04.22.25 Ask An Advisor With Wes Moss

Scared to Spend? Don't Cancel Plans and #1 Investment Benchmark Worried about the market and your upcoming vacation? Fiduciary financial advisor Wes Moss explains why you shouldn't cancel your beach trip due to market volatility. Learn a rational approach to navigating bear markets and protecting your life plans. Also, Wes reveals the surprising investment benchmark everyone is really watching (and why it might be misleading you!). Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the April 22, 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

• 0:00Speaker 00

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• 1:04Speaker 02

  Welcome to Ask an Advisor. We here at Team Clark talk with fiduciary financial advisor Wes Moss about the economy, investing, how to save for your future.

• 1:16Speaker 03

  An awful lot to be talking about when it comes to the economy, our futures, our retirement futures. Krista, thanks for having me, of course.

• 1:23Speaker 02

  Yes, it's always great to talk with you, Wes. Thank you so much to everybody who tunes in every week and watches this on YouTube. If you want to submit a question to Wes or to Clark, who will be back tomorrow, you can go to Clark.com/ask. And today, we're going to talk about something that I'm curious about. Should we cancel our beach trip this summer? If we're planning on going on one because of the stock market? And if there's a bear market, what do we do? Also, later on, what is the most popular benchmark that most of us look at when it comes to our investments? And I think you're going to tell us if that is actually the right one that we should be looking at.

• 1:59Speaker 03

  That's a good way to put it. Right. So benchmarks, what are we judging our portfolio against or with? So we do want to start with, and this really hits close to home for me. And this is, I think, a very real life situation. Well, it is a real life situation. It's why I'm bringing it here, because I think... I would not doubt that as we approach the, I guess it's travel season all year long. I mean, but particularly in the summer, when you may want to go somewhere, you may want to take your family, your kids, or maybe you're going as the grandparent and you're taking your kids and then their kids. And maybe because we live in the Southeast, a popular destination is Florida. It's a pretty big state. There's a beach to the east, there's a beach to the west, and there's

• 2:44Speaker 03

  the Gulf. So there's plenty of places to go in Florida. So it's a popular destination. So I want to talk about two kind of polar opposite things. One, the cost of a family beach trip. So that's fun to think about. I kind of love planning these things. And then the opposite of that, which is kind of the crux of the issue here is navigating bear markets. There's been a lot of turmoil this year and really scary headlines and stock markets have behaved erratically, I would say at best. You've got this bungee cord stock market. I don't even know if we could call it in the roller coaster phase because it's not even roller coaster yet. It's still in the shock phase. And that is scary for folks. Even if you've done a ton of planning,

• 3:28Speaker 03

  even if you have a balanced portfolio, even if you're diversified, even if you have your dry powder and you've got a really solid plan, there's something about an environment. And I think back during the pandemic where everything just was really scary and the stock market, and if you're in retirement, has these convulsions and so does your portfolio. And you take that, the worry about your money, which is a top worry in the world. I don't know if it's, I think, running out of money, I think is the number one fear in the world, right? Beyond dying, beyond any, beyond public speaking. It is widely known that fear of running out of money is one of the things that we think about, really no matter how much we have, because there's always

• 4:09Speaker 03

  these worries about what happens if we get into a worst case scenario? What happens if XYZ problem of the day or the year doesn't get worked out? What happens if the economy stays shut down and the pandemic doesn't go away? What happens if tariffs in this case, which is a conversation? That'll dominate a lot of 2025. They don't get resolved and things get even worse. And that goes, it'll take a sound, rational plan and it can kind of just bury it. And the call I got this week was from someone, let's call it late seventies. Their favorite thing in the world, and they've been doing this for the last 10 years in retirement, is taking their kids, their adult, three adult kids and three grandkids to the beach.

• 4:55Speaker 03

  And once in a while, get a photo from like a big, a fish photo from them. You get a photo with a grandchild in a boat or maybe on the beach. And it's beautiful water. The Florida beaches are gorgeous water. You pull out a big fish, like that's kind of an amazing photo, right? And I think a lot of us live for that as parents. And I think particularly as grandparents, we live for these moments. We live with these trips. And the conversation with this couple was, hey, what happens if just everything goes wrong? And our portfolio goes down 50%? And then they said, and we're canceling our beach trip with the family. I was like, wait a minute, you're can't, this is like, you've been doing this for the last almost decade.

• 5:40Speaker 03

  And now you're going to cancel the trip. Well, yeah, we don't feel like we can spend the money because the economy seems as though it's so terrible and there's no end in sight. And our portfolio is down and we don't, we just feel like we can't spend the money. And by the way, that fear and the uncertainty that we all live through all the time. And it's, I would say it's accentuated in 2025. That's what happens, by the way. That's what happens in an economy. That's what does cause a recession. It's really the fear of, wait a minute, things aren't going to get any better. So we're going to not spend. And when you don't spend, then things get worse. So I'm trying to do my part here. And first out of the gate, I said, I'm going to get to this, but you do not want to cancel your beach trip.

• 6:24Speaker 03

  This is really, I would say, this is you and Clark. Your expertise is telling people what they can spend and how to do a really, do an amazing beach trip without spending a whole lot of money. Now, you can go down to Florida and spend, if you want, you can spend $50,000 for a week. I mean, these houses can go for $3,000. I know you're shaking.

• 6:41Speaker 02

  That's insane.

• 6:41Speaker 03

  $3,000 a night, you can spend, you can have a private chef and you can spend a ton of money. These folks are not doing that. These folks are in the $5,000 camp.

• 6:51Speaker 02

  Okay.

• 6:52Speaker 03

  Five, maybe a little more, let's call it between five and 10. Still a lot of money, but normal family doing a big 14-person beach trip. It's not that inexpensive, but we're talking five to seven. And I said, you absolutely do not need to cancel the beach trip. And here's why, and this is, this I think applies, anybody listening, thinking about, hey, we were thinking about doing this, maybe it's not a beach trip, but it's something with a family. It's an expenditure that you could live without, but you really would rather go ahead and do it. So if, imagine you have a balanced portfolio and I said, let's just talk about going down 50% in your investments. When you already have 50% in dry powder and high safety,

• 7:36Speaker 03

  the only way to go down 50% would be for the stock market to go down 100%. And that's just not going to happen. If you've got stability in half of your portfolio, the world would literally have to end. And then they said, well, at that point, we can't go on a beach trip anyway.

• 7:54Speaker 02

  Right, and I would say like, that's probably the actual biggest fear, that or death. I would put those in front, yeah.

• 8:00Speaker 03

  For, for a balanced, safe, diversified portfolio to go down 50%, that means that everything would just have to go away. And, and I said, look, that's not happening. I know we're in a period of uncertainty, it's a little scary, but the world is not ending, and if it does, there's no beach to go to anyway. So we don't want to cancel our life plans because the stock market is erratic today. And as long as you have balance and safety, the only way for that to go away is for kind of the world to go away, the whole world order to go away. Bear markets last on average. So bull markets last over 1,000 days. Bear markets last about 200, 250 days. So if we

• 8:42Speaker 03

  can get through these shorter, relatively shorter, yet painful periods of time, we're going to get back to a point when markets are rising and everyone's feeling like, oh, of course we can go on a beach trip. But we're in one of those periods of time. We're in a, we touched down 20%. Are we in a, we're technically not officially at a bear market, but I'll call it a bear market. Certainly with all the uncertainty swirling around the world, when it comes to what's happening out of Washington, how does that impact the global economy and the US economy? As long as you have a plan and you're balanced, you should not be canceling your plans for life. And the response I got back from this couple later that night was, wow, I cannot believe we were thinking about canceling the beach trip.

• 9:26Speaker 02

  Oh, that's good.

• 9:27Speaker 03

  Thank you for kind of walking me through, looking at the world in a slightly more rational way. The world is not ending and we're not canceling the beach trip. And I don't want families to do that either.

• 9:39Speaker 02

  Okay. We'll go to some questions that came in for you, Wes. This one was from Bill in North Carolina. He says, I'm 60 years old. I am planning on retiring in two weeks. I have $630,000 in my TSP after the drop in the market.

• 9:53Speaker 03

  How much?

• 9:54Speaker 02

  $630,000.

• 9:55Speaker 03

  Okay.

• 9:56Speaker 02

  I will receive about $2,000 from my pension per month. My question is, my plan is to draw approximately $2,000 a month from my TSP to make money a little easier until my house and car are paid off, which is probably five or six years. Then I wouldn't plan on taking any money from my TSP until RMDs. Is this a sound plan? Or will I possibly be creating financial hardship on, down the road for myself? I'm in excellent health and have a father still alive at 97. My wife will continue to work for seven to eight more years and will also receive a smaller pension. I don't plan on taking social security until 67 or 70.

• 10:36Speaker 03

  Social Security is 67 or 70. Bill, you're worried about being a super early retiree. That's what he's worried about because you're 60, you're thinking, wait a minute, if I'm not going to live to 97, I've got almost 40 years. So you really have to be careful about this and arguably I get the worry, hey, I've got to draw $2,000 a month right out of the gate. I'm only 60. The short answer is no, I do not think he's putting himself in peril. And here's why. 2,000 times 12 is 24K a year. 24K a year divided by 360 is a little less than 4%. It's 3.8, 3.9%. So you're turning on, Bill, the 4% rule today. And it really shouldn't matter that you're a little extra young because this is a rule

• 11:21Speaker 03

  that's designed to have money last with an ultra-high probability of lasting 35-plus years. But here's what else is happening. His mortgage, which is $47, $50,000 left, that's probably a thousand bucks a month. Car payment, call it 500 bucks a month. That's going to all go away in five to seven years. So he's going to get back about 1,500 bucks a month in spending and he's taking two. So I think he's really, Bill, you're only going to have to probably use the, with this withdrawal rule, which isn't even touching 4%. So anything lower is even more conservative and great. And I think that works, then the pressure will be off even more in only five years.

• 12:02Speaker 03

  This 4% plus rule, I call it, rule of thumb, is meant to last 35 years. So I don't see how you would put your overall, provided the TSB account is balanced and it's got some fundamental, you've got at least 50% in equities, that's the rule of thumb. And then obviously stability for the other piece of it. But I don't see how doing this for five to seven years, even until you take social security, which would be seven to 10 years. I think you're fine doing that. The cool thing about what Bill's doing is he's layering and thinking about his retirement timeline and when different income streams start to come in. And that is really one of the most fundamentally important ways to do financial

• 12:46Speaker 03

  planning. You know, when your income streams come in and you know how much you're going to have to withdraw from the portfolio until you get to that point, income goes up, spending goes down. And Bill, I think you're in a great spot. At least that's my take.

• 13:00Speaker 02

  And with great genes, clearly.

• 13:01Speaker 03

  I'd say I'll take that.

• 13:03Speaker 02

  Todd in Florida says, hello Wes, I have a brokerage account that was up until recently managed by an advisor. It has a mix of ETFs and mutual funds, mostly in equities, but I want to move to a simpler three fund approach. Since this is a taxable account and I can't sell and then buy without incurring some taxes, what do you suggest I do with this account to rebalance? I have a similar issue in my Roth IRA, but I believe I'm able to buy and sell and rebalance within the account without incurring any taxes.

• 13:33Speaker 03

  Todd, a couple of things. One, you're totally right on the Roth or an IRA or 401k, anything that's tax sheltered, tax deferred, tax free, like a Roth. A Roth is really tax deferred and tax free, as long as you're following the conversion rules or the contribution rules. But you should have no worry rebalancing within the Roth. That's no problem, no big deal. You can buy, sell, and you're not worried about having to pay capital gains. On the taxable account, one thing we've never talked about here so far in the last year, Krista, would be the wash sale rule, Todd. The wash sale rule just says if you're selling something at a loss, you can't turn around the next day and immediately buy it back just so you

• 14:17Speaker 03

  can bank the loss. Remember, we've had a lot of questions around direct investing. And the reason direct investing, one of the main areas that makes it attractive is tax loss harvesting. You can do the same thing on your own. So if you've got this equity portfolio, maybe you have something at a loss, if you sell it, but you still want to own it so that you're just banking a loss to offset another gain, you just can't buy the The IRS says it's the same or substantially similar. So if you have stock XYZ, it's at a $10,000 loss, you still want to own it. You can't just sell it, take the loss and buy back the next day. It's called, you have to wait at least 30 days. Otherwise it triggers a wash sale rule. So just a thought around when you're doing some of your rebalancing.

• 15:02Speaker 03

  Secondly, this is where you want to bring out your unrealized gain-loss tab. The unrealized gain-loss tab shows you how much each position is either up. And if it's mostly stocks, it's probably up on most of these. If you've held them for, let's call it the last five years. Or maybe you have some that are flat to down. The ones that are flat to down, that's where you can start to sell without having to worry about taxes. If they're flat or lower. And that'll help you start the rebalancing. The problem, if you end up with big gains in a lot of different ETFs or funds, and if you sell them just to rebalance, you better really not like those funds. Because you're automatically triggering taxes.

• 15:46Speaker 03

  And even if they're long-term capital gain, you're talking about 15%. If you're in a higher income bracket, it can be over 20%. So you immediately are knocking 20% off the pie if you're doing that. So you really want to avoid that unless you're determined to find another fund as a replacement. How do you get around this if you do have a bunch of gains? Rebalance with your new contributions. So add to some of these other areas when you're putting new money in that you otherwise would like to own. That's one way of getting to the funds you would like, you would like to be in, without having to sell the ones that'll create a taxable gain.

• 16:23Speaker 02

  Okay. Chuck in Massachusetts wrote this. I'm a 33-year-old teacher paying into a pension. My wife and I also max out our Roth IRAs each year. Our Roth IRAs are with Fidelity and we invest in the zero funds, which have no fees. One-third large cap, one-third small cap, and one-third international. We have a high risk tolerance, especially because I plan to have a pension. Our goals are to have high diversification and earn maximum Long-term growth. Two questions. One, given our goals, should we consider any changes to our allocation? And two, we are decades from retirement, but how many years from retirement should someone with a 100% stock allocation begin to dial back the risk?

• 17:07Speaker 03

  This question from Chuck is for anybody listening that has a pension. You can look at this a couple of ways. If you have a pension, it's almost your bond. It's almost your safety side of your overall, even though it's a monthly income. I like to almost do the math in reverse. If you have a pension of $2,000 a month, $24,000 a year, what would that equate to in say a pot of money that you could draw the same $2,000 per year? It's almost a half a million dollars. So technically Chuck, you, anybody, anyone, teachers,

• 17:47Speaker 03

  municipal workers, federal workers that have pensions, you can look at that pension as a huge part of your dry powder. Now, it's not totally the same because you can't just take a huge chunk out, but it is ultra safe and steady for the, really for the, should be for the rest of your life. And if you have a survivor benefit off from it, your spouse as well. So he's right to, Chuck is right to think, I've already got the safe stuff covered. And you're super young in his early 30s and he has an aggressive risk tolerance. So I don't see any problem for someone in that situation to be 100% stocks. I like a third, a third, a third, a third large, a third small cap and a third international. And I don't see any, any problem with that, with what Chuck has told me.

• 18:33Speaker 03

  Caveat, and we had a question a couple of weeks ago here on the show of somebody who is 60, call it 65. They've been pretty aggressive and they got to retirement and they're still 100% in stocks. And then we had a 20% market correction. And when they said, wait a minute, now I gotta, Wes, should I be working longer? It's maybe you need, so you do want to avoid that trap. So for most people, even for Chuck, that's got this nice pension that you could count as your dry powder safety. It's similar. Still, within five years of stopping work, you want to start getting the portfolio balanced by then. If you want to take a more gradual approach to it, do 1% or 2% a year for the 10 years leading up to retirement

• 19:18Speaker 03

  to make sure you're not caught at 100% in stocks the day you retire.

• 19:21Speaker 02

  Great. All right. Well, next we're talking benchmarks.

• 19:24Speaker 03

  What do you think the most popular investment benchmark is for investors?

• 19:31Speaker 02

  All right. Can't wait to hear about it. We'll be right back.

• 19:35Speaker 00

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• 20:05Speaker 04

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• 20:35Speaker 03

  Welcome back to Ask an Advisor. I'm Wes Moss, along with Krista DeBias. And what is the most popular benchmark? When I say benchmark, I mean, when we're looking at our investments, you've got the S and P 500, the Russell 3000, the EFA, the International Index, the ACQ XUS, the Aggregate Bond Index. I mean, they're all important. But what is the most popular, do you think?

• 21:00Speaker 02

  Okay, I do not know the answer to this. So when you were saying benchmark, I was thinking if people are looking at their own investments, that what they really look at first is probably year-to-date returns, whether they're up or down.

• 21:12Speaker 03

  That's a good one. So it's a little bit of a trick question here is that when I say popular, I mean what people are looking at. I'm not talking about hedge funds or mutual funds.

• 21:21Speaker 02

  I would think S and P 500.

• 21:22Speaker 03

  If I were to venture a guess, what would a mutual fund use? They're trying to usually beat the S and P 500. Or the bond fund, they're trying to beat the aggregate bond index. But the reality is for most investors, and the reason I'm bringing this up is I think there's a giant disconnect of what's happening in the world right now, is your own high watermark. Your own high watermark is what everyone looks at. So it's not year-to-date, which is better than looking at your high watermark. Again, year-to-date doesn't really tell us a lot if it's like January 2nd.

• 22:00Speaker 02

  You know what? That makes sense. I actually am guilty of that. I do that. I'm like, oh, I was at this, you know, six months ago.

• 22:07Speaker 03

  Humans, and it's completely human to do. I think I'd probably do the same thing. Where what do you remember? You don't remember a trough. You don't remember when things are steadily going up. You remember the max your portfolio has ever been.

• 22:22Speaker 02

  That's so true.

• 22:24Speaker 03

  That's the most popular benchmark in investing. Well, I'm down 6%. I'm down. Well, wait a minute. And the reason I wanted to bring this up, Krista, is that here we are in a pretty tumultuous year, stock market, roller coaster, bungee cord, up and down. And then going back to the worry around, I've got, hey, I've got to cancel all my plans for the year and not spend any money because of tariffs and the economy. There's just this general sense of fear and uncertainty that's higher than normal.

• 22:57Speaker 03

  Well, what does that do? It brings this lens to your worldview is, wait a minute, things are really bad. And then you look at your portfolio and you look at your benchmark, which is your high watermark and you say, wait a minute, I'm down from the high watermark. This is, this is terrible. My investments must be doing terrible. Then I think about why that's so wrong is that if you go back over the last year, and I've had this conversation with families I've worked with over and over and over again. Well, how do you think you've done over the last year? Well, the answer is usually pretty good because if you look at the S and P 500, even though it's down from its all time high, it's still up about 6% over the last year.

• 23:40Speaker 03

  Aggregate bond index, again, another benchmark to look at. The total bond market index, a Barclays aggregate bond index, up around 5, 5 and a half percent on the year. So if you have a balanced portfolio, guess what? You're probably up four to six, maybe 7% on, over the past year, not year to date, but over the past 12 months. And when, it's funny, when I'll have these conversations and somebody thinks everything's going terrible and it's, the world is bad and my portfolio has to be, and they, wait a minute. Oh, we're up over the last year? And that changes a perspective.

• 24:16Speaker 02

  It makes sense. Like, I guess it's like, it reminds me of, maybe this isn't the best analogy, but Price is Right, remember the mountain climber thing where the mountain climber go up and up? So if you're going up and down, up and down, but you're still overall going up, you just don't want to fall off the cliff, like, and then you lose.

• 24:31Speaker 03

  So, so we think about the benchmark to look at, there's a little bit of a trick question. Benchmarks are really looking at different indices, S and P 500, Russell 3000, international, et cetera, bond indexes. But really, most people are looking at their own personal amounts, their own high watermark. And it's important, particularly, and it really hit me, is that there is, right now, I'm seeing a big disconnect on people thinking things are really bad, when really, over the past year, it's been a pretty okay year. I would say it's not amazing, but still, okay. And that, that is the lesson here is that when we're looking at our returns or looking at our retirement portfolio, the further out we go.

• 25:14Speaker 03

  The more rational we can behave and looking over the past year is infinitely better than looking at the high watermark to where you are today. Because if you think about this, you're, you're almost always going to be down from your high watermark, unless you check your portfolio on the particular day the market happens to make an all time high in the history of the world. So you're always 99% of the time, you're down a little bit from your high watermark. And that's just maybe to your prices, right? Mountain climber analogy, but more is better. So one year is good, three years is better, five years is better. And then 10 years would be even a better benchmark to look at to see how your investments are doing. And I think that's just the lesson, the takeaway.

• 25:57Speaker 03

  If you think things are terrible, take a look at how you've done over the past full year. Take a look at how you've done over the past five years as an investor. Take a look at the last 10 years. And I think that's a better, more accurate way to get, to get some perspective around investing. I think it really works and helps us through these tougher, tougher market environments.

• 26:18Speaker 02

  Okay, we'll go to questions now. This one came in from Joni in Georgia. I'm 65 and I've been saving all of my social security for a little over a year. I will continue to save until I'm no longer able to work. Currently I live comfortably off of less than $20,000 a year in income. My monthly social security is not great, but it allows me to have accessible savings, something I've never had before. And I would like to use the savings once I retire to supplement my monthly social security amount. What's the best way to grow my savings short term? That's four to five years. I do understand that my social security would have continued to grow if I had not taken it, but that train has left the station and there is no going back now.

• 26:57Speaker 03

  I love Joni here. This is good. Joni, the short answer is sure, you're right. Your social security could have been growing at six to 7% a year. Remember it grows at about 8% a year. If you wait till you're from your full retirement age to 70. She's maybe a little bit before that at age 65. So Joni, you're still not your full FRA, but you're right. The horse has left the barn, the train has left the station, the ship has left the port. It doesn't matter. She's already started. But when we're talking about social security, there's often, and rightly so, the question around maximization. How do I max? How do I get the most social security? Which totally makes sense.

• 27:39Speaker 03

  But when it comes to your social security, our social security personally, for our overall planning, it's really about optimizing it. And this is such a good example of someone who took social security for a lot of different reasons. Joni, you've never had a cash cushion. Guess what? Now you do. That is potentially much more powerful for her mental state around peace of mind than a slightly higher payment if she had waited several more years. So Joni, I like the way you're doing this. It's a cash cushion. What do you do with it? It's a pretty short horizon, four to five years. So you could go two ways with this. One, you could consider just a good old fashioned money market. Right now, those yields are around 4%.

• 28:24Speaker 03

  Even if you're in a government money market. I was checking CD rates the other day. You can find banks with four and slightly higher CD rates. But a lot of the bigger banks are less than that. So I almost like the money market. The other, I would say this is a step up in overall risk. But if you're going to use this money over time, like a retiree would pulling from the portfolio, you may want to consider some sort of balance, a half stock, half bond, highly diversified portfolio with that kind of balance. Because really, the horizon for you, Joni, it's really not just four to five years. It's really the rest of retirement. So I would look at maybe a balanced approach. Or to stay super conservative, just a money market over the next several years.

• 29:09Speaker 03

  But Joni is optimizing, which in my, in a lot of cases, my opinion, better than just purely maximizing.

• 29:18Speaker 02

  All right. This came in from Wayne in New Hampshire. Is the equity in your home taken into account when calculating your 4% withdrawal in retirement? Thanks for all your great advice.

• 29:29Speaker 03

  Short answer is no. No, Wayne, it is not. When you can't, can't live in retirement, you can't take shingles off the roof to Kroger and pay for groceries. So you can have all the equity in the world. You can have a $2 million house paid for, zero money in your investment account, and things are looking pretty rough. And of course, you go get a loan, but there's a, the reality here is that 4% rate of withdrawal rule does not include the equity in your home. One of the happy retiree formulas is to not have a mortgage, but that's in addition to having

• 30:10Speaker 03

  multiple streams of income and call this the, depending on how you're looking at it, 750,000 to a million and a quarter of liquid assets. Now, Wayne, on the other hand, I would say there's a huge however and a huge but here is that your home equity does matter and it can play a huge role in your overall planning. I was meeting with a family this past week that had a couple rental houses up on a lake and a lot of equity in the primary home, no equity in one of the houses in the lake and a fair amount in one of the other ones. And he's having to take a little bit more than the 4%. He doesn't like it. It feels uncomfortable. He feels a little imbalanced.

• 30:51Speaker 03

  But his plan over the next couple of years is to say, look, I don't need all of these properties and a couple of them have some real equity. So I'm going to sell one. I'm going to unlock the equity and then that goes into my liquid amount and all of a sudden now the percentages work out on the withdrawal rates. So A, you can think about just selling, in this case, moving to another one of your properties. If you don't have another property, downsizing. So if you have a ton of equity in a house, then it stands to reason that you could go to a less expensive house, take some of that home equity that goes into the liquid bucket, that provides the income you're looking for. So the short answer is no, it doesn't count, but it absolutely counts all at the same time.

• 31:33Speaker 02

  Okay. Dawn in New York says I have approximately $200,000 in a public employer 457B.

• 31:39Speaker 03

  Hold on, is this Dawn in New York?

• 31:41Speaker 02

  200,000.

• 31:42Speaker 03

  200K.

• 31:43Speaker 02

  457B.

• 31:44Speaker 03

  457B.

• 31:45Speaker 02

  The money is tax deferred. I contribute 17% of my salary. Recently, instead of tax deferred, I'm pouring current 457B payroll deductions into a Roth IRA. I'm 63 and want to retire at 65. Would you recommend moving some of the $200,000 to a Roth IRA, or is it too late for that? I'm worried about the taxes I will pay when I start making withdrawals.

• 32:10Speaker 03

  So Dawn, your 200, it's in a regular 457, which, which is like, is very similar to 403V, 401K.

• 32:21Speaker 03

  From my understanding, most of these plans will allow you to do the conversion. Again, we all have to go check and you never know exactly the provisions in the plan document because everyone's 401K plan, even the may or may not turn on some of these perks, levers, switches. So you, you obviously need to check with the plan, but a lot of these plans do allow this. I think you can do it. How do you do it? You're 63 already. You're still earning money. You're also a teacher or government employee.

• 32:51Speaker 02

  Yeah, public employer.

• 32:52Speaker 03

  Public, public employer. I would assume she's going to have a pension, which means that you're going to be in a pretty high tax bracket in the future as well, or potentially. And these conversions are always about timing when it comes to your tax bracket. So if you're in a high bracket today and you're going to be a low bracket when you're in retirement, if you have no pension, then usually the Roth conversion, particularly in your 60s and older, in my opinion, doesn't usually make a lot of sense.

• 33:24Speaker 03

  However, there may be some time, Dawn, in the next couple of years where your income is lower, where you've stopped working and you haven't turned on your pension, you haven't turned on your social security just yet, or maybe it's only a year or so where your income is low. That might be a good year to convert some of that. So the lower your income year, the more you could convert from retirement to Roth, because either way, you've got to pay the taxes. So if you're going to do this within the plan, and let's say you choose even a manageable number, let's say it's $10,000, $20,000, $30,000 to convert, you don't want to pay that out of your retirement money. So you still want to have your cash beyond that in order to pay those taxes. And I think that's just

• 34:08Speaker 03

  an important consideration, is that you've got to have some of the outside money to pay those taxes. What does that do? That also drains your after-tax money, which to me is high on the value chain, retirement money, taxable money, or after-tax money, and then the Roth. So you're having to spend some of that to get the money into the Roth. So I would just be careful about it, but it's always about taxes today. If you're in a really high bracket today, in a low bracket in the future, then Roth doesn't make sense. If that's the inverse, and you're in a lower bracket today and a higher in the future, then paying the taxes at a lower rate today to do the conversion does make sense.

• 34:44Speaker 02

  Okay. Well, thank you so much, Wes. That does it for us today.

• 34:47Speaker 03

  Wrap already, just like that?

• 34:49Speaker 02

  We're done. We're done. We'll see you next week.

• 34:51Speaker 03

  Send in your questions.

• 34:52Speaker 02

  Yes, please.

• 34:52Speaker 03

  Send us your questions. I love these. I love helping.

• 34:55Speaker 02

  Clark.com/ask. Thanks, everybody. Have a great day.