09.09.25 Ask An Advisor With Wes Moss

Summary

The Clark Howard Podcast

Episode: 09.09.25 “Ask An Advisor With Wes Moss”
Date: September 9, 2025
Host: Clark Howard (absent), guest host Krista, featuring CFP Wes Moss

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Episode Overview

This episode of “Ask An Advisor” features personal finance expert Wes Moss and Krista from Team Clark diving deep into retirement and investing questions submitted by listeners. The topics span the disconnect between the stock market and real economy, complex rollover rules (especially for company stock in 401(k)s), early retirement strategies, estate planning pitfalls (with a fun “Davy Buffett” story), brokerage comparison, mortgage payoff dilemmas, and Roth IRA distribution strategies. The tone is educational, approachable, and at times humorous, with Wes drawing on real-life cases and hypothetical scenarios.

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Key Discussion Points & Insights

1. Why Is the Stock Market So Strong Amid Economic Uncertainty?

[01:22 – 08:01]

• Wes Moss launches into the “two economies” thesis:
  • Stock market performance vs. Main Street economy: 2025 has been a “really strong year for the S&P 500,” not just tech but also financials, industrials, and utilities are performing well.
  • Disconnection: “The stock market and its performance can very often be disjointed from what’s happening in the economy. We could have a good economy and a bad market.” (Wes Moss, 01:54)
  • Earnings drive stock prices: Despite geopolitical tensions (tariffs, China, Ukraine war, Fed-White House disputes), “earnings from this time last year are up 11, 12, 13%.” Companies are “doing more with less,” i.e., increasing profit margins via efficiency and reduced headcount.
• Labor market concerns: Continuing jobless claims have risen by 13% from early 2024 (1.7M to 1.95M), signaling a cooler Main Street economy even as corporate earnings soar.
• Key lesson: The market “has been tuning out the noise,” focusing on business profits rather than macro/global uncertainties.

2. Ask An Advisor: Listener Q&A

a. NUA (Net Unrealized Appreciation) & 401(k) Rollovers

[08:03 – 11:19]

• Connie from NY: Can I move just the company stock from my 401(k) under NUA rules?
  • Wes explains:
    • NUA allows favorable tax treatment if moving company stock out of a retirement account, but you must roll out the entire 401(k) in that calendar year—can’t pick only the stock and leave the rest.
    • “It doesn’t need to be in a managed account. That can be in your own account, that self-directed IRA that you manage.” (Wes, 10:49)
    • Watch for miscommunication—managed (fee-based) accounts aren’t a requirement here.

b. Retiring Early with Kids at Home

[11:19 – 15:24]

• Jake from NC: Wants to retire at 63, lives frugally, has ~$220K in retirement savings, kids will be 12 and 16.
  • Wes’s take: Jake is “a candidate to wait for Social [Security] and maybe work a little longer.” Drawing down retirement savings before kids are grown has risks—waiting increases security, particularly as Social Security at 70 would nearly cover his target spending.

c. Retiring Very Early & Accessing Funds

[15:24 – 18:55]

• Matt from TX (39): Wants to retire at 50-55, ~$1.5M saved, most in retirement accounts, some in brokerage & 457.
  • Wes: “Your scenario is all about early access.” He describes the Rule of 55 (must leave job at 55+), Rule 72(t) (substantially equal payments for early penalty-free IRA draws), and the advantages of the government 457 plan (withdrawal at any age). Matt’s upcoming inheritance will also provide flexibility for pre-59½ access.
  • “I like the 457. Remember, if you do have an inheritance, that'll be available without penalty...” (Wes, 17:36)

d. Estate Planning Gone Awry: High Profile Celebrity Lessons

[22:15 – 29:47]

• Prompted by stories about Davy Jones, Jimmy Buffett, Aretha Franklin.
• Wes’s parable: “Davy Buffett”—a musician with a well-prepared estate plan, but conflicts still explode between co-trustees and heirs.
  • Disputes arise over wording (primary home vs. vacation home), new-found wills (“couch cushion will”), and interpretation of intentions.
  • Key takeaways:
    • “Even if you have the most buttoned up estate plan, it doesn't mean that people can't sue and trustees can't get along.” (Wes, 27:18)
    • Why plans go wrong: Human relationships, vague wording, old draft documents, and a litigious society.
    • Prevention: Upfront communication and “being really specific” in documents. Destroy old drafts. “Most of the time…things do go pretty smoothly, but we’re going to see from time to time these high profile cases where things have totally gone awry.” (Wes, 29:26)

e. Brokerage Recommendations and Target-Date Funds

[30:00 – 34:25]

• Lisa in CA: Is E*TRADE a good platform, and how about their Trafis (investment research tool)? Are target date funds bad if they get too conservative?
  • Wes: No issue with E*TRADE as a platform; Trafis is an advanced research screener, but always remember back-tests are not future guarantees.
  • On target date funds: “They are an easy button to help people be invested and that's better than not being invested…Do they get usually too conservative? In my opinion, by the time you get to retirement…yes.” (Wes, 33:48)

f. Paying off a High-Rate Mortgage with Retirement Funds

[34:25 – 38:18]

• Chris in MO: 25-year Navy vet, has $2M in retirement accounts, low liquidity, considering using Roth contributions to pay off a 6.25% mortgage.
  • Wes: “Having a mortgage is not some morally wrong thing…It’s a financial tool.” Don't “raid” retirement to pay off the house unless it’s a modest, manageable acceleration using Roth contributions. “One of the ingredients to being a happy retiree is having your mortgage pay off within sight. It's not necessarily paid off, it's paid off within sight, meaning within the next nine years.” (Wes, 36:34)

g. Early Withdrawals from Roth Accounts: Rule of 55 and 72(t)

[38:23 – 40:41]

• Tracy in FL: Can Rule of 55 and 72(t) be used for Roth 401(k) and Roth IRA withdrawals?
  • Wes: “Rule of 55 does work for the 401 and the Roth 401. …The Rule of 72T will work for traditional retirement accounts IRAs, but [doesn’t] apply…to a Roth IRA.” (Wes, 39:19)
  • Roth 401(k): Use Rule of 55 at separation after 55. Roth IRA: Must meet age 59½ and 5-year rule for full tax-free access.

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Notable Quotes & Memorable Moments

• "The stock market and its performance can very often be disjointed from what’s happening in the economy…what drives stocks is earnings." — Wes Moss [01:54]
• "They're doing things more efficiently, which is code for they're doing it with less people." — Wes Moss [06:35]
• "You can model the kind of companies that you're looking for [with Trafis]...but it does empower you to invest in the kind of companies or the kind of metrics you feel comfortable with." — Wes Moss [32:26]
• “Estate planning, I would say, is as much about the people as it is the paperwork…humans can make this messy really easily.” — Wes Moss [28:53]
• “One of the ingredients to being a happy retiree is having your mortgage pay off within sight. It's not necessarily paid off, it's paid off within sight, meaning within the next nine years.” — Wes Moss [36:34]
• “Rule of 55 does work for the 401 and the Roth 401…The Rule of 72T will work for traditional retirement accounts IRAs, but they don't apply…to a Roth IRA.” — Wes Moss [39:19]

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Timestamps for Key Segments

• 01:22 – Stock market vs. Main Street economy
• 08:03 – Company stock in 401(k)s, NUA rules
• 11:19 – “Super saver” retiring at 63 with young kids
• 15:24 – Early retirement and penalty-free access strategies
• 22:15 – Estate planning: celebrity disasters & Davy Buffett
• 30:00 – Evaluating E*TRADE, Trafis, and target date funds
• 34:25 – Should you use Roth contributions to pay off a house?
• 38:23 – Rule of 55 & 72(t) for Roth accounts
• 40:41 – Episode wrap-up

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Takeaways

• The market can disconnect from the economy—investors should focus on company fundamentals, not just economic headlines.
• Tax and access rules around retirement accounts (NUA, Rule 55, 72(t)) are complex but can be leveraged for greater flexibility—expert guidance pays off.
• Estate planning must balance good legal documents with clear family communication. Human factors are often the source of problems, not faulty paperwork.
• Mortgage payoff decisions should balance financial math (“tax tsunami,” compounding returns) with peace of mind—there’s no moral imperative, but a plan helps.
• Use the right tools for your investing style and stay informed about the changing rules—“easy buttons” like target date funds are useful but not perfect.

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For more listener questions or to submit your own, visit clark.com/ask. Clark Howard returns in the next episode.

Transcript

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[Krista]

Welcome to Ask an Advisor, where we here at Team Clark go deeper on all things investing, helping you save your money so you can retire early if you want and retire happy, which is.

[Wes Moss]

That's my primary goal specialty.

[Krista]

Yes. I love that. I think about it a lot now, so. And today, Wes, you are going to talk about a couple of things. One is there's so much going on in the news all the time. So why is the stock market doing so well about. Right. And then also estate planning and how that can go very wrong.

[Wes Moss]

Awry. It can go awry big time.

[Krista]

Yeah.

[Wes Moss]

Even if you have a great plan in place. And this was prompted by a listener who emailed in and said, hey, how could there be such a mess with all these celebrity states if they're so buttoned up? So we'll talk about that.

[Krista]

It can get so ugly. Yeah. So we all should be doing our state plan, even if it's a very simple, you know, nothing going on right now in your life and you're young. I think it's so important to always think about it. Clark always says that because none of.

[Wes Moss]

Us want to think about death 1000% not. So let's start with the economy as opposed to thinking about death. I was writing about this earlier in the week with the thought that there's really two economies and there's one stock market. Again, if you watch financial television like I do 24 7, you're always hearing different opinions about things are good or things are bad or the market should not do so well. The market has more room to run. And 2025 has been a really not an extraordinarily strong year for stocks, but pretty good. It's been a really strong year for the S&P 500. And we've also seen some broadening out beyond just the S&P 500, which is we know is very tech heavy. We've seen strong performance from financial companies, industrial companies, utility companies. So there's been some real broadening out. But the question is, what's happening in the real economy and the Main street economy? And I would just start this by saying that the stock market and its performance can very often be disjointed from what's happening in the economy. We could have a good economy and a bad market. And I think what we're seeing today is a really good market. And in just an okay economy, I'm not going to say the economy's bad, but we're in an interesting position. What's really driving and what always drives stocks is earnings. That's the first principle of all equity investing. If earnings rise in any given year, it's pretty hard for the stock market level not to follow. To some extent, earnings expectations early this year were somewhat muted in the single digit range. But what we've seen so far in 2025, and remember this is despite all of the geopolitical events we're seeing, we've had this massive back and forth about tariffs starting in March and April and that's still not resolved. That's a lot of noise around that. We've had this great back and forth because of the tariffs with big trading partners like China. We've had meetings with Russia, we're dealing still with the Ukraine war. We've got fighting between the White House and the Federal Reserve. So if you were to look around, there are lots of flies swirling all the time and they're noisy. I would say there's lots of noise and the noise is noisy. But the stock market has done well. And the question is why? Well, instead of having earnings up single digits, earnings from this time last year are up 11, 12, 13%, which is really, really strong. And that's from the corporate side of the ledger. So think companies and how they do versus the everyday American trying to get a raise or keep a job. And those don't always, and those are a little bit divergent right now. So we've seen second quarter earnings come in now that we're in the third quarter of the year, and again, really strong numbers, up 11, 12% in aggregate. We've seen companies like, and again, these are not buy, sell, hold recommendations, but we've seen companies like mine, Monster Beverage as an example, doing more with less. We've seen big logistics companies do more with less. And what does that mean? Well, it means that yes, we've seen revenue numbers go up, but we've seen profit numbers go up even more. And what does that entail? It entails companies hiring less and it entails companies maybe either laying some people off because now they're implementing technology that makes them more productive and they're doing it. One of the phrases I read this week is human light. They're just doing more with less people. And when you have less people, you're paying out less, so your profit margins are higher. And there's been a lot of increases in margin this year, which means companies are doing things more efficiently, which is code for they're doing it with less people. So companies are doing really well in aggregate, up 1112 percent in earnings. That's really good. But a lot of that is them squeezing more out of their business and doing it in a more cost effective way. Now take a look at continuing claims or jobless claims. I looked at both this week and if you look at continuing claims, I'll put my glasses on here. And I went to the Federal Reserve economic database and looked at continuing claims. These are people that have filed for unemployment, they're collecting insurance and they're looking for a job and they can't find a job. So this is not a bright spot in the economy. And if you go back to the beginning of 2024, we had about 1.7 million people that were unemployed looking for work. Now that was a little over a year and a half ago. Today we have 1.95 million. That's a 13% increase in the amount of people that are out there looking for work. So that's not a great economic number. So there is this thought of, well, how can companies be doing well? And the stock market's doing well, but the real economy is a little cooler than we'd like it now. The unemployment rate is still low, but we've seen a real slowdown in hiring. And we've seen more and more companies talk about, hey, we had really good profits, our earnings are good. That's that what, that's what matters is stock prices most of the time. But we're doing it with less people. So that's not so good for all of us as Americans. So I think it's today is just I want to, there's a reminder that the stock market is one thing and the economy is somewhat separate now. Over time you've got to have a good, gotta have a strong economy to eventually have good earnings and eventually power stocks higher. But they don't always have to move in perfect lockstep. And we're seeing that this Year. Really good stock market. I would say just an okay economy. And that's just the reality. I think as investors we have to accept and note that as an investor, what the market has been doing is tuning out the noise. The market has essentially said, well yeah, there's all these issues, tariffs and geopolitics and fighting with the Fed and where are interest rates going? And the market said, well, yeah, those are all not great things, but we're really focused in on what matters. Company earnings. And those have been really good.

[Krista]

Great. Are you ready for some questions?

[Wes Moss]

Throw them at me.

[Krista]

This one came in from Connie in New York. My question for Wes is about when you have company stock in a 401k. My Fidelity Financial advisor told me I need to roll over all of my 401k to a managed account to utilize the NUA. My company stock is only about 10% of that account, but has a significant value. Can I just move the stock portion of the 401k out as an NUA? Perhaps that is Fidelity's way of building managed accounts.

[Wes Moss]

Connie. Yes and no.

[Krista]

So what is an nua? Just to make sure.

[Wes Moss]

Now we covered this. I don't remember what we. It's been a while. Nua, as a quick reminder, is the rule of net unrealized appreciation. And it only applies to folks that have their own company Stock in a 401k. The NUA rule essentially says you have to run the calculation on this, but you can choose to take your stock and take it out of a retirement account and put it in a brokerage account so it's out. You end up paying ordinary income rates on the stock's basis. So imagine if you have $100,000 in a stock but your basis is only 5,000, right? That's a situation where NUA might really make some sense. You pay your ordinary income taxes on that basis of 5k and then basis.

[Krista]

Is what it was when you originally were given that stock or what your.

[Wes Moss]

Car basis is over the years, which can evolve. And then you only pay taxes at the long term capital gain rate when you choose to sell that stock. And for most people the long term capital gain rate is much more favorable than your ordinary tax bracket. So it could be. I was looking at a family situation where a family had 125, 130,000 in overall income. Some of it was from long term capital gain. They were able to stay in the 0% long term capital gain bracket. So imagine it's really a tax arbitrage between your long term capital gain rate Remember Those brackets are 0, 15 and then 20%. Not many people are in that really high long term capital gain bracket. Most people are in the 15% and even 0% long term capital gain bracket. So that's how Nua could work. Now Connie, the rule is your advisor is correct. You can't just take out the stock portion in the year you do nua, you do need to roll the whole 401k amount out. Now it doesn't need to be at the same time. For example, you could roll out the stock in March but by the end of the year the rest of the account has to go in that the non stock portion would be rolling into an IRA so that you avoid paying taxes on it. You would be looking at a direct rollover potentially there. But what they're saying it doesn't need to be in a managed account. That's the nuanced word that can be in your own account. That self directed IRA that you manage. It doesn't have to go into a particular managed account. So maybe some miscommunication with the advisor there, but they're right in saying in the year you do nua, the whole retirement account from work does need to be, does need to go somewhere all in by the end of that calendar year.

[Krista]

Okay, we're going to go to Jake's question. Jake's from North Carolina. I'm currently 59 and a half and I want to retire at 63. I have no debt. I currently I make 65k a year. We have 115k in an old target retirement IRA. No contributions happening at Schwab. 62k at my current employer in a target retirement 401k and then another account with a Vanguard fund with a brokerage with a 9.5% contribution of income. 3.5% of that is the company match. I have 10,000 in a Roth IRA at Vanguard. I'm only contributing $50 a month. I have 25k in a brokerage account with two stocks in it and 22k in a 3 1/2% online savings account. My goal is to pay my house off in two years then purchase a car and work the last year to pay it off. My currently vehicle has 300,000 miles. Wow. Clark would be very proud of that.

[Wes Moss]

We're all proud of that. What kind of car is that?

[Krista]

I know I am a single co parent of two boys that will be 12 and 16 when I retire. Their mom and I expect them to work and pay for college and transportation and we will help as needed. My Question is, at retirement, should I start drawing from my retirement accounts until they're depleted or almost depleted? Then take Social Security. If I start drawing Social Security along with my retirement savings, would that work? I live a very frugal life and should be able to easily live on about 3k a month after taxes during retirement. Social Security will be around 2,300 at 67. Full retirement age 2900 at 70 or 1800 if I take it at 63. I've tried to use online calculators and if nothing happens, my retirement funds should last about seven or eight years if I start drawing from them at 63. Any advice would be greatly appreciated. That was Jake.

[Wes Moss]

Jake. Yes, I do. I was scribbling down notes.

[Krista]

You're a note taker to try to.

[Wes Moss]

Keep up with these dollar figures. And I'm getting to about 200, $220,000 for Jake. Here are the most important numbers that he discussed. 59 and a half, 63, 12, 16, 63, 67, 70. There's just those.

[Krista]

A lot of numbers.

[Wes Moss]

It was just those. And what I'm seeing here is that Jake wants to be a really early retiree, and I love that he's 59 and a half, wants to retire at 63. So that's three years, three, three and a half years from now. What is maybe most important about this question, Jake, is the age of your kids. They're going to be in three years, 12 and 16. So they're really little now. They're what, nine and 13. They're super young. And you are eyeing retirement at 63. But your, your age 63amount for Social Security is only 1800 bucks. And if you wait till 70, it's 20, $2900, which makes sense. So I'm just looking at this. I'm saying you've got a quarter of a million dollars in assets, approximately. And yes, you could probably bridge and utilize that until you wait for Social Security. But I just think you're a candidate to wait for Social and maybe work a little longer. This whole scenario. Yes. It sounds like you're super frugal. Three grand a month, I mean, that's super low in spending. But if it were me, I would be thinking, my kids, these kids are not even going to be out of the house when I'm 63. 12 and 16 when you're 63. So, Jake, my advice, maybe it's obvious, is to be working a little bit longer so that you're not having to tap that $250,000 in savings just yet. And in the meantime, the cool part about you waiting for social is it gets to the point where it almost will cover all of your expenses for the rest of your life. And I know you don't want to work longer than that. And I usually advocate retire sooner but I think you're a candidate to work a little bit longer and wait for social. That's my take, Jake.

[Krista]

Matt in Texas says I am 39 aiming to retire between 50 and 55. I'm married. My wife is 33 with a 2 year old and another child due in October. We have 850k at Vanguard, 345k in a rollover Iraq, 170k. This is part of the Vanguard thing. 345k in a rollover IRA, 170k in a Roth IRA, 110k in a 401k and 105 in a K in a taxable brokerage. My wife has $70,000 in her 403, we have 51,000 in emergency fund and we have 20,529 plans. We will live well below our means. We live well below our means. My grandfather who's 93 retired at 50 and now has $4 million. My parents 73 and 71, their net worth is $7 million. My question is, is too much of my portfolio tied up in retirement accounts limiting access before 55? Should we prioritize funding a457? If my wife decides to leave, we'll have access to those funds and or continue investing in our taxable brokerage with excess funds. I, I would inherit 500k when my grandfather passes. I'm totally not taking into account any of my parents inheritance as it's hopefully two decades plus away.

[Wes Moss]

So Matt, if I'm keeping track of these numbers, roughly you're at about a million and a half dollars saved. At least that's just you. Then the another 170 of the 403B. This question, Matt, is about early access. You're young, you're young, your wife's young, in your late 30s and you're eyeing a super early retirement 50 to 55. So I would be thinking about when you can get access to money without penalty. This is all about that and there are a lot of different ways to do it. The rule of 55, think about that in your 401. But again in order to qualify for that you have to leave service of that job at 55 or later. So that may not work. If you want to do this at age 50. The rule of 72T in your retirement accounts, you can always. Those are substantially equal payments that you can turn on early, but they've got to go all the way until you're 59 and a half or five years, whichever is longer. So 72T could work for you here. The other thing that could work is the 457. If it's a 457 government plan for your wife that has a special provision where you can access that at a really young, at any age. If It's a government 457. So I like that idea. That gives you early access to money. Otherwise. The other thing that Matt, you're saying is that $500,000, I mean, your grandparents are in their 90s, so it's not out of the realm of that 500. At some point in the next 10, 15 years, you would have some inheritance as well. And remember, that would be tax free money and you'd be able to access that in a really favorable tax rate and scenario. So I think you have enough different assets to be able to do that. I like the 457. Remember, if you do have an inheritance that'll be available without penalty to get to for the most part. And then you can always use the rule of 72T on some of these IRAs if you go way before the age 55. But your scenario is all about early access. And I think we just talked through a couple of the main ways to do that.

[Krista]

Okay. And straight ahead, we're going to be back very shortly and you're going to talk about estate planning.

[Wes Moss]

Estate planning. It's not Jimmy Buffett, it's about Davy Buffett. Straight ahead.

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[Krista]

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[Wes Moss]

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[Wes Moss]

CMnobile.com welcome back to Ask An Advisor. Wes Moss along with Krista DBAs here to continue to ask listener questions which I've been loving lately. And we want to start with we're talking estate planning going awry. Yes, deep planning gone awry. This came from A listener who I think just referenced Davy Jones from the Monkeys. Hey, hey, we're the Monkeys. And one of our producers here, young enough to just say, what? Who are the Monkeys?

[Krista]

I know, gosh.

[Wes Moss]

And, and I said, Chris and I were sitting here singing hey, hey, we're the Monkeys. And she still said, no, don't, don't. I said, they're the mini. They were the mini Beatles. Is that a good way to say it?

[Krista]

Sure.

[Wes Moss]

They're kind of like the Beatles, but like 90% less than the Beatles.

[Krista]

They have one or two good songs.

[Wes Moss]

Anyway, there was been articles about Davy Jones, one of the Monkeys that had an estate, and there was a big estate planning fight. There's another article about how Jimmy Buffett, who obviously had a giant estate, had a big estate fight even though he had a bunch of estate planning done. And the question was a smart one, which is, hey, if you're doing all this estate planning and you're buttoning everything up, why are there still all these issues?

[Krista]

Sure.

[Wes Moss]

So I thought let's talk about estate plans gone awry. So instead of talking specifically about Davy Jones and Jimmy Buffett, I just made up a character named Davy Buffett. So think of him as a musician with lots of money. And act one of this story is essentially that he's really good at estate planning, really conscious. So he did a revocable trust, living trust, named his wife and his business partner as the co trustee. So he thought long term wife, best friend, business manager. So they're the trustees. He did a will, everything poured over into the trust, the personal property, and they even labeled that who gets the guitars, who gets the boat, who gets the vacation house. There was even a no contest clause in his will, which is if you contest this, then you're going to be left out of the inheritance, or at least in some regards, and then updated it. He was, he was good about updating. That's probably one of the hardest things to do is once you do a, an estate plan, people just don't want to revisit it. It's like I already did the estate plan, I don't really want to go back and do it again. So he even did that. So everything's buttoned up. Sounds great. But then the dispute begins because Davey Buffett passes away. Now all of a sudden everything's ready to get settled and now he has co trustees really trusted both of them, but they have totally different opinions on everything. So the wife wants things to get moved really quickly. The trustee, business manager wants things to be drawn out There's a fight over where royalty payments go. The conflict number two, what's the vacation home? He had a place in. Let's call it Nashville, in a place in Florida, and let's call it a place in the Keys, a cottage. Well, the wife said, well, his vacation home goes to. To me. Well, the girl said, well, that's not his vacation home. That was his primary home. He was mostly down here, and that's our vacation home. So there can be dispute over how we label things. And imagine how easy that dispute would be. The other thing is that things change over time. Maybe primary home was in Palm beach and he wasn't in the Keys a lot, but over the years, it kind of flip flopped, and now there's a dispute. Which one was really the primary? Which one was really the vacation home? Well, that's my home. So next thing you know, that's a conflict, and then that goes to court.

[Krista]

Then.

[Wes Moss]

And this is not unreasonable because this has happened. I think there was a case with maybe Aretha Franklin where this happened. There was another will that wasn't discovered until after things were already getting, oh, gosh, there was a couch. A couch cushion will.

[Krista]

Oh, no.

[Wes Moss]

And it said, no, I'm gonna leave this one particular condo in Nashville to my son. Well, wait a minute. The main will didn't say that. What was the date on that? When did he sign it? Was he in his mind?

[Krista]

Oh, exactly. The being in your right mind thing. People contest that a lot.

[Wes Moss]

Davy Buffett in his right mind. So you got everything planned out, but now there's this human toll with court battles, hundreds of thousands of dollars spent on lawyers. You've got family relationships that get fractured and people start arguing over all this. Even if you have the most buttoned up estate plan, it doesn't mean that people can't sue and trustees can't get along. Maybe don't get along and heirs say, wait, that's not fair. So you get this in this particular hypothetical musician story. You've got Koch trustees clashing. You've got some vague wording. Vacation home ended up being vague stray older documents that created confusion. And then probably the main thing that I've seen in practice over all these years, and I'm not an estate planning attorney, so this is this. Wills and trusts are for an estate planning lawyer to draw up, not a cfp, is that humans or heirs can always sue. That's really what this boils down to. So if somebody feels as though this is unfair for any reason, courts usually listen. Courts usually say, okay, well, maybe it was unfair. And then once you get into court, it just becomes really expensive and it gets very long and drawn out and things get delayed. Now we're in court. Well, we can't distribute the assets because we haven't decided on this. And now Lawyer fees are $50,000, $100,000, and nobody's distributing the money because it's still tied up. And this person over here, the son, has a pretty good case that the condo's his, and the girls have a pretty good case that that was the primary home and not the vacation home. So humans can make this messy really easily. And that's why you'll see these stories and you think, well, this guy was a half a billionaire or a billionaire, and he had great estate planning attorneys and he still had trouble. And that's because humans are complicated. Estate planning, I would say, is as much about the people as it is the paperwork. And that's just the reality of the world we live in. We live in a society that can be super litigious. Like it or not, that's part of the legal system we live in. And it can be super frustrating and it can derail even the most buttoned up plan. So how to avoid it? I don't know if there's any way to perfectly avoid any conflict in the future after you pass, but upfront communication before you pass. Nobody really likes to talk about these estate documents, but if you do, it really does clear the air. 1, 2. Be really specific so that there's not terminology disruption once people are reading the will and make sure there's no drafts, old drafts, signed, unsigned, laying around, that's going to create absolute havoc so you can get it really buttoned up. And most of the time, actually, in real life, things do go pretty smoothly. But we're going to see from time to time these high profile cases where things have totally gone awry.

[Krista]

Yeah, I was gonna say, like, I can imagine if it's really complicated, like almost doing like a videotape of a meeting with whoever you're leaving stuff to and explaining to them who's gonna get what, and just.

[Wes Moss]

That sounds like the beginning of a murder mystery.

[Krista]

I mean, and I think it makes.

[Wes Moss]

It even more complicated. Did somebody doctor the video? And I. Krista, I don't know. Now I'm even more confused.

[Krista]

Yeah, the communication is huge, though. I think if somebody feels blindsided, they're more likely to get even more emotional at a very emotional time. Anyway. All right, we'll go to questions. Lisa in California says, how do you like E Trade accounts. It seems to have great investment options, high yield savings and checking. Is this, I don't know if I'm saying this right. Tre Fis Trafis investment research tool. A good one. How do you like the high quality portfolio which outperforms the S&P 500? My advisor said Target retirement funds are not good since they become conservative based on retirement age even when the market's down. How does Wes feel about this?

[Wes Moss]

Hey Lisa, here's my thought on. I don't know how to pronounce it either is Trafis or I think it's Trafis. And first of all, E Trade, I don't use E Trade. E Trade was one of the giant discount brokerage firms like Charles Schwab or Ameritrade and now there's been a ton of consolidation in the industry and now they're owned by a really giant Wall street type firm, Morgan Stanley. So I don't really know exactly how well that's been integrated. It's been a couple of years. But let's just assume it's still a low cost, self directed option for you, which I don't see as a huge, there's really not a huge difference between what they do and the cost of being able to access the investments you want versus a Schwab or Fidelity. So I think. I don't know that there's any inherent disadvantage for being at E Trade. I just don't use it. I've used Schwab, Fidelity Vanguard for most of my life, so that's where I'm most comfortable. But again, I'm not saying there's anything wrong with etrade. The other thought is that that platform, which I've seen this and read about a little bit in the past, but it's a very interesting research tool. It's not the kind of, it's not a replacement for a portfolio manager. It doesn't say buy these 10 stocks. What it does try to do is allow you to do your own research and modeling and say, well, I want to find companies that have this amount of free cash flow and this net debt to EBITDA and this sort of earnings growth or dividend growth. So you can model the kind of companies that you're looking for and it acts as a screener to help you find that. You can also model out what earnings might do in the future, I believe for different companies and really do your own research. It's a tool for you to identify the companies that you feel comfortable investing in. It doesn't Surprise me that they have baskets that are pre screened. Maybe I don't know of this one, but the solid balance sheet healthy company scenario where they're saying here are the metrics we're using and these are the companies and they did a back test. Remember, it's a back test in the past about what companies have done well. So there is no perfect crystal ball here. It's, it's actually really easy to come up with a portfolio. If you're back to. It's super easy. You just pick a couple of the best performing stocks and they're included and you look at what those metrics are, next thing you know, you've got this wonderful portfolio that's crushed. The S&P 500 question is always what is going to happen, Lisa, moving forward? And there is no perfect crystal ball. AI can't do that for you. A research tool can't do that for you. But it does empower you to invest in the kind of companies or the kind of metrics you feel comfortable with. So I see no issue using it, particularly if you like being active in your investing. And as far as the Target Date portfolio, I'm not totally against target date funds because I think they are an easy button to help people be invested and that's better than not being invested. Do they get usually too conservative? In my opinion, by the time you get to retirement they get even more conservative and they end up 70, 80% in bonds, which I think that is not necessarily the right call for, for a lot of retirees, yes, I think they do. But there are of plenty, plenty of years when a target date fund has a nice balance of risk assets and safety assets. So they can be good. But just like any other fund, you need to understand what's under the hood. What's in that Target Date fund? What's the allocation? Okay, I understand it. I'm comfortable with it for the next couple of years, but it may not be forever.

[Krista]

Okay. Chris in Missouri says I'm a retired 25 plus year Navy veteran. Thank you for your service and currently work in the tech industry in Kansas City. And I have a guaranteed military pension. My wife and I have been diligent savers for our entire working lives but lost focus and got our buckets of money out of whack. And that we have nearly $2 million in retirement but underfunded our brokerage and liquid savings dry powder resulting in us having to take out a mortgage for our home and we're stuck paying six and a quarter percent interest. It's Crushing to me to be wasting so much money per year in interest that we will never get back. We purchased for 625,000, put 100,000 down in August of 2024. We currently owe 520,000. We can afford the payments, but with so much money in Roth IRAs, Roth TSP. Should we withdraw our contributions, avoiding the penalties to pay down our home faster? Should I pay it off today, do it in chunks or take another approach? I don't want to be normal. I want to be extraordinary. I love that.

[Wes Moss]

Chris, I think you're already extraordinary.

[Krista]

Yes.

[Wes Moss]

25 years in the Navy, extraordinary.

[Krista]

Wow.

[Wes Moss]

$2 million saved in IRAs.

[Krista]

Oh my gosh, that's unbelievable.

[Wes Moss]

Extraordinary. $520,000 on a mortgage. Yeah. Your rate's higher than you'd like it to be at six and a quarter, but it's also not. So having a mortgage is not some morally wrong thing. I mean, it's a financial tool to spread out payments to avoid a tax tsunami of pulling a whole bunch of money out of retirement accounts. Now, in your case, you have lots of Roth money, so as long as you've got five years and you're 59 and a half, you could take out some contributions, it sounds like to me, and pay this off early or sooner. But now you're taking half a million dollars out of your savings in order to pay off a mortgage early. And I just think about the loss of compounding for that and I don't know, and it just feels a little bit forced in order to do that. One of the ingredients to being a happy retiree is having your mortgage pay off within sight. It's not necessarily paid off, it's paid off within sight, meaning within the next nine years, which is a long window. Now it sounds like yours may be a little longer than that, but I would be looking to, if you're going to use your contributions and you can pull them out without worrying about the five year rule or the 59 and a half rule, which you should be able to do, it sounds like then you may just accelerate your payments. And we know that if you're accelerating your payments, maybe an extra $20,000 a year, $25,000 a year, maybe that cuts down the mortgage significantly, but who knows? Are you really going to be in this house forever? If you are, and this is your forever home, then I would be thinking about maybe paying it down a little extra every year. But again, this is just my opinion on it. I don't know if I'd be rating my retirement accounts certainly not regular 401 IRA money pre 59 and a half. That's a tax tsunami you just don't want to deal with. That makes the 6.25% mortgage look like a friendly walk in the park. But even if you do have mostly Roth money and you can pull out your contributions, you're also taking away from your retirement compounding. And remember, your house should slowly appreciate as well. So it's not the worst asset in the world either. Probably. I don't know your exact town where you are in Kansas, but I wouldn't look at having a mortgage as a moral failure. I would look at it as a tool that you can accelerate by accelerating the payments a little bit. But I'm not in the camp of you just taking all the money out and paying it off right away.

[Krista]

Okay.

[Wes Moss]

You are extraordinary, Chris. That's a pretty awesome situation to be for sure.

[Krista]

Tracy in Florida says thank you for going over the ways to access your retirement funds before 59 and a half. I have a question about both Rule 55 and 72T. Can either or both of these be utilized for accessing Roth funds? A Roth 401k for the rule of 55 and a Roth IRA for 72t. We are retiring in the year we both turn 55 and are wondering if we'll be able to access our Roth 401k funds from the employer we're leaving this year or just our traditional 401k funds without penalty. In addition, if we wanted to use 72t to access our IRA funds, can we do that from our Roth 401k or just our traditional? Thanks for all the wisdom you provide. I'm glad you've been added to the show. I've read your books and can't wait for any future ones you may be working on. Oh, and you are working on it?

[Wes Moss]

I am. The retire sooner method. Tracy, I think the simple answer here is The Rule of 55 does work for the 401 and the Roth 401. So you're good there. The Rule of 72T will work for traditional retirement accounts IRAs, but they don't apply. At least my understanding is they don't apply to a Roth IRA. You can't use a 72T early distribution. The rule on taking money out of that Roth 401 or Roth money is having it for at least five years and being 59 and a half to be able to access both the contributions and the growth. So I think you're pretty close to this also remember. So think of the retirement accounts at work. That rule of 55 is a really powerful rule and you can use it for regular 401 and Roth 401k money. And if you still haven't left work, which I don't think she has yet, and you're going to make it to age 55 at that employer, consider being able to roll funds into the 401 so you have more money in that to access it with the rule of 55. So just remember that as a possibility. Look, there's always a lot to think through with these decisions, and I'm only getting a snippet of your full situation, but those are some of the things I would consider from what you're asking.

[Krista]

Great. Well, that does it for us. Today in this edition of Ask An Advisor.

[Wes Moss]

No easy questions Today, no easy questions.

[Krista]

If you do have a question, you can go to clark.com ask and you can indicate whether your question is for Clark or Wes. Clark will be back tomorrow. Hope the rest of your day is fantastic and thank you so much. Please share this episode with a friend if you think they would enjoy it. We appreciate everyone who subscribes and likes our videos and our audio podcasts. Thank you so much.

[Wes Moss]

Wes. Thank you. Krista.

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