over time, that's where we see our biggest gains. But when you get to 60 or in your late 50s, if you're getting ready to retire, you shift into staying wealthy. And there's a big difference between those two approaches. And the staying wealthy approach doesn't mean you throw in the towel and say, I don't want to take any more risk and I'm just going to buy a bunch of bonds and money markets and CDs and a fixed annuity, which I knew is a four letter word here on the show.

[Krista Dibiaz]

Right. My goodness.

[Wes Moss]

And take on no risk. But it is the time to make sure that you again, for the vast majority of people, if you're a billionaire, you don't really need to have a lot of balance. You can lose half your wealth and you're still going to be okay. But for 99.9% of Americans, that balance is really key because when we do go through, let's say recessions, maybe great recessions, financial panics, struggles in the economy, in the stock market, and we're taking money for the portfolio because we're living on it. It's very different than accumulating. We're actually using it. That's why I think I'm such an advocate of balance and protecting wealth while still giving it a chance to grow and beat inflation over time. When you get into that mid-50s, early 60 phase, really, it's not so much about the age, it's when you're ready to stop working and drawing for the portfolio. So getting wealthy, it's okay to be highly exposed to markets and take on some real risk. If you're ever going to do it, it's in that accumulation phase. But don't let this period of great fervor and stock bonanza trick you into thinking now that you're even though you're in retirement, you're missing out and you need to be aggressive and be double down. So just don't let all of the headlines create FOMO to make overly risky decisions. Because if you're in that stage, you want to stay wealthy as opposed to just get wealthy.

[Krista Dibiaz]

What percentage of your job would you say is psychological versus computational?

[Wes Moss]

I'd say a third of investing is the number side of the equation because it's so computationally easy and quick today versus what it was 20 years ago. And we can do 10 times the amount of analysis than we used to be able to do in a really short period of time. Sometimes it's astounding particularly with market research, is one thing I've noticed. Our CIO and I the other day did something in 10 minutes and we both looked at each other and said, gosh, this would have taken like two days, five years ago to really compile all the data we were looking at. So it's certainly one healthy part, computation and analysis. But the other two thirds, if you're working with families that are working towards a plan, the other two thirds is the reframing, which is the emotional and behavioral side of investing that you may not really feel like you need it, but it's the most important piece of the equation.

[Krista Dibiaz]

Okay, well, that's why you've done so much research on.

[Wes Moss]

Yeah, it's a huge part of my

[Krista Dibiaz]

what makes someone happy in retirement.

[Wes Moss]

Yeah. And that, I would say is the other half of financial advice, in my opinion. If we get the financial planning and the investment side down, those are two major steps. I still think there's three more just as important steps.

[Krista Dibiaz]

By the way, this has become a topic of conversation at the dinner table for me when I'm out with friends. I was out with a big group the other week and because I read the Retire Sooner Method, your book and your new book, and you've now upped it to five core pursuits, I ask everyone, what are your core pursuits now and what do you think they'll be when you get to retirement and how

[Wes Moss]

do people react to that? Are they excited to give them to you or is it hard for them to think what they are?

[Krista Dibiaz]

For some people it takes a lot of thought. And that, I think, spurs you into going, huh, I better think about this. What you know, makes me happy, what gets me excited to get up in the morning.

[Wes Moss]

So yes, I mean, step two in the Retire Sooner Method is about creating your purpose because you're not going to find it. It's not going to just land in your lap one day and it's a fun amount of work to do. And the other thought around it is the amount of time you do. It is important. So more is typically better directionally more hours.

[Krista Dibiaz]

We will go to questions now that came in for you. This one came in from Chris in Georgia. Chris, Wes, get out your pen. I'm 60 and plan on retiring in two years. I will have about a million dollars, mostly in my pre tax 401k. I have a cash balance that will be worth and here are the options at 62 a $350,000 lump sum or 2,400 per month.

[Wes Moss]

Ooh. Oh, we've Got this is a pension versus lump sum decision, Chris.

[Krista Dibiaz]

And at 65, a $420,000 lump sum or $2,900 a month. And then here are the Social Security amounts. At 62, it's 2,500. At 65, 3,600. At 67, 4,500. Is it better to draw on investments from 62 to 65 and hold off on the cash balance of Social Security or just start everything at 62? There is longevity in my family into the mid to upper 90s.

[Wes Moss]

Oh, well, that is a big piece of the equation. Now you don't know that number, Chris. We don't know how long we're going to live. If you told me that you were definitely going to live to 90 or 90 or beyond, then the simple answer is wait on all these things because your break even. I don't even have to do the math. On social, we know the break even is 12 years. So if you wait from 60 to 67, 67 plus 12 years is what? 79. So by the time you're 79 every year beyond that, if you live to 90, it's 11 more years that you would have more money cumulatively than you would have if you had taken it early. Now, we don't know the answer to that though. And thank goodness we don't know.

[Krista Dibiaz]

Right?

[Wes Moss]

Thank goodness we don't know.

[Krista Dibiaz]

But don't you think he has to assume because of the longevity in the family?

[Wes Moss]

I do, yeah. Well, yes, absolutely. But no, the other thing is, it is an interesting conversation when you say, oh, my dad had a heart attack at 72 and my mom at 71 and I'm 68. There's no way I'm living to 90. Some people say it that way, some people say it this other way. Chris, I hope you live to your 100. Now let's do some math. The 62 versus 65. We're going to do the quick math. 2,400amonth times 12 is 28 8. And we're going to divide that by 350,000. That gives you an 8.22% pension amount. It's pretty good. Remember I have the 6% test. Remember we had a teacher email in and they were looking at the 10% level. I look at 6 plus that number is 8 plus, which would lean towards taking the monthly amount over the big lump sum. The other part of the calculation, you do already have some liquidity, Chris. You've already got another million in pre tax money, so that's a variable too. And then 2900. Your next calculation is 34,8 divided by 420,000. Oh, it's the same 8.28%. So there's two calculations. One is the lump sum versus the monthly. About our deal, I would lean towards the monthly amount here as opposed to the liquidity. You almost though can't go wrong by taking the money and having go into an ira. So a lot of people, if there's a tie, you still kind of want the money in your account for your heirs. If, let's say you don't live a long period of time, at least that money now goes to someone versus the payment streams will likely stop either for you or your life or you and your spouse's life. But on this one I'd be leaning towards the monthly. And the same goes with social. Krista is that every year you wait, every month you wait, it's about a 12 year break even. But if you're just penciling in 90, I think you're better off waiting on all of these, taking the income streams and then utilizing that million dollars for that gap. The only catch is that you don't want to completely raid that liquidity during that gap. So if you're taking 4 or 5, maybe even 6% of it to fill the gap, that's okay. If it goes beyond that as a withdrawal amount, then you have to start thinking about turning these on sooner as opposed to waiting forever.

[Krista Dibiaz]

Okay. This one's from Mark in Georgia. Wes. I'm 59. I have a net worth of $7 million consisting of paid for rental real estate and IRAs. I have 4 million in IRAs with 75% in traditional and 25% in Roth. I'm working part time and plan to stop in the next two years. Once I retire, I don't see my income coming out of the 24% bracket. I'm considering starting Roth conversions to the max of 24% bracket using this following logic. One, the taxes have to be paid by someone, me or my heirs. Two, while nobody has a crystal ball, I have to think taxes are going to rise. If not, at least I'm operating with a known rate, 24% and three, I'm lowering my RMD amounts. Four, I'm reducing the size of my estate in the event that inheritance tax caps are ever lowered. And five, when I die, a Roth is much better asset for my kids to inherit. I effectively consider this to be a hedge against the unknown. The only way I see this blowing up in my face is if the tax rates drop precipitously I'd love to get your opinion.

[Wes Moss]

Hey, Mark. Mark is retiring in two years. $7 million net worth. Three in real estate, four in IRAs. A million of that would be in the Roth. Three million would be in the IRA. Let me go through your list. Tax. Either you have to pay the tax, your heirs. Correct. Number five, he said something about paying the taxes for his kids. Correct. But that's an important word, Chris. We're going to come back to that. I don't like to predict tax rates. I don't think they're going much higher. They're already, in my opinion, so high. Between top federal and then the net investment tax, if you're a really high income person, you're 37 plus almost 4, you're already over 40. I don't think there's any appetite in America for any higher taxes. So I don't think they're going higher. I know a lot of books will say, well, they can only go up. I just don't believe that the lower rmd. Yes, totally correct and true in reducing your state. Probably not that big of a problem. Because if you're married, Mark, it's 15 million each. It's $30 million. Yes. If seven, that could double to 14, double to 28, and you're still under the cap. And that could change too. But you have plenty of money. And you mentioned a couple different times that you're okay with paying taxes for your heirs. That's the tiebreaker in this whole thing. Of course, you lower your RMDs, and if you convert up to 24%. So let's say now you're only 15 and you don't go above the 24% when it comes to making those Roth payments on the conversions, then for you, particularly from what you're telling me, I'm okay with a Roth conversion here. I don't know the exact amount. Every year it would be, but it's probably 100, maybe a little more than that per year. And it'll take a chunk out of the IRA, it'll lower your RMDs. And if in your mind you're saying, look, somebody's gonna pay it, you're already wealthy, you might as well pay it for your kids. You know, 1 in 10 families say that to me. They do. They're like, I'm okay to pay right now because I want my kids to have this. 9 out of 10 don't say, it's up to the kids, I'm going to let them pay. But if you're okay with that and paying a little bit more tax today, then you're a great candidate for the Roth conversion.

[Krista Dibiaz]

Todd in Iowa says Wes, you often mention a balanced portfolio. I'm 56 and have not balanced at all. My question is, how do you balance without taking tax hits when you're 95% in investments? My initial thought was to sell funds in my 401 now and transfer those to cash but still leave in the 401k to avoid taxes. Now the problem with this is neither of my 401ks offer an equivalent of the Vanguard Settlement Fund or the like. I'm currently sitting on about one and a half million in my total portfolio. Around 50% of that is in my 401k, traditional IRA and Roth IRA. 30% of the 401k is a Roth account. Any suggestions on how to balance this portfolio without taking the tax hits? Lots of tax questions.

[Wes Moss]

Todd in Iowa, remember a lot of your money is in the crock pot. That means that you can change it around and mix it up and you're not going to have to worry about taxes. We have this natural thought of, gosh, if I'm selling my stocks and I'm rebalancing from appreciated stocks into something safer, you're going to take a tax hit. It doesn't matter in an IRA. It does not matter in your 401k, nor your Roth, nor your Roth 401, nor your IRA. Those retirement accounts are quote qualified. That means that the taxes all stay in the crock pot until you take money out. And just rebalancing doesn't do that. So you're totally fine to rebalance within the retirement accounts and you don't have to worry about taxes. The other thing is that you mentioned that you don't have a cash type account in your 401k. That's not true. Every single 401k in America has a short term either a money market option, a cash type account that's a fund or a short term bond fund that is usually U.S. treasuries. So there is an option in there. You just have to look for it. It should be right there in the list. But it doesn't need to be in cash cash. It can be in a cash like dry powder investment that you're rebalancing into for more safety. So I promise you go look and you will find one of those options or multiple options within those, those accounts.

[Krista Dibiaz]

All right, we're going to come back and you're going to talk about the ultimate dividend. We'll get to more questions and if you have a question for Wes, go to wesmoss.com ask Investing with Schwab is

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[Wes Moss]

welcome back to Ask an Advisor. Wes Moss, along with Krista Debias. Welcome back, welcome back, Wes, you want to hear about the ultimate dividend?

[Krista Dibiaz]

I do.

[Wes Moss]

My favorite dividend that gets paid by stocks? Buy stocks. It's freedom. Oh, freedom is the ultimate dividend. I heard a little Braveheart in the background.

[Krista Dibiaz]

I heard George Michael.

[Wes Moss]

You heard George Michael. I heard Braveheart. And I think we're both right. There's a psychologist, Angus Campbell and he wrote, he studied humanity and concluded that the ultimate happiness elixir for humans is autonomy and freedom, which leads to the most sense of contentment that you can have as a human. Which is really the altruistic way to think about what we're doing. When we're talking about financial planning, we are literally trying to deliver. And you, as you are investing your money and planning for your retirement, you're trying to deliver yourself that autonomy forever. That is a magical elixir. When it happens, it doesn't happen overnight, it happens gradually. So it's not about income or status or square footage. Happiness comes when you feel like you are driving the car. And that is why everything we're trying to do when it comes to investing is to be able to replace our income without having to go do the job that 2/3, 3/4, 80% of Americans just don't love. There's a difference between hedonic and eudynamic happiness. I write about this in retired student math. Hedonic is about pleasure and fun. It's like Vegas, right? That's like hedonic. I'm going to go have an awesome time. What Aristotle wrote about was this udonomic happiness, which is a feeling of purpose and contentment and autonomy. And that comes from having a financial equation that you feel comfortable with, because we still know to this day, and I don't know if this will ever change that one of the top financial worries, even for folks with high net worths and a million, 2 million, even 3 million plus, still worry about running out of money. It's a still a top financial fear, which is a deeper fear than a headline. I'm worried about the Middle East. I'm worried about inflation. I'm worried about a market correction. The root of that is the general fear, which is much more powerful and scarier, which is, gosh, what if every, every, every, everything goes wrong and I run out? Then we lose our freedom and we lose that freedom dividend. So what we're trying to do, and this is part of the money green zones that I talk about, is that getting to those levels of the money green zones, which are a million dollars or more in cushion liquid assets, $100,000 of income, having a mortgage paid off, those three financial green zones to be in, they are there to pay you that dividend of freedom. And the amounts are not perfect. And the amounts in particular don't necessarily matter because they could be different for you. You could get to financial freedom with a lot less than a million dollars. It's Definitely possible. But in the expensive America that we live in, those are the levels that I've seen where people do have that feeling of, okay, now I'm driving the car. Now I'm in good shape. Now I can have that Aristotle type of happiness, which is, I have autonomy. I control my own destiny. I'm driving the car. And that is why having multiple income streams, whether it's social and a pension and 5, 10, 100 different investments, all paying you something, is very powerful. You asked earlier about the emotional and behavioral side of investing. That's an emotional and behavioral thought. I feel comfort when I have 30 different things paying me my income or 100 things paying me a little bit of income. That adds up to enough for me. And then we can go into rich ratio. As long as we have more coming in than is going out. You're in a piece where you're driving the car. So dividends from equities, also interest from bonds and other distributions and rent and all of those things together. Their power is in the freedom that they're giving you that autonomy. That's the whole purpose behind what we're doing as savers and investors.

[Krista Dibiaz]

Okay, let's go to some questions. Tyler in California sent this one in. Tyler's 28, and he says, I have around $70,000 in cash sitting in a standard checking account. I have no debt. I own two older reliable vehicles outright. I rent for $1,300 a month, and I bring in around.

[Wes Moss]

In California, mm.

[Krista Dibiaz]

I bring in around $5,000 a month post tax. I contribute 15% to a standard 401k and have been since I started my career in 2020. I'm also on track to max out my HSA this year. Around $20,000 would be a comfortable emergency fund. Should I invest the remaining $50,000 in ETFs like Voo, Vti, or QQQ? Should I contribute this money to a Roth IRA? I would like to purchase a home at some point in the next 10 years. So having that money tied into a Roth IRA makes me nervous.

[Wes Moss]

Tyler, don't be nervous about the Roth ira. It's the ultimate vehicle that allows you access. Now, you can only contribute so much to the Roth if you were allowed to contribute whatever you wanted. I'd say put everything into the Roth, because you can take out your contributions tax free the next day if you want. There's also that $10,000 first time home purchase rule that gives you an additional 10 beyond your contributions. So don't be worried about putting money to the Roth. Don't be nervous about that because it's the ultimate accessible account that also of course grows tax free. That's why we all love a Roth IRA or Roth 401k. So what I'm thinking for you is that you keep your 20,000 as your emergency, then you do your 7,500 bucks into a Roth this year, next year. So 7,500 over the, let's call it 7,500 over the next even five years is 37,500 and let's say another five years later. In 10 years when you want to buy a house, the whole thing's worth 70,000. The cool part about it is the whole 37,5 is accessible. And then another 10k of earnings because it's first time home purchase that's accessible. Now you're at almost 50 grand. So that's a lot of accessibility when it comes to thinking about buying a home. But you can't put all that much into the Roth right away. So you do your 7,500 there, then you take the rest 42,500, you take that and that's where you do your broad market low cost equity based ETFs. Because you're in your 20s and you're in the getting rich phase. And I think you'd be in great shape if you think of it that way.

[Krista Dibiaz]

All right. Gary in North Carolina says for the guaranteed bond part of my portfolio, my advisor is recommending an equity indexed annuity. I'm pretty sure he's getting compensated, although he's generally a fiduciary. He is recommending capping it at 7.5% to avoid fees from the company. Nothing below 0% returns, but also no returns above 7.5%. I had concerns about inflation. There are also surrender charges the first 10 years, but none after that. You are free to withdraw 10% per year without penalty. He shows on his charts that you can still make more even if you have a withdrawal versus a regular bond portfolio. For this part of my investments, he wants me to use mutual funds or index funds for the rest. What are your thoughts?

[Wes Moss]

I feel like every time we get an annuity question, it's all the sales points around the annuity. It's zero downside. It's 7.5% upside, which on the surface. Krista, doesn't that sound perfect?

[Krista Dibiaz]

Sure, they always sound great.

[Wes Moss]

That sounds so good. No downside, 7.5% upside. The reality is the way these things really end up working. And again, we don't know because I don't know the exact formula of how they're capturing part of a return of something. A lot of times they tie them to different indices. They usually use monthly caps. That's one of the ways that they end up having really low rates of return. Because remember, look, and all of these index annuities, equity index annuities, they're really just invested in bonds. That's where the money's really sitting. So the insurance company can't have a formula that could give you 8 or 9% because their bonds are just not going to do that. So they cap it and they say, well, we're going to let you have a half a percent of gain every month. If the market's up 4% in a month, the most you get is 0.5. And they do it again the next month and the next month. That's why the formulas make it so that it's nearly impossible to ever get to that 7.5%. I guess it's possible, but highly, highly, highly unlikely. It'll be somewhere between 0 and 7.5. Call it 1, maybe 2, maybe 3, I don't know. And you're locking yourself up in order to get that return. And because it is on the bond portion, it is understandable that you might want to do that for a sliver. Only catch I would say is that let's say your bond portion is $250,000. Would you be comfortable taking the 250 and putting it in one bond or would you rather have that have a high amount of diversity within 250,000 that owns an ETF that maybe owns 200 bonds? When you're buying an index annuity, you're essentially buying a bond because it's just the company that you're buying it from and their claims paying ability. Remember these are insurance contracts, not investments or insurance. Is the claims paying ability of the insurance company going to be around and financially in a good enough shape to be able to make those payments to you? That to me is the bigger hedge. Thinking about this like a bond is fine. Thinking about it as I'm going to put all of my bond money into one bond. That's where it makes me nervous.

[Krista Dibiaz]

Also I wonder what it means to say that the advisor is generally a fiduciary. I mean, aren't you a fiduciary or not or potentially this is a fiduciary advisor who has some of these companies wears two hats. There's a second company that sells insurance and when maybe in your agreement with them, when they're selling insurance they're not acting as a fiduciary.

[Wes Moss]

I think that's right. I think that's kind of how it works.

[Krista Dibiaz]

Okay, well, you could be a fiduciary

[Wes Moss]

on one side and then get commissions when you take off that hat. I think it has to be under a separate company from my understanding. Yes.

[Krista Dibiaz]

That's what I've seen.

[Wes Moss]

So I'll let you guys be the judge of that.

[Krista Dibiaz]

Okay. Well, thank you for joining us on this episode of Advisor.

[Wes Moss]

That went so quick. By the way, that last question was from Gary in Indiana. Is he really from Gary, Indiana?

[Krista Dibiaz]

Gary, Indiana.

[Narrator/Announcer]

I don't know.

[Krista Dibiaz]

I don't know. Thank you, Gary, for your question. Thanks to everyone for sending in your questions. Again, you can go to westmoss.com ask and we will see you next week.