09.30.25 Ask An Advisor With Wes Moss

Summary

The Clark Howard Podcast

Episode: 09.30.25 – Ask An Advisor With Wes Moss

Release Date: September 30, 2025

Host: Wes Moss (Guest Advisor), Krista DiBias

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Episode Overview

This episode of “Ask An Advisor” features certified financial planner Wes Moss, with Krista DiBias as co-host. The focus is on both the emotional and practical aspects of personal finance. The episode begins with a cautionary tale about the importance of clear financial communication within couples, especially in the face of unexpected loss. Wes also introduces a new, somewhat controversial “rule of thumb” on spending for financially comfortable listeners. The hosts answer listener questions about financial planning, retirement accounts, investment vehicles for minors, and emerging strategies for maximizing income and minimizing taxes. Throughout, the tone is empathetic and practical, with plenty of real-world examples.

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Key Discussion Points & Insights

1. The Importance of Financial Conversations with Loved Ones

Segment: [02:06]–[11:10]

• Wes shares an urgent story about helping a friend’s mother who was suddenly widowed and overwhelmed by financial uncertainty.
  • She discovered she’d lost her husband’s Social Security income and was unsure about pensions, mortgage balance, and available assets.
  • The lack of prior financial conversation created weeks of anxiety and confusion.
  • Wes guided her through considering retirement account withdrawals as an income stream, illustrating the profound relief a simple conversation can provide.
• Insight: Couples should have a clear, periodic “big picture” talk about where their money is, what comes in, what would happen if one partner passed away, and where to access account information and passwords.
  • “A 30-minute conversation can make that really difficult time a little less difficult.” — Wes Moss [09:25]
• Krista recommends creating a shared Google Doc or binder with essential documents and updates, emphasizing organization and safety.

2. Listener Questions — Expert Responses

a. Retirement Account Protection & Investment Choices

Segment: [11:10]–[13:35]

• Kim from Massachusetts asks about TSP (Thrift Savings Plan) protections past RMDs (Required Minimum Distributions) and post-retirement options.
  • Wes clarifies that RMDs don’t remove creditor protection from the bulk of TSP; only withdrawn cash loses that shield.
  • He confirms plenty of post-retirement life cycle or target-date mutual fund options exist, but points out protection is based on the type of account, not the type of fund.

b. UTMA vs. Other Investment Accounts for Minors

Segment: [13:35]–[16:19]

• Jason from Michigan asks if a UTMA is the best place for kids’ money.
  • Pros: Good vehicle, allows investment, low limitation unless gifting above $19K/year.
  • Watch-outs: At 21 (MI), kids get full control; could impact college financial aid (FAFSA); income above a threshold is taxed at parents’ (kiddie tax) rate; irrevocable.
  • UGMA and UTMA are nearly the same, differences are mainly state-based. Other options: 529s, brokerage in parent’s name, or Roth IRA if child has earned income.

c. Do I Need a Financial Advisor?

Segment: [16:19]–[20:40]

• Maria from Delaware, a diligent single saver with $1.2M, pension, paid house, and no debt, asks whether she’s missing out by not having an advisor.
  • Wes calls this “the best FOMO ever” and discusses why people tend to seek advisory help as their finances get more complicated with age.
  • Not everyone “needs” an advisor, but it can offer peace of mind, especially for those with substantial assets or complex situations. He encourages trying out advisory services like Vanguard’s Personal Advisor Select if curious, noting there’s “very little downside.”
  • “The person that’s the financial advisor is supposed to really dampen and take away a lot of that anxiety.” – Wes Moss [18:28]

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New Rule of Thumb: The 0.01% Rule

Segment: [23:35]–[28:45]

• Wes introduces Nick Maggiulli’s “0.01% Rule” for spending, inspired by a Jay Z quote (“What’s $50,000 to someone like me?”).
  • Formula: Take 0.01% of your net worth. Purchases under this threshold should be considered “not worth sweating over.”
    • Example:
      • $500K net worth → $50 threshold
      • $1M net worth → $100
      • $10M net worth → $1,000
  • The number represents your daily expected growth (assuming a 4% annualized return divided by 365), and the rule is an antidote for over-scrutinizing small purchases, especially for frugal “Clark Smart” listeners now in a comfortable financial position.
  • Context: “Are you really going to spend three hours trying to get a refund that is $150 and it’s going to take you three hours?” – Wes Moss [28:27]
• Krista jokes many listeners might still agonize over every dollar, but the principle is to value your time and mental energy once basics are secure.

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More Listener Questions (With Notable Insights)

Adjusting the 4% Retirement Withdrawal Rule if Your Home is Paid Off

Segment: [28:45]–[31:25]

• Amy from Arkansas wonders about increasing her withdrawal rate to 5% as her house is paid off.
  • Wes says having a paid-off home gives more flexibility; historically, a 5% rate still works 84% of the time over 30 years (with a 70/30 equity/bond split). He leans “4%-plus” as a happy retiree formula, but paid-off housing offers “insurance” against outliving assets.
  • “Paid off house and 4%-plus rule, both together at the same time.” — Wes Moss [31:23]

“Buy, Borrow, Die” Tax Strategy

Segment: [31:25]–[35:23]

• Alex from Georgia is using a “buy, borrow, die” strategy to supplement income via low-leverage loans against assets instead of selling and triggering capital gains, leaving assets to heirs for a step-up in tax basis.
  • Wes affirms it’s a smart, tax-efficient strategy as long as leverage is kept low and assets are diversified enough to handle market downturns.
  • “The reason you’re looking at it as an actual strategy is that you’re being intentional about it… That can make a lot of sense.” – Wes Moss [32:27]

TSP vs. Vanguard for Roth Conversions

Segment: [35:23]–[38:24]

• Greg from Florida asks if there’s any reason to leave TSP for Roth conversions, given both TSP and Vanguard have low fees.
  • Wes explains TSP index funds are excellent, low-cost, and cover global basics. Only real reason to move is for more fund choices or advanced strategies at Vanguard; otherwise, staying with TSP is totally sensible.
  • “Having the five broad indices that cover most of the world, that’s a really good place to start.” — Wes Moss [38:04]

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Notable Quotes & Memorable Moments

• On financial conversations:
  • “If something happened to you today on your walk, how hard would it be for your spouse, from a financial standpoint?...A 30-minute conversation can make that really difficult time a little less difficult.” — Wes Moss [09:25]
• On financial planning vs. anxiety:
  • “Half of America doesn’t have a written plan. 64% of Americans worry more about running out of money than death itself.” — Wes Moss [09:57]
• On the 0.01% Rule:
  • “It’s an interesting way to think about spending in any given situation… Don’t sweat that. Your time is more valuable.” — Wes Moss [28:32]
• On buy, borrow, die:
  • “You’re just using the natural rules of the tax code in life and I don’t think it’s crazy. Just watch your leverage amount.” — Wes Moss [34:34]

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Timestamps for Key Segments

| Time | Topic/Question | |-----------|--------------------------------------------------------------| | 02:06 | Financial crisis after death; importance of pre-planning | | 11:10 | TSP protections after RMDs; retirement account options | | 13:35 | UTMA vs. UGMA and other accounts for kids’ investments | | 16:19 | “Do I need a financial advisor?” FOMO and financial guidance | | 23:35 | Introduction of the 0.01% Rule for spending | | 28:45 | Paid-off house and the 4% (or 5%) withdrawal rule | | 31:25 | Buy, borrow, die tax strategy explained | | 35:23 | TSP vs. Vanguard for Roth conversions |

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Overall Tone & Style

Engaging, approachable, and practical, the hosts mix warmth with authority, making complex financial advice actionable. Wes’s personal examples and Krista’s listener advocacy ensure the tone stays relatable, occasionally lighthearted, but always on-mission: empowering listeners to be “Clark Smart.”

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Summary Takeaways

• Talk openly with loved ones about financial arrangements before emergencies.
• Simple organization—lists, shared documents—can prevent tremendous stress.
• Financial rules of thumb (like the 0.01% or 4% rules) are tools, not straightjackets; adapt to your situation.
• It’s okay to transition into enjoying your money once you’re secure; don’t agonize over tiny sums.
• Major decisions (advisors, account types, leveraging assets) should fit your specific goals, risk tolerance, and stage of life.

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To submit questions or subscribe to the newsletter, visit clark.com/askclark.

Transcript

[Commercial Announcer]

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[Wes Moss]

Tuesday on NBC.

[Commercial Announcer]

Jimmy Fallon and Bozma St. John host the highly anticipated new competition show.

[Wes Moss]

I hire 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea.

[Krista DiBias]

This is not Play Play.

[Wes Moss]

We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Maybe the best idea win on brand with Jimmy Fallon.

[Commercial Announcer]

Series premiere Tuesday on NBC.

[Krista DiBias]

Welcome to Ask an Advisor, Krista Dibiaz here with our teen park advisor, Wes Moss.

[Wes Moss]

Hey, Krista, Good morning.

[Krista DiBias]

Good morning, Good afternoon. Whenever you're listening, I hope if you're enjoying your walk a little faster, pick up the pace.

[Wes Moss]

There's nothing like listening to a podcast while you're.

[Krista DiBias]

That's what I do every day.

[Wes Moss]

10,000 steps. Do you measure your steps, by the way?

[Krista DiBias]

Oh, yes.

[Wes Moss]

How many do you get a day?

[Krista DiBias]

I try to get 15.

[Wes Moss]

15,000?

[Krista DiBias]

Yes.

[Wes Moss]

No wonder you're in such good shape. I use an app called Pacer.

[Krista DiBias]

Oh.

[Wes Moss]

And it is great if you have your phone on you. And the problem is you have to. It doesn't count if you're working out. And I don't have my phone with me, so my steps look light because I'm not adding in a little bit of workout time. I do not. I Rarely get in 10.

[Krista DiBias]

Okay.

[Wes Moss]

The weekends I always do. It's so funny. It's Monday is the worst day. It's such a sedentary day. I'm just at my desk the entire day and then it goes up little by little every single day of the week. And then it explodes because of sports on the weekend.

[Krista DiBias]

Oh, yeah. Well, I have two dogs that I try to walk, two walks a day if I can. And the first walks, usually three miles, their early morning walk. And then so that helps me a lot for sure.

[Wes Moss]

Hey, what are we talking about today?

[Krista DiBias]

Well, I know you have a story you were telling me earlier that you're going to talk about. First to share a warning for all of us about warning, you know, financial conversations, which are so important. And then you've got a new you love a rule.

[Wes Moss]

You love a. I love a rule of thumb. And I have not heard a new rule of thumb for a While, actually, we did have a new rule of thumb here. It was called the infinite time Horizon maybe a month or two ago, but we haven't had a new rule of thumb since.

[Krista DiBias]

Okay.

[Wes Moss]

And this is a brand new rule of thumb. Our Clark Smart audience may not like this rule.

[Krista DiBias]

Oh, okay. It's called the 0.01% rule.

[Wes Moss]

Yeah. There's a whole book about it. The Wall Street Journal did a whole article about it. There's a whole book about this, one rule of thumb. And I think for our audience, it might get a little controversial, for sure. But why don't we start with this? And full disclosure, this was not what I had prepared to talk about today. We were going to talk about another article that I found in Newsweek. It was another financial article that we can maybe save for next week. But this really just comes from a financial conversation I had last night. And so it's fresh on my mind, and it made me think that I should share it with our audience because it really, unfortunately, it applies to all of us or it will eventually apply to all of us. And I got a. Let's call this almost an emergency text from a friend of mine who recently, she had a parent pass away really unexpected, literally on vacation.

[Krista DiBias]

Oh, gosh, that's terrible.

[Wes Moss]

And it happened really quickly. And it was. It's just obviously super sad. And so it was her father in his later 70s, in otherwise good health, but passed away. And her mom, who is a little younger, in her late 60s, was really just kind of having a crisis and not knowing what to do, not understanding what amount of money was going to come in. And the text message was, hey, my mom is losing her Social Security. And she's really. She's in a major anxiety loop about this and doesn't know how she's going to be able to afford life.

[Krista DiBias]

Gosh, that is awful. On top of losing your husband unexpectedly so pretty quickly.

[Wes Moss]

Was able to get in touch with her. And I initially thought maybe there was some confusion about Social Security and how that worked and why she would be losing Social Security. But ultimately, very quickly, I understood that she had had a higher Social Security payment than her husband. So that if your spouse passes away and your Social Security payment is lower, then you should be able to step up to that higher amount. In this particular case, her Social Security was higher than his, but his was not insignificant. She got about 1700amonth. He got about 1,600amonth. But now that he's gone, very suddenly, that $1,600 a month is no longer it's gone. In fact, as she was checking on this and going through and trying to understand how much he was even getting, and really the whole story here is that she had almost no idea about anything with the finances. She didn't know her pension amount. She had to look up the amount she got in Social Security. The only reason she knew his Social Security was gone is that Social Security took it back.

[Krista DiBias]

Oh, no.

[Wes Moss]

Oh, insult to injury in a really tough time. So as she's going through, I guess we're on the phone, she's logging into her computer and she's saying, oh, my goodness, Social Security just took back his payment from this month. Imagine. So as we talk this through, I said, well, how. Tell me about your housing situation. Well, how much is the house worth? I'm not really sure. He said it was about X amount. How much do you have left on the mortgage? I really don't know. Where would I go to know figure that out? She said, I do know that we have a really low mortgage amount because they have a low rate. And the mortgage amount per month was well under $1,000, which is again, hard to find unless you have a 3% mortgage rate. But that was a good piece of news. Her Social Security was good at 1,700. A pension that was not nothing about $1,000 a month. She said, but that's it. Now that I've lost this other $1,600 a month, what am I going to do? Well, as we continue the conversation, she does have some savings, let's call it about a quarter of a million dollars in retirement accounts. And she didn't look at that account as providing income. She looked at it just as this corpus that sits there and hopefully grows. Because she's not near RMD age, she's really never had to take any money out of it. And I started to do the math and I said, well, at $250,000, even if you use the 4% rule, or let's call it four and a half, because she's already almost 70, that's 11,000, $12,000, almost 1,000 bucks a month. So the conversation went to, well, wait a minute. If your housing cost is still low, you still have your pension and you have your Social Security, now maybe you can start looking at this account in a new way that you've never looked at before, that this is now an income stream for you and that can't completely replace the lost Social Security check, but it goes a long way. Another thousand dollars a month to make up for that and all of a sudden her anxiety went way down and she said, wait a minute, maybe I, I think if I spend a little less at Costco, I'm going to be able to make this work.

[Krista DiBias]

Oh.

[Wes Moss]

And it reminded me that if. Here she is, has been in this anxiety loop since this happened. It's been a couple of weeks and she's been paranoid and frantic for this entire period of time. So you have this terrible life event and then you're worried if you're ever going to be able to pay your bills. And it reminds me that just the simplest conversations can really avoid that multi week panic. If she sat down and this is for every couple to think about. If something happened to you today on your walk, how hard would it be from a financial standpoint? Life standpoint, of course. Terrible. We're here talking about finances. How would your spouse be able to react to that? Would they have any clue where everything was? Would they know the different income streams coming in? If your income stream is lost, what happens to your spouse? And that can all be solved. And if you start saying to yourself, wow, my spouse would, I don't know, they wouldn't understand what to do. They wouldn't know how to figure this out. It might take weeks or months before they ever get any sort of clarity. But imagine going home and just having a 30 minute conversation. A 30 minute conversation. Lay out the big pieces of the equation. Hey honey, if something happens to me, here's how much I'm getting with this source and this source. Maybe this one stays because it's a joint life and maybe this one is gone. And just having that simple conversation can go so far. And the reason I'm giving this a low bar is that I just spoke with someone that had had zero conversations about it. That was the retirement account invested. I don't know, I don't even know how to log in. I think it's around 250,000. 30 minute conversation can make that really difficult time a little, a little less difficult. Now you take that a step further and we start talking about financial planning, sitting down, doing that along with your spouse and then revisiting that once or twice a year. There's a statistic I just read this morning, Krista. It was from an Allianz report about retirement in 2025. The first statistic I think is very telling. And my research is similar to this. 47% of Americans, which is nearly half, do not have any sort of written financial plan. Half of America, that means they haven't had that conversation. What's really keeping Americans up at night. Hint it's not death. 64% of Americans worry more about running out of money than death itself. Yeah, but that family conversation can go a really long way. And it was just another reminder. And unfortunately I get these reminders a lot but this one is really fresh in my mind. I just wanted to bring it to the audience so that that it does not happen to you.

[Krista DiBias]

And then maybe having like if you can a Google Doc with shared passwords or something with a trusted person, your executor, whoever, having a binder. If something happens to me, I have that for my kids with my will. And then I'm starting to put print out my latest statements from things and put them in there every month and then I get rid of them, put the next ones in so I don't have to keep a ton of that.

[Wes Moss]

But one page of passwords and 30 minutes to 60 minutes a year can go a really long way.

[Krista DiBias]

Yeah, okay, so Kim in Massachusetts says I am still six years away from RMDs, but I always loved the security of my TSP and its protection from lawsuits or collections. I know there's no equivalent protection after RMDs occur, but is there a similar life cycle mutual fund that I can purchase post RMDs?

[Wes Moss]

Kim, you're getting a couple things confused here. There are great protections we have when it comes to retirement plans. Now different states have slightly different rules. So I can't say this exactly for every state I'm in the state of Georgia, but talk to folks all over the country. You're in Massachusetts, I believe. Kim is from Massachusetts. The rules I think in Mass Are a little bit different as far as retirement accounts. But the TSP plan, the Thrift Savings plan is a government plan. And you're correct, that is almost the most ironclad protection about retirement assets. Whether it's even if you're in bankruptcy, there's a huge amount of protection. If you're in any sort of civil lawsuits, huge amount of protection. I don't think there's anything that's ever 100% ironclad, but that's about the highest level you can get when it comes to protection from creditors. Just because you turned 73 and now you have RMDs, that does not take that away. That's a misnomer because the vast majority of your money would still be in the Thrift Savings plan or a retirement plan. Now it is true that the money that has to come out is no longer protected. So if Your RMD is $20,000 this year and that goes into a cash account, then technically that's not protected, but it doesn't unprotect the entire corpus that still sits at tsp. Again, high protection if the money is in an IRA as well. But that's state by state. Now moving and finding another life cycle type plan similar to what you would have. Kim in the tsp. That's just another investment option. And there are plenty of investment companies that have those very similar options. Almost every big mutual fund company has a life cycle or target style fund that you can put those RMDs into if you choose to invest there. But the fund itself, the investment style itself, that doesn't give you the protection. The protection is that it is in a retirement account, particularly TSP.

[Krista DiBias]

Okay. Jason in Michigan says, I have two daughters ages 14 and 13 in addition to their Michigan State Plan 529s. Both have approximately 30k each. I have individual UTMA accounts set up for both, both of them as well with approximately 8k each. Is the UTMA the best place for their money?

[Wes Moss]

Jason in Michigan, I think UTMA is a really good place for having money for the kids. Usually your, your livid should be the annual gift limit, which is $19,000 per person. Above that, if you want to gift even more than that, then you'd have to file a gift tax return and then that would come off of your lifetime exemption. But let's just call it $19,000 is an easy limit to think about. Secondly, remember that there's something called the kiddie tax, meaning that if they get over about, let's call it $2,600 a year in unearned income, it starts to be taxed at your rate. However, the kids are still young, early teenage years. This is a great way for them to be invested in a UTMA account. The one downside that at least there's two small downsides, one, and they may not be downsides at all, is that in Michigan as an example, I think it's age 21, then that money automatically becomes theirs and it's their money now and it's their account just by virtue of them turning age 21. I don't know if that's a little bit different from state to state, but a lot of states are age 21. Secondly, there is a little bit of a financial aid impact. If you look at fafsa. FAFSA looks at that money in a UTMA account as their money. So it can sometimes make getting financial aid a little bit Tougher. So just know that. And it's irrevocable. Once you put money into one of these UTMA accounts, you can't take that money back.

[Krista DiBias]

Can I ask you, what's the difference? So Universal Trust for Minors act and then there's a UGMA Universal Gift for Minors account.

[Wes Moss]

Krista. I think that they're virtually. I don't know that there's much difference between the two. Okay. They're just different names and it could be state by state. Some have UGMA, some have UTMA. And again, other options to consider. 529 plan is another other option. A Roth IRA for the kids. If they have any earned income, then you could contribute up to the, to the maximum of either the Roth or how much money they've earned. And then Jason, it's not the end of the world to have a brokerage account. And it's just a brokerage account in your name. And it's eventually going to be money for the kids. But they all have their nuances. But I don't think there's anything wrong with the UTMA account. Only, only real downside for some parents would say, hey, my kid's not a full adult at age 21. But that's up to you as a parent.

[Krista DiBias]

All right. Maria in Delaware says I'm a 58 year old single teacher planning to retire in 6 years. I currently have 1.2 million saved in a 403B Roth IRA and pension contributions which I'll receive when I retire. My house is paid and I have no debt.

[Wes Moss]

The 43 go Maria.

[Krista DiBias]

I know the 4.3B is in a target retirement fund and my Roth IRA is in a total stock market index. I'll receive a pension that will pay me approximately 75% of my salary in retirement. I do not have a financial planner. I live a pretty boring financial life. But I've recently come down with a case of fomo. Fear of missing out for those who don't know, it seems like everyone combo for what it seems like everyone has a financial planner. Should I hire someone? I feel like I'm a decent saver, but maybe I can accomplish more financially speaking with the advice of a financial planner. And by the way, my accounts are with Vanguard, so Vanguard Personal Advisor select could be an option. Thanks.

[Wes Moss]

Have you ever heard of. This is great. I love to hear this because I've never heard of someone having FOMO over not having a financial advisor. That's amazing.

[Krista DiBias]

I know.

[Wes Moss]

It's probably the best FOMO str. I was said fomo. I thought usually it's about somebody being on a yacht or a cruise somewhere in the Caribbean, and you're wishing you were in the Caribbean, but not a financial advisor. But this is great. And I think it's a virtue of your age, Maria. You're thinking you are getting close to 60 and in your 20s, very few people have an advisor. In your 30s, very few people have an advisor. I think people usually start really thinking about getting Advisor in their 40s, and then the percentage chance that you're going to have advisor goes up as you age, because the amount of money you have saved gets to be a greater amount. There's more worry that comes with that. So this is a virtue of your life stage. You're looking around and you're saying, wow, hey, I've got a lot of money, $1.2 million invested. I hope I'm doing that right, too. I just pulled up a couple of charts. Half of America doesn't have a written plan. 64% of America is worried more about running out of money than death. So the confluence of all of these variables are making you not. I don't think it's FOMO of not having an advisor. I think it's the fear of not having a clear plan and being worried about it and looking at your friends and saying, well, Mary's got a plan. And she seems pretty locked in, as my kids would say, when it comes to her financial planning. And she's not worried about ever running out of money. That's where your FOMO's coming in. Not that you end up actually having a person, but the person that's the financial advisor is supposed to really dampen and take away a lot of that anxiety. So that's the fomo, I think, coming in. And I'm a big believer. And Warren Buffett always says, if you ask a barber if you need a haircut, the answer's always yes. And I'm a financial advisor, so I believe in our industry, and I believe that the peace of mind, a good fiduciary that can give to you and your family is absolutely invaluable for a really large percentage of people. Not everyone needs a financial advisor, but the percentage of folks who have financial advisors, as asset levels go higher, becomes increasingly higher, and the more money you have saved and the more complex your situation is. And I know you said yours is boring, but is it really that boring? All the money you have in the world, it's in a bunch of different accounts. Yes, you have a pension, so, yes, I do think it's a pretty straightforward situation, but give it a, give it a try. That's the other thing. You don't need to have a financial advisor for the rest of your life, but there's very little downside, particularly if you talk to the folks at Vanguard. They've got a program, see how you like that, see if that gives you the clarity that really you're looking for. You may not have an advisor there. It may be a rolling person and a place to call that they have your information. And you may not have a financial advisor. You may have a financial advisory team that changes. And if you think it's valuable and you want one person or one team to be consistent for a really long period of time, maybe then you go find another advisory team that would be more permanent. Either way, I think there's a lot, very little downside of giving it a shot.

[Krista DiBias]

Awesome. Okay, we're gonna take a quick break. And we come back. Brand new rule of thumb to help us all reduce our anxiety right around.

[Wes Moss]

Spending, opening your wallet and making a purchase that you might feel a little uncomfortable about.

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[Wes Moss]

Lowe's knows how to help make your home holiday ready for less. Get select Style Selections vinyl flooring for just $1.99 per squ foot and have it installed before the festivities begin. Our team can help you every step of the way. See a Lowe's Red Vest associate or visit lowe's.comholidayinstall to get started. Lowes we help you save basic Install only Date restrictions apply. Subject to availability. Installed by independent contractors. See Associate for details. Contiguous us Only. Welcome back to Ask an Advisor. Wes Moss, your host today along with Krista Dibias. How are we doing, Krista?

[Krista DiBias]

Doing great.

[Wes Moss]

We're going into a brand new fresh topic because you know I'm a sucker for rules of thumb.

[Krista DiBias]

I know. I can't wait to hear what this is. I only know the title of it.

[Wes Moss]

Rule of thumb, the 4% rule, the 50, 30, 20 rule, the 25x rule, the three years of dry powder rule. These are all ways to make financial circumstances the world of financial advice to make it more simple. And I think there's great value in that. And that's why I think I've always loved rules of thumb and they're easy to remember. So you boil everything down and this rule of thumb can help you here and this rule of thumb can help you there. Some are more important than others. I wouldn't put this at the top of the stack as far as one that's going to get you to a perfectly peaceful retirement, but I think it does apply to a lot of us. And here's the name of the rule or here's how it works. And first of all, I guess I'll acknowledge that this is the Clark Howard audience. This is a Clark Smart audience, and we're about to talk about a rule that relates to opening up your wallet and spending. And the Clark audience, your audience, our audience has been really good at not spending and is famous for being able to go without be modest spenders and then have great financial freedom because of it. So I'm not here advocating that you should be opening up your wallet because for so many of us, it is the very act of being disciplined around not spending that has gotten us to where we want to be. But I think there's also a tipping point. And this is where the here's the rule, the point.01% rule comes in. And it's Nick Maggioli, who is just wrote a book, and this is, I think, I don't know if the whole book is about this or it's a big part of the book, but it talks about. Evidently he heard Jay Z, the famous rapper I think is at some point has been a billionaire. But this is many years ago. He heard Jay Z say something like, what's 50 grand to somebody like me? Now, he said it in much more colorful language than that, as Jay Z does, as Jay Z might. But Nick started doing the math in his head and said, wait a minute, if this guy's worth 500 million, I think at the time, then 50 grand is only.01% of his net worth. So as crazy as that may sound, all of us, it may not be that big of a deal for him to sweat that much money. And this really goes back to allowing yourself to not sweat the small stuff when it comes to spending a little bit more in any given moment than you may want to spend. Nick, the author, gives an example that he used the 0.01% rule to pay $80 extra that he normally wouldn't have wanted to do, so that he could have choose his seats on a plane next to his wife who's. I mean, who's going to argue with that, right? But for him, it was, wait a minute, use the.01% rule. And it was 80 bucks. And it was okay. Now here's where it comes from mathematically. So you take.01% of your total net worth. So if it's your total net worth is 500,000, that would mean your 0.01% number would be 50$50. So anything less than $50, maybe you shouldn't spend a lot of time sweating it. If your net worth is a million dollars, it's a hundred bucks. If it's a $10 million net worth, it's $1,000. If you're now where there's $50 million, your point.01% rule would be $5,000. And the point he's making is that as opposed to spending a lot of time, maybe to get a refund or spending a lot of energy around something that is under this nominal level, this number, then you maybe are spending too much time and too much mental energy thinking about it when it, when it doesn't really impact you financially. And here's where the math comes in is that he's using a really conservative rate of return on your Overall net worth. 4% total growth. If you divide 4% by 365, what are you going to get? You're going to get about 0.01%. The assumption is that your overall assets and this is house and this is net worth and accounts should be growing conservatively, really conservatively at 4% a year. And that's where he comes up with this number. So I think it's an interesting way to think about spending in any given situation. Do I upgrade this? Do I get an extra dish at a restaurant? Clark Smart audience may say, well, I didn't get a thousand dishes and that's why I have money. And I don't disagree with that at all. But at a certain point when you have financial comfort, you don't want to spend. If you have a $5 million net worth, are you really going to spend three hours trying to get a refund? That is 150 bucks and it's going to take you three hours.

[Krista DiBias]

I know somebody who would.

[Wes Moss]

I know. So there are a lot of people that would. What this rule of thumb is saying is don't sweat that your time is more valuable. And I'll leave it up to the Clark audience to decide if they like the rule of thumb or not.

[Krista DiBias]

Okay. All right, let's go to my rule of thumb. Yep. Amy in Arkansas says I'd like to hear your thoughts about adjusting the 4% rule to more, possibly 5%. If the primary residence is paid for. I understand it's not income producing and not liquid, but I never hear it factored in at all. At some point it would be liquid or become available. Wouldn't it be insurance against running out of money? If I take 5% at 60 or 65 but also have a paid for home worth 650,000, shouldn't I sleep better at night with the higher withdrawal percentage? I just never hear it discussed.

[Wes Moss]

Amy, I think I discussed this because I. So first of all, you're trying to extend the 4% rule a little bit because the house has paid off. And I totally get that. If you're looking at the ingredients about a happy retiree or someone who is in the retire sooner, let's call it jet stream, you both want to use the 4% rule. I call it 4% plus. So I'm not saying no at this point to the five, but it also includes a paid off house because you're always going to need a place to live. You always need it. And even if it's going to be years out into the future that you can use the equity, everything gets more expensive. So your $650,000 house today may be worth 750 in the future, but it still may take now 750 to live in a similar situation. So I like being able to do both, having an ultimately a paid off house and using the 4% plus rule. However, William Bangin, the godfather of this rule, recently just wrote a book that said it should be 4.7%. He calls that the max safe rate. So it's really a range, Amy, and for you, pushing it to five, is that that dangerous over time? The answer's not really. If you do the math, if you're sticking to 4%, you've got a 99% chance money doesn't run out or at least 30 years. If you push it to 5% historically and mathematically with a 70% stock, 30% bond allocation, it still works for 30 years, 84% of the time. So it's not irresponsible to think that you can do five. Just know that of course there's a higher percentage chance that money runs out at the end of that long, long period of time. So just know that I would say that doing 5% without a paid off house would be, would be tougher. The fact that you do have a paid off house, it makes you a better candidate to be able to do that. But my fundamentals, and let's call these are the conservative, happy retiree rules of thumb, paid off house and 4% plus rule, both together at the same time.

[Krista DiBias]

Okay, this came in from Alex in Georgia. Question for Wes, because I don't want to give Clark a heart attack.

[Wes Moss]

What are you gonna, what are you asking, Alex?

[Krista DiBias]

Wes, who would you recommend the buy, borrow and die Strategy for? I'm 63, retired, my spouse, age 55, is retiring next year with no children and our house is paid for. I'm starting this strategy with 5% of my liquid net worth to supplement my income with tax free money. This will provide me with an additional 30k the first few years, maybe more later. I may pay the loan off slowly after 10 years of staying under the capital gains threshold. I have a Roth account that I want to grow over the next 10 years before withdrawing any funds.

[Wes Moss]

But we so we don't know where Alex is getting the loan from though.

[Krista DiBias]

Yeah, I was confused about that.

[Wes Moss]

We don't know where he's getting the loan, I would suspect. Well, it's only, it's probably two places, either on a piece of real estate it's paid for or his portfolio, which would be in the form of a margin loan. So right out of the gate, Alex buy, borrow, die strategy, that's pretty much what all of us do in the cycle of our finances. We buy things, we borrow money, and then we die. So the buy, borrow, die strategy, I don't think it would give Clark a heart attack because that's what, that's kind of the way the world does work over time. The reason you're looking at it as an actual strategy is that you're being intentional about it and you're saying, if everything's paid for today, then why not take 5% of the value as a loan so that I don't have to pay the capital gain tax? Happens all the time. That's, that's a really smart way to do it. And then when you die, then the money gets owed back, but you haven't had to pay taxes on it. So it's a way to. This goes back to tax efficiency, tax strategy and taking a loan out so that you don't have to pay taxes on selling something. That can make a lot of sense. What are the taxes to sell something? Well, they could be 20%, they could be 15, 20, 25%, depending on your income. What's it cost to take a loan? 6%, 7%. So you're doing the arbitrage, you're saying, well this, this makes more sense. Now you do that every year. And I think that if you're looking at an overall net worth of a million and you're. And you're only having $50,000 borrowed, then that's a low amount of leverage. And I think that can work really well. Where we run into trouble is that if we get overly leveraged borrowing too much on the paid for assets and the assets go down in value, then you get a margin crunch and then you can really quickly compound your overall losses. So you need to do it on a, if you're going to do this, it should be on a very diversified portfolio, not a particular stock and a piece of real estate or multiple pieces of real estate that should be set up well, fundamentally so that you're not worried about the value creatoring of that. Because the value, if your value creators on equities or a portfolio or real estate, then the percentage of your leverage, if it's 50,000 or 100,000, automatically goes up. And you've got to be careful about that. But you're also taking advantage. Just naturally here, if you think of it this way, is that your heirs should be getting a step up in basis. So it's very common practice for folks to say, well gosh, I'm in my 80s or 90s, I don't want to be selling this stock now because then I'm just paying taxes on it, when really if I wait longer and I pass away and give it to my heirs, they get a step up in basis and essentially avoid those taxes. And there's great debate about these tax rules, but that's the way it's been for as long as I could remember and I don't see that changing anytime soon. So you're just using the natural rules of the tax code in life and I don't think it's crazy. Just watch your leverage amount. Okay?

[Krista DiBias]

Greg in Florida wrote in with this one, I have 500k in a traditional TSP and over the last few years have been Roth converting to get the value down before RMD starts, I've been moving money to Vanguard index funds. The TSP now has an in plan conversion option in 2026 and expense ratios for the TSP funds range from 0.04 to 0.09. Vanguard can be had for similarly low costs. Is there a case to be made for staying in the TSP for Roth conversions? What are the factors that make a 401k tsp better or worse? Thanks for all you both do. I catch most of your podcasts via YouTube. You guys play well off each other. Thank you. That's nice.

[Wes Moss]

I'm glad that that's nice of him to say that. This is Greg. Mm Greg, TSP and Vanguard are they're cousins when it comes to investing. If you really think about how Vanguard started, it was just really simple. US Equity fund, then a total stock market fund, then a total bond market fund. Now they evolved a lot over time and there's a lot of other choices now. But TSP was very similar and Vanguard were very similar as far as investment options are concerned. But TSP hasn't innovated and created new products. They still have, unless I have missed this. Csifg Common Stock, Small Cap, International. Those are just three indices, very much like what you would find at a Vanguard for those particular indices. And then Fixed Income, which is a total bond market index. And then G. That was For F G is just the total bond market, which would be government and corporate bonds. And that's it. They make it really simple and it's five super low cost index funds and you can choose the ones you want or you can use their life cycle funds and they'll choose the mix for you. So if you're wanting to keep low, super low cost, keep things really simple and you're fine with those indices, which by the way can work really well for a lot of people for a long, long time, then if you're now getting that option to be able to do the conversion within tsp, that sounds like a yes to me. When you ask what's the advantage of rolling it to an IRA and doing this in a place like Vanguard if the costs are similar? The only advantage I can think of is choice. TSP still just has those five funds. That's it. But they really cover a huge part of the world. Vanguard has, I don't know how many they have, but I would say hundreds of different options. They have ETFs, they have index funds, they have their passive, they have active mutual funds, they have balanced mutual funds, they have target mutual funds. So it's just a matter of maybe more choice if you go to a place like that. But having the five broad indices that cover most of the world, that's a really good place to start. So if you like TSP and you're comfortable with it, I don't see any reason why not to stay.

[Krista DiBias]

Great. Well, that does it for today's episode of Ask Advisor. Yes, for sure. We'll be back next week. The Clarkster back tomorrow.

[Wes Moss]

Send us more questions.

[Krista DiBias]

Yeah, go to clark.comask and you can indicate if you want the question be responded to by Clark or Wes on there. So thanks for listening, thanks for subscribing, thanks for sharing with a friend and I hope you subscribe to our our daily newsletter as [e-mail] Newsletter have a great day.