Pod Insights The Clark Howard Podcast 03.04.25 Ask An Advisor With Wes Moss - 10 Habits of the Happiest Retirees About this episode 10 Habits of the Happiest Retirees Are you dreaming of a truly happy retirement? Fiduciary financial advisor Wes Moss reveals the 10 key habits of those who are living their best post-work lives, based on years of research. In today’s Ask an Advisor episode, Wes dives into both the financial and lifestyle choices that make all the difference. Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the March 4, 2025, Ask an Advisor episode of the Clark Howard podcast. Submit your questions at clark.com/ask. We hope you enjoy our weekly Ask An Advisor episodes, in which Christa and Wes discuss investing and retirement savings in depth. Let us know what you think in the comments! Learn more about Wes: Wes Moss, CFP® Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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1:21 Speaker 02 Welcome to this week's edition of Ask an Advisor. I'm Krista DeBias here with Wes Moss.
1:27 Speaker 03 Hi Krista.
1:28 Speaker 02 Hello, how are you today? And Wes, you've been studying the habits of happy retirees for a very, very, very long time, and unhappy retirees, which I love, because when you talk about financial planning, it's not, it's not just about the numbers at all. In fact, most of it's helping somebody plan out what kind of life they want to have, right?
1:48 Speaker 03 It really is. And when I first started doing this, called 15 years ago, when I started really thinking about these topics, it came from, when I was a newer parent, there was a popular book called The Happy's Baby on the Block.
2:01 Speaker 02 I read that book.
2:02 Speaker 03 Did you really, do you remember that?
2:03 Speaker 02 I certainly did.
2:04 Speaker 03 It was a really, it was kind of a popular book. I actually never read it. I just remember 10 people telling me. Oh, you gotta read happiest baby on the block. And in my mind, I thought, well, who's the happiest retiree on the block? What do they do? And I'd been working with retirees for a decade at that point. But I wanted to get more empirical data around it and not just what I thought. I wanted, so I started researching it and getting large groups and these large populations of retirement age folks and asking them about their lifestyles. And that's what I want to talk about. So I've got, I've really got some of my favorite habits I'll share today.
2:41 Speaker 02 And I love this because this is important, whether you're 25 listening or you're 65 listening to this podcast, because you want to put things in place, if you can, when you're young to think about. Like, I've been thinking about this for years because I've known you and I read your book that you wrote about this topic. And thinking about what kind of retirement do I want to have and planning for it, even though I'm not anywhere near retirement. So you've got 10 things that you're going to lay out for us in this podcast, right? Five and five.
3:10 Speaker 03 Right. We want this lifestyle and we're going to talk about lifestyle. There's five of those.
3:15 Speaker 02 Okay.
3:15 Speaker 03 Well, first, we're going to pay for it. So we'll start with the five financial habits of the happiest retirees.
3:21 Speaker 02 Okay.
3:21 Speaker 03 And then we'll do the five lifestyle habits of happiest retirees. And you make such a good point. And this first one's about how much money should we have? And I studied this and I got a median number and an average number and looked at the population of happy versus unhappy. And where did I get these numbers? I got them from the happy group. So we've got this population of retirees. We want to land in the happy group and we don't want to land in the unhappy group. So what, how much money do they have? First of all, I'm rounding these numbers because I want people to be able to remember them. I'm a big believer in round financial numbers. $897,000, that's not a number that anybody remembers.
4:01 Speaker 03 The median number here, and I've adjusted these for inflation over the years. And we've had massive inflation in the last, call it five years, ever since the pandemic. Not only do these numbers, they're updated for inflation, but I've also seen people with my original numbers 10 plus years ago that started, but it used to be 500,000 was the median. And that's, it was a relatively low number. There was some controversy around that. I mean, I think Suzy Orman says you need $5 million to think about retirement. I came out, I said, the median number for the happy retiree is 500K. How can you do, I've seen it work. I've seen it work because there's other financial steps here. So today, I think 500, if you're 25 or 35, that's too low.
4:46 Speaker 03 So we updated for inflation, the median amount for the happy retiree, if you were to be 60 plus today and you're going to stop working, 750K. So it's still not even a million dollars. 750K. Now, the average is one and a quarter million. But again, it's not 5 million. It's not these massive numbers that I think make people not even want to start trying. It's like, how are you going to get to 5 million? It's hard enough to get to a million in a quarter. But I'm telling you, and I think about when I was 25, and I know you and Clark talk about this, but if you just have this as a goal, and you give yourself, if you're 35, 40, 20 years from now, you're still, you should be able to be working, you can get to these
5:29 Speaker 03 numbers. You can get to these numbers. So the first step is that the happiest retirees have a minimum of 750K, average of one and a quarter million. That's first out of the gate. Got to be able to pay for the life in the big city. It's expensive to live in America. Two, multiple streams of income. Think about this starting today because you want to be able to have these multiple income streams once you are no longer working. The happier retirees have three plus, unhappy, less than three. Hopefully you'll have a good social security payment and maybe your spouse has a good social security payment. Maybe you do have a pension. Millions of Americans still have a pension. Maybe you bought a, you think about, well, what's another way to do it?
6:10 Speaker 03 Rental property. Maybe there's a rental property that by the time you're retired is really cash flowing from you. Maybe there are other benefits you're getting from maybe their military or veterans benefits. You don't necessarily have to be a real estate mogul. You could even, I see retirees that are Airbnb-ing things. That's a different model than owning a bunch of property. This is maybe you're Airbnb-ing your guest house or your house. So there's lots of different ways. Part-time work. You may want to stop from the soul-crushing job you've had for 30 years at 62, and you do a lighter job for five more years and you've got some part-time work.
6:53 Speaker 03 So think about, there are a lot of different ways of income streams and more is better. And though all those income streams come into one giant river of income in retirement, and the more diversification we have around the different income streams we have, the more peace of mind we have, hence more likelihood we end up in the happy retiree camp. Number three, mortgage payoff within sight. I found that those who were within five years of paying off their mortgage, or paid it off, or within five years, so close to paying off the biggest debt most Americans have, happiness levels went up big time. It allows you to spend more discretionarily as opposed to I have to make the mortgage, I have to make the mortgage.
7:36 Speaker 03 Now, once it's gone, you can choose what you're spending money on. So that's a huge part of it, and we can all figure out ways to accelerate our mortgage payments. Accelerate getting rid of our mortgage. If we add, depending on your balance and depending on your rate, you add $200, $300, $500 a month to your mortgage payment, you can shave a decade off a 30-year mortgage. So now we're starting to piece out the financial piece here. We've got $752.5 million. We've got multiple income streams. We have no mortgage. So our expenses are lower. What's next? To be able to get to that, those bigger, that million dollar mark, a million and a quarter, really tough to just save your way there. Happy retirees have a real propensity to be investors.
8:22 Speaker 03 They've got this, I look at it as rational optimism. It's so easy to be pessimistic about the world, look at the economy, pessimistic about the economy, pessimistic about the stock market and not be an investor. Happy retirees have a bias towards things are going to work themselves out. Rational optimism, which makes it easier for you to be an investor, which makes it easier to hit those financial, those liquid financial checkpoints. By the way, number one is a reminder is that's a liquid financial asset. That's not overall net worth. It's not just a overall net worth. We want to be able to get to that money. We want that money itself to be able to create another income stream. And then number five,
9:01 Speaker 03 smart spending. One of the very top fears we all have is running out of money. It's like public speaking, I think is like number one and running out of money is number two. It's a very real fear that's embedded in us and I see it, it almost can't go away. Right? Whether you have a million or three million or five million, the person with five million, they're still worried about running out of money. 10 million, still worried about running out of money. Because typically their spending is commensurate with what they have. So how do we solve for that? Well, we go back over the course of history, we just, we apply the 4% plus rule.
9:42 Speaker 03 Again, there's no magic here. This is just math and economic history. And the 4% plus rule just says that if you were to start in your first year of retirement, taking 4% of your assets, then you can up that for inflation every year. And over the course of economic history, the worst case scenario, people didn't run out of money for 30 years. And in most cases, 98% of cases, it lasted much, much longer than that. And utilizing the 4% plus rule, because it's really between four and four and a half percent. The majority of folks end up with more in their liquid retirement savings account in 10 and 20 and 30 years
10:25 Speaker 03 than they started with, but they've also been pulling out money the whole time. Now, if you're taking 6% or 7% a year, yeah, you would be worried about running out of money. So happy retirees know this, and they know the economic history and they know the math of this. But I consider a financial rule of thumb, it's an amazing guide that can guide us from year to year to year on how much we're safely able to withdraw from the portfolio and take your worry about running out almost down to zero. And if we do those five things, liquid retirement savings, multiple streams of income, we get rid of our mortgage, we're rational optimists, so we're investing the money and we stick to the 4% plus
11:06 Speaker 03 rule, that gives us a really good shot of landing in what I would consider, and I've seen through research, the happy retiree camp.
11:16 Speaker 02 That's great, and I do want to just add a note here on, especially for rule number one, habit number one, the having the amount of savings. You can create a variable by, maybe you have to move far away from a city, maybe you have to really downsize, but you can create a lifestyle. If you don't have that kind of money and there's no way you're going to get there, you know, it's about your lifestyle, right? It is what you save, but also it's what you spend, which was your final rule. So, you know, not to discourage anyone if you are close to retirement and maybe you're just not going to get there.
11:50 Speaker 03 I've gotten hate mail on both sides of that. It's like, "That's not enough money, you're crazy, that's way too much money, how can I ever get there?" So, none of this is easy.
11:58 Speaker 02 I know.
11:58 Speaker 03 None of it's easy. That's why 90, 95% of Americans are not in necessarily a great position to retire. And our job, I think, is to try to make it not just 5% of people that can get there, but 10, 20, and 30% of folks that can have real financial freedom and peace of mind and a happy retirement. And we'll do the five lifestyle secrets coming up.
12:22 Speaker 02 All right, we'll go to some questions. Henry in Delaware sent this one in. "I retired from the Air Force Reserve in December of 2021. I still have retirement money in a TSP even though I can no longer contribute. Should I roll these funds into my current employer's 401K? I'm hesitant to do this since the TSP fees are so low and my return has been over 45% since I retired. I'm currently 48 and don't plan to access the funds until I'm 65. Thank you for your service."
12:51 Speaker 03 Henry in Delaware, thank you for your service. And I don't see any reason. The answer is no. I don't think it needs to move it. Henry, I think you leave it in the TSP. There's a lot to think about when you're rolling money to a retirement plan. Where is it today? Do you have plenty of investment options? Are they low cost? Is it easy to access the money? Can you talk to somebody? Do you have any, is there anybody helping you? If the answer is yes to most of that, and in TSP, it may not be the most flexible plan, and you may not get the same person every time you're calling, but they've got really low cost investment options, and they're broadly diversified.
13:30 Speaker 03 So the TSP plan really can serve a lot of people for a really long period of time. And there's no reason you have to roll it anywhere. Those are all the things to consider. Now, if you really want to have more investment options in an IRA, and you want to go to Vanguard or Fidelity or Schwab, or one of the big investment houses, big investment firms, and have even, even a higher level of nuance and control, then, then maybe. But if you're going to be a highly diversified index oriented investor, which TSP offers, then I think there's no reason that he needs to move money from TSP into his company 401k plan.
14:14 Speaker 03 One thing that people think is that if I have more money in a particular account, I'm getting more compounding or more of a match. It doesn't, doesn't work that way. Your match is only on the amount of money you're putting in every year. And the compounding doesn't matter whether you have one account or five accounts. It's really the aggregate amount should be compounding, whatever the investments are doing.
14:34 Speaker 02 Lisa in Florida says, "We have about $2 million in a brokerage account at Fidelity. We've been setting funds aside for a cash purchase of a home. This account creates a lot of interest and dividends. Our advisor has suggested an SMA, Structured Managed Account, AKA tax washing. The fee is four basis points. We're considering using $1 million for this to see how it goes. Can you provide your opinion?"
15:01 Speaker 03 Lisa, couple of terms there. I don't know of anything called tax washing. That sounds like something that's not. Yeah, nefarious a little bit. There's no tax washing, but there is a term called tax loss harvesting. That's what she's getting at here, I think. And an SMA is a separately managed account. And what she's referring to here is something really new in the investment world. And it's called direct indexing. So think about this, you could own an index ETF. You put a million dollars in and it grows to $2 million. Well, if you want to get some of that money out, then the whole million dollars of gain over time, that's going to be taxable.
15:46 Speaker 03 Not the worst problem, but that's the way investing has worked for a very long time.
15:52 Speaker 03 Technology has allowed for taking, looking at a broad index, S and P 500, Russell 3000, one of the big indexes. And instead of owning one ETF, you own most or many of the components within the index individually. So as the index grows over time, because there's so many different positions in these indices, there are always going to be some losers, some stocks that are flat, some stocks that are down. So what this technology allows investors now to do through direct indexing is tax loss harvest the losers along the way. So that hypothetically, if it's mostly tracking the index, and it isn't perfect,
16:35 Speaker 03 but these typically are doing a pretty good job of tracking what the index does.
16:41 Speaker 03 By the time you get your 1 million turns into 2 million, instead of having no room to sell and get without capital gains, you've likely harvested losses throughout.
16:55 Speaker 03 And you can sell big chunks of that and have them offset by the losses and have no capital gains.
17:01 Speaker 02 So in a way, it's a wash of the taxes, I guess, that makes sense.
17:04 Speaker 03 In a way, it's a wash of the taxes. Right. That's a good way to look at it. So it's wa- it's washing away the gains by harvesting the losses.
17:13 Speaker 02 Okay.
17:13 Speaker 03 Now, I don't think it's four basis points either.
17:16 Speaker 02 Okay.
17:17 Speaker 03 Four is, I don't know of it being that inexpensive. Four basis points, 0.04 of an expense. That's typically in an ETF I see can be that low or even slightly lower. This involves, an SMA involves a lot of work. There's trading every single day in these things or every single week. I think she's, it's more like 40. So it's a little less than a half a percent. Maybe, I've never heard of one that cheap. Probably more like 40 basis points. But I like it.
17:48 Speaker 02 You like it as an idea?
17:49 Speaker 03 Yeah, I do. I do. I do like direct indexing.
17:51 Speaker 02 Okay. So Christian says, "My wife has a large amount of company stock RSUs and options. We're trying to figure out the most effective way to sell them and reduce our potential tax hit. Who would be the best person to pay a one-time fee for advice on how and when to sell? Would searching NAPFA be the best option for locating a fee-only financial advisor?"
18:13 Speaker 03 This is real, again, I would say this is more about tax. So when you're thinking about RSUs and options, your advisor, a financial advisor, nor a CPA is going to be able to say, "Hey, in six months, this stock's going to be higher or lower."
18:28 Speaker 02 Mm-hmm.
18:29 Speaker 03 So nobody's going to be able to say, "Your particular company's stock is going to be X amounts." So the strategy is less about what the stock does. It's more about timing for exercising these and when, let's say, the RSUs become taxable and managing your overall tax bracket.
18:50 Speaker 03 So rather than a fee-only planner, which you could use, I think a CFP hourly planner could do this, this is more of a CPA. I would be looking at a certified public accountant, a CPA. They work by the hour. That's how CPAs work most of the time. You can find financial planners that are hourly or project-based. There's just not a whole lot of them. So if you go to the Garrett Financial Planning Network and look in, let's say, the state of Georgia, there's only a handful, I could count on one hand, how many people do hourly and project-based only. The vast majority of folks that are fee-only want to have some
19:30 Speaker 03 sort of retainer and they want you to be a client for overtime. So I think in a lot of ways here, you're looking for a CPA here to help you with this as opposed to a financial planner. Both will work. I think CPA even better.
19:46 Speaker 02 Sounds great. Okay, so we're going to take a quick break and when we come back, you're going to talk about the lifestyle habits of the-
19:53 Speaker 03 Lifestyle happiest retirees.
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22:10 Speaker 03 Welcome back to Ask an Advisor. Wes Moss, Krista DiBiase. We're going to lifestyle, right?
22:17 Speaker 02 Yes.
22:17 Speaker 03 You think you're going to be a happy retiree?
22:19 Speaker 02 I hope so, because I've been listening to you for a while and I know, well, I don't want to get into what you're about to talk about, but I think I've heard a lot of these.
22:27 Speaker 03 What age do you think you will stop working?
22:30 Speaker 02 I don't want to ever totally stop working. That's one of the things that I know about myself. And my father was like this too. Like, I know that I won't, I want to always have something. So maybe it'll be something that I'm not really getting paid for, but I need to be on a loose schedule.
22:45 Speaker 03 The media business lends itself to that. It really does. And which goes into the first of the five lifestyle. And so happy retirees have 3.6 core pursuits. What are those? You know Joe Saul Seissai from stacking Benjamins?
23:01 Speaker 02 Yes, of course.
23:03 Speaker 03 He read this a long time ago in one of my books and he came up to me at this financial conference the other day and goes, you know, I love those things that you call them like you're supposed to have like 3.6 of them. They're like super activities. And I said, you're talking about core pursuits, which I wish I had, I wish I'd called them super activities because it's like a cooler way to do it. I'm not going to change because they, because I like the word pursuits. So a core pursuit is a hobby on steroids. It's a super activity like Joe Saul Seissai says. It doesn't matter what they are. It matters that you have a bunch of them. The more of these you have, the more likely you end up
23:46 Speaker 03 in the happy retiree camp. These are things that you will replace your working hours with. You have a lot of hours, 2,000, 2,500 hours a year that you've got to replace once you no longer are working. Part-time work can be one of them. But if it's fun and you're in one in five or one in four in America that actually likes to do what you're doing work-wise.
24:09 Speaker 02 Sure. Or volunteering.
24:10 Speaker 03 Or volunteering is another great example of that. That the more of these core pursuits we have, the more likely we have structure during our day and the more we have different activities to keep us mentally engaged and socially engaged. So there's the in's, walking, biking, hiking, running, jogging, celebrating, the, all the things that we can, the activities, a lot of those are social. And then there's, there's hundreds of other hobbies that people love to do. It doesn't matter what they are. It matters that you're doing them. And the reason I continue to call them core pursuits is that pursuit is in some way related, not perfectly etymologically, but it is in some way related to purpose.
24:55 Speaker 03 And these core pursuits, they're not just hobbies. They become your life purpose. And they may sound trivial, like, oh, you just golf. Well, that could be a real pursuit in your life. Social, athletic, getting outside, staying active, continuing to try to get better at something. I love core pursuits that you could improve in, you get better in. The happiest retirees are curious. You know, curiosity killed the cat. Lack of curiosity kills the retiree. So I want people to give some real street cred to the whatever core pursuits or hobbies on steroids that you have, they matter.
25:39 Speaker 03 And they can be the framework and the fabric of your future self. So don't discount them. Oh, I just like, it's just jogging. It's just walking with friends. No, that's, it could be a big part of your life. So the more of these are better. Unhappy retirees, by the way, have 1.9, less than two of these. You gotta have a bunch of these core pursuits. So that's number one. We figured out how to pay for it earlier. We've got our financial metrics. This is the lifestyle of those who end up in the happy retiree camp. Kids, you don't have to have kids to be a happy retiree, but those who do have kids that are independent, we want independent children. And Yes, we do. And this is, this is something that surprised me through our research, not surprising, but you're putting
26:24 Speaker 03 a number on this. If you live next to, or near, within driving distance, 50% of your children, of your adult children, you're two to five times more likely to end up in the happy retiree camp. We want to live near our independent children. We don't want our kids to be living with us. We want them near us. So if we're living in the same town, in the same metro area, in the same state where it's close enough that it's, it's drivable.
26:55 Speaker 03 There's a huge boost in the propensity to end up in the happy retiree camp if we live near our kids, independent kids. This is an interesting one I researched about marriage and divorce. And happy retirees get one marriage mulligan, meaning that there's no decline in retirement happiness if somebody's been divorced. Now, you get into three and four divorces and then you've got maybe I do see half of these levels come down, but there is no, no problem with a divorce. One, I call that one marriage mulligan. And it's not a requirement, being married in retirement, certainly not a requirement to end up in
27:37 Speaker 03 the happy retiree camp. But those who are married are four and a half more times likely to end up in the happy retiree camp. Marriage, partnership, socialization, which brings me to number four, connections, close connections. When I did research in this, I didn't ask about friends. I described these people as close connections, someone that you could call, that you would call on a really bad day, or a really good day. Sometimes it's hard if you have really good news. It's not, maybe sometimes that's even harder to share, right? So happy retiree, we've, over the course of the last 30 years in America, our,
28:16 Speaker 03 our social networks have actually shrunk, gotten smaller. You know, bigger social media, smaller real life. And so this is one where there is no plateau effect. Again, one of the things that I talk about in my books is that I believe there's a certain point that we need to get to. Money does buy happiness, a certain amount, but then it levels off. So we get diminishing marginal returns with new monies past a certain point. Doesn't work that way for close social connections. So the more is better, more is better, more is better. And happy retirees average almost four close connections in their life.
28:57 Speaker 03 Unhappy retirees, two or less, something we can all work on and be cognizant of, because I think a lot of socialization about the recognition that you've got to stay engaged and put a little work in to stay connected with folks. By the way, this is somewhat a social, this is maybe called a bonus one. Well, I'm going to skip to this and I'll give one quick bonus. Believe and do good. Happy retirees volunteer. They're charitably inclined. One of my favorite interviews I did for the Retire Sooner podcast was with Mitch Albom, who wrote Tuesdays with Maury. He says, "Giving is a living," and happy retirees do that.
29:36 Speaker 03 They do that. They belong to one organized social group. Sometimes that's church, sometimes it's synagogue, or it's maybe just a Wednesday night brew house group that you're part of, but it's an organized social group. Believe and do good. My favorite one, and I don't know if anybody's going to argue with me on this one, is that there's a happiness multiplier effect, and it comes down to travel, but it comes down to travel with friends or close connections.
30:09 Speaker 02 Love that.
30:10 Speaker 03 Those retirees who travel at least once a year with a group or with friends, not just alone, not just with your spouse, but with a group, other folks, are two and a half, two and a half more times likely to be in a happy retiree camp.
30:25 Speaker 02 I believe it.
30:25 Speaker 03 So book a trip with a friend, or with a bunch of them. It's good for happiness levels.
30:32 Speaker 02 All right. Well, we'll go to some questions now for you, Wes. Edward in Pennsylvania says, "What are your thoughts on TSP allocation during accumulation and drawdown phases? Also, what do you think about its target date funds? I worry a little about long-term success with the target funds during drawdown with only a 30-70 equity bond allocation in retirement. Thanks for your help."
30:53 Speaker 03 Edward, you're right. The TSP life cycle funds, which are just like target date funds, I think they're called life cycle with TSP. They are, they're still just a combination of the underlying funds. Remember, the underlying funds are pretty straightforward. There's five of them. CSI, which is common stock, which is something like the S and P 500, S, small cap, I international, FI, or FG, fixed income, which is a broad-based...
31:21 Speaker 03 Fixed income account you can access and G is the government one. So it's just treasuries. It's really, that's it. It's five funds, but they're super low cost and they really blanket, they give you the investment landscape. The problem with the lifecycle funds is exactly what Edward is worried about here is I think they get super, they get overly weighted towards bonds and fixed income overly quickly. I mean, retirement needs to be, this goes back to the, we talked, one of our, I don't know what episode it's been here on Ask an Advisor, but I know I've brought up the 4% plus rule.
31:59 Speaker 02 Oh, yeah. Both times.
32:00 Speaker 03 And the 4% plus rule, there's a lot to it, but one of the components is that, again, this is about, hey, I'm not going to run out of money. 4% plus inflation each year for the rest of retirement. It's predicated on having at least 50 to 70% in equities in your, in your balance portfolio. So if you're using one of these lifecycle funds or target date funds that swings really significantly to 70% in, in bonds for a huge chunk of your retirement, it's actually breaking one of the core tenets of the 4% rule. So what do you do instead, Edward? I would say make your own allocation, use the CSI, FG, use those five funds, make up your own allocation.
32:43 Speaker 03 And if you're super conservative and you don't like a lot of movement, then sure, use the fixed income funds. But for most people, it doesn't necessarily keep up with inflation like we need.
32:54 Speaker 02 This question came in from Ron in North Carolina. I'm recently retired and manage my own large portfolio of mostly growth stocks, growth ETFs, a few value ETFs and a few bond ETFs. After years of aggressively investing in quality, large cap growth stocks, I am still about 80% invested in these stocks. I'm trying to downshift to a third or second gear and diversify more into bond and value ETFs, but I'm finding it very difficult and taxing from an IRS perspective. The IRS.
33:22 Speaker 03 No pun intended, Ron, for taxing.
33:25 Speaker 02 The IRS and Social Security Administration consider my capital gains as income. So my annual tax bill is quite large and have also raised my Medicare premium four times. I am also making required minimum distributions on an IRA. I feel like I need a specific plan to downshift and diversify to minimize my taxes and keep my Medicare premiums reasonable. What do you recommend people in my situation do?
33:50 Speaker 03 Ron, this is a good problem to have. He's saying taxing as it's taxing in some ways to him mentally because he wants to have a more conservative portfolio, but it's also because he's stuck with taxes. This goes back to the unrealized gain-loss tab. So whether you're a fiduciary swap Vanguard, you're able to look at your investments on a per gain basis. You can sort by what is the biggest gain and the smallest gain. It sounds like most of everything he has, 80% is in equities or value, growth stocks, value stocks, they've done well over time. And so he feels a little trapped because to rebalance, he's got to sell some of his stocks that are most, almost all gains to buy something else that's a little more conservative.
34:34 Speaker 03 He said downshift. So there is no easy way to do this, except for look in that realized gain-loss tab and pick some of the equity positions that may be relatively flat, or maybe they have a much smaller gain and use those, those are your targets to sell to buy some of the other areas you'd like to invest in. And that's number one. Number two, if everything is at a gain, you've held these for years and years and years, then the only other way around this is, and there's no way around it, but to do it really gradually. So maybe you take 1% or 2% of the portfolio, you go from 80% down to 78, and the next year you go to 76 and 74, et cetera.
35:17 Speaker 03 So over the course of the next couple of years, you can downshift from 80% stocks down to 70 or even 65%. So it's really going to be gradual. But Ron's right, you've got to be careful every time you have these capital gains. I think what he's saying is that they're going to hit your IRMA, your Medicare premium. So a couple thousand dollars may not be an issue, but if you go, you've got to look up the IRMA limits and the categories and know what your income is, and then that'll get in a given year, and then know how much room that gives you for creating some long-term capital gain. That'll also be taxable, but it also can kick you up higher in Medicare premiums.
35:58 Speaker 03 So know how much room is left in the tax lock, how much you can fill it up with income without spilling over to the next tax category. So really, it sounds like the only way to really do this for Ron is to do it gradually, but that can still work over the next couple of years.
36:14 Speaker 02 All right, well, that does it for today's Ask an Advisor episode. We'll be back tomorrow with a new Clark episode. Thank you so much, Wes.
36:23 Speaker 03 Thank you for loving being here. Thank you.
36:25 Speaker 02 Remember, you can ask Wes or Clark a question at Clark.com/ask, and we hope you have a great rest of your day. Thanks for tuning in.
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