11.04.2025 Ask An Advisor With Wes Moss

Is Your Portfolio Too AI-Heavy? and Does Social Security COLA Keep Up With Inflation? In this episode, Wes Moss shares startling JP Morgan research: just 41 AI-related stocks now account for nearly 50% of the S&P 500's weight, making the market severely overweight in a single theme. Wes offers actionable advice on how to rebalance your portfolio. Also, with the new COLA increase, Wes sets the record straight on Social Security, demonstrating that it has quietly been one of America's best inflation fighters since 1975. He examines the history of COLA adjustments and provides an honest assessment of the fear surrounding the Social Security trust fund running out, clarifying what that worst-case scenario truly means for current and future retirees. Mentioned on the show: Rule 72(t): Secret Rule To Access Your IRA Early Rule of 72 Calculator - Clark Howard Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the November 4, 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. 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

• 0:00Speaker 00

  UKG is the workforce operating platform with unified HR, payroll and workforce management. Built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance and productivity, enabling every worker to confidently take action as work happens. Because when work works, everything works. Learn more at ukg.com/work. UKG, HR, Pay and Workforce Management.

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• 1:05Speaker 02

  Welcome to Ask an Advisor. I'm Krista Debiase here with Mr. Wes Moss.

• 1:09Speaker 03

  Wes Moss, Krista Debiase.

• 1:11Speaker 02

  With a blazer on today.

• 1:12Speaker 03

  It's cold. We're in the cold season. So it's like a real, the chilly season and it is a kind of thick. It's almost like a coat.

• 1:20Speaker 02

  Very nice.

• 1:21Speaker 03

  I might have to take it off if I start sweating.

• 1:23Speaker 02

  So last week you and Clark did an episode together and that was very well received. I thought that was so much fun. And you mentioned the AI, you guys talked about AI stocks.

• 1:32Speaker 03

  Yeah, we talked about private equity and 401ks. We also talked about AI at least a little bit. And the risk that we see, Clark brings up a really good point. It's not just the market itself that is getting AI heavy. And that's what I want to talk about today.

• 1:46Speaker 02

  Right.

• 1:46Speaker 03

  The overweight, the market is a weight problem weighted towards AI. And the question is how do you or should you or if you wanted to slim that down? And we touched on this last week, but there's new research I found over the past couple of days from JP Morgan that shows just how there's a handful, there's 41 of them, 41 AI related stocks that they are pointing to out of the S and P 500. So you've got 459 stocks that are not AI related and you've got 41 that are, that makes up the S and P 500 as far as the number of companies. But those

• 2:24Speaker 03

  Forty-one stocks really make up almost 50%

• 2:27Speaker 02

  Wow.

• 2:28Speaker 03

  of the market's weight.

• 2:29Speaker 02

  So we're going to get to that first, but also later on, there was a cola raise for social security recipients.

• 2:35Speaker 03

  Yes, and I want to talk about how there's the worry about social security. Does it really keep up with inflation? Is it gonna go away? There's always a fear around social security, and I want to go through some history in relation to the new raise recipients just got.

• 2:53Speaker 02

  Awesome. All right. So AI stocks. How worried do we have to be too?

• 2:57Speaker 03

  Well, I think it's just something that we we can't overlook, and it's so new that three years ago, there really weren't any AI stocks because AI hadn't really officially launched. It was really November of 2022. And in this short, just shy of call it 36 months, it's been the theme that has really driven the markets. And I think it's important to understand just how much it really is driving. And I, and again, new numbers out of JP Morgan that really tell the story from a math perspective, they identified 41 AI-related stocks. That's 8% of the S and P 500. And it's 47% of the weighting, almost half of the market is are those 41 stocks.

• 3:41Speaker 03

  As an example, it's the usual suspects at the top, Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, et cetera. But then there are other companies that are a little less well-known, but they're also in the AI camp, if you will, Cadence Design, Dell, NXP, Digital Realty Trust, Super Micro, et cetera. And then there's some AI-related utilities that are very involved. And then some capital equipment companies, Eaton, Trane, et cetera. And I'm not saying run out and buy or short these stocks. What I'm saying is that it's a pretty short list, and it makes up about half of the S and P 500. It's also made up, that little group has made up almost 75% of the returns over the past three years.

• 4:27Speaker 03

  So if you're looking at those 41, that's 74% of the total increase. If you look at the rest of the market, the other 459 companies, it has been much, much less. So those 41, as of this past week, up a little over 190% in total return. The other 459 stocks only up about 27%. And that's how you kind of put the two together and you get the S and P 500 return. But the 495 is up less than 1% since last November.

• 5:08Speaker 03

  So the drivers, even though it's been over the last three years, it's really even been more exacerbated over the past one year. Now, if you look at the top 41 stocks and they account for 50% of the weight, not the return, but the weight. That's actually not that new of a phenomenon. It is almost normal that the biggest 40 or 50 stocks do make up about half of the index. It's really the return that has been somewhat shocking. If you go and compare since November of 2022, three years, if you had money just in the safe three month treasury bill, you've made about 15% or just shy of a 5% annual return.

• 5:49Speaker 03

  The 459 non-AI related companies in the market, up about 8.63% annualized. So better than treasuries, but not a whole lot more than sitting money essentially in cash. So it's an overweight problem. That's what Clark and I talked about last week. The question is, what do we do about it? One, we don't want to abandon stocks, right? We can't, we can't keep up with inflation if we're not invested for the really long haul when it comes to equities. So we can't just give up on equities, but we can rebalance and we can be mindful that one, we're not. If you, if you own the general market, you're already about halfway invested in this one theme.

• 6:30Speaker 03

  AI. So be cognizant of that. And A, you could be rebalancing. And where would you be rebalancing? You'd be rebalancing away from this over concentration. That would include things like equal weight market ETFs that don't have everything in just the, or they're not weighted towards just the top 10 and top 41 companies. So that would be going beyond mega caps. It would be thinking about, do you have small companies in your 401k? Do you have middle sized companies? Don't forget about international. I still have a real bias towards United States and US stocks, because we do a lot of the revenue, a lot of the revenue for companies in the S and P 500 in America are coming from outside, because we have many global companies in the US. And then,

• 7:15Speaker 03

  of course, keeping your dry powder or safety assets. And those safety assets should be in things like treasuries or high quality corporate bonds. And they have nothing, they should have very little to nothing to do with this single themed market. Does the AI boom have legs? Yeah, it may very well continue for some time, but it has pretty skinny legs. It's holding it up. There's a lot of weight of that. So I would just be careful. And we really wanted to reiterate the theme that Clark and I talked about last week.

• 7:47Speaker 02

  Okay. Well, and people are definitely calling for more of those joint episodes. See if we can make it happen.

• 7:53Speaker 03

  Just what Clark wants, more podcast.

• 7:55Speaker 02

  Yeah, really. Okay, we're gonna go to questions. If you do have a question, I saw somebody commented, like, how do I even ask a question on this podcast? You go to Clark.com/ask and you can indicate if your question is for Clark or for Wes. Lou in Virginia filled out that form and he said, Wes, I have the opportunity to partake in an ESPP. What is the best way to determine if it's worthwhile? Any tips and or cautions would be appreciated.

• 8:22Speaker 03

  A couple of things. You want to like your company. That's the number one. So the ESPP is the employee stock purchase plan. And it is an opportunity for you to typically get shares of your company at a discount. That is a huge advantage over time. If you're always buying at, let's call it a 10 or 15% discount. I don't know exactly what yours would be, but it's going to be some discount. The other thing is that for a stock that's doing well, you're typically going to get a discount. Over a that maybe have started at a window, let's say the stock said 40 and it runs up to 50, you may be getting a discount at 40. So 10% off of that or 15% off of that.

• 9:05Speaker 03

  So you may get even a bigger discount than the stated discount that your company is giving you. So one, you're investing in your own company and you clearly should have at least some good understanding of are things going in the right direction? Do you see this as a, an enterprise that'll be around for the next 20 years, 10, 20, 50 years? And if that's the case, I've seen people make a really nice chunk of retirement money when it comes to these ESPP plans. And most of them you'll see are going to be from publicly traded companies where you're getting a discount on the stock. And unless the company is going to fade away over the next 10 years, usually these are something to consider.

• 9:47Speaker 02

  Doesn't it make sense even if you're going to sell the stock right away? If you're getting like a 15% discount?

• 9:52Speaker 03

  Well, you usually do have some holding period.

• 9:54Speaker 02

  Yeah.

• 9:54Speaker 03

  You usually have some holding period and that's going to be part of the plan that you're in. So I would consider that. How long do you have to hold it before you can sell it? Then there are also ESPP plans for private companies. This would be you getting shares in a company has to be valued. You get a certain percentage or shares in that company and you still get a discount. Those can be great. Those can be great investments too. I've seen people make a million or $2 million on their company, even private company stock. God forbid, we're talking about private equity here. It would be your own form of private equity. So on those, what you have to really be careful about is what you just brought up Krista about selling stock in a public company. That's one thing.

• 10:39Speaker 03

  It gets really hard in a private company and you usually have much longer hold times in order for you to actually realize maybe you do have gains. But usually if it's a private company, it may be a two, three, five year period where you're allowed to sell it.

• 10:54Speaker 02

  Mm hmm.

• 10:55Speaker 03

  So it is about the holding period. It's about the discount you get. And of course, above all, it's about, do you believe in the company over time? The one, the other risk here is over concentration.

• 11:07Speaker 02

  Mm hmm.

• 11:08Speaker 03

  Yeah. You've got to be careful about ending up with three quarters of your portfolio is this one company stock. That's something to really be careful about.

• 11:15Speaker 02

  I think Clark has always said, he thinks no more than 10% in a company.

• 11:19Speaker 03

  That's about right. I've seen people go higher than that, but that is a good rule of thumb.

• 11:24Speaker 02

  Joyce in Virginia wrote in with this. I keep hearing about saving $1 million before retirement. As a single person, is the $1 million per couple or per person? I understand everyone's circumstances are different, but I like having that marker or goal. Thanks. You don't have to use my question on Wes's podcast, but I think it would clarify it for some, and I agree with that.

• 11:44Speaker 03

  Joyce, I agree. I think it's really good for us to have a goalpost. Financial planning is, can be infinitely updated and changed, but it's really good to have a goalpost because it allows you to be able to give yourself a roadmap to get there. So I like having the goalpost and I still, yes, and the million dollar number is what I would call the financial green zone. There's the red, yellow. Get to a million and that is household investable assets. I think you're in a very good position to have a happy retirement. Now, it makes it tougher, Joyce, for you if you're single.

• 12:23Speaker 03

  But the world is, when it comes to running a household, there's usually one bill. It's one utility bill. It's one electric bill. It's one insurance bill. It's one mortgage. And it just is easier to get to these saving goals when it, when you have two people dividing and conquering. When we, my mom always used to say, when we were doing dishes. Many hands make light work.

• 12:49Speaker 02

  Mm hmm.

• 12:49Speaker 03

  And I would, I still to this day, when I call my kids, I say, guys, look, we could, one of you can do dishes, it's gonna take you an hour. If we all do it together, it's gonna take 10 minutes. So it's the same thing when it comes to saving with money. Many hands make lighter work. Now, yes, you may have to have two cards if you have two people and there's, there are certainly things that are, there's two dinners and as opposed to one. But the number really should still be a million, even if it's just you, because to me, that's a household number, what it costs to run a household and run a full retirement.

• 13:22Speaker 02

  But again, it all depends on, you know, so many factors, where you're living, you know, what you choose as a lifestyle.

• 13:29Speaker 03

  Of course it does. And I'll talk to folks that have everything paid off and their living, their spending is, they say, well, my spending's 2,500 bucks a month.

• 13:38Speaker 02

  Mm hmm.

• 13:39Speaker 03

  2,500 bucks a month in America.

• 13:42Speaker 02

  Right, right.

• 13:43Speaker 03

  Now, that's rare, and I'd say that's on the low side. But if your spending is pretty low, then sure, you may not need a full million dollars and your social security may cover it. But that's not where we want to be in retirement.

• 13:56Speaker 02

  Okay. Angela in Georgia says, I'm over 50 and in a higher tax bracket. My 80 year old mother is in a much lower tax bracket, but will likely leave me a decent sized traditional 401k, will be over 500,000 when she eventually passes. I've encouraged her to spend her money, but she doesn't seem likely to spend it all and wants to save some from, leave some for my family. Does it make sense to try to convert her money into a Roth IRA now to reduce the overall tax burden? And if so, should we convert a little bit each year or a bunch at once?

• 14:29Speaker 03

  So Angela, if you look at this purely by the numbers and you say, we're, this is collective money. And if you're a family collective, then if you look just at the math, it probably does make sense. Your mom may be in the 10% bracket, she could convert and still stay, let's call it in the 15, and you may be in the 30 bracket. So over time, if you were to, if your mom was to do the conversion, she's probably doing it at a much lower rate. And then it gets into a Roth, and then you ultimately inherit the Roth, and then it's tax free for you. But I don't know if it's the family collective and I don't know that your mom doesn't

• 15:11Speaker 03

  need the 500K for the rest of her life. She's 80, she could live, I met with somebody just this week, they're 92, I mean, and they've lived to 100. So your mom needs that liquidity for the rest of her life. And even though she's not actively spending it today on things she's choosing, she may need it in the future and it may be for healthcare. So the only way I would suggest this ever be done is that you are with your mom and a financial advisor that's looking at both of your situations. Can she afford to pay the taxes for you? That's really what this is. And that is the conversation I have with a lot of folks when it comes to the Roth conversion.

• 15:54Speaker 03

  Once in a while, a family will say, I really don't think I'm going to need this money, or I know I'm not going to need this money, and I would like to pay the taxes today for my kids. That's like one out of about 100. 99% of people say, I've paid a lot of taxes, my kids are doing okay, they're still going to get a lot of money. I don't want to pay the taxes today for my kids. Not everybody, but it's a pretty rare case. I've definitely heard it. I'd like to pay the taxes for my kids. If Angela, your mom says, honey, I'd love to pay those taxes for you, and it works with a financial advisor fiduciary who's looking at both situations, mapping out that your mom

• 16:38Speaker 03

  could live for another 15, 10, 15, 20 years, then maybe you collectively as a family decide that that's the smart thing mathematically, but it's got to be done together as a group.

• 16:51Speaker 02

  All right. Now, speaking of streams of income in retirement, social security.

• 16:56Speaker 03

  We just got a raise. We're going to talk about the history of social security, the raise that everybody's just getting that'll take effect in the beginning of next year when we come back.

• 17:06Speaker 02

  And more of your questions.

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• 19:32Speaker 03

  Welcome back to Ask an Advisor. Wes Moss here along with Krista Divias to answer your questions here on the Clark Howard Show. Krista, we're talking social security.

• 19:44Speaker 02

  Social Security, COLA raise.

• 19:46Speaker 03

  Social Security, I would say has quite, it gets a bad rap, but it has quietly been one of America's best inflation fighters. And it hasn't been forever. But if you go back over the history, and we just got a raise. If you're receiving social security, you got a 2.8% COLA cost of living adjustment. That starts in January of 2026. That may not sound like a lot on average for people. It's 56 bucks a month. So it doesn't, it's not a lot.

• 20:13Speaker 02

  It's something for sure. It's a utility.

• 20:16Speaker 03

  It is. I think the reason, and it didn't start, it was 1972, they passed the automatic COLA legislation. And then 1975, that was the first time social security checks went up for inflation. And the reason I think it gets this rap that it doesn't keep up with inflation is that we've had some really different periods of time where social went up a bunch, and then we had low inflation and social barely went up at all. In fact, there were a couple of years where there was zero COLA increase because during those years, we effectively had zero inflation. But if you go back over time, and I went back to 1975, social security really does keep up with the cost of living. So I'll

• 21:00Speaker 03

  start with the forgotten years. It was 2013 through 2021, and the annual cost of living increases were pretty, they were kind of invisible. They averaged 1% or they were, they're 1% or less. And that wasn't a failure of the system. And it wasn't that it wasn't keeping up. It was because inflation was itself was really low. So roughly 2009 and the 2010s, prices kind of barely budged in the overall economy. So we didn't get much of an increase. If somebody got a $7 increase per month, they just didn't even notice it. And that went on for a really long period of time. So people started saying, well, social security just doesn't go up for inflation was because we really didn't have a lot of inflation.

• 21:45Speaker 03

  Since though 1975, the COLA adjustments, that's when they started, there's been an increase in social security checks every single year except for three, oh nine, 10, two, two years of low inflation in 2015. Inflation then was effectively zero. But if you look over time since 1975, the average COLA increase has been 3.7%. So almost 4% per year. It's a, it's a very real number. Over the last 20 years, it's averaged 2.6%. So the, the COLA increase we just got is very much in line with that at 2.8%. Now, we did have some huge adjustments in the late 70s and 1980s.

• 22:27Speaker 03

  We hit 9.9% one year. That's a, that's a big jump. 11%. And then we, the, the largest was 14% in one year. Wow. A 14% raise. Then again, we went through this, that tame inflation period, one to 2%. But then more recently in 2023, we saw some extremes again because inflation was extreme. We got an 8.7% raise for social in oh three. That was the highest in 40 years. And now it's kind of come back down to earth. It was a little over 3% in 24, two and a half percent in 25,

• 23:03Speaker 03

  and now 2.8% for next year. It used to come in July and then in the 80s, they amended that. And now we get our raises at the beginning of the year, which I think obviously makes some sense. And again, it was, it was the pandemic inflation surge that, and that's why some of the more recent years were, were big, big jumps. The bigger question, I think, is that the fear of the trust fund running out.

• 23:33Speaker 02

  Well, yes, I was gonna say, I think since I've been in my twenties, since I was in my twenties, I've been told, don't count on social security, don't think it's gonna be there, it's gonna run out, Ponzi scheme, things like that. And so how much should different age groups think about this as a part of their retirement planning, you know?

• 23:53Speaker 03

  Remember what that means, and it makes sense that it gets the rap that it's gonna go away, because the truth is, at the current pace, and social security is very upfront about this, that trust fund cushion is set to run out in the year 2032, approximately. They don't know exactly when, but you hear, well, wait, the trust fund's gone, it's at zero, that means social's at zero. And of course, that is not the case. That's just the cushion is gone. And without that cushion, remember, everybody working a wage income job, whether you're self-employed, or you are W-2, you still pay into the social security system.

• 24:35Speaker 03

  And we have 160 million people in the labor force, and as long as they're working, they're gonna be paying into social security on the first X amount of their pay. So that number in itself, that current money coming in, and really it becomes a true transfer system, where money's coming in, then going out to social security checks. FICA's coming in, the FICA taxes are coming in, it's going right out to social security, and that would be able to still pay for 75 to 80% of the promised, in quotes, benefit that you see on that social security statement. So I think that's a worst-case scenario, social security goes down by 20 or 25%. Now, that's a big number. The reason I don't think that anybody

• 25:17Speaker 03

  over the age of 50 has to worry about that, is because we've already seen social security make some tweaks. They raised the full retirement age by several years, they were able to do that. They've been able to raise the amount of income we pay social security taxes on. So there have been changes, and it's just a math formula, and it's not that complicated. And I think what'll happen, if you really get to the point where the trust fund is, let's call it, a couple years, and Congress doesn't do anything unless it's emergency.

• 25:51Speaker 03

  I think if we get to within a couple of years of it going to zero, you're going to see some changes in the formula. Maybe they bump the retire, full retirement age up another year, or maybe instead of starting at 62, it's 62 and a half or 63. And those tweaks, they may not sound like a lot, but they can move the math closer to working. But I don't think it's going to happen or impact anybody who today is 50 plus.

• 26:15Speaker 02

  Makes sense because we're living longer too. So, okay, we'll go to questions and this first one's from Maggie in Alabama. My husband and I are both 28 and we have what we believe is a good foundation of maxed Roth retirement accounts as well as an HYSA with six months emergency fund and a general brokerage account. So I'm wondering what my best option would be for some safe growth for a fun account where we can put some excess money, which we can pull from for vacations. I want my money to grow, but I don't want this account to take on too much volatility or be locked up for any period of time. Thank you.

• 26:49Speaker 03

  Maggie, this is a time horizon question. And I see a lot of families do this. They, they want a separate bucket for specific costs. And vacation is probably the number one bucket, I see. But the reality is when you put money in a vacation account, you're going to probably spend it that year or the next year soon. So the time horizon is really short, Maggie. And you don't want to be investing that money in stocks when the time horizon is that short. So you're already using what is the right vehicle for that. And that's the, you said the HYSA, the high yield savings account. For one to two year money, you've got to really got to keep it in something short term. The last thing you want to have happen is you plan a family Disney cruise

• 27:34Speaker 03

  and it's X amount of dollars and the whole vacation account is in the market. And we're in a 20% correction. Now you're 20% shy of the cost of your Disney family vacation. So I think it's the wrong practice to think that you can put money in a stock account and have it be whole a year from now. The other thing you mentioned, people will often want to do this and they say they want a fun account or they want a play account. And I would contend that none of this is play and there is no such thing as fun money. Because think about how hard it takes to get money. Like, how hard we have to work. We have to work and we have to work hard.

• 28:18Speaker 03

  And then we've got to pay taxes and taxes are tough. And then at the end of the day, then we got to pay for everything. And then we've got to, then we're saving. Now, hopefully you saved first or you took it off the top. But either way, you have to pay for all those things, Maggie. And when it comes to fun accounts, I think that people like them when we're in a bull market and kind of everything's working. And people say, I like my fun account. But the minute we go into a bear market and when bear markets, most things don't work for a period of time. And your fun account becomes really unfun. So just remember that this is a serious sport. Investing is a serious sport. It's hard, takes discipline, takes time.

• 29:00Speaker 03

  And rarely have I ever seen a fun account really make a meaningful difference. What makes a real difference is discipline, broad diversification, low cost over a long period of time.

• 29:12Speaker 02

  I agree, but I understand.

• 29:14Speaker 03

  Did I just rain on Maggie's?

• 29:15Speaker 02

  Well, I'm with Maggie psychologically. Clark always jokes with me because I have to put things in buckets. And so psychologically, if I've put money aside and I don't need to feel any guilt about what I spend that money on.

• 29:27Speaker 03

  Oh, that makes it fun.

• 29:28Speaker 02

  Yeah, because you, then you save first, you do all those other things. But like this pocket of money, if I have this extra money, I can spend it on something frivolous or something I really enjoy, like an experience. That's what I would do too.

• 29:40Speaker 03

  So it's kill free money.

• 29:40Speaker 02

  That's what I think, yeah.

• 29:41Speaker 03

  But she's talking about fun for investing. That's how I read it. People are like, oh, I want a fun account to buy a bunch of stocks.

• 29:48Speaker 02

  I think it's, no, because she said for vaca-, okay, I don't know. We'll see, maybe she'll write back into us.

• 29:51Speaker 03

  Maggie, you're the best. Enjoy your vacation.

• 29:54Speaker 02

  Shay in Kentucky says, I'm turning 45 in a month. I can retire as a public school educator in 2031 at age 50 with a pension. I just realized that I need funds to bridge between 50 and 59, or 59 and a half. I'm looking to open a taxable brokerage account. Should I be aggressive or conservative in the taxable account with only having five years to build it? And should I be aggressive or conservative in my Roth IRA, knowing I have the pension in years?

• 30:21Speaker 03

  So Shay, first of all, it's so great to get to that 30-year mark. I've had so many teachers that I've worked with over the years and. You know, you're 18. It's like, I got 12 years left to get to the 30. And I just say, you've done it this long. You're over halfway there. Get to the 30 year and you're going to be so happy you did. And I can tell you, I've never had a teacher that gets to the 30 year mark, say, gosh, I wish I hadn't, I wish I'd stopped at 25 or 20. The reward there is great. And I don't know the exact formula for Kentucky, but most of the teacher retirement programs around the country, and they're usually state by state.

• 31:02Speaker 03

  You're going to get 2 and a half percent approximately of your highest, whatever the formula is, two years, three years, average salary and times the years, as long as you have a certain amount of years. So think about 2 and a half percent times 30, you're at 75%. 75%. Let's say you're, they're basing it on $75,000. You've got 55, $56,000 in income for the rest of your life. And that's pretty awesome. And so, so yes, stick it out, get to the 50 or get to the 30 year number. I would usually have your Roth be your more aggressive account because that's your longest term money. You absolutely are right. You do want a brokerage

• 31:46Speaker 03

  account because you want to bridge the gap before you get to 59 and a half. The rule of 55 probably doesn't apply if you're totally done working at 50. You could maybe lean on the rule of 72 T, the substantially equal payments that you could access your retirement money prior to 59 and a half without the 10% penalty. But there's some ramifications to that, too. You have to take it for a certain period of time, all the way to 59 and a half, five years, whichever is longer. But you're right. I would be aggressively saving in a brokerage account and I would be moderately investing as opposed to 100% stocks. That's how I would do it. I would do a little more balance, a little bit more conservative in the, in the brokerage for now than the Roth.

• 32:29Speaker 02

  Okay. And Stephen in Kentucky wrote in with this for Wes. Sorry, buddy. Another 4% question. I suppose I'm a little thick.

• 32:36Speaker 03

  I love that he called me buddy. Hey bud. My kids make fun of me for saying bud.

• 32:41Speaker 02

  Really?

• 32:41Speaker 03

  And I guess I don't really notice it, but I do say, I say, hey bud.

• 32:44Speaker 02

  I say to my son, yeah, I always said to my son when he was younger.

• 32:47Speaker 03

  My kids will come in and they're like, hey buddy.

• 32:51Speaker 02

  Okay.

• 32:52Speaker 03

  So hey, Steven. Hey, buddy.

• 32:53Speaker 02

  Steven says, I suppose I'm a little thick, but I would like to know. I'm in a construction field that is very hard on the body, so I will probably not continue working until full retirement age. I'm 56 at present with 1.4 million in my 401k. Should I retire prior to 65, I'll be paying around $1,100 a month for insurance. If I elect to postpone drawing social security, will I functionally be able to withdraw enough to live on $70,000 from my nest egg until social security kicks in? I always thought a million dollars was a lot until I've contemplated living on $40,000 a year.

• 33:28Speaker 03

  Okay, so Steven, I'm just doing some math for you. There are never too many 4% questions because it's not just a 4% question. It's a, how do I make my money last forever question? And that is never going to be a bad thing to talk about when it comes to what we're doing here. It's totally cool and I appreciate it. That's what the rule is about. It's the rule of thumb is about. It's about maxing out what you can take out from your investments without running out. I'm doing some quick math, 70 divided by this 1.4, that's 5%. On the surface, that's a little above the 4% rule of thumb, so it's not that far off.

• 34:06Speaker 03

  But realistically, it's probably more like 6% for you because that's a, you've got to pay the taxes. So it's really, you're probably going to have to take 6% out gross to net down to the number you need. So 6%, depending how long, so think about that 4, 4 and 1/4 withdrawal rate as your home base. It is not the end of the world to go above that home base. You just can't, you don't want to go way above the home base and you don't want to go above the home base for a really long period of time. So if you're only 56 and you retired today, You've got another nine, 10, 11 years, depending on when you want to turn on social

• 34:48Speaker 03

  security. So doing 6% for a full 11 years is probably too much and you're going to run it. You may run into a problem where you feel like your money is really withering. I think the answer here is that you're not too far off and every year that you're able to work does matter because it gets you closer to when social security kicks in. And then that makes it much easier to reduce your withdrawal rate. You get back to home base. I think the easier answer, at least what I see in real life, Stephen, is that is there anything you can do? Let's call it starting next year where you're making, well, you also have got to get to 59 and a half to utilize this 401k money unless, again, you use the 72 T rule, which we just talked about in the last question. So let's

• 35:31Speaker 03

  just take that, the age off the table and think about it as how do you bridge the gap until social kicks in? And the answer is part-time work. Imagine if you, if you need 70 and you earn 20, now you only need 50. And if you're only earning 20, you're probably paying almost no taxes on that or very little. Now granted, there's some taxes to pull money out of an IRA, but you're probably in a really good tax situation. So now all of a sudden you need 50 divided by 1.4 and now you only need 3.5%. Grossed up, maybe it's four, four and a half. So I think the, and I know that it's hard going from a, if you're, if you're

• 36:10Speaker 03

  actually on the job site and in some professions, it's really hard to do part-time work, but it's not impossible. And the construction industry, I think is understaffed for the most part. We're underbuilt in America, depending on the city you're in. And maybe it's not even construction. Maybe it's something completely different, but I think of that as you're in phase one of working saving. Maybe your phase two is, is way less work. Just have enough that you're not totally blowing the 4% plus rule out of the water. It makes it manageable. And I think that's the way to be thinking about this interim phase before social kicks in.

• 36:50Speaker 02

  All right. Well, that is going to do it for us this week on Ask an Advisor. Thank you, everybody, for listening and watching. Please share this with a friend if you think they'd be interested and subscribe, whether you're listening on any of the podcast apps or on YouTube. And we'd love reviews as well on Apple Podcasts or Spotify or wherever you're listening. Hope you have a great rest of your day.

• 37:16Speaker 00

  UKG is the workforce operating platform with unified HR, payroll, and workforce management. Built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance, and productivity, enabling every worker to confidently take action as work happens. Because when work works, everything works. Learn more at ukg.com/work. UKG, HR, Pay, and Workforce Management.