Retire on $500,000? Car Costs & Social Security

Christa DiBiase [00:00:01]: Hi, Wes.

Wes Moss [00:00:03]: Christa.

Christa DiBiase [00:00:04]: I’m very excited about today’s show.

Wes Moss [00:00:06]: This was your idea.

Christa DiBiase [00:00:07]: You’re talking about some really cool stuff today. First, most of us drive cars.

Wes Moss [00:00:13]: Sure.

Christa DiBiase [00:00:13]: And so—

Wes Moss [00:00:14]: That’s a fair statement. Yeah. That’s a fair statement.

Christa DiBiase [00:00:16]: I think it’s usually the second highest expense we have, you know, behind housing every month. And so you’ve done some incredible thorough research and comparisons to talk to us about the choices we make when it comes to transportation and driving throughout our life.

Wes Moss [00:00:31]: Car math.

Christa DiBiase [00:00:32]: I love it. Car math. And then later we get complaints sometimes, hey, all these people writing in have millions of dollars saved for retirement. So you’re going to talk about how you can retire on, say, you think you can make it to $500,000 a year.

Wes Moss [00:00:46]: I mean, the median—

Christa DiBiase [00:00:47]: I mean, total.

Wes Moss [00:00:48]: The Fed just came out with their new wealth report in America, and 65 to 70-year-olds’ median Net worth in America is $431,000. So yeah, maybe easy, quote, easier to be able to figure out retirement on $2, $3, $5, $10 million.

Christa DiBiase [00:01:05]: Sure.

Wes Moss [00:01:06]: But what about the vast, vast, vast majority of people in America that are barely getting to $500K? And we’ll answer that question. What can you retire on $500K?

Christa DiBiase [00:01:15]: And we’ll also get to your questions, which you’ve sent in at wesmoss.com/ask.

Wes Moss [00:01:22]: Car math. It’s been a long time since I did anything about cars. The last time it was really— this came from Clark, and maybe this was 15 years ago. And it was the— I remember the Nissan Leaf, where they were essentially, with the rebate people were getting, it was a free car.

Christa DiBiase [00:01:39]: Mm-hmm.

Wes Moss [00:01:39]: It was a free car, and it was actually free because I remember my producer Mallory went and she said, this is crazy. She went out and got a Leaf, drove it around essentially for free. Those days seem to be over. So I wanted to do some new car math.

Christa DiBiase [00:01:52]: My daughter actually drove Clark’s old Leaf when she was in high school and college.

Wes Moss [00:01:56]: If there was only a deal like that today. But okay. So I want to approach this 2 different ways. I’m going to call this car math. This is not about the car payment, even though obviously the payment is part of this. This is about the total cost. So if we’re, we’re going to do 2 things. One, I want to look at the Toyota Camry.

Wes Moss [00:02:14]: The hybrid version, which is a very modestly priced vehicle, great gas mileage, 51 miles per gallon. This is the hybrid version with a sticker price that is in the just under $30,000. Now, what I’m going to use for comparison is more like $31,500 with destination fees, some basic extras versus buying a— And we’re gonna look at a couple of ways to own this. Same car in a, in whether we own it, we buy it new and we do that every 10 years. We’re going to do buy used and do it every 10 years. We’re going to buy used and do it every 5 years. We’re going to do buy new every 3 years. And what if you just don’t want to own a car at all and just do rideshare?

Christa DiBiase [00:03:03]: Which is possible nowadays.

Wes Moss [00:03:04]: I know a couple of people that do that.

Christa DiBiase [00:03:05]: I do too.

Wes Moss [00:03:06]: So here is the, I’m going to call this the total cost of ownership. in a given year and over the course of 20 years. The assumptions I’m using here are 12,000 miles a year, and we’re assuming $3.50 per gallon for gas. Now again, who knows what gas prices are going to be? 12,000 may be way more than you need. It may be not enough. So we had, we had to make some assumptions, but those are the assumptions to look at the total cost. of ownership, which includes depreciation, which is the purchase price minus the sale price if we’re turning a car in or selling a car after this 10-year period, fuel, insurance, maintenance, repairs, tires, taxes, etc., fees. It does not include financing costs.

Christa DiBiase [00:03:54]: Mm-hmm.

Wes Moss [00:03:54]: So we’re not talking about interest here to keep all this even. And, and I, and I didn’t do an opportunity cost here of what if I saved this and we invested it, but we could probably do some rough math on that. Here’s the data again, just on one car, different ways of owning it, Toyota Camry. And we’re going to do buy new, keep for 10 years. That will cost over the course of life, this 20-year period. So you’d have 2 of them would be the total cost of about $123,000 or about $6,100 a year, which is about $510 per month. That’s all in.

Christa DiBiase [00:04:31]: Mm-hmm.

Wes Moss [00:04:31]: That’s all in. If you did the same thing but bought it used and did it every 10 years, so you’re buying a 3-year-old Camry, then, then in 10 years you’re buying another 3-year-old Camry. It’s actually a tiny bit cheaper. Not a ton though, which was surprising. About $115K over that 20-year period, $5,700 a year or $475 per month. What if, because you’re getting a used car, you did this every 5 years? Buy used, replace every 5 years. It comes out to almost the same as buy new, keep 10, and you get to $6,200 a year, $520 a month. So really all those options are in the $500 per month range, which I think is an important way to look at this.

Wes Moss [00:05:15]: Now you can also say, what if I just bought a new car every 3 years? So I was always in warranty, never had to worry about any sort of repair costs, hypothetically. Well, of course that’s gonna be more expensive. It costs another about $50,000 over the course of that 20-year period. So it’s about $8,800 a year or $735 per month on average.

Christa DiBiase [00:05:40]: And I bet if you had a car that wasn’t as reliable as a Toyota, which they depreciate slower than other cars, that would even be a bigger difference.

Wes Moss [00:05:49]: Well, and that’s gonna come up in our next section on looking at different, different kind of cars.

Christa DiBiase [00:05:53]: Okay.

Wes Moss [00:05:54]: And what the total cost would be, which I picked a smattering of what I think I think are a good, a good broad section of different cars to choose from. Well, we’ll see which kind of car you choose. And then what if you just did rideshare? More and more people I talk to are doing just rideshare. I think part of it is that we— I live in the city.

Christa DiBiase [00:06:10]: Mm-hmm.

Wes Moss [00:06:11]: And particularly for folks who maybe only have to go to the office 2 days a week, if you’re working from home, it’s a legitimate option to say, I’m just not gonna own a car. I’m gonna do rideshare only, UberX or Lyft or whatever it might be. The average cost for that, and I’ve looked at a couple different metrics for this, if you’re only doing really short rides, it’s super expensive. It’s like $6 a mile. But if you go to longer rides and it’s like more like a dollar.

Christa DiBiase [00:06:36]: Mm-hmm.

Wes Moss [00:06:36]: So on average, the fare per mile cost is about $2.30, give or take. So all these examples I did with the Camry were 12,000 miles per year. For rideshare, I did only 6,000 miles, and it’s still about double the cost, Crystal.

Christa DiBiase [00:06:58]: Wow.

Wes Moss [00:06:58]: So even if you only need half the miles, 6,000, looking at about $2 and change per mile, you’re going to spend about $1,150 a month, or almost $14K per year over 20 years if you did that, versus $120 $3,000 to buy brand new Camry and do it twice over that life cycle. That’s $123,000. Rideshare, $275,000.

Christa DiBiase [00:07:25]: Wow.

Wes Moss [00:07:26]: Whoa. Same car, different ways to own that car. Now, here are your car choices, Christa.

Christa DiBiase [00:07:35]: Okay.

Wes Moss [00:07:35]: How much car to own? So we already know that essentially buying new every 10 years is pretty much the same as buying used every 10 years. It’s a little bit more expensive, so I’d say that’d be my default.

Christa DiBiase [00:07:50]: Mm-hmm.

Wes Moss [00:07:50]: That’d be my default. We’re going to choose from this total cost of ownership: Kia K4 LX, one of the most inexpensive cars you can find. It’s about $22,000, $23,000 starting MSRP, 33 miles combined MPG. Then we’ll go Toyota Camry LE Hybrid, which we’ve already looked at. Tesla, Model Y. We know which one Clark would choose.

Christa DiBiase [00:08:14]: Well, that’s what I drive.

Wes Moss [00:08:15]: What if you got a bunch of kids and you wanted a big American SUV like so many Americans? Chevy Tahoe LS, 2-wheel drive.

Christa DiBiase [00:08:23]: How many miles per hour?

Wes Moss [00:08:25]: Uh, you get 17 miles MPG.

Christa DiBiase [00:08:28]: Okay,

Wes Moss [00:08:28]: having owned some big American SUVs, that’s super generous. It’s more like 12 or 13, particularly if you live in the city. And then what if you wanted to go Hog wild, what would this be? A BMW 530i. It’s about $62K MSRP and gets 31 miles per gallon, depending on how you drive. With the way you drive, it’d probably be like 20 miles per gallon.

Christa DiBiase [00:08:54]: That’s true.

Wes Moss [00:08:54]: Total cost of these 3 cars. Here’s one thing that’s surprising. Even though the Kia K4 is only $23,500 versus the Camry at $31,500, The total cost annually, because of the depreciation after 10 years, because the Camry holds its value more significantly than the Kia does, hypothetically, they’re almost the same annual amount.

Christa DiBiase [00:09:21]: Hmm.

Wes Moss [00:09:22]: Camry is $6,100 a year on average. The Kia is $6,000. Tesla Model Y, again, we’re looking at depreciation, gas or electricity, which is, by the way, the Tesla, you can imagine, wins there. Insurance a little higher for the Tesla. Now, somebody— Clark may say that’s— this— these are my assumptions.

Christa DiBiase [00:09:38]: No, it’s true.

Wes Moss [00:09:39]: Uh, maintenance and repairs similar. $8,300 a year ownership for a Tesla. So it’s about $6,000 for the Kia, $6,100 for the Camry, $8,300 for the Model Y. If you want to go big SUV, the Chevy Tahoe is going to cost you about $11,000. on average per year. And then of course, if you want to get super fancy in the BMW, that’s going to be closer to $12,000 per year. Again, we’re looking at all these different components, which include depreciation, insurance, gas, electricity, maintenance, repairs, taxes, and fees. Buy new every 10, that wins in my book.

Christa DiBiase [00:10:22]: Mm-hmm.

Wes Moss [00:10:23]: And with 4 kids, I’m gonna probably have to go for the big American SUV.

Christa DiBiase [00:10:30]: Quick question. If you did your new every 10 years versus, um, new every 3, and you took that money over the course of a working lifetime and invested it— Well, can we do 20 years?

Wes Moss [00:10:44]: Can we do 20 years?

Christa DiBiase [00:10:45]: Sure, the savings. If you invested the savings, how much would you have on average?

Wes Moss [00:10:49]: All right, so we’re gonna do The difference between the buy new every 3 years and the buy new every 10 years, Christa, is it’s all— it’s a— it’s $2,700 a year. Let’s call it $3,000 just to make it easy. Okay. $3,000 times 20 years is going to be $60,000, but with a rate of return of 7%, I’m gonna say it’s probably You could have an extra $100K in the bank if you forewent the buy new every 3 and did buy new every 10.

Christa DiBiase [00:11:28]: Okay. Very interesting. Thank you for that. Car math. Car math. We’ll go to some questions. Caleb in Florida says, I’m 19 turning 20 in April, and I’m a finance and financial planning student who is also licensed and lives at home. I really enjoy your content because it helps me learn both investing and how to communicate with clients.

Christa DiBiase [00:11:47]: I have a car.

Wes Moss [00:11:48]: Caleb’s already got clients. He’s 19.

Christa DiBiase [00:11:50]: I know.

Wes Moss [00:11:50]: That’s awesome.

Christa DiBiase [00:11:51]: I have a car my parents leased for me with the lease ending in June of ’27 and about a $23,000 buyout. I currently have $10,000 saved toward it. My parents might help for planning, but for planning, I’m not going to account for that. My net worth is around $34,000, $15,000 in cash, $5K in an emergency fund, and $10K car fund. $10,000 in a brokerage and $9,000 in a Roth. I currently invest $1,250 a month between my Roth and taxable account. I also have a Florida 529 with about $40,000 that should become eligible for the 15-year Roth rollover in June of 2027. My plan is to eventually roll around $35,000 into my Roth using max contribution limits and use the remaining $5K toward the car.

Christa DiBiase [00:12:40]: Would you lower my $1,250 a month investment contributions temporarily to build a larger car down payment? My credit score is around 790, but this would be my first auto loan, so I’m concerned about the interest rate.

Wes Moss [00:12:53]: You know, you— because your credit score, Caleb, is so high, I think you’d be like a super prime borrower at 790. And maybe, maybe this wouldn’t be the case because you’re still— and you haven’t had a lot of But well, either way, his credit score’s at 790, so you should get a really— you really would get the best rate you could get. And I don’t know exactly what that’d be, but it could be pretty low. I’m thinking like 4, maybe 5%, without knowing exactly. You’re gonna get a really good rate. One quick caveat, because this happened to me, Christa, on a lease buyout. It’s an interesting situation where as you get this purchase price, but you don’t know what the car’s gonna actually be worth. And I remember getting a, like in your case, I, I think I had a purchase price of $23K, but the car was still worth like $28K.

Christa DiBiase [00:13:47]: Mm-hmm.

Wes Moss [00:13:48]: So it makes it so that it’s a really good buy. And then the inverse obviously would be true if it was, if your buyout is $23K and the car’s only worth $18K, you obviously wouldn’t wanna buy it. So just obviously look at that. I don’t think Caleb, What’s the most important piece of all of these different variables that you just talked about is time. And when you’re 19, you can never make up for the power of, of continuing to put money away and invest it at your young age. So you’re doing $1,250 a month. Never in a million years would I recommend cutting that back because you’re going to be going and buying a depreciating asset.

Christa DiBiase [00:14:31]: Mm-hmm.

Wes Moss [00:14:33]: I mean, $1,200 every single month over the course of a year. I mean, we’re talking about what, almost $15,000 in savings and then the compounding on top of that. So no, I wouldn’t, I wouldn’t scale back on that. And it, and if it means you have to have a little, you already have $15,000 in cash. So You have more than enough already to put some money down and get a low-interest car loan with your really good credit. So my gut tells me, do not slow that savings down.

Christa DiBiase [00:15:03]: 19 years old. I thought that was— I was misreading that until I read it again. That’s pretty impressive.

Wes Moss [00:15:09]: That’s awesome.

Christa DiBiase [00:15:10]: Anonymous in Georgia says, I have an 18-year-old about to graduate from high school and planning to pursue pre-med. I have over the years been saving in a 529 plan for her educational needs. All the 529s have invested in 100% stocks. I’m hoping my child will qualify for a scholarship to cover her tuition, but I would need to use some funds for her room and board. In the current climate, how would you suggest allocating the 529 investments so that I can protect it for upcoming short-term needs while also planning for near-term and long-term, near-long-term medical school needs? In my faith, we are also not allowed to invest in interest-based investments. Another reason why the funds are invested 100% in stocks.

Wes Moss [00:15:53]: So from a faith perspective, you cannot— you are prohibited from doing anything that’s interest-based. Okay. So again, any sort of 529 plan, you’re gonna have options for equity or stock funds, and then anything that is bond-oriented or even money market-oriented, those are also interest-paying. Those are going to be off the table for you. So there is really no good answer here. Uh, normally I would say you would want some money market and some fixed income for that shorter-term area, but for you, that doesn’t seem like it’s going to be an option. Well, what could you do then? You’re going to continue to be equity-based, broadly diversified, which, by the way, may not end up being the worst strategy over time. It’s not the most dire strategy, but here’s how you could look at this.

Wes Moss [00:16:47]: Perhaps, and let’s say that you needed the money this year. It’s been a great year in the market. Equity markets are up 12, 14%, depending. One way to lock in maybe more of that would be able to say, hey, my room and board, as opposed to paying it every month, maybe you ask the landlord and you pay the whole year upfront. So that you, if you were coming off a good year when you need the money, one way to help you essentially lock in some gains and stability after a good market period of time, see if you can pay the entire year out of the gate. So that’s one way to work the system a little bit. On the contrary, if you go into school, your daughter goes to school, and the market’s down 25%, well then you’d still want to be paying monthly.

Christa DiBiase [00:17:34]: Mm-hmm.

Wes Moss [00:17:35]: But if we’re in a good, uh, an environment where your account value is strong and we’ve had really good run-up, like now, the one way to get some stability is to pay for a big chunk upfront.

Christa DiBiase [00:17:45]: Okay. Harris in Florida says, I have a comment about umbrella insurance. I agree it’s important. If you have other drivers in the house, I have a 25 and 29-year-old and my wife, and own multiple cars, we have 5, a million-dollar policy is $4,385. It’s about the same price with any of the insurance companies. I do remember when it was under $1,000, But that was many years ago.

Wes Moss [00:18:10]: But how much coverage does he have? The umbrella?

Christa DiBiase [00:18:12]: He’s got, uh, $1 million, a $3 million policy. Sorry, a $3 million policy is $4,300.

Wes Moss [00:18:20]: Oh, $3 million? Okay, that sounds okay. Okay, $4,300. Okay.

Christa DiBiase [00:18:25]: Yes, that was my fault. Sorry. And next question, should you include your IRA in your net worth for insurance?

Wes Moss [00:18:32]: You know, it depends on the state. So Harris, a couple things. You hear about policy, uh, insurance policies that are umbrella that are super cheap, and it’s like $400 for $1 million worth of coverage. That’s with no kids and like one car.

Christa DiBiase [00:18:49]: Mm-hmm.

Wes Moss [00:18:50]: But when you have a half a dozen cars like you, Harris, and you’ve got you and your wife and your 25 and 29, you’re still paying insurance for your 25 and 29-year-old? So that’s a lot of liability there for any insurance company. So, so now you’re paying like more like $1,200 per million dollars in coverage, and that sounds about right.

Christa DiBiase [00:19:12]: Okay.

Wes Moss [00:19:13]: That sounds about right just because you’ve got a lot of different liability and many, many, many cars in order to insure with lots of people. So that seems right to me. Technically, you sh— you don’t really need to count your 401 money because that’s a RISA. backed, and that’s super, super protected. And IRA protection in these— in liability cases and bankruptcy is more dependent on your state. I believe Florida is very protective of your IRA money. Some states are not. However, what if I’m doing this rough calculation— and again, we’re even in your higher cost of insurance, you’re still It’s a low cost to cover a tail event.

Wes Moss [00:20:00]: Something crazy happens and you get sued. If it were me, I would be still including the value of my retirement accounts. You may make an argument that you don’t need to because you’re in Florida. I’d say for most people, you do want to include your retirement money unless it’s all 401 money, and that 401 money really should be fully protected.

Christa DiBiase [00:20:19]: Okay, well, we’re going to take a quick break. When we come back, How do you retire comfortably on less than $500,000?

Wes Moss [00:20:26]: Can you retire? Can you retire on $500K? This Thanksgiving, when you’re sitting around the table, take a look around because after studying thousands of retirees, I found the happiest ones aren’t just doing things. They’re doing things with people, cooking with, traveling with, laughing with. We’re in the middle of a friendship recession in this country. In my new book, The Retire Sooner Method, I’ll show you ways to fight back and build the connections that make for happy retirees. Pick up your copy today on Amazon or your local bookstore. Christa, can you retire on $500K?

Christa DiBiase [00:21:08]: I hope so, because that’s what most people—

Wes Moss [00:21:10]: The majority of Americans, that’s the median number. It’s actually more than the median number. Fed’s new survey is out very recently, their 2026 release, which has 2025 numbers, median ages 65 to 74 in America, the median family, family net worth is $431,000. Now, the average in that age range, 65 to 74, is $1.9 million. Well, how did it get to $1.9 million? Doesn’t mean the average family has $1.9 million. It means that you’ve got, literally, we have trillionaires in America and those trillionaires And multi-billionaires and $100 millionaires, they skew the numbers. So the reality is that that is not a representative number for most families. What’s representative is the median.

Wes Moss [00:21:58]: So you line up everybody in America and you pick the middle point. It’s $431,000. It means actually 50% of people have less than that. So I think it is, is an important question to say, can you retire on $500K? And the answer is, The short answer is it is possible, but it is difficult. And just because it’s difficult though doesn’t mean it’s not possible. And there are a couple of ways to make this work. Number one, the question has to do— and we’re going to assume you have $500,000 in liquid savings, whether that’s an IRA or a brokerage account. We’re not going to get specific about taxes here, just that, that’s the gross amount.

Wes Moss [00:22:39]: If you do not have a mortgage payment and your mortgage is paid off by your retirement date, then all of this does become, in my opinion, very possible. Can you do it at 62 when Social Security kicks in? You have $500K and Social Security kicks in at 62? My answer is, again, likely not. Because 62, you have your most reduced Social Security payment. And guess what has not kicked in yet? Medicare. So you have this 3-year gap and you have that extra, extra expense for healthcare.

Christa DiBiase [00:23:16]: Right.

Wes Moss [00:23:17]: So even though you can go and get healthcare through the exchange, and if you keep your income really low, maybe you do get some sort of supplement, but I think that’s even too early. So if you’re— if we’re trying to make this work, Here are 2 variables that get us there. There’s really 3. One, wait at least till 65. 67 is better. That’s your full retirement age for most people. Number one. Number 2, if you don’t have a mortgage, that means that giant cost of housing is mostly out of the picture.

Wes Moss [00:23:46]: Yes, you’ve got property tax, et cetera, but that makes it very possible. And here’s the third one. And again, we can’t control this necessarily. It’s really hard to do this when you’re single. Because you have just one Social Security payment. It makes it easier if you’re married and you have 2 Social Security payments. So here’s the way I look at this financially. If you’ve got $500,000 and you’re, let’s say you’re really pushing it and we’re going to go above the 4% rule and we’re going to go all the way to 5%.

Wes Moss [00:24:18]: So again, a little high on a withdrawal rate, but at round numbers here, 5% of $500K is $25,000 a year, about $2,000 a month. Then I take the average Social Security payment, which is about $2,000 a month for folks at 67. It’s obviously less than that. It’s more like $1,400 if you take it early. That’s why it’s better to wait a little longer if this is the situation that you’re in. But imagine if you have 2 of you making $2,000 in Social Security. So you’ve got $2K. Plus $2,000.

Wes Moss [00:24:54]: And then again, you can make the argument, not everybody’s going to have that amount, maybe less, but let’s say $2,000, $2,000, and Social Security 1, Social Security 2, and $2,000 a month from the assets. Now we’re at $6,000 a month, or a little over $70,000 a year. And if we can get there and have no mortgage— Oh, it’s very possible and very likely. So I think the good news is that it’s possible. The big variables that we went over today are things to think about if you, if you may end up in this situation as you’re eyeing your early to mid-60s.

Christa DiBiase [00:25:33]: Okay. We’ll go to some questions. Steven in New York says, I’ve always been interested in personal finance and I love helping out friends and family with the basics of investing and budgeting. I’ve always had the idea of becoming a financial advisor one day. either as a side job or post, ideally, early retirement. I have a full-time job, but is there something you think I should do or can do now? Should I start studying and working towards the CPA exam, or is that something that I should consider when I’m fully in it? And I think maybe, you think CPA or CFP? I was kind of wondering if you meant that.

Wes Moss [00:26:08]: Uh, well, you could, you could do either. I’d say CFP would be Would be better.

Christa DiBiase [00:26:14]: You’re right. Okay. So this is Steven again, and he says, for background, I’m in my mid-40s.

Wes Moss [00:26:19]: Steve, there are a couple of different ways to look at this. Depends on how much of a, a gradual transition from your current career. I mean, I, for, I don’t know what you do. Uh, maybe you’re a teacher or an engineer or any sort of other career. It is pretty tough to be able to go study for the CFP, pass the CFP. And then the big catch on that is that you can’t really, quote, be a CFP until you put in a lot of hours. You have to have something like 6,000 hours, I want to say. But if you were— and I’ve talked about this shortage.

Wes Moss [00:26:54]: I was looking at the McKinsey study about financial advisors. The real shortage, it’s a projected shortage over the next several years. It’s that because so many advisors are in their There are baby boomers of retirement age. There is a projected 100,000 less financial advisors over the next 5 to 10 years than are needed.

Christa DiBiase [00:27:20]: Wow.

Wes Moss [00:27:20]: So, Stephen, the industry needs you. So you have a less supply of advisors, and then you have more demand of more and more people in America are seeking financial advice. A, we’re a wealthier country than we’ve ever been. And there’s more and more people getting to the point where they’re saying, hey, I’d like some help. So I think a reasonable path— and 40 is still super young. I’ve known many people that are in their 40s and later that, that started, went from engineers or teachers, by, uh, um, marine biologists that have transitioned to becoming advisors.

Christa DiBiase [00:27:54]: Wow.

Wes Moss [00:27:54]: And the radio producers who have gone from radio production to becoming financial advisors. And it just takes some time, but it’s a nice gradual— you can do this gradually. So you, you have to enroll in a program. That’s the other thing that makes it— you gotta enroll in a CFP program that allows you to then take the test. Of course, that’s going to take a while to study. And then once you have that though, I bet you, you, if you applied for 10 jobs, even part-time, I bet you get 9 out of 10 of those jobs if you are somebody who’s already passed the CFA. You won’t be able to use it right away, but you’re, you’re a zero risk for an employer because all you have to do is put your hours in and then you can, then you will be able to use it. And that’s a huge leg up.

Wes Moss [00:28:44]: So that’s how I would, I would do it.

Christa DiBiase [00:28:46]: Okay. I would also recommend, as I always do for any career change for anybody, is do some informational interviews. Sit down with some CFPs and talk to them about what their day-to-day work is like and things like that, just to get more of a sense before you commit financially to studying it, I would say.

Wes Moss [00:29:02]: Agreed. Talk to many, many firms. Okay.

Christa DiBiase [00:29:05]: This is from James, in parentheses Bond, in Oregon. Should I ditch the bond funds?

Wes Moss [00:29:11]: Oh, that’s why. That’s even the funny name.

Christa DiBiase [00:29:12]: Very funny. Very funny. That’s cool.

Wes Moss [00:29:14]: James Bond in Oregon.

Christa DiBiase [00:29:16]: Should I ditch the bond funds? I was hearing on another podcast why bond funds are inferior to owning specific individual bonds and why losses can occur. I’ve been a longtime holder of 3 Vanguard bond funds. They’ve all been in the doldrums since 2022. So I’ve got unrealized losses of 6 to 12%. Would I be better off exchanging out of those into something else at this point? They make up less than 10% of my portfolio and I’ve got other dry powder like money market CDs and I bonds.

Wes Moss [00:29:50]: James Bond. In Oregon. If you’re going to continue to maintain dry powder and you want flexibility, then you— it’s always about where are we starting. Just like any investment, it’s really about where are we starting today moving forward. And what you see on a statement, if you have mutual funds, first of all, you’re not seeing the interest that you’ve collected. So you may have an unrealized loss, but you’ve probably made some money. If you were to count all the interest you’ve gotten over those years. So I think sometimes mutual funds paint a more dour picture than what’s really happened because you don’t really, you very often you don’t see the income that you’ve gotten.

Wes Moss [00:30:36]: So they probably haven’t been as bad as they might look. Number one. Number two, it’s all about where rates are today moving forward. So depending on when you listen to this particular podcast, rates change every single day. Right. Just like the stock market does. If you’re a bond investor today and the 10-year Treasury’s at 5% or 5.25%, then there’s a very high likelihood that you make around 4% to 5% per year over the next several years in many of the different total bond market funds. So just because they haven’t been great because rates were lower and went and normalized doesn’t mean they won’t be pretty good moving forward.

Wes Moss [00:31:17]: So I would just, I wouldn’t be ditching bond funds, especially today. The next piece of the equation is that rather sure, individual bonds can be very good. And I own some individual bonds. I really like that what is in the middle between a total market bond fund and an individual bond, a target bond fund or an ETF. So there are ETFs that give you a specific year of maturity. You get lots of diverse diversification within the ETF. You get to pick your year and build a bond ladder that way. Super low-cost, flexible way to do it.

Christa DiBiase [00:31:51]: Okay. Curious Kathy in Washington says, Wes mentioned this order for withdrawing assets in retirement: 1, brokerage account; 2, traditional retirement account; and 3, Roth retirement account. Wouldn’t it make more sense to withdraw from the traditional retirement account first, keeping withdrawals low enough to stay at the 12% tax bracket or lower, And then withdraw from brokerage accounts or even stay within the 22% bracket with withdrawals. By minimizing brokerage account withdrawals, there would be more of a chance of passing on stocks to heirs with a step-up in basis.

Wes Moss [00:32:28]: Kathy, you’re thinking about this the right way. And I guess the conventional wisdom is this order: brokerage, IRA, then Roth. So if you have to do a simple rule of thumb, and thumbs are meant to be non-precise, then that is the general order. But the way you’re thinking about it is the right way to think about it. In practice or real life, there’s usually a combination happening of all 3. Now, most likely in the early years, it is brokerage and IRA. And yes, you manage your IRA withdrawals to what level may be comfortable for you. So if you want to stay in the 12 bracket, And that means you can only pull out— that you could pull out $2K a month from the IRA and you’re still in the 12 bracket, and then another $1,000, $2,000 from the brokerage account, and that gets you to your spending while keeping your overall marginal tax rate at a comfortable level.

Wes Moss [00:33:28]: That’s how it works in practice. So I know we, we love rules of thumb and why I talk about them, Mm-hmm. but they are the starting point. The nuance and real-world application is usually a combination of these accounts, and you’re thinking about it the right way. Chris, I love having you here. I love these questions. So thank you as always for being in studio. You can find me throughout the week.

Wes Moss [00:33:51]: We’re at yourwealth.com. That’s Y-O-U-R, yourwealth.com. Have a wonderful rest of your day.

Dislcosure [00:33:59]: Hey y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us at wesmoss.com. That’s W-E-S-M-O-S-S.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Sooner Podcast. And now for our show’s disclosure. This is provided as a resource for informational purposes and is not to be viewed as investment advice or recommendations.

Dislcosure [00:34:26]: This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular company. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. will be achieved. The information provided is strictly an opinion and for informational purposes only, and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.

Dislcosure [00:35:08]: This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment, tax, estate, or financial planning considerations or decisions. Investment decisions should not be made solely based on information contained herein.