No. Forty trillion is a number so large that it is indeed hard to fathom, but it is no surprise that we reached that level. The debt has been rising for a long time and looks like it will continue to do so. What to do? In my opinion, the best strategy for an investor to follow when reading the news is to stick with your asset allocation, rebalancing as warranted. My allocation was chosen, not to maximize my wealth, but rather so that when I read or hear something disturbing, I don't need to take action. Remember the wise maxim: "Don't just do something, stand there!"
Many articles discuss what percentage of income to replace. This may be useful when looking at large groups of households. But the percentage of gross income actually spent prior to retirement may vary considerably among different households. A more individualized approach is better. I agree with you on not focusing on total income per se, but on that portion of income you actually spend. I accumulated enough to provide the cash to continue spending as before. Whatever percentage of my pre-retirement income that amount may be can be derived. And, in addition to annual inflationary adjustment in spending, don't forget hedonic adjustment. A rough proxy for this is the annual Real GDP growth percentage. Jonathan among others discussed this. These are ideal goals to shoot for but not everyone may achieve this. Some will need to downshift their spending in retirement. But aiming for a goal, and coming up short is preferable to not having a goal at all.
I'm pleased that Jonathan planned to share parting words of wisdom after passing. I realize most of personal financial management comes down to psychology. We can quickly learn the basics but implementing and sticking with a well designed plan is another matter. Sort of like knowing the importance of healthy eating and exercise, but failing to follow the plan. I think one ingredient to staying with a plan is simplicity. As Jonathan said, the amount to hold in bonds and cash is a personal decision. VT provides a simple yet excellent way to invest in stocks for those who prefer passive index investing.
I came across the FIRE (Financially Independent, Retire Early) movement years ago. I had no interest in retiring early myself, but I was intrigued by the concept of attaining financial independence. For myself, it was the point in time when I realized that I no longer felt stress while managing my finances. And like you, I enjoy managing our finances, and over the years have adapted suggestions from many wise folks, some of whom have posted on Humble Dollar. For myself, "enough" meant I could focus on living without stressing over financial matters. Nice post, Dan.
Once retired, our annual income stream is vital. I consider an income stream composed of SSA, dividends and annuity payments to be a reasonable choice. But mindful of future inflation risk, I prefer generating our income stream by drawing on our mix of stocks, bonds (all intermediate and short term Treasurys and TIPs) and cash (Treasury bills and money markets). There is nothing preventing us from purchasing an annuity at some future time, should we wish to.
We cannot predict the future of course, so we look at probability theory. Many focus on the probabilities of various outcomes, but not always on the impact of a low probability event, should it happen. So, we must take into account both likelihood and consequences. Following the well known "4% Rule" is supposed to fund a 30 year retirement. If the residual portfolio balance drops to zero, but only after those 30 years it is counted as a success. Not good though if the person or couple who followed that plan is still alive after that time period. I'm a fan of Bill Bernstein, and recall his discussion of Pascal's Wager, which covers this. A 65 year old just beginning their retirement has an average remaining life expectancy of about 19.7 years (call it age 85). But, that is average. The probability of that same person living to 95 is about 10-15% for men and 15-21% for women. So its little wonder that many prefer to deal with the risk of living a long time by spending less, thus leaving a larger estate behind should they not make it to a very advanced age. Excellent article, Matt! I agree that maximizing SSA is a sort of partial longevity insurance (not withstanding what the government does to stabilize its finances). And when I retired at 65, I assumed a 40 year retirement as a sort of margin of safety.
And it will continue to beaten to death for the simple reason that we all know its future financial stability is in jeopardy, yet so far Congress has not taken action. Which leaves all of us having to not only deal with the uncertainty of how our investments may fare, but now also the uncertainty of what we all used to assume was the one thing we could count on. Thanks for a good article and also the link to Steiner's.
Comments
No. Forty trillion is a number so large that it is indeed hard to fathom, but it is no surprise that we reached that level. The debt has been rising for a long time and looks like it will continue to do so. What to do? In my opinion, the best strategy for an investor to follow when reading the news is to stick with your asset allocation, rebalancing as warranted. My allocation was chosen, not to maximize my wealth, but rather so that when I read or hear something disturbing, I don't need to take action. Remember the wise maxim: "Don't just do something, stand there!"
Post: Federal debt
Link to comment from August 19, 2026
This was a pleasure to read. Such a beautiful and positive way to confront the loss of a loved one.
Post: My Sister – A Reflection One Year Later
Link to comment from August 13, 2026
Many articles discuss what percentage of income to replace. This may be useful when looking at large groups of households. But the percentage of gross income actually spent prior to retirement may vary considerably among different households. A more individualized approach is better. I agree with you on not focusing on total income per se, but on that portion of income you actually spend. I accumulated enough to provide the cash to continue spending as before. Whatever percentage of my pre-retirement income that amount may be can be derived. And, in addition to annual inflationary adjustment in spending, don't forget hedonic adjustment. A rough proxy for this is the annual Real GDP growth percentage. Jonathan among others discussed this. These are ideal goals to shoot for but not everyone may achieve this. Some will need to downshift their spending in retirement. But aiming for a goal, and coming up short is preferable to not having a goal at all.
Post: What is the right percentage?
Link to comment from August 9, 2026
Well said, Dick.
Post: Looking Back On My Hard Luck Days
Link to comment from August 9, 2026
I'm pleased that Jonathan planned to share parting words of wisdom after passing. I realize most of personal financial management comes down to psychology. We can quickly learn the basics but implementing and sticking with a well designed plan is another matter. Sort of like knowing the importance of healthy eating and exercise, but failing to follow the plan. I think one ingredient to staying with a plan is simplicity. As Jonathan said, the amount to hold in bonds and cash is a personal decision. VT provides a simple yet excellent way to invest in stocks for those who prefer passive index investing.
Post: Jonathan’s Parting Thoughts: No. 8
Link to comment from August 7, 2026
I came across the FIRE (Financially Independent, Retire Early) movement years ago. I had no interest in retiring early myself, but I was intrigued by the concept of attaining financial independence. For myself, it was the point in time when I realized that I no longer felt stress while managing my finances. And like you, I enjoy managing our finances, and over the years have adapted suggestions from many wise folks, some of whom have posted on Humble Dollar. For myself, "enough" meant I could focus on living without stressing over financial matters. Nice post, Dan.
Post: Looking Back On My Hard Luck Days
Link to comment from August 7, 2026
Once retired, our annual income stream is vital. I consider an income stream composed of SSA, dividends and annuity payments to be a reasonable choice. But mindful of future inflation risk, I prefer generating our income stream by drawing on our mix of stocks, bonds (all intermediate and short term Treasurys and TIPs) and cash (Treasury bills and money markets). There is nothing preventing us from purchasing an annuity at some future time, should we wish to.
Post: For most retirees, the greatest fear is not death—it is running out of money before they die.
Link to comment from August 7, 2026
Sounds both simple and smart to me.
Post: For most retirees, the greatest fear is not death—it is running out of money before they die.
Link to comment from August 7, 2026
We cannot predict the future of course, so we look at probability theory. Many focus on the probabilities of various outcomes, but not always on the impact of a low probability event, should it happen. So, we must take into account both likelihood and consequences. Following the well known "4% Rule" is supposed to fund a 30 year retirement. If the residual portfolio balance drops to zero, but only after those 30 years it is counted as a success. Not good though if the person or couple who followed that plan is still alive after that time period. I'm a fan of Bill Bernstein, and recall his discussion of Pascal's Wager, which covers this. A 65 year old just beginning their retirement has an average remaining life expectancy of about 19.7 years (call it age 85). But, that is average. The probability of that same person living to 95 is about 10-15% for men and 15-21% for women. So its little wonder that many prefer to deal with the risk of living a long time by spending less, thus leaving a larger estate behind should they not make it to a very advanced age. Excellent article, Matt! I agree that maximizing SSA is a sort of partial longevity insurance (not withstanding what the government does to stabilize its finances). And when I retired at 65, I assumed a 40 year retirement as a sort of margin of safety.
Post: For most retirees, the greatest fear is not death—it is running out of money before they die.
Link to comment from August 6, 2026
And it will continue to beaten to death for the simple reason that we all know its future financial stability is in jeopardy, yet so far Congress has not taken action. Which leaves all of us having to not only deal with the uncertainty of how our investments may fare, but now also the uncertainty of what we all used to assume was the one thing we could count on. Thanks for a good article and also the link to Steiner's.
Post: Short term and long term Social Security planning
Link to comment from August 4, 2026