03.25.25 Ask An Advisor With Wes Moss

Are you seeing unsettling headlines about 2025? You're not alone. Reports show a surge in retirement account trading, with a staggering 40% of people moving to stable value funds. Fiduciary financial advisor Wes Moss explains why "Tariff Terror" is driving these decisions – and the incredible reason why we should navigate uncertainty with confidence. Also, with market dips and volatility on the rise, how can you protect your portfolio? Wes introduces the "Dry Powder Principle” -- your strategic reserve of safety assets. Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the March 18, 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 Advertisers: Credit Karma Learn more about your ad choices. Visit megaphone.fm/adchoices

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• 1:13Speaker 02

  Welcome back to Ask an Advisor. I'm Krista Debius.

• 1:17Speaker 03

  Wes Moss. Hello.

• 1:18Speaker 02

  We're so happy to be with you again today, going deeper on all things investing. And I'm really excited about today's show, Wes, because you have a couple of awesome topics. So you're going to talk about how we can save. There's a secret to saving more for retirement. Is that right?

• 1:32Speaker 03

  There is. There's psychological tricks.

• 1:35Speaker 02

  I like that. And then you're also going to talk about risk tolerance.

• 1:39Speaker 03

  And how that changes over time.

• 1:40Speaker 02

  Okay.

• 1:41Speaker 03

  And I found a new, I found a really cool study on that. So it prompted me to think it's an important topic.

• 1:47Speaker 02

  Okay, yeah, especially these days.

• 1:48Speaker 03

  Especially these days and risk tolerance. So let's start by, I would call this, think about your future self for a minute.

• 1:56Speaker 02

  All right.

• 1:57Speaker 03

  This is a secret. We got this from some researchers from Indiana University and UCLA researchers. So we've got some Hoosiers and we've got some Bruins. And these two universities have put a lot... A lot of work into figuring out how people can save more for the future. When you're asked to think about the future, 80% of us start by thinking about today. We immediately start thinking about today and it's really hard to visualize into the future. But if we can do that, it might really help us saving. There's another piece of this and psychologists call this the going home effect. Think about your last trip to, I was thinking I had to drive to a sporting event for one of my kids.

• 2:41Speaker 03

  Had to look up the high school in the map. I'd never been there. It was, you know, let's call it an hour away and I'm driving up to this North Georgia county that I hadn't been to, hadn't been to this high school and it took about an hour and it just felt like it took forever to get there. And it wasn't just because of Atlanta traffic. It did, it took an hour. But do you ever notice though, then when you come home, it feels like it feels like a quicker drive?

• 3:10Speaker 02

  Of course, yep.

• 3:11Speaker 03

  Way quicker.

• 3:12Speaker 02

  Yeah.

• 3:12Speaker 03

  It's a way quicker drive. And again, I'm not saying because there was less traffic. It still took about the same amount of time, but we know as we're going home. And that psychological component gives us less uncertainty. I know where we are and I know where I am and I know, so that's called the going home effect. And when we have a little bit more certainty, we think clearer, we're calmer, we have less worry about it and we act more rationally. We know that we're scared and we're uncertain and we're frazzled. We don't make great decisions. That's just life. It's not just in finance. It's just life in general. So how do we trick ourselves into saving more?

• 3:52Speaker 03

  Because the problem with savings is it's not ever really that urgent and it's so far into the future. It's like going to this high school that was, it's really, really far away. I, it's hard to think about it. So that's one of the biggest challenges that we all face when it comes to saving retirements. Way out into the future, do I really have to do all this work today? It's not going to pay off for 30, 40 years. It's hard for Americans to do that. So. These researchers from UCLA or from UCLA and Indiana University did a whole bunch of different experiments and different tricks and different prompts on trying to see what helped move the meter in convincing people or helping people save a little bit more.

• 4:36Speaker 03

  And one of their experiments, they stumbled across this and they did this with the customers of a Swedish fintech company. So it was, I don't know the name of the company, but it was a company that again, think of a brokerage company or a retirement planning company. To this participant base, 6,700 people, every time it was time for them to either look at their percentage savings or put money away, they asked them this question. They said, picture your future self in 2035. And now adjust what you think you should be saving for your future self. What are you going

• 5:16Speaker 03

  to be doing in 10 years? That moved the participants on average to save 14% more in long-term assets. 14%. That's like a game-changing number into long-term investment assets as opposed to cash. So they went through all these ways of trying to trick yourself to do this and this is what worked. I see this in the Harvard study. It's called the retire without regrets. The retirees that were the happiest drew out a colored pencil, a little roadmap of what they're going to be doing in five years or two years or three years. And the ones that did a better, more comprehensive job on that ended up being happier in retirement. So this kind of comes back to trying to crystallize or visualize. And this is, I think, where any sort of financial planning,

• 6:01Speaker 03

  whether it's at the dinner table with you and your spouse, whether it's at the financial advisor, the act of sitting down and talking about it for an hour, hour and a half and drawing something out is so powerful. It sounds like, well, what's the big deal? I'm going to draw out what I'm going to do in the future. I'm going to ask myself what my future self should be doing. Well, Look, athletes have coaches and they do a lot of visualization because it works. And we can do the same thing when it comes to retirement. So if you take this research, newly discovered research, is that visualization of what you want to be doing in 10 years really helps up the ante when it comes to how much you're going to save. And I think it's important,

• 6:41Speaker 03

  you're not going to some crazy sweat camp retreat to figure this out. This is just dinner table, across the desk, visualize, and it helps.

• 6:51Speaker 02

  I love that. Okay. Javier in Colorado has a question going back to last week's dry powder.

• 6:57Speaker 03

  Would you say Javier, maybe?

• 7:00Speaker 02

  Javier. Sure. I hope I'm pronouncing it correctly. Javier. A question for Wes, please provide a strategy for three years of dry powder. Right now I have my money in Schwab Value Advantage Money Investor Shares. I'm 71 years old and retired. I love the podcast and enjoyed your book, What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life. Thanks.

• 7:23Speaker 03

  Thank you, Javier. Dry powder can be a lot of different categories. It doesn't have to just be cash, cash that's sitting there with no interest. It can of course be CD, anything that is relatively safe compared to stocks and real estate and other assets that have prices move a bunch. And it doesn't mean prices don't move some, but bonds really fill this category and there's a bunch of versions of that. So of course CDs, of course, cash, money markets count, high quality US bonds that are not super long-term. So dry powder doesn't count super long-term bonds because they can move a lot in price. So I would say intermediate to some extent counts, but really intermediate to shorter-term bonds,

• 8:06Speaker 03

  government, municipal, corporate bonds. What doesn't count would be high-yield bonds or junk bonds. They act a little bit more like stocks. So think of your dry powder can have a lot of different components to it. And to me, that all counts. Remember, we want three years' worth of the spending need beyond your guaranteed income sources. And you can really round that out with some diversification.

• 8:28Speaker 02

  Great. This came in from Jeff in Georgia. I'm 44 and I'm currently and consistently putting 15% into my company's 403B. I just happened to notice when I was looking at the account that they offer a Roth 403B in addition to the traditional 403B. I've been putting money into this 403B for almost 21 years. It's the first company I was hired with after leaving the Navy in 2004. Just looking around online, I've figured out that the Roth is post-tax and traditional and pre-tax, but I don't know if I should put money into the Roth 403B. Should I put half of what I'm currently putting into the Roth 403B and the other half in traditional? Should I put the full 15% into the Roth and transition away from

• 9:11Speaker 02

  the traditional, or just keep everything going to the traditional? My company matches up to 3% of what I put in, but they also have a pension that I'm enrolled and invested in. Wow, lucky you. A lot of people don't have that anymore. I'm just trying to figure out what kind of retirement account would be best. Any sort of insight would be greatly appreciated.

• 9:30Speaker 03

  Jeff, to Roth or not to Roth? To Roth 401K or not Roth 401K, regular 401K? That is a tough question, and I don't know if there's a perfect answer here. What I would tell you is, first of all, he's been saving. Jeff, you've been doing 15% for 21 years. In my opinion, that's 90% of the battle. The other 10% of the battle is figuring out which account is better. Now, you already have a ton. It sounds like you already probably have a lot in the regular 403B. The choice of a Roth or not a regular, there's advantages and disadvantages to both. So you can argue either, but primarily, the lower the tax bracket you're in today, the more likely it's better to do the Roth IRA, the Roth 401K. If you're

• 10:15Speaker 03

  in the 37% bracket and you're making a ton of money right now, you get a big pre-tax advantage by using the regular 401K, lowers your overall tax rate. In fact, if you do it, Bankrate has a calculator on this.

• 10:27Speaker 02

  It's a 403B, but I know that doesn't matter.

• 10:29Speaker 03

  Right. 403B, 401K, Roth 403B, 401K. They're somewhat synonymous, very, very similar. But if you were to go and look at a calculator where you're trying to figure out the answer to this question, if you check the box that is, I'm doing a regular 401K, 403B, and I'm getting the deduction, but I don't get the tax-free nature of it eventually when I'm starting to withdraw money. If you check the box that says you take the what you've saved by using the regular 401k, because remember this is pre-tax dollars and you invest that as well, your net almost always, from what I can tell in these calculators, you always, you should mostly always win,

• 11:14Speaker 03

  and that's the better strategy. But very rarely do folks say, oh, I'm saving $6,000 because I'm lowering my taxes by using the 401k. I'm going to take that $6,000 and invest it, and that's going to grow over time. So that's one way I would look at it is if you are doing this and you're quote saving money, you want to reinvest the technically the savings as well. But if you're in a high bracket, and again, 32%, 37%, and when in retirement, you're only going to be in the 15% bracket, then I lean towards keeping traditional 403B contributions. But if you're in a moderate, call it the 24% bracket,

• 11:56Speaker 03

  and even lower makes this even better, then I would do the Roth.

• 12:01Speaker 02

  It also can kind of force you, if you're not someone who's going to like take the extra money and invest it, if you were going to put $6,000 in and you can still put $6,000 in post-tax, you're kind of forcing yourself to actually save more money because you're paying the taxes on it and you're still, you know.

• 12:16Speaker 03

  It's another cool way to think about the Roth. But it really is, it's all about taxes today versus tax tomorrow. And for most people, the Roth retirement plan option does make a lot of sense unless you're in a super high bracket. He also has a ton of money he's already saved in the regular. So if you want to start to try to get that balanced, your Roth is here and your regular savings, your traditional is here, I would lean towards probably doing more in the Roth, and you could always split it.

• 12:46Speaker 02

  Sure. Steve in Minnesota wrote in with this one for you, Wes. Please help me wrap my brain around two different percent rules that you have discussed. First, as a retiree, you can withdraw about 4% of their saved funds each year and typically have the funds last all of their retirement. Second is the evaluating lump sum pension buyout versus annual pension, and the rule that if the annual pension is greater than 6% of the lump sum, then take the pension. If a pension wants the lump sum to last all of their retirement, then why is the decision point not at 4%?

• 13:21Speaker 03

  So he's saying. Wait a minute, why do you use six for one rule and four for another?

• 13:27Speaker 02

  Right.

• 13:28Speaker 03

  Man, nobody's ever asked me that before. So I guess I have to have an answer for that. I think there's a very simple explanation here is that the 4% rule, and this gets missed, the 4% rule accounts for inflation, the 6% rule doesn't.

• 13:46Speaker 02

  Okay.

• 13:47Speaker 03

  The 4% rule is about your own money and making it last. The 6% rule is not your money, it's the pension promising to pay you, and you have to be alive to get it. That's why those two numbers are so different, and they're different. But the calculations and how we came up with these, they're taking into account some majorly different variables. One, it's your own money, and it counts for raising the amount every year for inflation. Pensions, by and large, most pensions, not all, but by and large, most pensions do not give you a COLA. It's a set amount, it doesn't go up. And again, it's not your money, and you gotta be alive and/or your spouse to get it.

• 14:28Speaker 03

  That's why those are two completely different scenarios and why one's four and one's six. That's a cool question.

• 14:35Speaker 02

  You have an answer for everything, I love it. Okay, and coming up next, we're going to talk about risk tolerance. So, and historical risk tolerance.

• 14:44Speaker 03

  Changes over time.

• 14:45Speaker 02

  Yes.

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• 16:59Speaker 03

  Welcome back to Ask an Advisor. Wes Moss along with Krista DeBias. You have a big lineup of questions coming.

• 17:06Speaker 02

  I do. We're getting lots of questions again. If you want to ask a question, go to Clark.com/ask and you can pose your question to Wes or to Clark.

• 17:15Speaker 03

  And they're getting more complicated.

• 17:17Speaker 02

  They do get complicated.

• 17:18Speaker 03

  They're getting more complicated.

• 17:19Speaker 02

  Right. Because you do go into more complicated investing topics.

• 17:23Speaker 03

  We got like a head, some of these are like a half a page.

• 17:26Speaker 02

  Yes. Which please don't send us a half a page if you can avoid it.

• 17:31Speaker 03

  I'm fine with it, but it is, that's probably the max. I'd say that's the limit.

• 17:35Speaker 02

  Yeah.

• 17:35Speaker 03

  Max limit. But I'm happy to do it. And the more in-depth and the more numbers that we get, I think that the more we can drill in on actually helping someone. But we wanted to go into changing risk tolerance.

• 17:48Speaker 02

  Right, right.

• 17:49Speaker 03

  Again, how do we come up with these topics? It's usually something I read or a chart. I love finding new charts and it's

• 17:56Speaker 02

  You love a chart.

• 17:57Speaker 03

  I love a chart and a table, a heat map. Oh, one of this, we actually have a, I want to talk about a heat map too. But this was a JP Morgan publication, I believe. And they had this really interesting chart and they used different colors for the percentage of how likely or how self-identified you were aggressive to conservative on a time continuum. So if I'm 30, what do most people put? Are they aggressive, moderately aggressive, moderate, moderately conservative, conservative, all the way out to age, call it 80 or 90. And, and it's an interesting shift according to the research, meaning that, and I want to frame this in thinking, I think I call this from being bold

• 18:43Speaker 03

  to being balanced. And what we see empirically is that people shift their risk tolerance over time. I think that makes sense. You start out more aggressive and then you migrate to becoming more conservative. What's a little bit interesting is that in the 30-year-old category, there's actually a fairly big chunk of folks that are in the conservative group. Even though you're in your 30s and you've got a forever time horizon, there's still a higher amount of folks that are in the conservative leaning group, conservative, safe investments, than there are people in their 40s. And it's because I think you're starting out, even though we'd say start when you're 20. Most people aren't, don't start investing until they're in their 30s and/or 40s. So you do tend

• 19:26Speaker 03

  to see there's a bigger contingency or a higher propensity when you're starting out. To be a little more cautious, hey, I haven't been investing for a long time, so I want to keep money just in cash. I get it. Then we see, again empirically, that risk tolerance peaks at around age 55. So you see the most people that identify themselves as aggressive, moderately aggressive, moderate investors, and the fewest in the conservative camp. And then by around age Call it 55, you start seeing the conservative group start to really jump. And of course, that keeps going in 60s, 70s and 80s as people add more balance or more conservative

• 20:09Speaker 03

  pieces or ingredients to the overall investment pie. So that is what the data says, and that's what I see in real life. It's natural as you get closer to retirement, you start thinking, wait a minute, I'm not going to get a paycheck anymore. So I really can't have my entire portfolio go down by 20 or 30% if I'm all totally invested in stocks. So that begs the question of kind of where do we want to be as a guideline per age? Now, I will say this, even though I love rules of thumb, there is no one size fits all on what your allocation should be for your age. If you're 30 or 40 or 50, there's no exact, there's nothing to tell you what works. Now, the way I think about this is I go back over market history and look at economic data,

• 20:54Speaker 03

  market data, think about some of the really important financial planning rules of thumb. And then I think about just behavioral finance and investment behavior. And I think if you look through that lens, you can start to get an indication of approximately where most people should be at a certain age. And this is how I would look at it. I think if you are in your twenties through forties, that's early career still, super early career, and you sell in super long time horizon, that's the time that you want to be arguably 90% in stocks, 100% in stocks, provided you still have some emergency money, some, some liquid money to get to.

• 21:38Speaker 03

  So that phase, very simply, is mostly in equities. This is where corrections, bear markets, dips, you name it, that's your friend during that period of time. You want the market to dip because your dollar, you should be investing regularly, AKA dollar cost averaging, you're smoothing out your purchase price over time. Then you get to, I would call it the next phase, Krista, the 40s to the 60s. That's where you want to start to. Enter into balance. Now, this may be 25, 30% into safety assets, maybe more depend, again, depending on your risk tolerance, but you still want to have the majority of your

• 22:18Speaker 03

  investments in longer term assets that can keep up or beat inflation over time. I think it's when you get to your 60s, you get in your 60s, that's when you really want even more balance, call it 40% in bonds potentially. And then of course, your 70s, that's when that number increases. Now, there's a caveat to that is the financial planning rule of thumb. This is the heat map I was talking about. G P Morgan also did a heat map that showed the different withdrawal rates from 1% withdrawal rate, all the way up to a 10% withdrawal rate, and paired that with different allocations from all in bonds or cash, all in stocks,

• 23:00Speaker 03

  and then everywhere in between, to try to figure out what gave you the highest probability of never running out of money. Well, of course, the 1% withdrawal rate didn't matter. Right. You never run out of money. You're leaving everything invested. 2%, same thing. 3%, same thing. But of course, 10% and 9% and 8% and 7%. Almost in every scenario, people run out of money with a high confidence of running out of money. It's the opposite of what we want. We want a high confidence of never running out of money. So on the heat map, of course, the 1%, 2%, 3% withdrawal rate, that's in the green. Then you got the red and the high withdrawal rate. So where do you find some sort of happy medium? And this is goes back

• 23:42Speaker 03

  to the concept of we wouldn't be able to max out our withdrawals without running out of money. And that goes to the 4% line. That's where the heat map kind of has some different coloring, but with still a really high probability not running out. 90 to 95% of the time, money doesn't run out for 35 years. That's what they did in the study. And that's with the balanced half stock, half bond portfolio. So as we change our risk tolerance over time and we get more I think for most folks, if you're really having to withdraw money, you don't want to go beyond 50% in bonds in most cases. And I think that that gets lost in the idea of you look at some of these target date funds.

• 24:25Speaker 03

  And when somebody's in retirement or a few years into retirement, it's 60, 70% in bonds. I just think that gets too conservative. It doesn't apply to the 4% rule. You need to have that 50% in equities in order to be able to keep up with inflation.

• 24:40Speaker 02

  Okay. All right, I'm going to give you some questions now. This came in from Bonnie in Ohio. I'm 64, retired. I retired at 62 and I have a net pension of $3,900. My husband will be 68 in October. He retired in 2024 and he's trying not to take social security until he is 70. Social security would be 3363 at this time and at 70, it'd be over $4,000. We have just paid off our mortgage and we have $500,000 in equity and $800,000 combined in our 401ks. We have a car payment of $550 at just over 5% four years to go. That is our only bill. We lived on savings for his first year of retirement.

• 25:24Speaker 02

  We have a HELOC at 6.5%. It's $100,000 of available credit. My thinking is to live off the HELOC until my husband can take social security and let the 401k continue to grow. I have everything in a target retirement fund 2030. I know I can access those funds if I need to. I don't think we'll need additional support once he starts collecting social security and I'll collect my own at 70 as well. I feel pretty good about those numbers since it puts us in the same income to expense ratio as when we worked. So, does using the HELOC make better sense than pulling from the 401k?

• 26:00Speaker 03

  Hmm. Bonnie, that's a good one. A lot of variables. I'm writing these down.

• 26:05Speaker 02

  Lot of numbers.

• 26:05Speaker 03

  $3,900 in pension, husband's 68. He wants to wait two years to get to his full social at age 70. Mortgage paid off, $800,000 in savings, $550 car payment.

• 26:20Speaker 03

  What I can deduce here, I'm deducting that they don't need that much money because the HELOC's 100. That could bridge the gap for two years. That means she probably has less than 50,000 of a need. That's important here because first of all, it's an interesting idea, right? I mean, if you said the HELOC was 12% interest, it's no way, Bonnie, that's crazy. Don't use the HELOC. Just judiciously pull money out of the 401k. Don't even mess with the HELOC. It's in kind of that that heat map zone. It's not red hot, bad. It's not green, let's go. It's kind of somewhere in the middle, 6.8%, I think. So it's a high rate, but it's not crazy high. It intuitively does make a little bit of sense to utilize that, bridge the gap, because

• 27:05Speaker 03

  what is she doing? She's keeping her tax rate low. Because pulling money from the HELOC, that doesn't go towards your tax rate. So you'd be at an ultra-low tax rate. At the same time, the problem, I think, Bonnie, this is just my opinion, I think it comes on the back end. Okay, we got to pay the HELOC off. Mortgage is already paid off. Now you get 100-plus thousand dollars in HELOC. Well, if you want to get rid of that six, almost 7% interest, where's it going to come from? Well, yes, you're going to be getting some social security coming in, but that's a bigger bill to get rid of it quickly. So the money's got to come out of the 401k anyway. And if you do that in a big chunk, then you have a lot of income

• 27:47Speaker 03

  in one year and your tax bracket goes up and you pay a lot more in taxes. So it makes sense intuitively, and I think if it was a small amount, I could see how that would work and it wouldn't impact your taxes. But so I love, I really love that idea. But I don't love when the payback phase comes because I feel like it could get you into a tax vortex of pulling a bunch of money out of the retirement account. So I would lean towards not doing it and just judiciously taking just what you need out of the 401k. If it's only 40 or 50,000 dollars, and the only other income is the pension right now.

• 28:23Speaker 03

  I think Bonnie, you and your husband are still in a pretty low tax bracket. So it's not a ton of taxes. The rate shouldn't be that high anyway. So that's how I would play this is just be, just take just the bare minimum you need out of the 401k to supplement. I don't think I'd mess around with the HELOC, but I think it's a, it's actually a really smart idea.

• 28:42Speaker 02

  Okay. This is from Caroline in South Carolina. I'm concerned about my IRA accounts, which are held at the same brokerage as my checking account. Is my retirement at risk if a scammer gets hold of my bank account information? Should I move my retirement funds to a different brokerage than my checking?

• 28:59Speaker 03

  Caroline, look, we are all worried about this and rightfully so. I mean, there are thousands or millions of cyber attacks literally every single day. And the big, any bank, and particularly the large brokerage firms have entire cybersecurity teams that are monitoring every transaction, try to minimize this and cut it down to as low as humanly possible. I don't see any reason that having brokerage firm A with a bank account at the bank division of brokerage firm A is any less safe than having brokerage firm B and a bank account at brokerage firm A. I don't see any, I don't think you need to do it.

• 29:41Speaker 03

  I'm totally fine to have an investment account at one place and also have a bank account at another. It really goes back to the cyber vigilance. It's two factor authentication. It's checking your accounts on a regular basis to make sure nothing's happening that's out of the ordinary and, and strong passwords. I think if you can really continue to do that, that to me is much more effective and more important than trying to spread out bank here, brokerage here, bank here, brokerage here. Totally fine to have a couple of different bank accounts. I get that. I've got more than one bank account, more than one banking institution, but. I would just say you don't necessarily need, I don't feel the need to do that from a cyber perspective.

• 30:22Speaker 02

  Okay, and this came in from Gail in Vermont. Question for Wes, can you explain the benefits, if any, of investing substantially in dividend stocks and ETFs as opposed to the more commonly recommended equity index funds and ETFs, target date funds, et cetera. My YouTube feed seems to be full of channels promoting too good to be true monthly income streams from this investment strategy. What am I missing? Thank you for your very informative weekly appearance. I really appreciate it.

• 30:50Speaker 03

  Gail in Vermont, the too good to be true, you didn't give me a number on that, but I would just expect that's 10% a year income is probably an ad she saw and that is too good to be true.

• 31:03Speaker 02

  And then you get more because you're in the algorithm.

• 31:05Speaker 03

  Oh, and she's even, so Gail's been looking around for, for income producing stocks. The other thing I probably should have mentioned in the, the thought around the changing risk tolerance, remember the stock continuum is really, it's a giant continuum, meaning you've got some stocks that are aggressive and have super volatile, high beta stocks, and then you've got low beta stocks that are, and that goes into this conversation around dividends. If you're in an index fund, cap weighted, then if you look at the S and P 500 right now, it paid collectively, the dividend on the whole market is about 1.3%. And that's important because dividends are, in order to call something a dividend stock, it's

• 31:46Speaker 03

  all relative, right? If the S and P 500 has dividend at 2.5%, and over time, I mean, if you go back to 1980, the dividend on the S and P 500 was 5.5%. So what was a dividend stock? Well, it should, dividend stock then was a 7% or 8% yielder. It's all relative. Today, you've got a ton of big companies that dominate the S and P 500 that are technology based, that are not known to pay a whole lot in dividends. If you look at the tech sector, they pay less than 1% on average. So a lot of those companies pay zero in dividends. So to have a dividend stock, it's relative. I would say a dividend stock to call, and this is a subjective, there's not a, there's not a perfect black and white answer or definition

• 32:28Speaker 03

  here, but for me, a dividend stock in today's world, it has to be at least 2% and that's pretty low. And you can easily find that you look at the utility sector, a lot of those companies are closer to three, the oil sector or energy sector, it's well over three. Those are dividend stocks in the world we live in today. So to have anything beyond, call it 4% or 4.5% as a dividend, you're running into a little, a lot more risk. And there are lots of things that pay 7, 8, 9, 10%. Where are you going to likely suffer there is on the value side. So remember, we're all after TR equals GI. Total return is growth plus income.

• 33:09Speaker 03

  So if you have a huge number on the income side, then there's probably something wrong with the growth side. I think when you're looking for dividends, then that's why I want to look at kind of a Goldilocks zone. Not too low, so one or two, 0 to 2% is probably a little low to call it a dividend stock. You're probably looking at 2 and 1/4 to 4%. That to me is the Goldilocks zone for companies that pay out steady cash flow. And I think that that becomes more and more attractive to folks as we change our risk tolerance over time. Note that dividend paying companies are usually more mature, they're slower growing. So they have a lower G and a bigger I.

• 33:51Speaker 03

  A younger technology company that's growing gangbusters will have a bigger potential for G growth. And they're not paying out any dividends because they're still a newer company and all the money's going back to reinvest for growth. So as we go from the continuum of high growth, no income to a more mature, slower growth, higher income, that continuum can be attractive as we get closer to retirement. Again, these are styles of investing. There's no perfect answer, right or wrong. It, I think a lot of this goes back to our risk tolerance. As I get into retirement, I'm a little less okay with huge swings in my stock portfolio.

• 34:32Speaker 03

  One way to do that is reduce stocks. Number two is change and modify the kind of stock. And big indexes are typically going to be weighted towards the big players right now. Big players in the market are big sized companies that dominate are much more weighted towards tech, high growth, low dividend, low income. So just note that as you do some of this planning, but it always goes back to if there's anything that's 10% rate of return in income, that's something that usually doesn't last.

• 35:02Speaker 02

  Yeah, Gail was right on with her. It's probably too good to be true.

• 35:05Speaker 03

  Gail Vermont is right on the money. Thank you, Gail.

• 35:08Speaker 02

  Thank you, everyone, for your excellent questions. Keep them coming, Clark.com/ask. And we will be back next week. We'll be back tomorrow with a new episode of The Clark Howard Show. Have a great rest of your day.