09.30.25 Ask An Advisor With Wes Moss

The Crucial Financial Conversation Everyone Needs To Have NOW and Brand New Money Rule When was the last time you talked to a family member or loved one about your finances? Wes shares an important financial conversation warning that stems from a tragic and immediate crisis. Wes explains how a simple, 30-minute conversation could have prevented weeks of crippling anxiety – and what you need to do ASAP to prepare yourself and your family. Also, there’s a brand new money rule of thumb: The 0.01% Rule. Clark's listeners are famous for their frugality, but Wes argues there's a tipping point where we spend too much energy worrying about small expenses. This mathematical rule helps you decide when to open your wallet without regret. Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the September 30, 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: BOOKS BY WES MOSS Wes Moss, CFP® Wes Moss - Clark.com Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:01Speaker 00

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• 0:27Speaker 01

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• 0:40Speaker 02

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• 0:47Speaker 03

  Welcome to Ask an Advisor. Krista DeBias here with our two park advisor, Wes Moss.

• 0:54Speaker 04

  Hey Krista. Good morning.

• 0:55Speaker 03

  Good morning.

• 0:56Speaker 04

  Good afternoon.

• 0:57Speaker 03

  Whenever you're listening. I hope if you're enjoying your walk, walk a little faster, pick up the pace.

• 1:04Speaker 04

  There's nothing like listening to a podcast while you're.

• 1:06Speaker 03

  That's what I do.

• 1:08Speaker 04

  Strolling.

• 1:08Speaker 03

  Every day.

• 1:08Speaker 04

  Getting you to 10,000 steps. Do you measure your steps, by the way?

• 1:11Speaker 03

  Oh, yes.

• 1:12Speaker 04

  How many do you get a day?

• 1:13Speaker 03

  I try to get 15.

• 1:14Speaker 04

  15,000?

• 1:15Speaker 03

  Yes.

• 1:16Speaker 04

  No wonder you're in such good shape. I use an app called Pacer. And it is great if you have your phone on you. And the problem is you have to, it doesn't count if you're working out and I don't have my phone with me. So my steps look light because I'm not adding in a little bit of workout time. I do not, I rarely get in 10. The weekends I always do, it's so funny. It's Monday is the worst day. It's such a sedentary day. I'm just at my desk the entire day and then it goes up a little by little every single day of the week and then it explodes because of sports on the weekend.

• 1:52Speaker 03

  Oh yeah. Well, I have two dogs that I try to walk, two walks a day if I can. And the first walk's usually three miles, their early morning walk. And then, so that helps me a lot for sure.

• 2:02Speaker 04

  Hey, what are we talking about today?

• 2:04Speaker 03

  Well, I know you have a story you were telling me earlier that you're going to talk about first to share to a warning for all of us about.

• 2:12Speaker 04

  A warning.

• 2:13Speaker 03

  You know, financial conversations, which are so important. And then you've got a new, you love a rule, you love a financial.

• 2:18Speaker 04

  I love a rule of thumb and I have not heard a new rule of thumb. For a while. Actually, we did have a new rule of thumb here. It was called the infinite time horizon, maybe a month or two ago, but we haven't had a new rule of thumb since.

• 2:33Speaker 03

  Okay.

• 2:33Speaker 04

  And this is a brand new rule of thumb. Our Clark Smart audience may not like this rule.

• 2:40Speaker 03

  Oh, okay. It's called the 0.01% rule.

• 2:43Speaker 04

  Yeah, there's a whole book about it. The Wall Street Journal did a whole article about it. There's a whole book about this one rule of thumb. And I think for our audience, it might get a little controversial.

• 2:53Speaker 03

  Mm hmm. For sure.

• 2:54Speaker 04

  But why don't we start with this? And I, full disclosure, this was not what I had prepared to talk about today. We were going to talk about another article that I found in Newsweek. It was another financial article that we can maybe save for next week. But this really just comes from a financial conversation I had last night. And so it's fresh on my mind, and it made me think that I should share it with our audience, because it really, unfortunately, it applies to all of us, or it will eventually apply to all of us. And I got a, let's call this almost an emergency text from a friend of mine who recently, she had a parent pass away. Really unexpected, literally on vacation.

• 3:34Speaker 03

  Oh, gosh, that's terrible.

• 3:36Speaker 04

  And it happened really quickly. And it was, it's just obviously super sad. And so it was, it was her father in his later 70s, in otherwise good health, but passed away. And her mom, who is a little younger, in her late 60s, was really just kind of having a crisis and not knowing what to do, not understanding what amount of money was going to come in. And the, and the text message was, hey, my mom is losing her social security. And she's really, she's in a major anxiety loop about this and doesn't know how she's going to be able to afford life.

• 4:14Speaker 03

  Gosh, that is awful on top of losing your husband unexpectedly.

• 4:19Speaker 04

  So pretty quickly was able to get in touch with her and I initially thought maybe there's some confusion about social security and how that worked and why she would be losing social security, but ultimately very quickly I understood that she had had a higher social security payment than her husband. So that if your spouse passes away and your social security payment is lower, then you should be able to step up to that higher amount. In this particular case, her social security was higher than his, but his was not insignificant. She got about 1,700 a month. He got about 1,600 a month, but now that he's gone, very

• 5:00Speaker 04

  suddenly that $1,600 a month is no longer, it's gone. In fact, as she was checking on this and going through and trying to understand how much he was even getting, and really the whole story here is that she had almost no idea about anything with the finances. She didn't know her pension amount. She had to look up the amount she got in social security. The only reason she knew his social security was gone is that social security took it back.

• 5:26Speaker 03

  Oh, no.

• 5:27Speaker 04

  Insult to injury in a really tough time. As she's going through, I guess, we were on the phone, she's logging into her computer and she's saying, oh my goodness, social security just took back his payment from this month. You imagine. So as we talk this through, I said, well, how, tell me about your housing situation. Well, how much is the house worth? I'm not really sure. He said it was about X amount. How much do you have left on the mortgage? I really don't know. Where would I go to know, figure that out? She said, I do know that we have a really low mortgage amount because they have a low rate and the mortgage amount per month was well under a thousand dollars, which is again, hard to

• 6:09Speaker 04

  find unless you have a 3% mortgage rate. But that was a good piece of news. Her social security was good at 1,700, a pension that was not nothing, about a thousand a month. She said, but that's it. Now that I've lost this other $1,600 a month, what am I going to do? Well, as we continue the conversation, she does have some savings. Let's call it about a quarter of a million dollars in retirement accounts. And she didn't look at that account as providing income. She looked at it just as this corpus that sits there and hopefully grows. Because she's not near RMD age, she's really never had to take any money out of it. And I started to do the math and I said, well, at $250,000, even if you use the 4% rule,

• 6:53Speaker 04

  or let's call it four and a half, because she's already almost 70, that's $11,000, $12,000, almost a thousand bucks a month. So the conversation went to, well, wait a minute. If your housing cost is still low, you still have your pension and you have your social security. Now, maybe you can start looking at this account in a new way that you've never looked at before, that this is now an income stream for you and that can't completely replace the lost social security check. But it goes a long way, another $1,000 a month to make up for that. And all of a sudden, her anxiety went way down. And she said, wait a minute, maybe I, I think if I spend a little less at Costco,

• 7:37Speaker 04

  I'm going to be able to make this work.

• 7:39Speaker 03

  Oh.

• 7:40Speaker 04

  And it reminded me that if, here she is, has been in this anxiety loop since this happened. It's been a couple of weeks and she's been paranoid and frantic for this entire period of time. So you have this terrible life event and then you're worried if you're ever going to be able to pay your bills. And it reminds me that just the simplest conversations can really avoid that multi-week panic. If she sat down, and this is for every couple to think about, if something happened to you today on your walk, how hard would it be from a financial standpoint? Life standpoint, of course, terrible. We're here talking about finances. How would your spouse be able to react to that? Would they have?

• 8:25Speaker 04

  Any clue where everything was, where they know the different income streams coming in? If your income stream is lost, what happens to your spouse? And that can all be solved. And if you start saying to yourself, wow, my spouse would, I don't know. They wouldn't understand what to do. They wouldn't know how to figure this out. It might take weeks or months before they ever get any sort of clarity. But imagine going home and just having a 30 minute conversation. A 30 minute conversation. Lay out the big pieces of the equation. Hey, honey, if something happens to me, here's how much I'm getting with this source and this source. Maybe this one stays because it's a joint life. And maybe this one is gone.

• 9:07Speaker 04

  And just having that simple conversation can go so far. And the reason I'm giving this a low bar is that I just spoke with someone that had had zero conversations about it. That was the retirement account invested. I don't know. I don't even know how to log in. I think it's around 250,000. 30 minute conversation can make that really difficult time a little, a little less difficult. Now you take that a step further and we start talking about financial planning, sitting down, doing that along with your spouse and then revisiting that once or twice a year.

• 9:50Speaker 04

  There's a statistic I just read this morning, Krista. It was from an Allianz report about retirement in 2025. The first statistic I think is very telling and my research is similar to this. 47% of Americans, which is nearly half, do not have any sort of written financial plan. Half of America. That means they haven't had that conversation. What's really keeping Americans up at night? Hint, it's not death.

• 10:18Speaker 04

  64% of Americans worry more about running out of money than death itself. But that family conversation can go a really long way. And it was just another reminder, and unfortunately, I get these reminders a lot. But this one is really fresh in my mind. And I just wanted to bring it to the audience so that it does not happen to you.

• 10:40Speaker 03

  And then maybe having like, if you can, a Google Doc with shared passwords or something with a trusted person, your executor, whoever, having a binder. If something happens to me, I have that for my kids with my will. And then I'm starting to put, print out my latest statements from things and put them in there every month. And then I get rid of them, put the next ones in. So I don't have to keep a ton of that, but.

• 11:00Speaker 04

  One page of passwords and 30 minutes to 60 minutes a year can go a really long way.

• 11:07Speaker 03

  Yeah. Okay, so Kim in Massachusetts says, I am still six years away from RMDs, but I always loved the security of my TSP and its protection from lawsuits or collections. I know there's no equivalent protection after RMDs occur, but is there a similar life cycle mutual fund that I can purchase post RMDs?

• 11:27Speaker 04

  Kim, you're getting a couple of things confused here. There are great protections we have when it comes to retirement plans. Now, different states have slightly different rules. So I can't say this exactly for every state. I'm in the state of Georgia, but talked to folks all over the country. You're in Massachusetts, I believe. Kim is from Massachusetts. The rules I think in Mass are a little bit different as far as retirement accounts. But the TSB plan, the Thrift Savings Plan is a government plan. And you're correct, that is almost the most ironclad protection about retirement assets. Whether it's, even if you're in bankruptcy, there's a huge amount of protection.

• 12:10Speaker 04

  If you're at any sort of civil lawsuits, huge amount of protection. I don't think there's anything that's ever 100% ironclad. But that's about the highest level you can get when it comes to protection from creditors. Just because you turn 73 and now you have RMDs, that does not take that away. That's a misnomer because the vast majority of your money would still be in the Thrift Savings Plan or a retirement plan. Now, it is true that the money that has to come out is no longer protected. So if your RMD is $20,000 this year and that goes into a cash account, then technically that's not protected, but it doesn't unprotect the entire corpus that still sits at TSP.

• 12:54Speaker 04

  Again, high protection if the money is in an IRA as well, but that's state by state. Now, moving and finding another life cycle type plan similar to what you would have, Kim, in the TSP, that's just another investment option. And there are plenty of investment companies that have those very similar options. Almost every big mutual fund company has a life cycle or target style fund that you can put those RMDs into if you choose to invest there. But the fund itself, the investment style itself, that doesn't give you the protection. The protection is that it is in a retirement account, particularly TSP.

• 13:32Speaker 03

  Okay, Jason in Michigan says, I have two daughters, ages 14 and 13. In addition to their Michigan State Plan 529s, both have approximately 30K each. I have individual UTMA accounts set up for both of them as well, with approximately 8K each. Is the UTMA the best place for their money?

• 13:52Speaker 04

  Jason in Michigan, I think UTMA is a really good place for having money for the kids. Usually your limit should be the annual gift limit, which is $19,000 per person. Above that, if you want to gift even more than that, then you'd have to file a gift tax return and then that would come off of your lifetime exemption. But let's just call it $19,000 is an easy limit to think about. Secondly, remember that there's something called the kitty tax, meaning that if they get over about, let's call it $2,600 a year in unearned income, it starts to be taxed at your rate. However, the kids are still young, early teenage years.

• 14:34Speaker 04

  This is a great way for them to be invested in a UTMA account. The one downside that at least, there's two small downsides. One, And they may not be downsides at all is that in Michigan, as an example, I think it's age 21, then that money automatically becomes theirs and it's their money now and it's their account just by virtue of them turning age 21. I don't know if that's a little bit different from state to state, but a lot of states are age 21. Secondly, there is a little bit of a financial aid impact. If you look at FAFSA, FAFSA looks at that money at a UTMA account as their money. So it can sometimes make getting financial aid a little bit tougher.

• 15:16Speaker 04

  So just know that. And it's irrevocable. Once you put money into one of these UTMA accounts, you can't take that money back.

• 15:23Speaker 03

  Can I ask you, what's the difference? It's a Universal Trust for Minors Act and then there's a UGMA, Universal Gift for Minors Account.

• 15:29Speaker 04

  Krista, I think that they're virtually, I don't know that there's much difference between the two. They're just different names and it could be state by state. Some have UGMA, some have UTMA. And again, other options to consider, 529 plan is another, other option, a Roth IRA for the kids. If they have any earned income, then you could contribute up to the, to the maximum of either the Roth or how much money they've earned. And then Jason, it's not the end of the world to have a brokerage account. And it's just a brokerage account in your name and it's eventually going to be money for the kids, but they all have their nuances, but I don't think there's anything wrong with the UTMA account. Only, only real downside for

• 16:11Speaker 04

  some parents would say, hey, my kid's not a full adult at age 21, but that's up to you as a parent.

• 16:17Speaker 03

  All right. Maria in Delaware says, I'm a 58 year old, single teacher, planning to retire in six years. I currently have 1.2 million saved in a 403B Roth IRA and pension contributions, which I'll receive when I retire. My house is paid and I have no debt. The 403B.

• 16:33Speaker 04

  Go Maria.

• 16:33Speaker 03

  I know. The 403B is in a target retirement fund and my Roth IRA is in a total stop market index. I'll receive a pension that will pay me approximately 75% of my salary in retirement. I do not have a financial planner. I live a pretty boring financial life, but I've recently come down with a case of FOMO, fear of missing out, for those who don't know. It seems like everyone.

• 16:55Speaker 04

  FOMO for what?

• 16:56Speaker 03

  It seems like everyone has a financial planner. Should I hire someone? I feel like I'm a decent saver, but maybe I can accomplish more financially speaking with the advice of a financial planner. And by the way, my accounts are with Vanguard. So Vanguard Personal Advisor Select could be an option. Thanks.

• 17:13Speaker 04

  Have you ever heard of, this is great. I love to hear this because I've never heard of someone having FOMO over not having a financial advisor. That's amazing. I know. It's probably the best FOMO. I was, you said FOMO, I thought usually it's about somebody being on a yacht or a cruise somewhere in the Caribbean and you're wishing you were in the Caribbean, but not a financial advisor. But this is great. And I think it's a virtue of your age, Maria. You're thinking, you are getting close to 60. And in your twenties, very few people have an advisor. In your thirties, very few people have an advisor. I think people usually start really thinking about getting an advisor in their forties.

• 17:55Speaker 04

  And then the percentage chance that you're going to have an advisor goes up as you age. Because the amount of money you have saved gets to be a greater amount. There's more worry that comes with that. So this is a virtue of your life stage. You're looking around and you're saying, wow, A, I've got a lot of money, $1.2 million invested. I hope I'm doing that right, too. I just pulled up a couple of charts. A half of America doesn't have a written plan. 64% of America is worried more about running out of money than death. So the confluence of all of these variables are making you not, I don't think it's FOMO of not having an advisor. I think it's the fear of not having a clear plan and being worried about it and looking at your friends and saying, well, Mary's got

• 18:38Speaker 04

  a plan and she seems pretty locked in, as my kids would say, when it comes to my, her financial planning. And she's not worried about ever running out of money. That's where your FOMO is coming in. Not that you end up actually having a person, but the person that's the financial advisor is supposed to really dampen and take away a lot of that anxiety. So that's the FOMO I think coming in. And, and I'm a big believer. And you, Warren Buffett always says, if you ask a barber, if you need a haircut, the answer is always yes. And I'm a financial advisor. So I believe in our industry. And I believe that the peace of mind, a good fiduciary that can give to you and your family is absolutely invaluable

• 19:18Speaker 04

  for a really large percentage of people. Not everyone needs a financial advisor. But the percentage of folks who have financial advisors as asset levels go higher, becomes increasingly higher. And you get, the more money you have saved and the more complex your situation is. And I know you said yours is boring. But is it really that boring? It's all the money you have in the world. It's in a bunch of different accounts. Yes, you have a pension. So yes, I do think it's a pretty straightforward situation. But give it a, give it a try. And that's the other thing. You don't need to have a financial advisor for the rest of your life. But there's very little downside, particularly if you, you talk to the folks at Vanguard, they've got a program.

• 20:02Speaker 04

  See how you like that. See if that gives you the clarity that really you're looking for. You may not have an advisor there. It may be a, a rolling person and a place to call that they have your information. And you may not have a financial advisor. You may have a financial advisory team that changes. And if you don't, if you think it's valuable and you want one person or one team to be consistent for a really long period of time, maybe then you go find another advisory team that would be more permanent. Either way, I think there's a lot and very little downside of, of giving it a shot.

• 20:38Speaker 03

  Awesome. Okay. We're going to take a quick break and we come back. Brand new rule of thumb to help us all reduce our anxiety, right?

• 20:45Speaker 04

  Around.

• 20:46Speaker 03

  Spending.

• 20:47Speaker 04

  Opening your wallet.

• 20:48Speaker 03

  Okay.

• 20:48Speaker 04

  And making a purchase that you might feel a little uncomfortable about.

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• 23:08Speaker 04

  Welcome back to Ask an Advisor. Wes Moss, your host today, along with Krista DeBias. How we doing Krista?

• 23:15Speaker 03

  Doing great.

• 23:16Speaker 04

  We're going into a brand new, fresh topic because you know I'm a sucker for rules of thumb.

• 23:22Speaker 03

  I know. I can't wait to hear what this is. I only know the title of it.

• 23:24Speaker 04

  Rule of thumb, the 4% rule, the 50, 30, 20 rule, the 25X rule, the three years of dry powder rule. These are all ways to make financial circumstances, the world of financial advice, to make it more simple. And I think there's great value in that. And that's why I think I've always loved rules of thumb. And they're easy to remember. So you boil everything down and this rule of thumb can help you here and this rule of thumb can help you there. Some are more important than others. I wouldn't put this at the top of the stack as far as one that's going to get you to a perfectly peaceful retirement, but I think it does apply to a lot of us.

• 24:06Speaker 04

  And here's the name of the rule, or here's how it works. And first of all, I guess I'll acknowledge that this is the Clark Howard audience. This is a Clark Smart audience. And

• 24:18Speaker 04

  We're about to talk about a rule that relates to opening up your wallet and spending. And the Clark audience, your audience, our audience, has been really good at not spending. And is famous for being able to go without, be modest spenders, and then have great financial freedom because of it. So I'm not here advocating that you should be opening up your wallet because for so many of us, it is the very act of being disciplined around not spending that has gotten us to where we want to be. But I think there's also a tipping point, and this is where the, here's the rule, the .01% rule comes in. And it's Nick Majoli who is just wrote a book.

• 25:00Speaker 04

  And this is, I think, I don't know if the whole book is about this, or it's a big part of the book. But it talks about, evidently, he heard Jay-Z, the famous rapper, I think is at some point has been a billionaire, but this is many years ago. He heard Jay-Z say something like, "What's 50 grand to somebody like me?" Now, he said it in much more colorful language than that.

• 25:23Speaker 03

  As Jay-Z does.

• 25:24Speaker 04

  As Jay-Z might, but Nick started doing the math in his head and said, "Wait a minute. If this guy's worth 500 million," I think at the time, "then 50 grand is only .01% of his net worth." So as crazy as that may sound to all of us, it may not be that big of a deal for him to sweat that much money. And this really goes back to allowing yourself to not sweat the small stuff when it comes to spending a little bit more in any given moment than you may want to spend. Nick, the author, gives an example that he used the .01% rule to pay $80 extra that he normally wouldn't have wanted to do

• 26:05Speaker 04

  so that he could have, choose his seats on a plane next to his wife. Who's, I mean, who's going to argue with that?

• 26:12Speaker 03

  Right.

• 26:12Speaker 04

  But for him, it was, "Wait a minute, use the .01% rule." And it was 80 bucks and it was okay. Now, here's where it comes from mathematically. So you take 0.1% of your total net worth. So if it's, your total net worth is 500,000, that would mean your .01% number would be $50. So anything less than $50, maybe you shouldn't spend a lot of time sweating it. If your net worth is a million dollars, it's a hundred bucks. If it's a $10 million net worth, it's $1,000. If your net worth is $50 million, your 0.01% rule would be $5,000. And the point he's making is that as opposed to spending a lot of time, maybe to get a refund

• 26:56Speaker 04

  or spending a lot of energy around something that is under this nominal level, this number, then you maybe are spending too much time and too much mental energy thinking about it when it, when it doesn't really impact you financially. And here's where the math comes in, is that he's using a really conservative rate of return on your overall net worth, 4% total growth. If you divide 4% by 365, what are you going to get? You're going to get about 0.01%. So the assumption is that your overall assets, and this is house and net, this is net worth and accounts, should be growing conservatively, really conservatively at 4% a year. And that's where he comes up with this number.

• 27:40Speaker 04

  So I think it's an interesting way to think about spending in any given situation. Do I upgrade this? Do I get an extra dish at a restaurant? Clark Smart audience may say, well, I didn't get a thousand dishes and that's why I have money. And I don't disagree with that at all. But at a certain point, when you have financial comfort, you don't want to spend, if you have a $5 million net worth, are you really going to spend three hours trying to get a refund that is 150 bucks and it's going to take you three hours?

• 28:12Speaker 03

  I know somebody who would.

• 28:13Speaker 04

  I know, there are a lot of people that would. What this rule of thumb is saying is don't sweat that. Your time is more valuable. And I'll leave it up to the Clark audience to decide if they like the rule of thumb or not.

• 28:25Speaker 03

  Okay. All right, let's go to questions. Yep. Amy in Arkansas says, I'd like to hear your thoughts about adjusting the 4% rule to more, possibly 5% if the primary residence is paid for. I understand it's not income producing and not liquid, but I never hear it factored in at all. At some point, it would be liquid or become available. Wouldn't it be in Assurance against running out of money. If I take 5% at 60 or 65, but also have a paid for home worth $650,000, shouldn't I sleep better at night with the higher withdrawal percentage? I just never hear it discussed.

• 29:02Speaker 04

  Amy, I think I discussed this because I, so first of all, you're trying to extend the 4% rule a little bit because the house is paid off and I totally get that. If you're looking at the ingredients of a happy retiree or someone who is in the retire sooner, let's call it jet stream, you both want to use the 4% rule. I call it 4% plus. So I'm not saying no at this point to the five, but it also includes a paid off house because you're always going to need a place to live. You always need it. And even if it's going to be years out into the future that you can use the equity, everything gets more expensive. So your $650,000 house today may be worth 750 in

• 29:45Speaker 04

  the future, but it still may take now 750 to live in a similar situation. So I like being able to do both, having it ultimately a paid off house and using the 4% plus rule. However, William Bangen, the godfather of this rule, recently just wrote a book that said it could be, it should be 4.7%. He calls that the max safe rate. So it's really a range, Amy. And for you pushing it to five, is that that dangerous over time? The answer is not really. If you do the math, if you're sticking to 4%, you've got a 99% chance money doesn't run out or at least 30 years. If you push it to 5% historically and mathematically with a 70% stock, 30% bond

• 30:28Speaker 04

  allocation, it still works for 30 years, 84% of the time. So it's not irresponsible to think that you can do five. Just know that of course, there's a higher percentage chance that money runs out at the end of that long, long period of time. So just know that. I would say that doing 5% without a paid off house would be, would be tougher. The fact that you do have a paid off house, it makes you a better candidate to be able to do that. But my fundamentals, and let's call these are the conservative happy retiree rules of thumb, paid off house and 4% plus rule, both together at the same time.

• 31:05Speaker 03

  Okay. This came in from Alex in Georgia. Question for Wes, because I don't want to give Clark a heart attack.

• 31:13Speaker 04

  Are you gonna, what are you asking Alex?

• 31:16Speaker 03

  Wes, who would you recommend the buy, borrow and die strategy for? I'm 63 retired. My spouse, age 55, is retiring next year with no children and our house is paid for. I'm starting this strategy with 5% of my liquid net worth to supplement my income with tax-free money. This will provide me with an additional 30K the first few years, maybe more later. I may pay the loan off slowly after 10 years of staying under the capital gains threshold. I have a Roth account that I want to grow over the next 10 years before withdrawing any funds.

• 31:48Speaker 04

  But we, so we don't know where Alex is getting the loan from though.

• 31:51Speaker 03

  Yeah, I was confused about that.

• 31:53Speaker 04

  We don't know where he's getting the loan. I would suspect, well, it's only, it's probably two places. Either on a piece of real estate that's paid for or his portfolio, which would be in the form of a margin loan. So right out of the gate, Alex, buy, borrow, die strategy. That's pretty much what all of us do in the cycle of our finances. We buy things, we borrow money, and then we die. So the buy, borrow, die strategy, I don't think it would give Clark a heart attack because that's what, that's kind of the way the world does work over time. The reason you're looking at it as an actual strategy is that you're being intentional about it.

• 32:31Speaker 04

  And you're saying, if everything's paid for today, then why not take 5% of the value as a loan? So that I don't have to pay the capital gain tax. It happens all the time. That's, that's a really smart way to do it. And then when you die, then the money gets owed back, but you haven't had to pay taxes on it. So it's a way to, this goes back to tax efficiency, tax strategy, and taking a loan out so that you don't have to pay taxes on selling something. That can make a lot of sense. What are the taxes to sell something? Well, they could be 20%, they could be 15, 20, 25%, depending on your income. What's it cost to take a loan? 6%, 7%?

• 33:15Speaker 04

  So you're doing the arbitrage, you're saying, well, this one, this makes more sense. Now, you do that every year. And I think that if you're looking at an overall net worth of a million and you're, and you're only having $50,000 borrowed, then that's a low amount of leverage and I think that can work really well. Where we run into trouble is that if we get overly leveraged borrowing too much on the on the paid for assets and the assets go down in value, then you get a margin crunch and then you can really quickly compound your overall losses. So you need to do it on a, if you're going to do this, it should be on a very diversified portfolio, not a particular

• 33:56Speaker 04

  stock and a piece of real estate or multiple pieces of real estate that should be set up well fundamentally so that you're not worried about the value cratering of that because the value, if your value creators on equities or a portfolio or real estate, then the percentage of your leverage, if it's 50,000 or 100,000 automatically goes up, you've got to be careful about that. But you're also taking advantage just naturally here. If you think of it this way is that your heirs should be getting a step up in basis. So it's a very common practice for folks to say, well, gosh, I'm in my 80s or 90s. I don't want to be selling this stock now because then I'm just paying taxes on it when really,

• 34:40Speaker 04

  if I wait longer and I pass away and give it to my heirs, they get a step up in basis and essentially avoid those taxes. And there's great debate about these tax rules, but that's the way it's been for as long as I could remember. And I don't see that changing anytime soon. So you're just using the natural rules of the tax code in life. And I don't think it's crazy. Just watch your leverage amount.

• 35:03Speaker 03

  Okay. Greg in Florida wrote in with this one. I have 500K in a traditional TSP and over the last few years have been Roth converting to get the value down before RMD starts. I have been moving money to Vanguard index funds. The TSP now has an in plan conversion option in 2026. Expense ratios for the TSP funds range from 0.04 to 0.09. Vanguard can be had for similarly low costs. Is there a case to be made for staying in the TSP for Roth conversions? What are the factors that make a 401k TSP better or worse? Thanks for all you both do. I catch most of your podcasts via YouTube. You guys play well off each other. Thank you. That's nice.

• 35:48Speaker 04

  I'm glad that that's nice of him to say that. This is Greg. Greg, TSP and Vanguard are They're cousins when it comes to investing. If you really think about how Vanguard started, it was just really simple. US Equity Fund, then a total stock market fund, then a total bond market fund. Now, they evolved a lot over time and there's a lot of other choices now. But TSP was very similar and Vanguard were very similar as far as investment options are concerned. But TSP hasn't innovated and created new products. They still have, unless I have missed this. CSIFG, common stock, small cap, international.

• 36:29Speaker 04

  Those are just three indices, very much like what you would find at a Vanguard for those particular indices. And then fixed income, which is a total bond market index. And then G, that was for F, G is just the total bond market, which would be government and corporate bonds. And that's it. They make it really simple and it's five super low cost index funds. And you can choose the ones you want, or you can use their lifecycle funds and they'll choose the mix for you. So if you're wanting to keep low, super low cost, keep things really simple. And you're fine with those indices, which by the way, can work really well for a lot of people for a long, long time.

• 37:09Speaker 04

  Then if you're now getting that option to be able to do the conversion within TSP, that sounds like a yes to me. When you ask, what's the advantage of rolling into an IRA and doing this in a place like Vanguard? If the costs are similar, the only advantage I can think of is choice. TSP still just has those five funds. That's it. But they really cover a huge part of the world. Vanguard has, I don't know how many they have, but I would say hundreds of different options. They have ETFs, they have index funds, they have, they're passive. They have active mutual funds, they have balanced mutual funds, they have target mutual funds. So it's just a matter of maybe more choice if you go to a place like that, but.

• 37:55Speaker 04

  Having the five broad indices that cover most of the world, that's a really good place to start. So if you like TSB and you're comfortable with it, I don't see any reason why not to stay.

• 38:05Speaker 03

  Great. Well, that does it for today's episode.

• 38:08Speaker 04

  That was quick.

• 38:08Speaker 03

  Of Ask an Advisor. Yes, for sure. We'll be back next week. The Clarkster back tomorrow.

• 38:14Speaker 04

  And send us more questions.

• 38:16Speaker 03

  Yeah, go to Clark.com/ask and you can indicate if you want the question to be responded to by Clark or Wes on there. So thanks for listening. Thanks for subscribing. Thanks for sharing with a friend. And I hope you subscribe to our daily newsletter as well at Clark.com/newsletter. Have a great day.

• 38:40Speaker 00

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