The Clark Howard Podcast – Episode Summary Title: Ask An Advisor With Wes Moss
Release Date: July 29, 2025
Host: Clark Howard
Guest: Wes Moss, Fiduciary Financial Advisor, Team Clark

Introduction

In this episode of The Clark Howard Podcast, Clark Howard is joined by his fiduciary financial advisor, Wes Moss, to delve into the topic, "Are You Richer Than You Think?" Additionally, they explore the intriguing Net Unrealized Appreciation (NUA) rule and address several listener-submitted financial queries. The discussion provides valuable insights into personal wealth perception, retirement planning, and optimizing investment strategies.

Are You Richer Than You Think?

Timestamp: [01:04]

Clark and Wes begin by challenging listeners' perceptions of their own wealth. Wes introduces the concept of the "rich ratio," which compares monthly income to monthly needs. If your income exceeds your needs (a ratio over one), you're considered "rich" in practical terms.

Key Points:

• Rich Ratio Explained:

  • Formula: Income ÷ Needs
  • Example: If you need $5,000/month and earn $6,000/month, your rich ratio is 1.2, indicating financial comfort.

• Median Income Insights:

  • U.S. Median Household Income (2019): ~$75,000 annually.
  • California Median Income: ~$111,000 annually.
  • Georgia Median Income: ~$92,000 annually.

• Wealth and Happiness:

  • Money contributes to happiness up to a certain point, after which returns diminish.
  • Studies from UCLA and the University of Pennsylvania support this plateau effect.

• Rich Ratio in Practice:

  • Having six times your salary saved by age 50 places you ahead in the financial landscape.
  • Savings habits, investment contributions, and having a financial buffer contribute significantly to feeling "rich."

Notable Quote:

"Your rich ratio is what you have coming in every month is your income. A lot goes into that divided by what your need is." – Wes Moss [03:15]

The NUA Rule Explained

Timestamp: [20:57]

Wes Moss introduces listeners to the Net Unrealized Appreciation (NUA) rule, a lesser-known tax strategy beneficial for those holding significant company stock within their 401(k) plans.

Key Points:

• What is NUA?

  • Stands for Net Unrealized Appreciation.
  • Applies primarily to company stock held within a 401(k).

• How It Works:

  • Traditional Rollover: Taxes are paid on the entire amount at ordinary income rates upon withdrawal.
  • NUA Strategy:
    • Pay ordinary income taxes only on the cost basis of the stock.
    • Pay long-term capital gains taxes on the appreciated value when the stock is sold.

• Tax Benefits:

  • Potentially significant tax savings by leveraging lower capital gains rates versus ordinary income rates.

• Applicability:

  • Most beneficial for individuals with large positions in company stock within their retirement accounts.
  • Not widely applicable, typically relevant in specific scenarios.

Notable Quote:

"NUA is like a financial coupon lost in the junk drawer that can save you a ton in taxes." – Wes Moss [24:46]

Listener Questions

1. Kevin from Ohio: Brokerage Account Necessity

Timestamp: [08:36]

Question:
Kevin is approaching 50, has multiple retirement accounts including Traditional and Roth IRAs, 457B plans, and anticipates not receiving Social Security. He wonders if he and his wife need a brokerage account since they aren't planning to retire early.

Wes's Response:

• Flexibility & Optionality:

  • Having a brokerage account provides additional flexibility in managing tax brackets and withdrawal options during retirement.

• Current Position Advantage:

  • With robust retirement accounts, a brokerage account isn't strictly necessary but can be beneficial for added investment flexibility.

• Recommendation:

  • While not essential, opening a brokerage account could offer peace of mind and additional avenues for investment.

Notable Quote:

"It's not about the amounts coming in and going out. It's about that ratio." – Wes Moss [07:00]

2. Glenn from Texas: Target Date Funds vs. Diversified Portfolio

Timestamp: [12:53]

Question:
Glenn seeks advice on whether to stick with target date retirement funds or manually create a diversified portfolio, suggesting selecting a fund with a later retirement date to achieve higher equity exposure.

Wes's Response:

• "Target Date Hack":

  • Selecting a fund with a later target date can provide a more aggressive asset allocation.

• Customization:

  • Understanding the underlying asset allocation is crucial.
  • Regularly review and adjust based on personal risk tolerance and retirement goals.

• Pros & Cons:

  • Pros: Simplicity and automatic adjustment.
  • Cons: May not perfectly align with individual risk preferences.

Notable Quote:

"Glenn is the perfect Clark Howard listener because he just hacked the target date system." – Wes Moss [14:22]

3. Aaron from Ohio: Vanguard Mutual Funds in Different Brokerage Accounts

Timestamp: [15:05]

Question:
Aaron inquires about setting up recurring contributions to a brokerage account using Vanguard mutual funds and ETFs, and whether transferring these funds incurs extra fees with brokers like Schwab or Fidelity. He also asks about Vanguard's recently expired tax-avoidance patent.

Wes's Response:

• Tax-Efficient Investing:

  • Vanguard’s dual offerings of mutual funds and ETFs enhance tax efficiency.
  • The expired patent allows other mutual fund companies to adopt similar strategies.

• Brokerage Fees:

  • Transaction fees may apply when purchasing mutual funds through different brokers.
  • ETFs typically have lower or no transaction fees, making them a preferable choice for cost-conscious investors.

• Recommendation:

  • Consider utilizing ETFs to minimize fees and maintain flexibility.

Notable Quote:

"The lower friction option is usually the ETF." – Wes Moss [16:30]

4. Michael from Florida: Pension Plan vs. Self-Managed Investments

Timestamp: [26:17]

Question:
Michael's wife, a teacher in Florida, must choose between a pension plan and a self-managed investment plan. They wonder if the guaranteed pension benefits outweigh potentially higher returns from investing independently.

Wes's Response:

• Longevity Consideration:

  • Evaluate how long the spouse plans to remain in the teaching profession.
  • Longer tenure increases the value of a pension plan.

• Financial Stability:

  • Pension offers a stable, predictable income stream, which can complement other investments.

• Strategic Combination:

  • Balancing pension benefits with personal retirement savings can optimize overall retirement security.

Notable Quote:

"If you think that she's going to be a teacher for a long time at like, let's call it 25, 30 years, then you've got this cool financial situation where you have a pension." – Wes Moss [27:45]

5. Nathan from Louisiana: Railroad Pension and Retirement Timing

Timestamp: [28:59]

Question:
Nathan, a 35-year-old locomotive engineer, asks whether to treat his railroad retirement pension as a bond fund to focus his investments on growth-oriented ETFs. He also seeks advice on whether to retire at 60 or delay retirement to age 70 to maximize retirement income, akin to delaying Social Security.

Wes's Response:

• Pension as a Safe Asset:

  • Treat the railroad pension as a conservative, stable income source, similar to bonds.

• Investment Strategy:

  • With a stable pension, more aggressive investments in other accounts can be justified.

• Retirement Timing:

  • Unlike Social Security, delaying railroad pensions beyond the standard retirement age does not increase benefits.
  • Recommend retiring as soon as eligible if relying on the pension, without waiting for increased payouts.

• Insurance and Benefits:

  • With continued insurance coverage from the union until Medicare eligibility, health coverage gaps are mitigated.

Notable Quote:

"You've got a very stable, you're going to get something very much like Social Security once you retire." – Wes Moss [31:10]

Conclusion

Clark and Wes wrap up the episode by encouraging listeners to submit their financial questions and highlighting the importance of understanding personal financial metrics like the rich ratio and leveraging rules like NUA for optimal tax efficiency. The episode underscores the significance of personalized financial planning and informed decision-making to achieve long-term financial well-being.

Final Thoughts:

"We think that our listeners are probably better off than they might think, richer than you might think." – Wes Moss [07:00]

For more insights and personalized advice, listeners are invited to submit their questions at www.clark.com/askclark.