Pod Insights The Clark Howard Podcast 03.10.26 Ask An Advisor With Wes Moss About this episode Should You Dump U. S. Stocks for International? & Top Retirement Number To Watch in 2026 With international stocks outperforming the S&P 500 recently, many investors are asking the same question: Is it time to pivot overseas? Before you overhaul your portfolio, learn why you might already have more international exposure than you think. Also, Wes revisits the most important metric for your financial peace of mind in 2026: The Rich Ratio. Retirement isn't about the total size of your nest egg; it’s about the "margin" between what you have and what you need. We explain how to calculate your ratio in under 60 seconds and why "financial richness" is often achieved more quickly by lowering your "needs"—specifically by tackling "big rocks" like your mortgage. Whether your ratio is currently above or below 1.0, this simple math will provide a clear roadmap for your retirement security. Mentioned on the show: A Better Way To Think About Your Net Worth Backdoor Roth IRA: How High Earners Can Still Contribute Are You Richer Than You Think? Your "Rich Ratio" Could Tell You Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the March 10, 2026, 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. Let us know what you think in the comments! Learn more about Wes: BOOKS BY WES MOSS Wes Moss, CFP® Wes Moss - Clark.com Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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0:50 Speaker 03 Welcome to Ask an Advisor, this week's show. I'm very excited about Wes. We've got some good questions for you. Krista Devias, we're with Wes Moss.
0:58 Speaker 04 Ah, you're Krista Devias, and I am Wes Moss, and it's, I'm excited that you're excited to be here.
1:02 Speaker 03 I am, because first of all, the topics you're talking about, the first topic, a lot of questions come in about this, international stocks versus domestic stocks. Is it time for us to load up on international stocks? You're going to answer that question for us, and then you're going to answer some of the questions that came in from the listeners and viewers of this podcast. And you're also going to talk about the one retirement number that still matters this year, and I don't know what that is, so I'm excited to hear about that.
1:30 Speaker 04 It's a rule of thumb ratio that is super important.
1:33 Speaker 03 Okay, awesome.
1:34 Speaker 04 Most of this is prompted by real life questions and real life concerns that I hear about, whether I'm watching the financial media or getting feedback because all the questions we get, the awesome questions we get here that you all send in.
1:49 Speaker 03 And Curious Krista wants to know this, too. I really do.
1:53 Speaker 04 Curious Krista, good. I love that you're starting to use that a little bit, because the questions are just, they're always making us think here on the show, so I love it, and we appreciate them, and we appreciate you listening. And this comes from, not a direct question, but I can start to feel as tides are changing by the mentions of certain things that are happening in the news. And one recently is the mention of international, international, international.
2:22 Speaker 04 And part of the reason I am getting more and more questions about that, and really, when someone asks about, hey, how much do I have in international? I'd like to figure that out. They're really asking, shouldn't I have more international? And the reason is because over the past year, international stocks have done really, really well. Now, they're definitely playing catch up over the last couple of years, but over the last year, the S and P 500 is up, let's say roughly 16% and international stocks, just a broad international ETF is 36%. There's a big difference, 20% win or 20% gap when it comes to international.
3:05 Speaker 04 And investors are starting to ask, hey, am I underweight international? Should I be shifting more to overseas? Is this the start of a new global investment regime? So it's certainly an important question to ask because if you think about it, inside your 401k plan, you think about the choices, you've got US, large cap and small and mid, and then you've got international. And usually you don't, you may have international options that are large, small growth value, but a lot of 401k plans are just an international index. So it is one of a few important choices. But just a couple of points of caution is
3:45 Speaker 04 that we do have what I would consider, there is a very pronounced behavioral idea when it comes to investing that's called recency bias. It kind of says what it means, which is we think very quickly what has just done well, or pretty recently, is this going to continue to do well? We're great, we humans are so good at extrapolating. We are the best extrapolators. If something's going up by two per year, we think it's going to go up by two for every year. If something's outperforming by 20% a year, our brains are saying, well, it's going, isn't it going to continue? Of course it's going to continue. I want to make sure people don't get overly excited about international because of the recency of the rates of return. Leadership and reversion to the mean.
4:32 Speaker 04 Happens in markets and it's one of the few immutable rules around markets is that when you have one place that's led for too long, you have another place that starts to catch up. This last year is probably a good example of that. Small cap US stocks have done really well this year and have played catch up to large cap, which has been winning for a lot of years. It's a somewhat of a reversion of the mean. International stocks have done well relative to US, but US has kind of crushed international stocks over the past three years and five years. So there's just some catch up happening here. And this goes back to why asset allocation is important. We don't know when that leadership necessarily turns, but if you look back over the course of economic and market history,
5:15 Speaker 04 if an asset class is averaged 10% a year, but it's only averaged 4% a year for the last few, usually it's due for a catch up. We just don't know when the catch up typically rotates. We're seeing it now though. Then there's the worry, and this is the other fear that pushes these questions about international. Hey, do I need international? Not just because of the rate of return, but because of a story like this, cover a Barron's story fairly recently, "The Reign of the Dollar Is Coming to an End." What's that tell you? It tells you that, well, maybe I shouldn't just be in the US. If our own very dollar has, its reign has come to an end, do I want to be in the US dollar?
5:58 Speaker 04 So then there's some fear pushing us towards international. Now, I do think that we have seen, the gist of this story is that central banks, so think about the Federal Reserve here in the US, but in other countries, the European Central Bank, the Bank of Japan, Swiss Nat, the National Bank, et cetera, they have a huge amount of dollar reserves, US dollars mostly in treasuries. There's this thought that they've been dumping US treasuries to buy gold. That's not true. They have just been adding less and they've, the article used this, they kind of intimated, US central banks have kind of been quietly
6:40 Speaker 04 quitting US dollar. So they're not just throwing it out and getting rid of it, just they're not adding, they're letting bonds mature and they're not buying as many treasuries. So they're reducing their dollar reserves at least a little bit and the US dollar is down relative to the other six major currencies by about 8% over the past 12 months. So there has been a shift. But it's not as though there's some global panic or collapse and every bank is getting out of the US dollar for other currencies because the US dollar is still, and this is why I think a really important way to think about the dollar relative to every other currency. Are we going to ever lose our reserve status for the dollar? Think of just the economic machine that is a global economy.
7:23 Speaker 04 It's, it's hard to even know exactly what it, the number is. Let's call it a hundred trillion dollars. It's just gargantuan. The US dollar and other dollar pegged currencies are about 60% of all global commerce. So if you look at all the transactions, money, all, almost everything in the United States, obviously is US dollar. We're a giant part of the global economy. International payments from country to country, the buying countries, buying oil from other countries, 60% of global transactions in a year are, are dollar. Then you've got the euro, which is roughly 15%.
8:05 Speaker 04 Then you've got the Chinese yuan at about 5%. And then you have the Japanese yen at three and the British pound at three, and then everything else is in the low single digits. And by the way, someone asked me the other day about Bitcoin and digital currency. It doesn't even show up as a, it's not even a rounding error. It's a point 001 when it comes to digital currency. So imagine how entrenched and large that system is that, that has been using the dollar. And by the way, I remember 15 years ago, I did a radio story about this and those numbers are almost exactly where they were 15 years ago. I remember thinking, wow, 60, it's just hard to unseat the dollar. And I've been looking at this over the last month.
8:48 Speaker 04 I remember, well, it's really the same as, and I did a story on this 15 years ago. So I'm not worried about the US dollar losing its currency, its reserve currency. Should you load up on international? I think that it should be part of a well diversified asset allocation. Also remember, and this is one of the reasons I've been biased towards US stocks, is that 40% of the revenue generated from S and P 500 companies is from overseas. You have big companies like, as an example, McDonald's, 60% of their revenue is from outside of the United States. Can you think of a more American brand? Apple, over 50% of their revenue outside the US. Intel, over 70%. Nike, over 50%. Procter and Gamble, I think it was a very
9:30 Speaker 04 US-centered company, 55% of revenue outside of the United States. So, think about a company does business, makes a sale, that's 1,000 euros in another country, and then the US dollar weakens and that currency strengthens. When it gets converted back to the United States, what happens? You get more dollars. So, there is a hedge, to some extent, against a declining dollar by owning global or multinational companies. So, before you did your US stocks to try to have a larger portion in non-US domiciled companies, take a look and just see what you own. If you own a bunch of large multinational companies, you're already getting
10:12 Speaker 04 at least a partial hedge against a weakening dollar because of global companies doing business all over the world.
10:19 Speaker 03 Okay. Well, let's take some of the questions that came in through your us. This one's from Gary in Nevada. He says, "I've heard you say that FOMO Freddie will actually trail the market by piling into the prior year's hottest sector or strategy. My question is, have you ever looked at Glad I Missed Out Gladys?" That is, someone who piles into last year's losing sector or strategy. It seems like at a lesser level, that is what I'm doing when I rebalance my portfolio.
10:47 Speaker 04 How cool is that? I love-
10:48 Speaker 03 That was from Gary in Nevada.
10:50 Speaker 04 Gary, nice call, Gary, on Glad I Missed Out Gladys. That's pretty cool. I love that. He's taking this to a whole nother level. Why not? I think it's awesome. And yeah, I hadn't really thought about that, but are there, that's what's happening when you're rebalancing. And anytime you rebalance, what are you really doing? You're selling the asset class that did the best, and you're buying the asset class that did the worst, or did less, say, less well over time. To some extent, if you're a Gladys and you're glad you missed out- This rebalancing almost forces you to buy something that hasn't done quite as well. We've had a lot of themes in the last couple of weeks where we're seeing reversion to the mean.
11:36 Speaker 04 International has lagged and now it's doing better. Small caps have lagged, now it's doing better. It's really easy in a year where your small cap part of your portfolio didn't do all that well, and you just shun it and you don't add to it, you don't rebalance more to it. So that the idea here, Gary, is that rebalancing automatically makes you kind of a glad I missed out Gladys, because then I can now buy more of something that did a little less well than something else, or didn't do, it did poorly, but I still want to own it. And I want to add to that because it may, we may have a reversion of the mean. And that is the whole point of rebalancing. Rebalancing, just think of it in an extreme case. You have, you start retirement at 70% in stocks.
12:21 Speaker 04 You never rebalance. Well, let's say you're seven years before retirement and you really are comfortable only owning about 70% in stocks. And then seven years later, you retire. And now your portfolio is 90% in stocks and you've quietly gotten more and more comfortable with that. It's like you've been a frog boiling in the water. Very slowly though, just the temperature just goes up and up and up and you don't really notice it. And all of a sudden you retire and the water now starts to boil and the stock market goes down by 30%. And you're not 70 anymore and you don't have a hedge of 30% in safety assets. Almost everything's in stocks.
13:02 Speaker 04 So now you've just created, you've been hit by sequence of return risk. And now, when you really need the money and start withdrawing, you've gotten hit because you hadn't been rebalancing. And now you've gotten caught up in the equity storm when really you didn't want to do that to begin with, because you slowly, the temperature rose and you got more and more and more comfortable. Rebalancing, being a glad I missed out gladde and recognizing that rebalance every year can help you avoid it.
13:32 Speaker 03 Steve in Wisconsin says, when retirement statistics are shared, we often hear statements like, the average person has X amount of dollars in their 401k. Isn't that potentially misleading? Many individuals have multiple 401k accounts from different employers and IRAs alongside their 401ks. So, an account level average doesn't necessarily reflect a person's total retirement savings. I'd be much more interested in the average total retirement savings per person, regardless of how many accounts it's spread across. Similarly, we often hear that roughly 40% of the population owns their home outright, which I do. That figure also seems misleading, since it can include corporate owned homes or rental properties. What I'd
14:14 Speaker 03 like to understand is, what percentage of owner occupied, single family homes are owned free and clear? Thanks for all the insight you share. I really appreciate the thoughtful, data-driven discussions.
14:25 Speaker 04 Steve, you're right. Why does it matter if Americans have two, three, four, five? We had a question, I think, last week. Somebody had seven different brokerage firms. So, yeah, it doesn't matter. Those stats are really just for the media. And they're just kind of interesting, I guess. But it's really hard to aggregate. And I've spent a lot of time trying to get to the bottom of these numbers. And the Fed has this survey of consumer finances, and they do a pretty good job. But yeah, the average balance of a retirement plan probably tells us very little. So, you're right. Let me come back to that, though. The quick and easy answer on the homeowner part of this, 40% outright, does the corporately
15:08 Speaker 04 owned mess that number up? Remember, those corporate owned homes are, people are renting those. So, the number of folks that have their mortgage paid off, that own their homes in America, these are humans, individuals, not companies or hedge funds, it's about 40%. So, it is. That number is not skewed by the data of corporate ownership.
15:31 Speaker 04 As far as knowing what Americans really have, you've got to just look at the overall net worth. That's really the number that matters because at some point, your net worth can be either, even if it's not liquid, can be turned into an income stream or be liquidated. So it's really, I think that on a scale of one to 10, your retirement balance in XYZ retirement fund, it's like a four out of 10. Your net worth, when it comes to your finances and getting into a green zone, like I talk about in the retire sooner method. Part one is about the money green zones we want to hit to be able to retire sooner. It's really about your overall net worth and savings
16:15 Speaker 04 and not just in a particular account. Here are the numbers though, for net worth. About one in three households in America have a net worth of 500K or more. About one in five households have a net worth of over 1 million. And again, this is including your property value, which is a huge chunk for a lot of people, your home equity. The top 10% of households in America, that's the 90th percentile, starts at about 1.9 million. Let's call it just shy of two. So to be in the top 10% of households, net worth is just shy of $2 million. Now, the median household net worth, remember, just not taking the average here, just the middle point,
17:00 Speaker 04 is 192,000. That is the middle point of America for a large age range. So those are the numbers. By the way, the top 10%, if you're in the closer retirement age, 55 to 64, is closer to 3 billion. So as we get older, to be in that top 10% of net worth, it's a higher number. But you're right, your net worth is your home equity, it's your savings, your taxable work, which accounts, your retirement accounts, your Roth accounts, any sort of rental assets, commodity, everything minus liabilities, that's what matters.
17:33 Speaker 03 Okay. And then Mike in Ohio sent this one in for you, Wes. My question probably falls into the good problems to have category. I'm in Eligible for both Roth and a deductible traditional IRA. So I've just been maxing out my nondeductible traditional IRA contribution. I was playing with ChatGPT recently and it told me to stop doing this. ChatGPT recommended that I put the money in an ordinary brokerage fund as the tax treatment would be favorable. What are your thoughts? Thanks for all you and your team do.
18:03 Speaker 04 Hey, Mike in Ohio. Thanks for checking in with us here, just us humans here on the Clark Howard Show, Haskins Advisor. Nondeductible IRAs can be fine if you're doing a backdoor Roth. So if you're, if you're putting money into an after-tax IRA or a nondeductible IRA, just to convert it quickly into a Roth, which would be a backdoor Roth conversion, then it is, it is fine. But for the most part, if you're doing nondeductible IRAs, you're just creating a tax problem because you're, you're paying taxes at your rate. Then you're contributing and then you've got to keep track of your nondeductible portion for the rest of your life,
18:48 Speaker 04 which makes your taxes really complicated. And, and that's an issue. The other thing is that you are trading, let's say you're paying 24% in taxes to now have your net amount to then get put into a nondeductible IRA. If you're just saving in a brokerage account, and again, this is about taxes today versus taxes tomorrow. For the vast majority of folks, you're pulling money out of that IRA in a worst case scenario at a 15% tax. Or I'm sorry, out of, out of a brokerage account because it's long-term capital gain, which is super favorable. Your dividends are at long-term capital gain rates,
19:31 Speaker 04 which for a lot of Americans is zero, depending on your income. And for most Americans, it'll, it'll go up into the 15% range. For only a small portion of the, the ultra-high earners, it can go up to the 20% long-term capital gain rate. But we don't want to trade paying taxes at 25, 25%. And then knowing that in a brokerage account, we can be pulling money out at 15. When in retirement, we may be at an ordinary income rate that's a 24%. So there's tax efficiency in a regular brokerage account. There's more simplicity in a brokerage account. And unless you're trying to do a backdoor rod.
20:12 Speaker 04 So I'd say GPT was probably partially right, but I'm glad you checked with us, you're mortals.
20:21 Speaker 03 All right, we're gonna take a quick break. We will be back with more of your questions. And Wes is going to tell us the one retirement number that still really matters this year.
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22:44 Speaker 04 Welcome back to Ask an Advisor. I'm Wes Moss here along with Krista Debiass who is about to dive back into your bag of questions, but before we do that, we're going to talk about the rich ratio. The one retirement number that let's say it still matters in 2026, the world's changed. The AI is shifting the ground under our feet in so many, in so many industries. We had, I think I originally wrote about this back in 2012 and since then we've had a global pandemic. We've had violent bear markets. We've had waves of economic stimulus. We've had austerity, we've inflation, the mag seven tariff tantrum and tremors.
23:28 Speaker 04 And then of course, back to where we are today, the nervousness around the whack a mole market and AI, what it'll do for our future. So it's been a lot, but one thing that has not changed at all is the power of thinking about the rich ratio and really your comfortability around your have in retirement relative to your need in retirement. And if you think about retirement as this long journey and you've got it and you're just going and it's an uphill, it's a slow uphill climb all the way and you've got a backpack on and you start picking up shiny rocks because they look good. You pick up little rocks and you put in the bag, you pick up maybe some bigger rocks because they look, they're awesome and you want to keep them for posterity.
24:09 Speaker 04 The next thing you know, you're way down the line and you've got this heavy backpack on, it's full of rocks and those rocks are spending commitments. Those rocks are maybe debt. Those rocks are assets that create more taxes that you have to pay on. And what does it do? It makes that journey now harder.
24:32 Speaker 04 Relative to having a light backpack heading into retirement and you can either drop some of the rocks and make things light, or you can accept maybe what is a much longer, harder climb. And that's where the rich ratio comes in because it's a very simple way to think about what retirement's going to look like for you, which is have divided by need. And think of that you have is your total monthly net income after taxes. Your need is your monthly spending requirement. And if the rich ratio that you have is above one, I would say you are financially rich. If it's below one, you are financially strained regardless of what of how high the
25:16 Speaker 04 income is. And it works at every income tier. If you earn a million dollars a month, like Curious Krista, you would still be poor if you needed $2 million per month.
25:28 Speaker 03 Sure.
25:29 Speaker 04 You're curious about what it would like to have a million dollars coming in a month though, too.
25:33 Speaker 03 That would be insane.
25:34 Speaker 04 Everything. Everyone's curious about that. You can earn, let's say, six grand a month after taxes and be financially rich if you only need four grand. And I see this all the time. And that's a comfortable human being. It's a comfortable human being. So rich isn't about the income. It's about the margin and the cushion, the safety.
25:52 Speaker 03 That's so. I love that. Rich isn't about the income. It's about the margin.
25:57 Speaker 04 Yeah, it's about the ratio. Well, I think it matters much today in 2026, or maybe even more in a scary, constantly changing world. This has not changed. It's the same. You don't need an enormous algorithm and code through artificial intelligence to figure this out. Tale of two retirees, Tom, he's got a $12,000 a month need, social security 2500 pension of 1500 a month and portfolio of 1.2 million. This guy's pretty wealthy. He needs 12 grand, socials at 2500 pension at 1500 in the portfolio. His income is only eight grand a month. His need is 12. He's $4,000 underwater every single month. It just keeps getting worse and worse and worse. His rich ratio would be 0.67, way under 1%.
26:44 Speaker 04 Lifestyle is outpacing his income structure and that is wealthy? Yeah, he's wealthy, but financially stable? No, not at all. Susan, on the other hand, in 2026 is more intentional, less rocks in her backpack. Monthly need of $4,000. Now, you may say in America, 4,000, well, I did that. Who can, well, if you have no debt whatsoever, then I know many families that live on four or five grand a month. It's not as crazy as it sounds. Social Security coming in at 2,200, a pension of 1,800, a portfolio of 500K. Not nearly as much as Tom, but her ratio or half coming in is 5,600 a month. Her need is four. Rich ratio of 1.42%.
27:29 Speaker 04 She's got cushion and cushion equals a lot of confidence.
27:34 Speaker 03 And comfort.
27:35 Speaker 04 Confident Krista, that's where you are.
27:37 Speaker 03 Cushion is comfort, like you're saying, so their needs are. So I guess the thing to really look at is, is it, are these, all these things, all these rocks really needs or are they wants? And if you can lower your needs, that's going to give you power in life.
27:50 Speaker 04 And that's why one of the financial green zones is getting rid of the mortgage. That's usually a top one or two need because you, once you have mortgage, you need to continue to pay it off. Not only do you need housing, but you, they'll take the house away if you don't do it. So it's getting rid of that is creating, getting rid of one of the largest rocks.
28:09 Speaker 03 Or if you have to make extreme changes, maybe you sell that house and you move to a place that's much more affordable. And that would lower your quote unquote needs, right?
28:18 Speaker 04 Depends on how much equity you have, depends on where mortgage rates are, which by the way, continue to have gotten a little bit better. So there's more to this, but I think we've got to run to questions here. But think about all the complexity in the world and then think about the simplicity of your rich ratio. You could calculate it in probably 30 seconds or a minute. And it'll tell you how much cushion and margin you have.
28:43 Speaker 03 Neil in California sent this question in for you, Wes. I'm a retired firefighter and my pension is $6,100 a month after taxes and medical insurance. It has a 3% COLA. I'm six years old and my wife is 59. If I pass, my wife will continue getting our pension at the same rate. We're debt free and our monthly budget is $1,650. We have about $360,000 in investments and our emergency fund. I have a couple of questions. One, how do we calculate our net worth? And two, what would be the proper way to consider my pension as part of my portfolio and diversification?
29:18 Speaker 04 Firefighter Neil, thank you for your service and your bravery for probably a very long period of time because you have, I can tell you did this for a long time. Because you've got a very serious pension and that's a J T W R S pension.
29:33 Speaker 03 What's that?
29:34 Speaker 04 Joint with rights of survivorship because his wife will get the same amount for her life, even if something happens.
29:41 Speaker 03 That's great.
29:41 Speaker 04 To Neil and a 3% COLA and very likely if Neil worked outside of being a fighter fighter at some point. Or his wife did because of the new changes, getting rid of the WEP, the windfall of elimination provision and the government pension offset. He may be able to get some decent social security too. But I don't know if he even needs it because $6,100 a month. So first of all, the simple answer to your net worth question is just assets minus liabilities. That's it. If your investments are 360 and your home equity or is 360, your net worth is 720. What is missed though, and this is a big variable for you guys, Neil, is the income.
30:23 Speaker 04 Now your income stream doesn't technically count as net worth, but for you, it should count as your net worth because it's tremendous. And think of it this way, and you do need to calculate the size of it if it were an asset. So that you can better figure out your overall asset allocation. And the way to do that is essentially you're choosing a rate of return that you would need to get in order to get $6,100 a month from a bond. So let's just pick 5%. So $6,100 a month times 12 is $73,200 a year. That's what you're getting in income guaranteed for life and it goes up by inflation divided by five or 5%.
31:05 Speaker 04 It would take you 1.46 million in a bond account to generate that 73 grand forever.
31:15 Speaker 03 And actually that's, he said that's after taxes and expenses, right? So.
31:19 Speaker 04 So we're even undercounting.
31:22 Speaker 04 So really you, you already have about a million and a half dollars worth of what I would consider fixed income. So now I would say of you've got your other 3.360,000. So you really have about 1.8, think of it as 1.86 million dollars to consider, 1.8 million dollars to consider of your overall investment pie. So even if you had all 360K in stocks, because you have such a large portion in what I would consider more of a fixed asset, you would only have about 20% in stocks.
32:02 Speaker 04 If that whole 360 was in equities, because the other 80% of your investment pie is really that fixed account or stable income. That's how I would look at this. It would take a net worth of, call it $2 million to be in the position that you're in today. By the way, one thing we just casually skipped over is Neil's rich ratio through the roof because he has 6,100 a month and he only needs 1650.
32:31 Speaker 03 Right.
32:32 Speaker 04 Means everything's paid for.
32:33 Speaker 03 That's awesome.
32:34 Speaker 04 So he's got a rich ratio of like three and a half or four. It's awesome.
32:37 Speaker 03 Okay. Christopher in Oregon says, my wife and I started using a side hustle to save for a vacation house starting in 2019. We've had the money set aside in a savings account that is now down to 3.39%. The fast increase in the price of vacation homes where we were looking, along with the changes in short-term rental laws there, has pretty much put it out of reach. Now we have over a hundred thousand dollars saved and our likelihood of purchasing that vacation home is very slim. We owe $80,000 on our current house at 3.65%.
33:08 Speaker 04 How much, I'm sorry, how much?
33:09 Speaker 03 80,000.
33:10 Speaker 04 80,000.
33:11 Speaker 03 At this point, do you think we should just pay off our current mortgage? Should we just tackle some of it? If the housing market dips where we want to buy, it might be back on the radar, but it seems unlikely. The side hustle isn't making as much, but our regular W2 jobs are fine. I'm a federal worker with 12% going into my TSP, and we both have fully funded Roth IRAs. We have no other debt, about three months of savings, separate from the vacation home account, with a very little likelihood of any reduced income. I don't know the best way to utilize this extra money, and it seems like it's not doing enough in a savings account. Thanks for your valued opinion.
33:47 Speaker 04 Christopher in Oregon. So Plan A was to buy the rental property, and you saved a bunch of money to do it. And now the rental market is out of reach, and you don't want to do that. So now it's Plan B. It's like, okay, what do I do with this money I've saved? So it's kind of a good problem to have. And then you have $80,000 left on the mortgage. My rule of thumb on getting rid of the mortgage is a third or less of your after-tax money, pay off the mortgage. Now, 80 divided by 100 is not a third. It would take 80% of your 100 to do that. So it kind of violates the one-third mortgage payoff rule. But you also said you have three months' worth of emergency savings.
34:30 Speaker 04 You've been funding at 12% the Thrift Savings Plan for a long time. It sounds like you have other savings here, Christopher. It depends on your liquidity. I'd love to see you just pay off the mortgage. You're not going to be displeased by doing that. The other thing here is, I think, I bet you have stable income, because you're in Thrift Savings Plan. So maybe it's a government employee.
34:53 Speaker 03 It is, and he said it's very unlikely that they'll have reduced income in the future.
34:58 Speaker 04 Okay, so you have a really steady income. Your income is more like a bond versus a stock, Christopher. So I would say you could be in the camp where you have a high probability of keeping your job, very stable income. And that would violate my one-third rule, probably. I don't know some of your other after-tax assets. If you have more after-tax assets, non-IRA money, then maybe it makes this even easier. But I guess I would lean towards getting rid of that mortgage. If you're in a position to do it now, worst-case scenario, your home is totally paid off. And if you really had an emergency, how do you get to some money? You could always have a home equity line as a cushion.
35:39 Speaker 04 Which you probably won't ever need. I doubt you'll be upset if you pay it off. Use that money to pay off the mortgage.
35:45 Speaker 03 And then take that mortgage payment every month and put that somewhere.
35:48 Speaker 04 Put it right back in.
35:49 Speaker 03 All right, Timothy, also in Oregon, says, "My 19-year-old daughter has already saved $3,000. She works most of her hours during college summer break, but she doesn't make money every month, so monthly contributions aren't possible. What would be the best investment with Vanguard for her? She already has a Vanguard account established."
36:07 Speaker 04 Timothy, in Oregon, when you're thinking about a young person, they can be all equities. The big firms like a Vanguard or really any of the big brokerage firms, they all have ultra, ultra, ultra-low-cost S and P 500 funds options, and then total stock market options. Both are fine.
36:25 Speaker 03 I have to assume this is a Roth IRA, too, don't you think?
36:28 Speaker 04 Yeah, I think she's-
36:29 Speaker 03 Because of the income.
36:30 Speaker 04 I thought it was Roth. And it's fine that the income is lumpy. Yeah, in a perfect world, we're putting a little bit of money in every single month, but it's still fine to contribute when you get it or when you have it. The consideration for somebody really young like that would just be, do you just do the S and P 500 or do you do a total, total stock market? The S and P 500 is all 100% large cap. A total stock market fund, index fund, is going to be more like 80% ultra-large cap, which means you have another 20% in small and mid, and I like that, particularly for somebody really young. Regardless of what brokerage firm you're with, you're going to have probably those two options.
37:12 Speaker 04 And I would lean more towards total stock market for somebody this young, even more so than the S and P 500, but I think you would be in good shape with either.
37:21 Speaker 03 Good for her for starting so young, too. Well, that's going to do it for us this week on Ask an Advisor. I hope you heard something that made a difference in your life or you can share with someone else you know. We hope you have a great rest of your day, and we will be back with a new episode next week.
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