The Clark Howard Podcast Episode Summary
Title: Is the 60/40 Rule DEAD? and Inheriting Money The Right Way
Release Date: August 12, 2025
Host: Clark Howard
Special Guests: Wes Moss and Krista Dibias (Team Clark)

Introduction to the Episode

In this episode of The Clark Howard Podcast, Clark Howard, alongside his expert team members Wes Moss and Krista Dibias, delves into critical financial strategies and considerations for both current investors and those anticipating the complexities of inheriting wealth. The discussion primarily centers around the longevity of the traditional 60/40 investment rule and the multifaceted aspects of inheriting money responsibly.

Segment 1: Evaluating the 60/40 Investment Rule

Timestamp: [01:14] – [07:42]

Wes Moss initiates the conversation by addressing a perennial question in investment circles: "Is the 60/40 Rule DEAD?" The 60/40 rule traditionally advocates for a portfolio composed of 60% stocks and 40% bonds, aiming to balance growth potential with risk mitigation.

Key Points Discussed:

1. Definition and Purpose of the 60/40 Rule:

   • Moss explains that the 60/40 rule symbolizes a balanced portfolio where stocks represent the growth component and bonds serve as a stabilizing force against market volatility.
   • "The idea behind it is predicated on we want stock or equity exposure to be able to outpace inflation. But we also want this conservative side that does pay us income or interest from bonds that is there to offset and not go down while stocks are going down." [02:06]

2. Historical Performance and Relevance:

   • Moss references his research from his 2013 retirement book, illustrating how a 60/40 portfolio would have performed from 2013 to 2025.
   • He notes that despite a general upward trajectory in the stock market, the bond market's improved yields due to rising interest rates have bolstered the overall portfolio performance.
   • "If we're balancing stocks and bonds, anytime you're not 100% in bonds or 100% in stocks, you have a balance." [02:06]

3. Impact of Interest Rates:

   • The conversation highlights the significance of the interest rate environment, noting that bond yields had risen from below 2% in 2013 to approximately 4.25% in 2025, enhancing the attractiveness of bonds within the portfolio.
   • "The 10-year treasury back then... is now yielding around 4 and a quarter percent." [05:53]

4. Future Outlook:

   • Moss asserts his belief in the continued efficacy of balanced investing, despite evolving market conditions.
   • "I don't think the 60/40 is dead. Are there other iterations, are there other pieces to add into that overall pie? Absolutely. But I just don't think balanced investing is dead by any stretch of the matter." [07:42]

Segment 2: Listener Questions – Professional Guidance vs. Cost-Effectiveness in Investment Management

Timestamp: [07:42] – [14:32]

Krista Dibias introduces listener questions, beginning with one from an anonymous retiree couple considering the merits of continuing with a fiduciary financial advisor versus switching to a diversified mix of index funds for cost-effectiveness.

Key Points Discussed:

1. Value of Fiduciary Financial Advisors:

   • Wes Moss emphasizes the comprehensive role of financial advisors beyond mere portfolio management, including planning, estate considerations, and tax strategies.
   • "The advisor should help you with the overall planning and that cash flow and that helps you be a better investor over time." [09:13]

2. Cost Considerations:

   • The couple currently pays 0.5% annually on a $2.8 million portfolio, amounting to $14,000 per year.
   • Moss notes that this fee is relatively low compared to industry standards, which can range up to 1%.
   • "Half a percent is actually at the low end of the spectrum." [09:13]

3. Alternatives with Lower Fees:

   • Moss acknowledges services like Vanguard and Fidelity offer advisory options at competitive rates, potentially providing a more cost-effective solution without sacrificing professional guidance.
   • "Vanguard has an option and you're going to pay a certain part of a percent." [14:14]

4. Importance of Professional Expertise:

   • He underscores the benefits of having professional oversight to navigate complex financial landscapes, reduce emotional decision-making, and integrate various financial aspects seamlessly.
   • "To fly totally blind in that one giant area when you don't have the desire nor maybe the expertise to do so. That creates anxiety in its own light." [12:52]

Segment 3: Roth Conversion Ladder and Tax Strategies

Timestamp: [14:32] – [19:17]

A listener named Chris from Texas seeks guidance on implementing a Roth conversion ladder from his traditional 401(k) to optimize tax efficiency.

Key Points Discussed:

1. Mechanics of Roth Conversion Ladder:

   • Moss outlines the step-by-step process of transferring a portion of the 401(k) to an IRA and subsequently converting it to a Roth IRA, mindful of the pro-rata rule to minimize tax liabilities.
   • "You just have to make sure you're not mixing pre-tax and post-tax money in your IRA to avoid the pro-rata tax complication." [16:20]

2. Importance of Plan Flexibility:

   • The feasibility of performing in-service rollovers is contingent on the employer's 401(k) plan provisions.
   • "If your 401k plan allows for an in-service rollover while you're still working, then the answer is you could do this very likely in any given year and you would just take a portion." [17:00]

3. Tax Planning Considerations:

   • Moss advises on aligning conversion amounts with tax brackets to maintain tax efficiency, emphasizing the unpredictability of future income and tax rates.
   • "Good tax planning is getting an estimate and an idea that's pretty darn close to what it's going to be. That way you're not paralyzed making decisions." [19:03]

Segment 4: Understanding Self-Directed 401(k) Brokerage Accounts

Timestamp: [19:17] – [21:58]

Steve from Pennsylvania inquires about Fidelity's fully paid lending program and self-directed brokerage options within 401(k) plans.

Key Points Discussed:

1. Functionality of Self-Directed Brokerage Accounts:

   • Moss explains that these accounts allow investors to access a broader range of investment options beyond the standard offerings, facilitating greater customization of investment portfolios.
   • "You're getting more optionality. You get to do the ETFs or the stocks you want as opposed to just the funds of the 401k." [20:07]

2. Potential Benefits:

   • Greater investment flexibility and access to individual securities can enhance portfolio diversification and potential returns.
   • "They have a better chance of keeping you as a client for life if that's the gotcha." [20:42]

3. Considerations and Caveats:

   • While there might not be hidden fees, the primary benefit for providers is client retention and deeper integration into their financial ecosystem.
   • "The gotcha is exposure to what they could offer over time." [21:00]

Segment 5: The Great Wealth Transfer and Inheriting Money Responsibly

Timestamp: [21:58] – [35:43]

The discussion shifts to the impending massive transfer of wealth, known as the Great Wealth Transfer, and how both inheritors and those planning to leave assets should navigate this complex terrain.

Key Points Discussed:

1. Magnitude of the Wealth Transfer:

   • Moss cites a Market Watch article estimating that $84 trillion will transfer from one generation to the next over the next 20 years, with $16 trillion expected in the upcoming decade.
   • "Now, the reality check here is that 70% of people are not going to have any inheritance. And a lot of that's concentrated in the top 1%, in the top 10% of wealth in America." [22:27]

2. Implications for Inheritors:

   • Inheritors often face challenges in managing sudden wealth, leading to potential financial missteps.
   • Moss advises taking time to assess the inheritance and integrating it thoughtfully into existing financial plans.
   • "You don't have to do anything right away. With one exception... you just have to think about what this might mean for me and my family." [28:49]

3. Estate Planning Essentials:

   • Emphasis on the importance of wills, trusts, and durable power of attorney to ensure assets are distributed according to one's wishes and to streamline the transfer process.
   • "The real solution for this is to discuss it, just to talk about it. And maybe today is just a reminder to nudge mom or dad or if your mom or dad listening to talk to the kids." [33:50]

4. Challenges Among the Wealthy:

   • Surprisingly, even among the wealthy, a significant portion lacks comprehensive estate plans, underscoring the need for proactive financial planning.
   • "Among even wealthy folks... only 54% have a basic estate plan." [29:08]

5. Practical Steps for Effective Inheritance Management:

   • For receivers, Moss recommends patience and strategic planning, especially when dealing with concentrated assets like individual stocks or real estate.
   • For givers, the focus is on clear communication with beneficiaries and establishing structured plans to ensure assets are managed and distributed effectively.
   • "It doesn't have to be an expensive, overly in-depth proposition. You can find an estate planning attorney." [33:13]

Segment 6: Listener Questions on Investment Efficiency and Brokerage Programs

Timestamp: [35:43] – [43:16]

Further listener questions explore the tax efficiency of target date ETFs versus mutual funds and the intricacies of brokerage lending programs.

Key Points Discussed:

1. Target Date ETFs vs. Mutual Funds:

   • Moss explains that while ETFs generally offer better tax efficiency due to their structural advantages, the difference may not be dramatically significant in the context of target date funds.
   • "The structure of an ETF is better... but not necessarily or dramatically better." [39:39]

2. Fully Paid Lending Programs Explained:

   • Moss breaks down how brokerage firms utilize clients' securities to facilitate margin lending and short selling, sharing a portion of the revenues with clients.
   • "They're splitting the money that they're receiving from this. So they're gonna pay you just like they get paid." [40:16]
   • However, he cautions that returns from such programs are highly variable and often tied to the volatility of the underlying stocks.
   • "Stocks that are in high demand to be shorted... those rates can go up to something like 20, 30% a year." [42:44]

3. Risks Associated with Lending Programs:

   • The primary risk highlighted is the potential for holding highly volatile or risky stocks that are frequently shorted, which could negatively impact the client's portfolio.
   • "You're going to get paid 20% in a lending program to keep holding a stock. It's probably because a lot of people are shorting the stocks. You have the great risk of that stock going down." [42:52]

Segment 7: Managing Assets for Elderly Care

Timestamp: [43:16] – [48:19]

Mary from Wisconsin seeks advice on asset allocation for her elderly aunt with substantial assets and upcoming long-term care costs.

Key Points Discussed:

1. Asset Allocation Strategy:

   • Moss suggests a balanced approach, recommending a mix of equities and "dry powder" (cash or liquid assets) to hedge against inflation and provide necessary liquidity for care costs.
   • "80% bonds but a little bit 20% in equities can actually smooth out the ride over time and be an inflation hedge, at least a portion." [46:37]

2. Interest Rate Considerations:

   • He emphasizes the importance of locking in current interest rates by investing in longer-term bonds or CDs, especially given the current environment where rates are favorable.
   • "If you can get that 4% plus rate... that covers a couple of months every single year." [48:19]

3. Risk Management:

   • Moss advises against placing all assets in cash due to the risk of declining interest rates, advocating for strategic investments that provide both growth and safety.
   • "Your money market immediately goes down in yield. But the ten-year treasury is essentially locking in for four and a quarter percent." [48:19]

Conclusion

The episode effectively navigates through pivotal financial strategies, addressing both seasoned investors contemplating the relevance of traditional investment rules and individuals preparing for the significant financial transitions associated with inheriting wealth. Wes Moss and Krista Dibias provide insightful, actionable advice, grounded in current market conditions and timeless financial principles, ensuring listeners are well-equipped to make informed financial decisions.

Notable Quotes

• Wes Moss:
  "The advisor should help you with the overall planning and that cash flow and that helps you be a better investor over time." [09:13]

• Wes Moss:
  "I don't think the 60/40 is dead. Are there other iterations, are there other pieces to add into that overall pie? Absolutely. But I just don't think balanced investing is dead by any stretch of the matter." [07:42]

• Wes Moss:
  "Good tax planning is getting an estimate and an idea that's pretty darn close to what it's going to be. That way you're not paralyzed making decisions." [19:03]

• Krista Dibias:
  "We all have moments when we could have done better. Like cutting your own hair. Yikes. Or forgetting sunscreen so now you look like a tomato." [24:29]

Final Thoughts

This episode underscores the importance of balancing traditional investment strategies with modern financial tools and emphasizes proactive estate planning to navigate the impending wealth transfer effectively. Whether you're an investor questioning established norms or someone preparing for future financial legacies, the insights shared by Wes Moss and Krista Dibias offer valuable guidance tailored to diverse financial journeys.