10.07.25 Ask An Advisor With Wes Moss

Is Inflation Good or Bad for the Market? and the $5 Million Dollar American Dream The market loves a "Goldilocks" environment, but what is the magic number for inflation that delivers the highest stock returns? Wes dives into the data to show how inflation rates directly impact your portfolio. Also, Investopedia put a price tag on the American Dream, but Wes has a reality check. Find out what you need to earn over your working career to afford a home, raise kids, pay for college, and reach the "Green Zone" in retirement. Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the October 7, 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

• 0:05Speaker 00

  Welcome to Ask an Advisor where we here at Team Clark go deeper on all things investing, saving your money.

• 0:12Speaker 01

  Inflation, the American dream.

• 0:14Speaker 00

  Yes, yes, yes. So today, on today's episode, Wes, you're going to talk about a couple of things. The American dream, what does it take? That's been in the news a lot lately.

• 0:25Speaker 01

  What does it cost?

• 0:26Speaker 00

  What does it cost?

• 0:27Speaker 01

  It's a pretty high number, supposedly, according to an Investopedia study.

• 0:31Speaker 00

  Oh, okay. And then is inflation good or bad for the stock market? You asked me this this morning, and of course, I promptly got it wrong.

• 0:37Speaker 01

  Well, you got it almost right.

• 0:39Speaker 00

  We'll see. I don't know.

• 0:41Speaker 01

  It's more complex than that. So maybe let's just start with that. And this was prompted by really reporter question, asking me to sit for an interview, talking about inflation. And it's a really simple question, if you think about this. Is inflation good or bad for the stock market? And I thought, wow, that's such a simple question. Do we really, do we really want to do an interview about it? And then, as I thought about it for a second, I thought, well, wait a minute. It is pretty nuanced. There's not just a super easy answer. But I'll start with the super easy answer, is that we want Goldilocks inflation. If you can imagine that we're in a nice, not too hot, not too cold zone, 0 to 2%, closer

• 1:23Speaker 01

  to 2%, that's the zone the stock market seems to like the most, at least historically, if you go back over the last 50 years. And that's where we see the best performance. If we get to a point where we have lower inflation than that, the reason that inflation, and usually interest rates would be super low, is that the economy is starting to have a little bit of a problem. So even though it's not necessarily a bad environment, for another couple of reasons, that's a different rate of return than we found when inflation is sub 2%. Then it's pretty clear, if we go from the 2% to 4% zone, returns come down. We go to the 4% plus zone, as far as inflation, then returns come down even further. So we'll

• 2:06Speaker 01

  go through this number. So first of all, there is no one variable. That impacts how the market does. In fact, it's even more nuanced than that. It is really, the question goes to what kind of stocks do well when inflation is high? What kind of stocks do well when inflation is low? So there's really two layers of that. So I'll start by just saying there are all sorts of variables that are determining whether stocks do well or not. Valuations, earnings really is what drives equity prices higher over time if earnings are growing. So there's, there's valuation, there's how the economy is doing, there's interest rates. So there are so many layers of variables in order to figure out this question. But if we were to isolate and just say, well, let's just look at different inflation regimes,

• 2:51Speaker 01

  different inflation environments over the past 50 years and see how stocks do just in general, the S and P 500, before we break it into different categories. And here are the numbers. If you look at when inflation is greater than 4%, so that's getting pretty high. It's high and obviously we've seen, if you go back to 2021, 2022, we saw eight, nine percent inflation. In that zone, rates of return on average are in the 6% range, which again, not great relative to stock market history. So, so it's pretty clear that really high inflation just isn't great for stocks. So that's the first answer. If you go to a moderately high zone, 2% to 4% inflation over time,

• 3:36Speaker 01

  stocks average a little less than, just a little bit less than the overall market return at about 10%. But the sweet spot or the Goldilocks zone, inflation not too hot and not too low or too cool. That's when you get 14.2% average rates of return. So that's better than market history. That's the zone that the stock market really likes. Some inflation, not too much inflation, but we also don't want less than zero, which we've also had some periods of time where we've seen a little bit of deflation. Now, there's not a ton of data for that. So even though average rates of return for the stock market, when we have inflation less than zero over the past 50 years, there's not a ton of data on that because it's a pretty rare event. But you see.

• 4:20Speaker 01

  A 13% average rate of return. I wouldn't put too much stock in that in that data because it's just a really small sample set. It's really just, there's only a couple of months even where we saw inflation less than zero. So that's the larger answer to the question, which is, we want to see for the broad market, if you're an investor, you want a little bit of inflation, not too much, not too hot, not too cold. That's the Goldilocks inflation zone. If we dig a little bit deeper, and we've done a lot of research on this over the last several years. And if you go back to 1960, Krista, and we're going, looking at a lot of history here, that corollary

• 5:00Speaker 01

  really holds true of how I just talked about this. And if you go to the 1960 to 72 period of time in America, we had a Goldilocks inflation environment. Inflation averaged 2.9%. I mean, that's kind of relatively in check and low. And stocks did pretty well, about 9% a year. Dividend stocks did about 12. Growth, growth stocks did about nine. There's not a huge disparity between the two. But then you get into these extreme periods, and I would call the 1973 to 1982 period, that's an extreme

• 5:35Speaker 00

  Right.

• 5:36Speaker 01

  Hyperinflation. Inflation averaged 9% a year. Nine for that long stretch of time. That was a very different environment. Dividend stocks did pretty well. They averaged about 11% a year. And growth stocks, as an example, think of today, what would be a dividend stock? Think of a utility company, a bank, an industrial company that pays dividends. They're growing, but not extremely fast. Growth companies, think of the big technology companies that don't really pay dividends, but they're trying to grow at 20, 25% a year. That's a growth company. That growth companies did really poorly during that period of time. Just barely above the flat line, averaging only 2% a year. So it also stands to reason that you can think of really high inflationary

• 6:20Speaker 01

  environments, good or better for, still not great for anybody, but better for dividend paying companies, really low inflationary

• 6:30Speaker 01

  Environments, very good for growth oriented companies. If we have low inflation, we probably have low interest rates. So investors are more willing to say, well, I don't, I can't get much sitting my money in cash.

• 6:41Speaker 00

  Savings, yeah.

• 6:42Speaker 01

  I'm going to go ahead and invest in a company that may have good returns, but way out into the future. So that's when the market pendulum swings toward growth stocks. And we have really low inflation and lower interest rates. The takeaway for investors, we're in the Goldilocks zone right now. We're not quite at the 2% level, but we're under 3% for inflation. And that's still a pretty decent environment in general for stock market.

• 7:10Speaker 00

  Okay. All right. Are you ready for questions?

• 7:12Speaker 01

  Let's do it.

• 7:13Speaker 00

  If you have a question, you can go to Clark.com/ask. And Jassen in Georgia did that.

• 7:19Speaker 01

  Jassen.

• 7:20Speaker 00

  This question.

• 7:20Speaker 01

  Okay.

• 7:21Speaker 00

  I'm currently halfway through my career, but I'm looking to branch out to something else entirely. I've looked into getting my CFP accreditation, but it says you need a four-year degree before the exam or within five years of taking the exam. There are also hours that need to be gathered for experience. As someone who would be doing this part-time around their full-time job, how would you advise me to move forward? While my current job isn't my passion, I've developed a true passion for helping people take control of their finances rather than letting money control their lives. And I want to share that with anyone willing to listen. Your segment has been a great addition to the show. And if Clark has to cut back, I'm glad they filled the gap with a financial advisor like you. That's nice. Thanks, Jassen.

• 8:04Speaker 01

  Jassen, what a cool question. And here's the deal. Did Jassen tell us his age?

• 8:10Speaker 00

  No, but halfway through his career.

• 8:12Speaker 01

  Halfway through his career. I'm going to assume he's 40, 35, 40.

• 8:16Speaker 00

  Probably.

• 8:17Speaker 01

  This is cool because, and there's a problem in the financial advice industry. And you, it's almost counterintuitive because you think of how technology has made everything easier to invest. And there's more things we can invest in at a lower cost. And there's so much advice swirling around. You would almost think there's less of a need for financial advisors. But I think it's because the world is even more confusing than it's ever been. It's the opposite, I think, is true, which is there's even more of a need for financial advisors. And demographically, we, our industry, financial advice, is a really aging industry. 50% of all CFPs are over the age of 50.

• 9:01Speaker 00

  Oh, wow.

• 9:02Speaker 01

  50%. 40% of today's advisors are supposed to retire by the year 2034.

• 9:10Speaker 00

  Wow.

• 9:11Speaker 01

  Again, it's kind of right in the next, call that, what's that, nine years? You're going to see almost half of the industry retire when we need that many more people, that many more people need help. So we have a supply and demand problem. There's so much supply of people needing advice and the supply of advisors is actually contracting pretty rapidly.

• 9:32Speaker 00

  And then the, the supply of non-advisors giving advice on TikTok and stuff is expanding, which is scary.

• 9:38Speaker 01

  Expanding. I just, I don't have, I don't know, I don't have TikTok, so I haven't seen that, but you're probably right about that.

• 9:43Speaker 00

  Oh, yeah.

• 9:44Speaker 01

  So you would be part of the solution, Jassen. And we need folks like you that want to do this. But part of the reason we're in this imbalance is that it is really a long road to get the CFP. It's 6,000 hours of experience in the field. It's 4,000 hours of structured apprenticeship. It's a four-year degree. It's an exam, which I'm glad I took that exam right out of college because I was still used to studying and I was working in the industry. I had graduated from college, so I was still in test-taking mode. I've seen people that go back in their, let's call it 30s and 40s. And then it's like, well, I got to restart and, and figure out all these different sections of the CFP and then I have to sit for a six-hour exam.

• 10:28Speaker 01

  So it does take a lot of time. And then if you don't have your bachelor's, you've got to get that within, I think, five years as well, what he's saying. So I would just say this, the best, the most logical way to get this done is that I think you've got to get a, a job, a part-time job, an apprenticeship somewhere in the financial industry. So let's say you're an engineer and you're working full-time. I know it sounds really tough to do, but you, you almost have to get a job somewhere in financial services. And once you're in that job, and it doesn't have to be. The perfect financial job, but it needs to be something that gets you in kind of the

• 11:11Speaker 01

  jet stream of being in the industry. I think it's also really, it's much easier to pass the CFP test if you're already in practice as well. I think if you do it purely and academically, it makes it really, really hard. So I know it's a hard road. We need you, but I would also say the, the most realistic way to really get this done is have a, an internship, apprenticeship, part-time work, even if it's 10 hours a week, that will put you on the road to being able to accomplish that long list. And it sounds like it's a passion for you. So I know you can do it.

• 11:43Speaker 00

  Awesome. David in Texas says, Mr. Moss, is there any benefit on having a low-cost, high-yield bond ETF as part of my portfolio? I see it as an extra yield boost to the current total bond fund I already have.

• 11:57Speaker 01

  David in Texas, you're a multi-asset class income investor. So I love the thought of having a lot of diversification, how you're getting your income. So that also means a variety of stocks and stock categories that pay income, but the bond side is what you're asking about and talking about. And high-yield bonds, they have done really, really well, I would say, over the last several years. So I'm not against them. They are for more aggressive investors and knowing that they have a lot of volatility. They're not like watching the total bond market index, which moves only a little bit. High-yield bonds, they may not move as much as equities, but it's pretty close. And when you're getting

• 12:37Speaker 01

  a 6%, 6.5% yield, which is about where high-yield bonds are paying today, it comes with some risk and some volatility. So I would use it as a satellite or a piece of the overall, not the whole portfolio. Number one. Number two, they don't count as dry powder. So if you're looking at the safety portion of your portfolio and we're looking for highly safe, let's call it high-quality corporate and government-type bonds, high-yield bonds, remember, they've been renamed, just to make them sound less bad, which is they used to be called junk bonds.

• 13:13Speaker 01

  That's what high yield bonds are today. They just have a nicer title to them.

• 13:16Speaker 00

  A lot nicer.

• 13:17Speaker 01

  High yield. Oh, that sounds good. Junk bonds.

• 13:20Speaker 00

  Wow.

• 13:21Speaker 01

  Very different, but they're the same thing. They've just been rebranded.

• 13:24Speaker 00

  Well, that's quite a rebranding.

• 13:25Speaker 01

  It's like how the estate tax was rebranded as the death tax.

• 13:30Speaker 00

  Yes.

• 13:31Speaker 01

  Words matter. So the industry figured out how to make them sound less bad. But over time, if you're in a diversified, let's say an ETF or a fund that has lots of different high yield bonds, then you've probably done pretty well over time. So where are yields today? High yield bonds are in the six, six and a half percent range. Government bonds are going to be more like the 4% range. The 10-year treasury today is a little over 4%. And the reason I say that is that you're not getting a ton of extra yield right now. The, if the industry would tell you that high yield spreads are very low, and that just means that you're not getting a whole lot of extra risk to own a low rated quality

• 14:13Speaker 01

  company that has bad credit essentially. So we have to be careful. And when the economy goes awry, then high yield bonds can take big hits. Five, 10, 15, even 20%, depending on what kind of crisis we go into in America. If you, if you go back to the pandemic, high yield bonds fell almost as much as stocks did. But you do get this six, 7% yield along the way. So I think they're a nice compliment to an otherwise high quality, dry powder section of the overall portfolio.

• 14:47Speaker 00

  All right, Chris in Washington says, hello, Wes. Thank you for adding another podcast to your busy schedule and helping Clark wind down with other endeavors he enjoys. I have a simple question that has confused me since I started listening to financial podcasts. I understand the amount needed for retirement is based on what you plan to do in retirement. However, I like to use the generic benchmarking system out there, such as Fidelity's, to make sure my wife and I are not falling behind in retirement savings. My wife and I are seven years apart, though. She just turned 30 and I'm 37. Fidelity states you should Should have one times your annual income by 30 and three times by 40. We started, I started late saving for retirement when I was 30.

• 15:31Speaker 00

  I currently have 250K and do not think I will hit the 360K savings goal by 40. My wife is at 60K but would need 100 to be on track. We are both in new jobs now, which do provide pensions if we stay where we are for at least five years. We also have a brokerage with about 50K invested. My question is, should I be looking at our individual incomes and individual savings to match ages when comparing to the suggested? Or should I be incorporating out full home incomes and retirement amounts, assuming my age is our age? Thank you.

• 16:06Speaker 01

  Whoa.

• 16:07Speaker 00

  It's a lot.

• 16:08Speaker 01

  It's a lot, Chris.

• 16:09Speaker 00

  And by the way, I don't think 30 is late. If you look at statistics, you're early, man.

• 16:14Speaker 01

  It's not at all. And, and they, he already has 250,000 saved, another 50, really 300.

• 16:18Speaker 00

  Yeah.

• 16:19Speaker 01

  Here's what I would say about the age multiplied by your income and where you should be charts. I, I think they're fascinating. Like if there's a new article that pops up and I haven't seen that chart for three months or six months, I always look at it.

• 16:31Speaker 00

  You love a chart.

• 16:32Speaker 01

  I love a chart. I love a table. So I, I don't blame you for looking at these things. They are at least somewhat helpful. Totally get it. But I would scrap that chart completely. Just throw that chart out. And it's nothing against who publishes it because it, most financial firms publish the same chart. It's just math. But it's confusing. It's particularly if you've got a big age gap between you and your spouse. It's your age, it's your income, it is the age of your spouse, the, your age. So that can be different. Depending on what your income is, maybe your income's artificially low right now. Maybe it's artificially high right now. Does that really matter? What matters is what you need to spend in retirement. So if this is a generic benchmarking system to make people feel guilty.

• 17:19Speaker 01

  So I would just scrap it. Don't just don't even look at that. Remember, financial planning is about making the complicated simple. And that chart kind of makes it even more complicated. Here's how you make it simple. Just use the 25X rule and think less about what you're earning today and what you're going to need to spend in retirement. And if you do some quick math here, and I'm going to just use the financial calculator. If you've got $250,000 and you average 6% a year, and let's say you are 37, so 25 years, you'd be 62. At a 6% rate of return, if you're saving 15K a year, and this is compounding on top of the 250 you already have.

• 18:04Speaker 01

  Well, you really have 300, but let's just do 250. For the next 25 years, just mathematically, that comes out to 1.9 million.

• 18:15Speaker 01

  And if you're using the 25X rule, think of it this way. If you need 50K times 25, that equals a million and a quarter. Right? That means that you could, if you've got social security and you may have a pension, and I would think putting all that together is 50. If you have a million and a quarter, again, 50K times 25 is 1.25. That's the 25X rule. You would have another $50,000 on top of that. So then you have $100,000 per year in retirement that can escalate higher for inflation. That's how I would be looking at this and not a complicated chart.

• 18:54Speaker 01

  I'd be looking at just making sure that you've got your million and a quarter. And by my math here, you would have almost $2 million if you're saving a little over 15, and that's early. It's at age 62. So now you've got $2 million.

• 19:11Speaker 00

  And you may end up saving more than that a year as income goes up.

• 19:15Speaker 01

  Then you've got $2 million saved, which if you just use the 4% rule, that's 80K in spending, plus all of your pensions and social. Now you're at 130. That's the way I would be looking at this planning. Fast forward, say, well, what would it take to get 100 a year, 100 and a quarter a year? And just use the 25X rule. That's the amount you would need in savings. You do the math where you say, I want at least 50 for my investments. Or in this case, I want 80 for my investments. The 25X rule allows you to do that, plus social, plus pensions. That's how I'd be looking at this.

• 19:50Speaker 00

  Okay. All right, we're going to take a quick break and when we come back, the $5 million American dream.

• 19:56Speaker 01

  Sounds expensive.

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• 20:43Speaker 01

  Welcome back to Ask an Advisor. I'm Wes Moss, along with Krista D. B. Oz, here on the Clark Howard Show, Ask an Advisor session. Talked about inflation in stocks. This is a broader topic about the American dream and the cost of the American dream. And this is not a number for retirement. This is the amount that supposedly, according to Investopedia, and this is an article that's been floating around recently. And I've had a couple of different people ask about it. So I wanted to cover it here on how much you need to earn. Earn over the course of your career to pay for all the big stuff. The big chunk of it is retirement savings.

• 21:26Speaker 01

  So they're estimating you need, again, these are not my numbers. This was the Investopedia saying this is what you need. And I would agree with some of these numbers and I would disagree with some of them. But let's just, according to their lights, retirement is the biggest chunk and you need 1.6 million dollars for that. Again, quite the 5 million is how much you should be earning in order to have the, the spending power to do all these things. Healthcare, they estimate 414,000.

• 21:56Speaker 00

  This is per person?

• 21:57Speaker 01

  This is for a, it's really should be for a household.

• 22:02Speaker 00

  Okay.

• 22:03Speaker 01

  But if you're single, it's per person.

• 22:04Speaker 00

  Okay.

• 22:05Speaker 01

  For the most part, I look at this Krista as a household.

• 22:09Speaker 00

  Okay.

• 22:10Speaker 01

  It's, it's hard enough. Remember what the statistic is that half of Americans have no retirement savings at all. The median retirement account right now sits at 134,000 dollars, not even close to 1.6.

• 22:22Speaker 00

  Right.

• 22:23Speaker 01

  Investopedia is saying, so one, they say you need 1.6 million in retirement savings. Healthcare is going to cost 414, homeownership is 958K. Let's call that a million dollars. Again, median, single family home prices right now at about 415,000. And then they base that off the 30 year fixed mortgage rate, which at the time they did this, it was about six and a half. They're saying the cost of kids, to raise your kids and then the cost to send the kids to college. They're putting that at 650K to raise the kids and 230 for college. So that's 875 grand. So almost $900,000. Cars, now I don't know, maybe Clark will have a heart attack on this one. $900,000.

• 23:08Speaker 00

  Wow.

• 23:08Speaker 01

  Over the course of your lifetime, they're estimating two new cars every 10 years.

• 23:14Speaker 00

  Oh, wow. Yeah. I mean, that probably is average. Yeah.

• 23:18Speaker 01

  The vacation budget, again, this is for your lifetime, 180,000, pets, 39,000. They're taking the average cost for one dog and one cat.

• 23:27Speaker 00

  Oh, my gosh.

• 23:28Speaker 01

  And veterinary bills and food, et cetera. And then, well, a wedding. I guess they're assuming that only one of the kids get married.

• 23:37Speaker 00

  Okay.

• 23:37Speaker 01

  Or maybe you pay for one of the two and they're saying $34,000, $38,000 for the wedding. You add it all up, that's $5 million. Which, by the way, is the first problem I have with this article, that's after taxes. So it means you have to earn about $7 million in gross pay in order to net down.

• 23:58Speaker 00

  Over your lifetime, yeah. Wow.

• 24:01Speaker 01

  You know, I don't know. I would just say that I understand the car number. I understand homeownership, that number. Those people aren't just paying for the first house in cash. You're going to pay some interest to have a mortgage. Healthcare, hard to argue with that one. And then 1.6 million in retirement savings. That to me is, that gets you into what I would consider the green zone of retirement savings. Done a lot of research around this and I think that is an appropriate number. The retirement green zone, in my opinion, starts at $1 million in investable liquid assets for retirement. So I'm not going to argue with the 1.6 million. Now, what would you have to make in order to make this work?

• 24:42Speaker 01

  And I'm looking at, now I think a 30% tax rate, maybe a little high for some people. But if you're 25% federal and 5% state. So again, depends on where you live here, but that's the number I used. To net 5 million, you would need to make 7.14 million, which essentially is $160,000 a year in gross income. Over your, they're looking at this over your 45-year working life.

• 25:10Speaker 00

  Wow.

• 25:12Speaker 01

  Now, there are two.

• 25:14Speaker 00

  Seems realistic.

• 25:15Speaker 01

  It does seem realistic. 45 years?

• 25:18Speaker 00

  But making that much for 45 years.

• 25:20Speaker 01

  Right. That part is really.

• 25:22Speaker 00

  That's insane to me.

• 25:23Speaker 01

  But here's the, I would think the good news, because let's get a dose of reality into this. And there's a big difference between saving your way to the American dream and then investing your way to the American dream. And if you do the numbers, because the biggest chunk of this is retirement savings. If you're just saving your way and you're going to put away $1.6 million, assuming no rate of return, which that's probably artificially low as well. Then by my math, you need to make 100, you have to average 160K a year. But if you were to save every year and invest those dollars in order to get to 1.6 million

• 26:06Speaker 01

  by the time you're done your 45 years, it's not nearly as much having to be socked away as you might think.

• 26:12Speaker 00

  Mm hmm.

• 26:13Speaker 01

  By my math, you would have to earn about 480,000, which would net to about 338,000 over that period of time. And if that compounded at 6% over time, then where do you end up? Well, you still end up with the 1.6 million because the net 308, call it 340 grand, which would be 7,500 bucks a year or 650 bucks a month, growing at 6% a year, then you get to that number. You get to the 1.6 million dollars in savings. And to me, that's the biggest cost of this whole equation.

• 26:53Speaker 01

  Now, if you do the math on that, you end up with having to earn about 119, let's call it 120,000 dollars a year. So saving your way to the American dream is, and this is trying to put it into perspective for all of us, like, what does it really mean over 45 years? You'd need to earn about 160K gross. If you invest your way to the American dream, that number drops all the way down to 120,000. So 6% for 45 years, 7,500 bucks a month, or 7,500 dollars a year, or 650 dollars a month gets you to the 1.6 million.

• 27:32Speaker 00

  Yep.

• 27:33Speaker 01

  So I, again, I don't really, it's expensive.

• 27:37Speaker 00

  It is.

• 27:38Speaker 01

  It's a lot of earnings over a 45-year career. 7 million, depending on our tax rate, it could be 6 million if you're a lower tax rate, to net down to the five that they're saying in this study. And I don't think it's that far off, and it's a big mountain to climb.

• 27:53Speaker 00

  Yeah, it is. And I think, of course, all of this, like you've always said, is affected by what is your lifestyle going to be in retirement? You know, are you going to pay for a $35,000 wedding? Maybe a lot of people wouldn't. I mean, there's so many, do you need a new car every 10 years? So, you know, there's certainly, there's so much that we can do. And that's what, you know, Clark talks about so much, is like figuring out how to live with.

• 28:16Speaker 01

  What would you guys say about a $40,000 wedding? Crazy or normal?

• 28:21Speaker 00

  He would think that's insane.

• 28:22Speaker 01

  Insane. Think about this, though. The $1.6 million. And if you use the 4% plus rule, I'm just going to use 4.5% for easy math. That's $72,000 a year in income, starting in retirement. You add another 40K in social security. Or maybe a pension as well, you're at 112. If you don't have a mortgage.

• 28:46Speaker 00

  That's key.

• 28:47Speaker 01

  A lot of people in America can live on that.

• 28:49Speaker 00

  Yeah, and maybe when they're younger, a lot of people are paying down their mortgage. So their expenditures are much higher than they might think they're going to be in retirement if they get that paid off. One of your keys to a happy retirement, as you say, not having a mortgage, right?

• 29:03Speaker 01

  That is, that is wonderful. Oh, really? In the newest book that is still yet to be released. It is having your mortgage pay off within sight.

• 29:13Speaker 00

  Okay.

• 29:14Speaker 01

  If you have a 30 year, you have 30 years left, that's bad for retirement happiness. If you are within a certain amount of years. So there's light at the end of the tunnel. That adds to retirement happiness.

• 29:26Speaker 00

  Okay, I cannot wait. We'll hear more about that book, I'm sure. Any idea of when it's going to be released?

• 29:33Speaker 01

  Hopefully sooner than later.

• 29:35Speaker 00

  All right, we'll go to questions. This one came from Joe in Georgia. Should I continue to carry a large life insurance policy on my wife and I? I'm 58, she's 55. I'm paying $1,900 a year for $200,000 for me. And I have two grown children, one of which is still single. And we supplement his income. I have $300,000 in a 401k and I own seven rental properties that are worth around 1.7 million. We have $125,000 in debt, most of which is our primary home. I would like to invest the insurance premium in my 401k to catch up on the catch up.

• 30:12Speaker 01

  On the catch up. Joe, you could ask 10 people on this and maybe get 10 different answers. In large part, insurance has done its job, meaning that you, we want to, we want insurance, we want to pay for insurance, but we obviously don't want to have to use it. And that's why we do lower cost term policies. And then hopefully you've just wasted all your premiums and everyone is now financially independent, you're financially independent for retirement, the kids are out of the house, and you don't need the insurance anymore, so you can stop paying it. You are not, in my opinion, you're not quite there. So it makes sense to say, well, I don't really need this anymore. I can go ahead and drop it.

• 30:55Speaker 01

  But if you were to just start today, is it a good deal to have $200,000 that would come to your wife if you pass today for $1,900 a year? In my opinion, that's still a low amount of money to protect that much in, that would add that much in assets. Because remember, when, if something happens to you, your wife will go down to just one social security payment, not two. You won't have both of you together for retirement. So I think that, I know you're 58, so you're getting close to the point where I think you could think about giving this up, but you're a little, in my opinion, you're a little far away from that. And I would continue to do the $1,900 for the $200,000. Remember, it's insurance.

• 31:40Speaker 01

  It's in case of a, something really bad happens that you don't expect. Sure, you could invest the $1,900 over the next, call it, five years. Is that really going to get you anywhere close to, if something were to happen in three or five years and you pass? It doesn't come close to the 200,000. So my opinion, even though you've got $2 million between your 300 and your 1.7 in, in real estate, and you're, you're technically, you're pretty much funded when it comes to retirement. I would keep, I would not be getting rid of that insurance policy today. That's just my opinion on it.

• 32:17Speaker 00

  I assume it's term life.

• 32:18Speaker 01

  I'm assuming it's term life.

• 32:19Speaker 00

  And I would, what I would do though, cause I just recently re-upped, I did a 10 year, additional 10 year term life policy. I would shop it around a little just to see if you look at 10 year policies and how much they would cost, cause that does sound a little high to me unless there's some medical underwriting issue for term life for that much money.

• 32:38Speaker 01

  But it is the bird in hand.

• 32:40Speaker 00

  Right, but you don't have to do anything. You can keep that policy or you can shop it around.

• 32:44Speaker 01

  I would shop around and see what a brand new policy would cost. Again, based on where you are health-wise, we don't know.

• 32:50Speaker 00

  Yeah.

• 32:51Speaker 01

  So that's another option. If you could get the same amount for less over the next five or 10 years, maybe it's worth doing that too. But I would be of the mind of not getting rid of the insurance just yet.

• 33:03Speaker 00

  Steve in Missouri says, hi guys, I have a question about saving in 529 plans for my children. My wife and I go back and forth on how much to fund their college and how much we're willing to help them on that, but I found an interesting loophole. Open 529 plans for each of my kids the year they were born. Under the Secure 2.0 Act, I understand I can roll over up to $35,000 from each 529 to my child's Roth IRA penalty and tax-free as long as the account is at least 15 years old and my child has earned income. My plan is to fund each 529 so that by the time they're 16 and working, I can roll over the Roth IRA maximum each year and get the full $35,000 transferred by around age 21

• 33:46Speaker 00

  or 22, letting it compound for decades. Is this approach sound under current IRS rules? Is there anything I need to watch out for such as contribution limit interactions, plan specific restrictions, or better account options to maximize long-term growth? Instead of using this 529 money for college expenses, I'd love to kickstart their retirement portfolios with rocket fuel instead, letting the magic of compound interest do its thing for several decades. Is this a good strategy? Thanks.

• 34:16Speaker 01

  Steve, I think it's a great strategy. It really is. I love it. This is a very real rule. This isn't just some loophole. This is IRS-approved under Secure 2.0. It's, they say you're able to roll over 529 money, but there's a limit to it. You can only do $35,000 from a 529 to a Roth. And you can only do up to the contribution limit in any given year. So it's going to take a while. The other caveat is that the 529 account has to be pretty old. So it's, I believe it needs to be a 15 year period.

• 34:48Speaker 00

  He's said that. So I think he does know that.

• 34:50Speaker 01

  And then the beneficiaries has to have some earned income, et cetera, which obviously can happen as kids start working. So I would say it's a really good plan. You've got to be careful about rolling over contributions or earnings on those contributions in the last couple of years. So you've got to be careful about that. But I think it's a really good idea. Even 35K grown at 7% a year could be a half a million dollars by the time your kid retires. So your children retire. So I think it's a really good number. The question is then, how do we pay for college? I think about this as a, again, there's no right answer on this one, but I always think of this as a third, a third, a third, meaning that depending

• 35:33Speaker 01

  on where the kids go to college, I mean, you could be in a state like the state of Georgia, where you go to in-state school, maintain a certain grade point average and it's extraordinarily low, almost free for tuition. Not every state is like that. Where is Steve coming from? Did he say?

• 35:48Speaker 00

  Yeah, Steve is in Missouri.

• 35:50Speaker 01

  Missouri. I don't know if how it works in Missouri, but I think of it as kind of the third, a third, a third rule where, and this is why most people don't retire until their kids are already out of college, is that one, you help them pay for a third of it while you're still working and they're in college. Two, a third of it comes from savings. 529 plan that you already have, maybe it's another type of savings. And then three would be to have the student either pay for the, a third of it, or take out loans. And I think that that allows skin in the game. So you've got, everyone's kind of sharing what has now become an enormous number for, for most families. And depending on your state, you've got to be able to break up a cost like

• 36:35Speaker 01

  this. A third coming from while you're working, a third coming from savings, a third coming from the burden on your children having that college debt so that their skin in the game. So the question is, what are you going to do on the savings side? And are you planning on continuing to work until they're through college? There's only so much we can squeeze out of the orange here. I think if you had to choose and figure out how you would pay for college, I think advantage goes to the potential of several hundred thousand dollars long-term in retirement for the kids. So I think it's a really good idea, but still gotta pay for college.

• 37:15Speaker 00

  Yeah. Okay. McKay in Georgia says, I love this show. Crazily enough, my kids ask to listen sometimes. Anyway, I've had this-

• 37:23Speaker 01

  That's because of you, Krista. They like to hear you.

• 37:25Speaker 00

  No way. Absolutely not. Anyways, I've had this idea for some time. I want to invest our disposable income in some way to balance enjoying it now, but also have it grow so that it bumps up our baseline lifestyle before retirement. I have a very steady paycheck and I love my job, but I don't expect significant raises. How can we do this? I'm happy to consider more complex solutions if they squeeze out more over time.

• 37:50Speaker 01

  McKay, first of all, I can't believe your kids listen. That's pretty cool.

• 37:53Speaker 00

  I know. Clark would make a joke about they're probably falling asleep in the car.

• 37:57Speaker 01

  They are. I can just say, my kid, I've been, I've done radio and podcasts now for almost 20 years, I guess 17, 18 years. And it, when my kids were really young, I think they thought it was somewhat cool. And then after the first year or two, they just absolutely could care less.

• 38:16Speaker 00

  Right.

• 38:16Speaker 01

  And they did turn that off if it comes on. And the only time I ever hear about being on the radio for my kids is when one of their buddies at school said, oh, I heard your dad on the radio. And they're like, yeah, whatever. I don't even know what he's talking about. So anyway, it's cool that they're learning. They're going to be very smart kids. Number one. Number two, I think your question McKay goes back to the automatic increases in savings that you're able to stomach and not make it so that you can't pay the rest of your bills. And more and more 401k plans, and in fact, I believe now after the Secure 2.0 Act,

• 38:56Speaker 01

  any new 401k plan allows for this. So not every older 401k plan does, but most of them do. Is that there's an escalation option inside your 401k contribution and you can have it automatically ratchet up your savings. I think it's just in 1% increments. And I don't know exactly if you can do it four times a year, once a year. But even if you do it once a year, McKay, and you may not notice that extra savings that you're getting. So maybe you're saving 8% today and you go auto escalate. And in a couple of years, you're at 12, 13, 14% and you may not have even noticed

• 39:38Speaker 01

  that you're saving that much more in your retirement accounts. You're almost tricking yourself into saving a little bit more. You said that your salary is going to be pretty much level. So there's only again, so much juice you can squeeze out of your salary and put into savings. And it's really hard to manually do that. So I would look at this as just a, you're tricking yourself into saving more by turning on the auto ratchet up higher contribution limit inside the 401k. The other thing you can do is just to get started and it doesn't have to be a huge amount of money. Maybe it's the amount you won't miss much. Maybe it's a hundred bucks. Maybe it's $200 a month. And you're doing that in a brokerage account and you're doing an auto investment plan and

• 40:21Speaker 01

  you're doing a reinvestment plan and you may not miss that all that much either. So I think that you, there's two ways to kind of trick yourself into saving more. First of all, it's starting small and then, but you're doing it today. And if you do that for another 10, 15, 20 years, sounds like if you've got young kids. That could add up to more than you might think. So I would think about tricking yourself into just saving a little bit more this year that could turn into a lot more in the future years and then add up to an awful lot way down the line.

• 40:55Speaker 00

  I love that McKay has a job that's so fulfilling, too. I think that's so important, even though not expecting significant raises. Yeah, loves the job.

• 41:05Speaker 01

  Do we have more questions?

• 41:06Speaker 00

  No, that's it, man. We're done for the day.

• 41:09Speaker 01

  It's a wrap.

• 41:10Speaker 00

  It is. Thank you for joining us. Please share.

• 41:13Speaker 01

  I love these questions, by the way.

• 41:14Speaker 00

  We've got plenty.

• 41:15Speaker 01

  We have a great audience.

• 41:16Speaker 00

  Yep.

• 41:16Speaker 01

  Really is.

• 41:17Speaker 00

  Oh, no question. Best audience in the entire country. I'm absolutely convinced. People are so nice. There are a couple on YouTube who aren't as nice, but that's okay.

• 41:27Speaker 01

  That's okay.

• 41:29Speaker 00

  Most people are fantastic. Thank you so much. Share this episode with a friend. Subscribe, please, to our YouTube channel or wherever you listen and hope you have a great rest of your day. Clark is back tomorrow with a brand new episode.