Pod Insights The Clark Howard Podcast 06.09.26 Ask An Advisor With Wes Moss About this episode Are you on track for a happy retirement? It takes more than just a healthy bank account. In this episode, Wes Moss shares the lifestyle data that separates truly happy retirees from the rest. It all comes down to a "magic number" of core pursuits – the super-activities that keep you moving, socializing, and fulfilled. Then, he dives into the financial side, breaking down the psychological power of dividend investing and how it can bring calm to your retirement portfolio. Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the June 9, 2026, Ask an Advisor episode of the Clark Howard podcast. Submit your questions: WesMoss.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. Visit megaphone.fm/adchoices
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1:16 Speaker 02 Welcome to Ask an Advisor. I'm Krista DeBias, here with Wes Moss.
1:21 Speaker 03 I'm Wes Moss.
1:22 Speaker 02 I'm back.
1:22 Speaker 03 Yeah.
1:23 Speaker 02 I'm back, back, back.
1:24 Speaker 03 So good to have you back.
1:26 Speaker 02 Well, Mallory did an amazing job, so I want to thank her for sure. Everybody loves her, of course.
1:31 Speaker 03 Good, that's good. She'll be excited to hear that. But, you know, it was cool of her to fill in while you were out, and it's great to have you back.
1:38 Speaker 02 Well, thanks. I'm super happy to be back. And I hear that you basically gave birth while I was gone. You've got your book ready, right? It's available, is that right?
1:48 Speaker 03 That's the one way to say it.
1:49 Speaker 02 Didn't it feel like it? I mean, you worked on it forever.
1:51 Speaker 03 Yeah, it did. I did work on it for almost, at least a year and a half.
1:55 Speaker 02 It was funny, somebody made a comment on one of the videos, and he was like, I think it was a guy, I don't remember, the irony of waiting for a book called Retire Sooner to come out, because you can preorder it right now, but you get some bonus stuff, like a workbook and some other stuff, right? If you Pre-order on Amazon?
2:11 Speaker 03 Right. The Retire Sooner Method, which is a green book, you can't miss it, is available now on Amazon. And if you get it before the September 1 date, there are four different things that you are bonuses that you get. There's a workbook that you would get right away, even though you have to wait a little bit for the book. And there's a video that explains everything with charts in color, a signed book. So you just take your order code from Amazon and go to Retire Sooner Method. And then you plug it in there and that's how you get all those bonuses.
2:42 Speaker 02 All right. Was all that already explained on Amazon? So we don't have to worry about it?
2:46 Speaker 03 That's the funny thing about it. It's not as clear as you would like.
2:49 Speaker 02 Okay.
2:49 Speaker 03 So that's why it's, I think it's helpful just to say, all you do is if you get it on Amazon, you take your order number and go to Retire Sooner Method.
2:57 Speaker 02 Okay.
2:57 Speaker 03 That's simple, even though it's complicated.
2:59 Speaker 02 Let's put that, we will put that in the episode notes so you can see, see what to do there.
3:03 Speaker 03 That's a good one.
3:04 Speaker 02 Um, so today in this episode, you're going to be talking about one of the things that you, you have researched so much, core pursuits in retirement, how important those are.
3:15 Speaker 03 Non-negotiable.
3:16 Speaker 02 And you've got some secret ones that...
3:17 Speaker 03 I have a list of ones where people in America list it as the number one thing that brings them the most joy and the most happiness in retirement. So I'll, I'll talk about some of those.
3:26 Speaker 02 And then people call Clark the man from Roth, and I might call you the man from, well, charts, but dividends. You love dividends?
3:33 Speaker 03 Yeah.
3:34 Speaker 02 So later you're going to talk about how much of your retirement should be in dividends, right?
3:39 Speaker 03 How much of your retirement income should come from dividends?
3:43 Speaker 02 Yeah. Very cool. All right. And of course, we're going to get to your questions. If you have a question for Wes, you can go to wesmoss.com/ask.
3:52 Speaker 03 So this topic is very fresh for me in my mind around the lifestyle side of retirement. We can plan for the money side. We have to plan for the money side, of course. And we want to get into the retire, the money green zones, which is, it's a whole nother topic. But once we get there, we have that foundation. If you don't have the core pursuit side of the equation, and a core pursuit for me, the how I define it, these are hobbies on steroids. They are super activities is another cool way to think of them. These are things that you really love to do. They're not, I just do this. I just golf or I just garden a little bit, or I just play cards. I just walk. I just do yoga.
4:35 Speaker 03 If you think about some of the things that you love to do, in your mind, you don't say, "Well, I just do this." And if it is that kind of activity, where you can throw a "just" before it, then it doesn't count. It doesn't count as a core pursuit because it's kind of a, yeah, once in a while. Like, if you play golf twice a year, that's not a core pursuit. It's not a really big part of your life. But I've seen examples over the years of retirees and folks that whether they retire on a normal retirement-type age, or sooner, and they're early retirees, if they don't end up quickly having a really robust schedule, where you have a full calendar of things to do, a diverse calendar of things to do,
5:19 Speaker 03 then you can quickly become listless. And you end up with this lack of purpose. Because socialization gets harder. That's another topic. When we stop working, that automatically gets a little bit harder, and it automatically gets harder as we age per decade. That's just almost an anthropological fact, particularly in the world we live in today. But core pursuits is kind of the netting that holds all this together, because it can help you reschedule your life in a good way, exactly the way you want to reschedule it, as opposed to being answering emails at 8 o'clock at night, or answering questions or emails. I probably sent you emails when you were traveling. And knowing, Krista, you do actually get back
6:01 Speaker 03 to me. I don't even know where exactly you were when you emailed me back, but we're kind of always on work mode in America, the way we live today. So when we get to retirement, it's a pretty big shock when all that stops. So the idea of having these super activities becomes critically important. From my research, and I look at the happy camp versus the unhappy retiree camp, and there's a statistically significant difference between the number of different core pursuits that each of the groups have. The unhappy group doesn't have enough. They have four on average or less. The happy group of retirees has five or more.
6:44 Speaker 03 And in some of the cases, people have a dozen or 12, 13, 15 different core pursuits they list out, which is pretty remarkable.
6:52 Speaker 02 That's a lot. That sounds like you're never not busy with the core pursuits.
6:56 Speaker 03 You just constantly do. And I think part of it too, one of the things I, there's a core pursuit, almost vortex that happens, that's a really positive cycle as you start doing more in different activities. A lot of them end up being socially based. You end up doing even more activities because you get lots of other ideas. Hey, if you're a tennis player, you're probably going to get dragged into pickleball.
7:20 Speaker 02 Yeah.
7:20 Speaker 03 And if you're playing pickleball, you may get dragged into something else.
7:23 Speaker 02 Like a Mahjong group.
7:25 Speaker 03 You probably.
7:25 Speaker 02 That's the thing everyone's doing now.
7:27 Speaker 03 I know, it is. It has gotten popular. So core pursuits are non-negotiable because they help us when we get into retirement, not just create this schedule and structure that we all need as humans, at least to some extent. It helps us create our new sense of purpose. One of my favorite charts, title is percentage of Americans who report having a strong sense of purpose. One group, 88% of them have a strong sense. Another group has 32%. Well, you can probably guess which group's which.
7:57 Speaker 02 Right.
7:57 Speaker 03 The happy retiree group has 88, 88% of them have a strong sense of purpose. So the unhappy retirees at 32%, the happy retiree group is almost three times the level of having a sense of purpose. And that is very, very telling when it comes to retirement happiness. So the magic number is five or more different core pursuits. The other thing I found had to do with the amount of time, the amount of time commitment, or it's not necessarily a commitment, because these are things we love to do. The average for the happy retiree group is 18.6. We'll do round numbers here. Almost 20 hours a week on average doing the things they love. The unhappy group is about 13.
8:41 Speaker 03 If you do the difference per week, it's 280 extra hours a year, which if you equate that to a work week, which is a 40 hour week, it's seven extra work weeks.
8:52 Speaker 02 Wow.
8:53 Speaker 03 But you're not working.
8:54 Speaker 02 Yeah.
8:54 Speaker 03 You're doing your core pursuits. So to me, it is not just about the number and the diversity of the core pursuits you're doing. It's about the amount of time you're able to commit to them. Another thought when it comes to some of this research, working out, exercise, physical activity, movement, super important and popular, even in both groups. But statistically, the happy retiree group, and I'm going to go round numbers again here, is in movement type activities, exercise for about an hour a day on average. The unhappy group is about 45 minutes a day, again, on average. So that's a 15 minute difference. It's not dramatic.
9:34 Speaker 02 It really isn't a big difference.
9:35 Speaker 03 It's a 15 minute per day difference. So adding 15 minutes to your physical activity, helpful, gets you closer to the happy retiree group. So to me, these are some of the things that we can really be thinking about. And we don't need to wait until we stop working. We should be doing them today. So we're cultivating them. Here are some of the creative shows up a lot, Krista. I was surprised it's how popular creative core pursuits were. Some of the ones that I write about, painting, woodworking, photography, blowing glass. I get a lot of great ideas from this research. Restoring old trains, not one that I would have ever come up with. Writing a memoir, gardening.
10:16 Speaker 03 Gardening is hugely popular for cooking, sewing, cross stitch, crocheting, songwriting, digital video editing, playing music, filmmaking, macrame, arts and crafts. So huge creative category. And then adventure. There's something about adventure core pursuits too. There, there's also a very interesting statistical relationship between the two groups. The happy retiree group averages almost two, what I would call adventure related core pursuits. The unhappy group is less than one. So it's almost double between the two groups. And adventure is anything I would, well, let's see if you agree. Are these adventure core pursuits? RVing?
11:00 Speaker 03 Yes, camping, traveling, traveling. I love this. This was a direct quote for some of the research, whenever possible. That sounds like you. It sounds like close. Fishing, I put that in adventure, boating, motorcycling. There was a leather clad grandpa that replied, riding my Harley with my buds, horseback riding, kayaking, scuba diving, coral reefs, rock hunting and tumbling, rock hunting, flying planes. It's almost a little too dangerous for me. Bird watching, bass fishing, go to the beach, horse racing. Again, adventure related core pursuits. It gives us something even more to look forward to. And then anticipation is so powerful and so helpful
11:40 Speaker 03 mentally for us when it comes to filling our days. There's a whole nother list of health and fitness is super popular, as you can imagine. A lot of these things you might, somebody said, biking, regular and e-bike. I try to stay off the E part of the bike so that you're actually getting exercise. There's huge category for social and service volunteer, a lot of animal caretaking that in our research, foster animals, animal shelter, helping at animal shelters, et cetera. So the top 20 include traveling, reading, walking, music, painting, crafts, cooking, writing, riding my Harley with my friends showed up a couple of different times. So it's so important.
12:22 Speaker 03 It's to me, it's such a fun part of thinking about when we're no longer answering emails from overseas, we get to really lean into the things we love to do.
12:32 Speaker 02 What are your like top three core pursuits right now, you think?
12:36 Speaker 03 Oh, me personally? By the way, this is a cool exercise for anybody to do. And I've never, it's a little cheesy to say, what are your core pursuits? Right? I think, even though I keep up with the term, I like super activities a little bit better. But every time I've ever asked, even a grumpy person, I've asked this to, and people love to give you their core pursuits because you challenge them and say, look, you need five. People are like, oh, wait a minute, five? What are my five? And they'll sit down and think, well, I like this. So it's a very cool question to ask your friends, even if they're grumpy. They'll sit down and give them to you. For me, I would say that coaching has been one, but that's kind of, that's every year. So I could call that a core
13:19 Speaker 03 pursuit. I do that with, I've done that with all of my different kids at their different ages. So coaching lacrosse is big. I would say golf has got to be in the top three for me. I love playing golf. I would put pickle easily in there because I was just in a pickle league, pickleball league. So those are three that come right off the top and then playing music. I play music and I have a, let's call it a dad band, if you will.
13:45 Speaker 02 Nice.
13:45 Speaker 03 So that's a really fun one, too.
13:47 Speaker 02 I love it. Okay, let's go to some questions. Adam in Alabama says, I'm about two years away from retirement and I have my assets in a 403B, divided between a target date fund, REIT, annuity, and money market. When I think about starting with my 4% distributions, should that percentage be calculated from the entire portfolio or should the dry powder portion be excluded from that calculation?
14:11 Speaker 03 Adam's asking, this is a kind of a technical question, but it's probably something that people think about a lot. If you've got the whole Adam from Alabama portfolio, let's say 30% of it is in dry powder, safety bonds, et cetera, money market, and then the other 70% is in a diversified way of looking at stocks, maybe commodities. But so the question is, do you count the dry powder? The answer is yes. You count the dry powder as the whole pie. You even, in my opinion, count the cash because first of all, cash, unless we're in a very rare situation, doesn't seem super rare because we did have a long period of zero interest rates, but usually over the course of
14:53 Speaker 03 history, cash earns us something. CDs earn us something and they are there as a buffer for the more volatile, likely faster growing piece of our overall economic or investment pie. And I think when it comes to planning, making it simple is a really important element to making these successful, making these rules work. So yeah, you could say technically I've got this much cash and I'm going to exclude it, not counting the 4% rule because it's not paying much. Include the whole pie, Adam, the whole, even though you have some dry powder that's only paying you 3% or 4%, it counts.
15:30 Speaker 02 Okay. Gary in North Carolina sent in this one. What are your thoughts on EIA's Equity Indexed Annuities? My advisor is recommending them for the guaranteed part of my income versus bonds. He mentions the cons with them as well. Thanks for all your help.
15:45 Speaker 03 He mentions the cons?
15:47 Speaker 02 Mm-hmm.
15:47 Speaker 03 Okay, so this is good. So- Gary, I think the fact that you get, you're trying to get both sides of the equation here and your advisor is telling you that, that it's some transparency. So I think that's a good thing. A lot of times, these equity index annuities or fixed index annuities are sold like they're the perfect product that's ever been created. All the upside of the stock market, none of the downside. It just gets a portion of the S and P, but no doubt, they often sound like the magical investment. But the reality, this is the point, they're not investments. They are not investments. A fixed index annuity or an equity index annuity, they are insurance
16:29 Speaker 03 products. You can invest your money in them, but these are not investment products. They're not regulated by the SEC. They are regulated by the insurance commission in the state that you buy them. And they are dependent on the claims paying ability of the insurance company. So it's like buying, it's almost like investing in a bond, the A bond or a bond from a company. And would you do that if a third of your portfolio, let's say the, the safety part, that's the bond part, would you ever put that in one bond from one company? So think of it that way. I'm very comfortable owning bonds, but I want to own an ultra diversified portfolio of bonds. I wouldn't want to just buy one company. So I think that's the way to think about it.
17:15 Speaker 03 And I think I would agree with your advisor is that it is relative to what you are owning instead of this, meaning that in my opinion, these are not a replacement for equities or stocks. Even though they say they're linked to the S and P 500, that actually is somewhat irrelevant, the way they do these calculations. So as a substitute for the safety piece, then that is in the right direction. Just know that you're betting on the credit of one company, they do pay commissions. Now, maybe there's some out there that I have not heard of, but usually these are four to eight percent of commissions that get paid. So you put a hundred thousand dollars in, somebody's getting paid five to eight grand like that. And then you
17:59 Speaker 03 get locked up, meaning that they're illiquid for a longer period of time. So again, that might work for you for that sliver or that portion, Gary, but I just want you to know all of the of the cons and the pros so that you can weigh them. Not not for me.
18:17 Speaker 02 Eric in Ohio says, I'm a teacher with two or three years left of teaching. Is the 10% rule still in place regarding taking pension versus lump sum? Should I take it all and invest it myself? My current numbers are $38,000 per year versus a lump sum of $417,000.
18:37 Speaker 03 Okay, Eric, you are a teacher in the state of Ohio, and you're asking about the 10% rule. This is a question about do I take a monthly amount for the rest of my life? That's pretty much guaranteed. No real guarantees in the world we live in. Versus a big chunk that I could likely roll into my retirement account. That's how I'd look at this. So we do the math and my rule for that, my rule of thumb is the 6% test.
19:03 Speaker 02 Right, that's what I thought it was 6%.
19:05 Speaker 03 Mine is 6%. I love that Eric's talking 10.
19:09 Speaker 02 Right.
19:10 Speaker 03 Maybe I missed something.
19:11 Speaker 02 Yeah.
19:12 Speaker 03 So let's do the math. You take your annual amount, which in your case would be 38,000, divided by what you could take, which would be 417,000. And what do you get? 9.1%. That beats my 6% test by a mile, which would lean towards taking that monthly amount. Because it's pretty hard to quote ensure the amount you're investing is getting that high of a rate of return with seemingly no risk or not a lot of risk. Again, these pension programs still have to make money over time in order to continue to pay people. But you're way above my line of 6%. Usually it's really not till 8, 7 or 8%
19:56 Speaker 03 until I would start really considering the monthly amount. But you're way up here at 9. I'd lean heavily towards that. The only catch, just remember, Eric, unlike social security.
20:08 Speaker 03 Essentially is going to give us a COLA adjustment every time we have inflation for whatever inflation is. These state teacher pension amounts only go up when they vote that they can go up by a certain amount. So they are not tied to COLA. There's not automatic increases. So just remember that $38,000 a year that you would be getting may not go up much, may go up some, but they have to vote on doing so.
20:34 Speaker 02 All right. Well, we're going to take a quick break. When we come back, what percentage of your retirement income should come from dividends?
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22:54 Speaker 03 Pricing participation may vary. Promotion pricing may be lower than meal pricing. Welcome back to Ask an Advisor. I'm Wes Moss, along with the great Krista D.B.S. It's great to have you back here in the studio.
23:06 Speaker 02 I'm so grateful for my job, for sure, and I'm very grateful to be back.
23:10 Speaker 03 I think we all are, unless you're a happy retiree and you're so glad you're done working. All right, we're gonna go into, speaking of retirement, I want to answer this question. How much of your retirement paycheck should come from dividends? Dividends sound great. Everyone says they're good, but are they? Well, it depends on how you look at it. A two-part way to think about this, one, it's about your investment style, which can be determined by what phase you're in. So if you're an accumulator and you're 30s and 40s, you may not care that much about dividends. You're just looking total return and appreciation.
23:51 Speaker 03 The second part of it would be a psychological impact of dividends. And the first caveat is that we're all after the same thing, regardless of your phase in life. We're accumulation, distribution, pre-retirement, post, we're looking for total return. Total return equals growth plus income. That's it. You can either have your assets go up in value, or they can pay you some rent, dividends, interest. And then you put those two together and that's your total return. How you get there can be different for anyone. And it depends on those two stages, investment style and really psychologically, what makes you comfortable as an investor. So first, as any real problem that should get solved in the right way is you need to understand
24:37 Speaker 03 how much you need. So what is your gap of, let's say you get social security, and then how much more do you need beyond social security, to keep it simple? Let's say that number's $50,000.
24:47 Speaker 03 Well, you can do this two different ways. And there's variations of all these ways, but let's call it two distinctly different ways. One is the appreciation and sell. If you only need $50,000 and you have a million dollar portfolio and the stock market goes up 10%, you've gone up $100,000. So you just sell part of that and you've got your 50,000 and your portfolio is still grown and you've got your spending money. I don't know if you'd call that income, but it's spending money. It's a withdrawal and you're withdrawing from your appreciation and that can work. And there are plenty of people that do it that way. What's interesting is that if you're investing in, let's say, just the S and P only as your only
25:29 Speaker 03 investment, the dividend yield on that is actually pretty low on a percentage basis. There have been years where it's been three, four, or 5%. So a million dollars at 5% would, would give you 50,000 in dividends. We're not there today. The market value has gone up so much, the income hasn't quite kept up. So even though the market has gone up, the percentage of dividend yield is close to 1%.
25:55 Speaker 02 Oh, wow.
25:56 Speaker 03 It's only 1%. So a 5 million, you need $5 million in a portfolio at 1% dividends to get you that 50,000.
26:03 Speaker 02 Wow.
26:04 Speaker 03 So the yield really matters. Here's another way to look at it. If you're getting 3.5%, you don't need 5 billion. You would need 1.5 million and that would get you there. It doesn't sound like a big difference, 1%, 3.5%. It matters every quarter, every 10th of a percent matters when it comes to dividends. So another way to do this would be to have a portfolio that is paying you 3%, 3.5%, 4%. Now that's getting a little harder to find, but there are plenty of companies and sectors in the S and P 500 that are much more dividend heavy and do pay in those higher ranges. They're not, historically, everything is depressed because the market's gone up a lot
26:48 Speaker 03 and dividend rates are lower today than they've been in a little while. But you can still find 3% dividends, 4% dividends. It's just, it's a little harder to find. So either can work. You can do the appreciate and sell or have a portfolio that gives you an overall yield of let's say 3% or 4%. The reason I lean towards dividends, and I would say this is much more for, I think it's for, again, this is goes back to your investment style. It can be for any age because if you don't need the cash flow, you just reinvest and reinvest and reinvest. And that works for accumulators. But I think it works really, really well for people who are in the distribution phase, saying, I need money every single month or every single year in order to supplement
27:33 Speaker 03 my other income sources. And there is something psychologically very powerful in a good way when dividends themselves, the income, just the income part of the, of that equation is paying the bills. And to me, dividends to some extent equal calm. The stock market and being an investor takes a lot of internal intestinal fortitude when things get hairy and headlines get crazy and markets go down. Retirees that I know that are very, very calm and very happy and comfortable, never, they're not worried about running out of money, which is a major fear in the United States.
28:15 Speaker 02 Sure.
28:15 Speaker 03 Almost, almost at any income level or any
28:18 Speaker 02 Yeah.
28:19 Speaker 03 investment savings level. That fear doesn't really go away. But if you're not relying on that appreciation and sell strategy, and you have a year where markets are down or flat, or a couple of years where markets are down or flat, but the dividend income itself is filling that gap, that's a place where you can really have a sense of calm. And I think that's why, I don't know if there's a perfect answer to how much of your retirement paycheck should come from dividends, but if the whole thing can come from dividends or other forms of income, I've seen that put people mentally and psychologically, emotionally in a pretty darn good place.
28:57 Speaker 02 Okay, let's go to some questions. Again, if you have a question for Wes, you can go to wesmoss.com/ask. Zoe in Washington filled out our form and she said, hi Wes, I'm planning to retire soon at age 64. My question is whether I should convert my 401k to Roth each year or just invest my RMD when the time comes. I have no assets other than my house worth 1.2 million and paid off. I have 200,000 in a Roth IRA and 1.5 million in my 401k. I will draw about 200,000 from my 401k until age 70, but I want my kids to inherit the remainder. After age 70, I expect to have $120,000 in annual income from social security and a pension.
29:41 Speaker 02 If I don't do anything, RMD is going to be very painful. But in order to convert my 401k to Roth, I would have to use some of the money I withdrew to pay taxes. I'll keep it under 24%. The 24% tax bracket and convert $90,000, withdraw an additional 30k to pay the taxes. That may not help as much with RMD because I might just be converting the gain. On the other hand, my kids will have more flexibility with regular investment accounts with step up in basis upon my death. What would you do?
30:14 Speaker 03 Hey Zoe in Washington, there's a lot to that. Right out of the gate, so I'll clear this part up. You just listed out your accounts. You've got your, you've got 401k and you have Roth. You don't, it doesn't sound like there's much taxable money here. Kids don't get a step up in basis on that. There's no step up in basis for IRA money or Roth money. Anything that's outside of that, yes. The house, step up in basis, that's not in a retirement account. A taxable brokerage account, any stocks in there, they would get a step up in basis. But in this case, it's not the retirement account. So let's just clear that up right out of the gate.
30:54 Speaker 03 Secondly, the numbers you're telling me 64 to 70, you're going to be withdrawing $200,000 spending money to live on. Well, that means your income is at least 200 grand. And if you're converting 90, that whole conversion amount is also income. So now you're at 290. And if you're single, and I don't know the brackets perfectly in my head, but 24% bracket only goes up to a little over 200k. So you're already maybe right there or already pretty close to the, to filling that 24 bucket. And then from 202 to 256, that's the 32 bracket. And then you're in the 35 bracket at 256 or more.
31:38 Speaker 03 Again, these are single, not married filing jointly. So I look at it as, and the numbers are obviously higher than that if you're, if you're married filing jointly, but. If you're already almost at those levels, then your Roth conversion is going to be more like 24, 32, maybe even 35% to convert. These are just round numbers here. At 120, when you hit 70, you said you had 120K in income. And your RMD, let's say, is 4%, 60, 70,000. Your income's only 180. So your income's even lower in the future, even it seems like with the RMDs.
32:22 Speaker 03 And the other big thing, Zoe, it seems like almost all the money you have right now, the liquid money, it's already in retirement accounts. So in order to pay the taxes, you've got to take even more out of the retirement accounts. And I wouldn't want to do that. Usually if you're going to do a Roth conversion, you want it to come out of other after-tax accounts. So yeah, I mean, again, you can always look at the Roth Decision Tree chart that we talked about last week. But I would go to your CPA or your advisor and really do the math on this. There's some pretty in-depth planning, but to me, it doesn't seem like taxes today versus taxes tomorrow would be leaning towards a Roth conversion.
32:58 Speaker 02 Scooter in Georgia says, hey Wes.
33:00 Speaker 03 Scooter.
33:02 Speaker 02 I'm very fortunate to work for a large organization that provides me RSUs as part of my compensation. It is an aristocrat stock, and while it does have its ups and downs, it's fairly stable. As today's value makes up about 40% of my total investments. And the amount of RSUs I receive increases with each new promotion. I hear everyone say I should diversify, but I'm struggling to understand how selling now and paying long-term capital gains, reinvesting in a brokerage account, and then paying taxes again would be the best financial move. I'm 46. I make around $200,000. I have 1 million saved in total with 600K in a Roth traditional 401ks, and I plan to retire at 55.
33:47 Speaker 02 Thanks for all you and Clark do. I wouldn't be in the position I'm in today without your advice.
33:51 Speaker 03 Hey Scooter, a lot of numbers you threw out there. You're in your mid-40s, you're going to retire mid, in about 10 years, mid-50s.
34:01 Speaker 03 Forty percent of a million dollars saved already. So you've probably got about 400 grand in what it sounds like a blue chip stock. Just remember, blue chip stocks go down too. It's rare-er if you're looking at a decline outside of a general market decline, but it happens. It happens all the time. There's a lot of examples I can think of that are really big declines. So let's say you had a billion dollars scooter. And you had half of all your stock in one company, which by the way, it's not uncommon for a billionaire to do that.
34:34 Speaker 02 Wow.
34:35 Speaker 03 That's a lot of times how the people become billionaires.
34:36 Speaker 02 Right, that's true.
34:38 Speaker 03 Usually founders of companies that go, think of the Elon Musks of the world, the founders of Microsoft. So if you've got a stock and that's half of your billion dollars and it goes down by 50%, big whoop.
34:51 Speaker 02 Wow.
34:52 Speaker 03 But you're still fine. You know, there's no material impact on your, on your life.
34:58 Speaker 03 For scooter, it would be. If you had 40% of the portfolio go down in a big way, or maybe even more than a big stock market decline, 50, 60%. That would mess up retirement. So that is not a chance that I would like you to take. Now, you've got two things. Nobody, we don't want to pay taxes unnecessarily, so I totally get that. But I also don't want you to have your retirement get messed up because something happened to your company fell out of favor in the world. And we live in a world that we're economically, things change and there are a lot, it's a lot of a.
35:37 Speaker 03 The economy we live in is a little more bifurcated winners, losers, winners and losers, kind of winner take all economy a little bit. That's more within tech, but I think I'm trying to make the point that just, I don't want you to take the risk. So we're balancing that with taxes. You're already making 200 grand a year. The capital gain rates are favorable all the way up to, if you're married, all the way up to like 600 some thousand dollars a year in income. So you have plenty of room in the 15% long-term capital gain bracket. What you have less room in is the net investment income tax. That NII tax is 3 point, almost 4%. So that kicks in at 250. So I think what I'd be looking to do is I'd meet with your CPA,
36:22 Speaker 03 do the math, and maybe you have room up to about 250. You're already 200 in income in long-term capital gains before that net investment income tax kicks in. So here's the other thing, Krista, very often you get these RSUs. You've already paid income on them and then they're growing. If you've got a big chunk of those RSUs, remember it's not all, all, all gain. There's some real basis there. So you may be able to sell a fair amount that gets you diversification that maybe you're finding lots that are higher or more recently attained.
36:57 Speaker 02 Very good point.
36:58 Speaker 03 And then you can reduce your concentration down to 30% or maybe 20%. I would really try to figure out how to do that from a tax perspective. You don't want 40, 50% of your assets in one company headed into early retirement.
37:12 Speaker 02 All right. Gerald in Michigan says, Wes, I have an account at Ally Bank where I have a savings account and I have 12 laddered CDs. The total on deposit at Ally is approaching the FDIC maximum of $250,000. My question is, are the CDs considered a separate account for FDIC insurance purposes? Or should I consider opening another account at a different institution? My savings portion is well under the FDIC limit, but combined with the CDs I'm approaching.
37:42 Speaker 03 Gerald in Michigan, in the great state, the Wolverine State.
37:46 Speaker 02 One of your favorites.
37:47 Speaker 03 They're all one. Just because you have 12 different CDs doesn't give you new limits on each one. It's the per account name or titling. So 250 is the limit. And if they add up to 240, that means you only have 10 grand worth of FDIC limit. Now, you also have another 250 if you were to have retirement funds at the bank. Not a lot of people do that. It's possible. But if it's just you in your name and you don't have any beneficiaries, you could add up to five beneficiaries that apply or applicable to the FDIC. So you could have a transfer on TOD account with a beneficiary and another beneficiary. And each one will give you another 250.
38:29 Speaker 03 But if it's just you, Gerald, and you're at the 250, it's not as though you can have a joint, you have a joint account with a spouse, TOD account with a beneficiary, et cetera. So it limits your, if you're married and you've got kids and beneficiaries, you can really utilize, there are a lot of 250Ks when it comes to FDIC. And you can get a ton of coverage at one bank. If it's you and you've got just this in your name alone, then yeah, you would be looking to diversify amounts above that into another bank.
39:01 Speaker 02 Okay. Well, that does it for us today on Ask an Advisor. We will be back next week with a brand new episode. Thank you so much. We hope that you will share this episode with a friend if you learn something and also that you're subscribed to the podcast wherever you listen or on YouTube, that you're subscribed to our channel, youtube.com/Clark. Have a great day.
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