Every few years, a familiar worry resurfaces: Can we still trust U.S. Treasuries?

It’s a fair one. Fiscal deficits are rising. Government debt dominates the headlines. Political theatrics are hard to ignore. These concerns are understandable.

But this piece is not a dismissal of those worries. It aims to weigh them against the steady role Treasuries continue to play in global markets and in investors’ portfolios.

Because the key, as always, is to separate signal from noise. And noise is never in short supply.

U.S. Treasuries are often described as “risk-free.” Of course, no investment truly is, but no other assets have earned that reputation as convincingly. Their strength is structural: deep markets, global demand, and the dollar’s central role in international finance. These aren’t passing features. They’re foundational pillars of a system that continues to hold.

WE’VE BEEN HEAR BEFORE

Concerns about the national debt are nothing new. In the mid-1980s, Congress passed the Gramm-Rudman-Hollings Act in response to growing fears of a looming fiscal cliff.¹

That was nearly 40 years ago.

Since then, warnings have echoed: interest rates would skyrocket, the dollar would collapse, foreign buyers would flee. But none of those predictions played out in a sustained way. Interest rates stayed low for decades. The dollar remained strong. Treasuries continued to anchor global portfolios.

THE OTHER SIDE OF THE LEDGER

Most debt conversations focus on the total amount owed, but it would be wise to consider both sides of the ledger. An equally important story is the government’s ability to repay what it owes.

The United States has a broad and resilient tax base, drawing revenue from some of the world’s most profitable corporations and wealthiest individuals. In 2024, over 94 percent of federal revenue came from income, payroll, and corporate taxes.²

That revenue base gives the government something that matters more than the size of its debt: flexibility. The capacity to raise more if needed. This is a critical ingredient in maintaining trust and stability in U.S. Treasuries.

That doesn’t make debt a non-issue. But it puts the conversation in better context.

THERE IS NO SUBSTITUTE

Some point to shifting foreign ownership of Treasuries as a sign of trouble. But the truth is, global capital needs a home that is safe, liquid, and capable of absorbing trillions in flows. There are few alternatives.

That’s why central banks, sovereign wealth funds, and even the U.S. tri-party repo market continue to rely on Treasuries. ³,⁴ It is not because of short-term politics. It is because no other asset plays the role as effectively or as consistently.

Foreign holdings may ebb and flow with trade dynamics or currency shifts. But the long-term, strategic demand? It’s still there.

HIGH DEBT DOES NOT GUARANTEE CRISIS

Japan offers an interesting counterpoint. With a debt-to-GDP ratio over 250%, more than double that of the United States.⁵,⁶ And yet, its financial system remains stable, and interest rates are close to zero.

This is not to suggest that debt is irrelevant, but it serves as a useful reminder that high debt levels, on their own, do not lead to crisis. The surrounding structure, including credibility, strong institutions, and consistent demand, matters just as much, if not more.

Could Treasuries someday lose their special status? In theory, yes. Anything is possible. But if that day ever comes, it will likely coincide with a much broader breakdown in global order. In that kind of environment, the safety of any asset would be in doubt.

That’s not a prediction. It’s simply an observation about the scale of disruption required to unseat the U.S. Treasury market.

A WARNING FROM ‘THE BOND KING’

Not everyone views Treasuries as the unshakable anchor they once were. Even some of the most seasoned investors are questioning the long-term role of U.S. Treasuries.

Jeffrey Gundlach, CEO of DoubleLine Capital and one of the most influential fixed income investors of the past two decades, has voiced serious concerns. In a June 2025 interview, he offered this warning:

“There is an awareness that the long-term Treasury bond is not a legitimate flight-to-quality asset.”⁷

He points to shifting dynamics: the dollar falling during selloffs, long bond yields rising after rate cuts, and growing concern over rising interest costs. As low-yield bonds mature, they are being replaced by debt with much higher yields. According to Gundlach:

“The interest expense for the United States is untenable if we continue running this budget deficit and continue to have sticky interest rates.”

Gundlach raises legitimate questions. But even he stops short of calling Treasuries broken. His concern is about strain, not collapse. The system is being tested, not undone.

While the pressures are real, rising interest rates and persistent deficits, they are not set in stone. Policy can change. Priorities can shift. The system still has tools it can use.

And this is where perspective matters.

Markets are noisy. Bad news sells. Loud warnings travel further than quiet resilience. But alarm does not erase the quiet strength of systems that continue to function.

Even Gundlach points to stress, not failure.

Which brings us back to what still works.

STILL DOING THEIR JOB

Treasuries aren’t immune to worry, however they continue to serve their purpose. They provide liquidity, offer stability, and act as a counterbalance in times of uncertainty.

We’re seeing that play out again in real time. Renewed tensions with Iran have reminded investors what uncertainty feels like. Once more, yields have dropped and the dollar has strengthened. These are clear signs of a flight to safety.

Even amid rising deficits and political noise, Treasuries continue doing what they’ve always done: deliver reliability in a world that often falls short.

References:

1. U.S. Congress. Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings Act). Public Law 99–177, 99th Congress, December 12, 1985.

2. U.S. Department of the Treasury. “Government Revenue.” Fiscal Data – America’s Finance Guide.Accessed June 20, 2025.

3. Board of Governors of the Federal Reserve System (U.S.). “Rest of the World; Treasury Securities Held by Foreign Official Institutions; Asset, Level [BOGZ1FL263061130Q].” FRED, Federal Reserve Bank of St. Louis. Accessed June 20, 2025.

4. Federal Reserve Bank of New York. “Tri-Party Repo Data Visualization.” Federal Reserve Bank of New York. Accessed June 20, 2025.

5. U.S. Department of the Treasury. “National Debt and Debt-to-GDP Ratio.” Fiscal Data – America’s Finance Guide. Accessed June 20, 2025.

6. World Economics. “Debt-to-GDP Ratio: Japan.” World Economics. Accessed June 20, 2025.

7. Jeffrey Gundlach, interview with Bloomberg, “Gundlach on Treasuries, Gold, Fed, AI, Private Credit, Trump,” June 11, 2025.

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Disclosure: Advisory services offered through Human Investing, an SEC registered investment adviser. This material is for informational and educational purposes only and is not intended as investment advice, an offer, or a solicitation to buy or sell any securities. Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. Any third-party opinions or sources cited are believed to be reliable but are not guaranteed for accuracy or completeness. Please consult your financial professional before making any investment decisions.

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We live in a world where money feels more complicated than ever. There are more choices, more opinions, and more pressure to get it right. And because money is personal and often emotional, and it can be hard to know where to begin.

After working with hundreds of families, one thing stands out: the people who feel most confident about their finances aren’t the ones with the highest returns. They’re the ones with a system. A simple, repeatable process for managing cash flow, expenses, and uncertainty.

And for most people, that system starts with how you hold cash. The key is giving it structure.

That’s why I use a three-bucket approach:

1. One bucket for the everyday—bills, groceries, and life’s basics.

2. One for the unexpected—emergencies, repairs, and surprises.

3. And one for the future—a place for your cash to grow and outpace inflation.

It’s not flashy. But it works. And in a world full of noise, systems that work quietly are often the ones that matter most.

Bucket One: Daily Life

This is your foundation. The money that pays for groceries, gas, the electric bill, subscriptions and everything else that keeps your life moving. It’s not meant to grow. It is meant to flow—steady, predictable, and low stress.

Purpose: Keep life steady. Pay your bills without stress.
Where to keep it: A checking account you trust.
What to keep in mind:

• Aim to match your monthly spending – money in and money out, with a small buffer.

• Enough to avoid dipping into savings or taking on credit card debt for the basics.

• Not so much that you’re leaving money idle for no reason.

Too much in this account means money is sitting still and losing ground to inflation. Too little, and small surprises can throw everything off.

Cash in this bucket is like oxygen: you don’t think about it when it’s there, but when it’s not, nothing else works.

Bucket Two: The Buffer

No one plans for a broken transmission. Or a surprise tax bill. Or a layoff. But those things happen. That’s why this bucket exists not to help you get ahead, but to keep you from losing ground when life doesn’t go to plan.

It also covers the bigger, less frequent expenses you can anticipate. Things like replacing your car, covering a major home repair, or helping a child with college or a wedding. If it’s a larger expense and you expect it within the next five years, it belongs here. Planning for these ahead of time keeps them from becoming financial emergencies when they arrive.

Purpose: Provide breathing room when the unexpected shows up.
Where to keep it: High-yield savings, money market funds, or short-term Treasuries. These are safe places where your money is still accessible and earning more than a checking account.
What to keep in mind:

• Cover 3 to 6 months of essential expenses.

• Add extra for planned one-time costs like a new roof, tuition, or a car.

• Focus on after-tax interest. Earning a bit more here helps these dollars avoid quietly shrinking under the pressure of inflation.

This is the bucket where it makes sense to look for a little more yield. That might come with a small sacrifice in liquidity. Your money may take an extra step or a day or two to access. But that added friction can be useful. It creates a natural pause that gives you a moment to think before reacting. Sometimes, having to slow down is exactly what protects you from making a decision you might regret.

This bucket may not make headlines, but it builds resilience. It helps turn unpredictable moments into manageable ones and keeps you moving forward with confidence.

Calculating the right amount is important. But holding too much here can also create risks. Cash that sits for years without a purpose slowly loses value. That is where the third bucket comes in.

Bucket Three: The Future

If Bucket One is about staying afloat and Bucket Two is about staying safe, Bucket Three is about moving forward. This is where your cash begins working toward the future, whether that is your own retirement, future generations, or a lasting legacy. It is not for today, and probably not for next year. It is for the life you are building over the long run.

Purpose: Grow your money in a way that keeps up with, and ideally outpaces, inflation.
Where to keep it: A diversified investment portfolio aligned with your goals and timeline, whether growth, income, or a mix of both.
What to keep in mind:

• Time in the market is more powerful than trying to time the market.

• There can be periods where the market goes down, but in the end the market is undefeated. 

• Emotional decisions often cause more harm than poor performance ever will.

This is also a place where working with a fiduciary financial advisor can be especially helpful. An advisor can help you figure out how much to invest, how often to do it, and which types of accounts are the best fit for your goals. They provide structure, help you stay focused, especially when the market makes it tempting to second-guess your plan.

Final Thought: The Real Goal

Getting your financial life in order starts with building a system that makes the rest of your decisions easier. A system that keeps you steady when things get noisy. A system that gives every dollar a job.

The three-bucket approach is simple by design. One bucket to keep life running. One to absorb the unexpected. One to grow for the future.

As author James Clear puts it, “You do not rise to the level of your goals. You fall to the level of your systems.” The families who feel most confident about money aren’t the ones with the biggest portfolios. They’re the ones with a clear, repeatable system they trust, especially when things get hard.

This isn’t about wringing the highest return out of every dollar. It’s about creating margin, building structure, and letting consistency do the heavy lifting. In personal finance, small steady steps beat frantic leaps.

Start with where you are. Build a system that fits your life. And trust that simple, well-built plans often lead to the strongest outcome.

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Disclosure: Investment advisory services offered through Human Investing, an SEC registered investment adviser. Investments involve risk, including the potential loss of principal. Diversification does not ensure a profit or guarantee against loss. Past performance is no guarantee of future results. This material is for informational purposes only and is not intended as individualized investment advice. Any references to market trends or economic conditions are for illustrative purposes and may not reflect future developments. Consult with a qualified fiduciary advisor before making financial decisions.

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Markets have been moving fast lately — in both directions

Down 10% in two days. Up almost the same the next. Three trading days: A full year’s worth of returns gone, and then mostly back again. 

Looking at the S&P 500 last week feels disorienting. And in a way, that’s the point.

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This kind of movement makes people wonder if the system is broken. But this is exactly how markets work. They are brutally efficient at processing new information, whether it’s political, economic, or emotional.

Markets don’t wait for clarity. They move quickly on possibility, repricing risk in real time, regardless of how ready you feel. And when things are uncertain—when leadership seems unpredictable, policy is in flux, or the narrative changes overnight—the swings can be dramatic.

Fast drops, slow climbs — that’s the deal

Volatility is the price of admission for long-term growth. There’s a reason people say, “Markets take the stairs up and the elevator down.” Even looking at the last few years, gains usually build gradually, while losses often arrive quickly and unexpectedly.

Yet, over the decades, the odds have been in your favor. On average, the S&P 500 has risen in 52% of trading days, 73% of calendar years, and 94% of decades. (Source: Capital Group)

Three days of outliers over the last 25 years

New York Times

The sharp losses of April 3rd and 4th, followed by the rebound on April 9th, are outliers in magnitude but not in pattern. The biggest gains and losses tend to cluster together, and they often show up when they’re least expected. Selling after a big drop means missing the potential surge that follows. Buying after a big rally means forgetting what preceded it.

This isn’t a timing game. It’s a discipline game

Discipline doesn’t mean knowing what happens next. It means staying in the game when it feels like the rules are changing. It means resisting the urge to flinch when the noise gets loud.

The headlines will keep coming, and volatility will return. But the most reliable part of markets is that they change. The market may take the stairs up and the elevator down — but over time, it remains one of the most reliable places to grow long-term wealth.

Hold fast to your financial plan. Stay invested.

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Disclosures: These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal.  Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Comission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

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Most investors, at some point, experience moments when it feels like the world is shifting beneath them. This week is one of those times. 

On March 4th, the president implemented new tariffs: 

• 25% on imports from Mexico and Canada (except Canadian energy, which faces a 10% tariff). 

• An additional 10% tariff on imports from China.  

Markets reacted predictably: the stock market dropped, volatility spiked, and headlines shouted.
 
And even as I write this, the situation continues to evolve. Markets are adjusting, policymakers are responding, and uncertainty remains. But while the news cycle moves quickly, the principles of sound investing remain the same. 

Why do tariffs make investors nervous?

At their core, tariffs increase costs for businesses, which can squeeze profit margins. And if there’s one thing markets care about, it’s profits. 

We read many perspectives on the global economy, and Dr. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, has been a consistent voice of reason for over a decade. Known for his practical insights, Dr. Kelly asserts that tariffs result in "higher prices, slower economic growth, reduced profits, increased unemployment, greater inequality, lower productivity, and heightened global tensions." 
 
Investors aren’t just reacting to tariffs. They’re reacting to the unknown: 

• How long will these tariffs remain in place?

• Are they just a negotiation tactic? 

• Is this a temporary period of volatility, or the beginning of a longer cycle? 

Markets don’t panic about what they know—they panic about what they don’t.

Investing is messy. It always has been. 

Market downturns often feel like a unique crisis. But history tells a different story. 
 
Recessions, inflation spikes, political uncertainty, trade wars, interest rate hikes—these challenges are not new. The market has faced them all before. And yet, over time, it has moved higher. 
 
As noted by author Seth Godin, “The future is messy, and the past is neat. It's always like that.” 

The importance of perspective

Market downturns feel different when you’re living through them. The news feels bigger. The risks seem higher. The headlines are scarier.  
 
This feeling is amplified after strong market years, when investors feel they have more to lose—at least on paper. In 2023 and 2024, the S&P 500 delivered a total return of nearly 58%, propelling more investors into the ranks of "401(k) millionaires," according to Fidelity. 

It’s natural to feel anxious about market fluctuations, but fear is never a sound investment strategy.  

A strong financial plan is built specifically for you — your goals, your risk tolerance, and your timeline. More importantly, it’s designed with the understanding that markets are unpredictable and often messy. By accounting for uncertainty upfront, your plan provides a steady framework, allowing you to stay the course during volatility instead of reacting to short-term fluctuations. 
  
As John Bogle, the founder of Vanguard, wisely put it, “The stock market is a giant distraction from the business of investing.” 
  
Bad news drives headlines, but bad news should not drive investment decisions. Market downturns are inevitable, but they are also temporary. 

Reasons to sell? There will always be more.

There has never been a time in history when you couldn’t find a reason to sell. 
 
Recessions. Political chaos. Interest rate hikes. Pandemics. Trade wars. Every one of these events made investors think, “Maybe this time is different.” 
 
And yet, over time, the market has rewarded patience, discipline, and long-term thinking. 

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Morgan Housel, author of The Psychology of Money, puts it best: "Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control. A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy." 

What can you control?

While headlines will continue to change, wise investors focus on what they can control: 

1. Maintain an emergency fund. The best way to endure volatility is to have enough cash to cover the unexpected. 

2. Manage your news consumption. Headlines are designed to capture attention, not provide perspective. 

3. Hold enough short-term bonds and cash so that you’re never forced to sell long-term investments during even the longest downturn. 

4. Maintain a diversified approach to your portfolio. Lately, the market has been driven by just a handful of the biggest companies. However, as of March 4th, a globally diversified portfolio has outperformed the S&P 500 year to date. 

5. Stay focused on the long game. Your success as an investor won’t be determined by what happens in the next week or month. It will be determined by how you navigate market noise over decades.

What should you do now?

If you have a financial plan, now is a great time to revisit it. These moments of uncertainty are exactly what your plan was built for. 

If you don’t have a plan, this is a reminder of why you need one. A well-structured investment strategy helps you stay focused when markets get messy. 

At Human Investing, we help investors build financial plans that are designed for the long term; plans that account for uncertainty, so you don’t have to react to every headline. 

If you’re feeling unsure about the road ahead, let’s talk. The best investors aren’t the ones who predict the future—they’re the ones who are prepared for it.

References:

Kelly, D. (2025, March 3). The trouble with tariffs. J.P. Morgan Asset Management. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/notes-on-the-week-ahead/the-trouble-with-tariffs/   

Housel, M. (2020). The psychology of money: Timeless lessons on wealth, greed, and happiness. Harriman House. 

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Disclosures:

These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal. Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

The opinions expressed by third-party individuals, including Dr. David Kelly, Seth Godin, Morgan Housel, and John Bogle, are their own and do not necessarily reflect the views of Human Investing or its affiliates. Their inclusion is for illustrative and educational purposes only.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Commission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

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As the person who manages most of the financial decisions in your household, it's natural to want to ensure your spouse is financially secure if you're no longer around. The financial burden on a widow can be overwhelming, especially with the lesser-known tax implications that often follow the death of a spouse. By planning ahead, you can safeguard your spouse from unnecessary financial stress.

Taking a few proactive steps now can help shield your spouse from these challenges and give them peace of mind. This guide will walk you through the financial implications of losing a spouse and what you can do today to ensure you preserve your assets for their well-being.

There are two common tax shocks you want to get ahead of:

Tax shock #1: The “survivor's penalty”

After a spouse dies, the widow is often left facing what’s called the "survivor’s penalty," which refers to higher taxes that result from a change in filing status. While you may currently file taxes jointly as a married couple, your spouse would be required to file as a single taxpayer after your death. This change can increase their tax bill substantially.

Here’s why this matters:

• Higher Marginal Tax Brackets: After your passing, your spouse’s income could fall into a higher tax bracket due to the narrower brackets for single filers compared to married couples.

• Reduced Standard Deduction: In 2024, the standard deduction for married couples filing jointly will be $29,200, but for single filers, it will be just $14,600. This reduction will increase the amount of income subject to taxes.

Looking ahead, it’s important to note that individual tax brackets are set to revert to pre-2018 levels in 2026, further increasing the tax burden on your spouse if you’re no longer here.

Tax shock #2: Hefty taxes on IRA distributions

If your spouse inherits your retirement accounts, such as an IRA, they’ll also face higher taxes due to Required Minimum Distributions (RMDs). These distributions are considered ordinary income, and combined with their new single filing status, could push them into an even higher tax bracket! The larger your IRA, the bigger this tax burden becomes.

What may seem like a well-planned nest egg now could become a source of financial strain later on due to taxes. By understanding this, you can take steps now to lessen the impact on your spouse’s financial future.

Firsthand example from a retired couple

When Spouse #1 and Spouse #2 file jointly, both receive Social Security and must take Required Minimum Distributions (RMDs) from their retirement accounts. Let’s look at their income and tax bill while filing as Married Filing Jointly (MFJ):

Now, if Spouse #1 passes, Spouse #2 becomes the sole taxpayer, facing a shift to the Single filing status. Spouse #2 is still required to take the same RMD amount as the beneficiary of the retirement accounts and claims Spouse #1’s higher Social Security benefit under the survivor benefit rules. However, Spouse #2 cannot receive both Social Security payments, so Spouse 2’s income is reduced. Here’s what their tax situation would look like:

Despite an almost 16% drop in income, Spouse #2's tax bill increases by over 30%, showing the impact of the survivor’s penalty on income and tax liability.

This example highlights why it’s essential to plan ahead to help lessen the financial burden on surviving spouses.

Four strategies to protect your spouse from a heavy tax burden

Fortunately, there are several strategies you can use to reduce the tax burden on your spouse in the future:

1. Complete Tax Projections: To best plan for the future and make calculated decisions, it’s necessary to understand your expected lifetime tax bill. A comprehensive tax projection will identify your current and future tax rates, potential gaps, and overall lifetime tax obligations. This helps you make informed decisions today.

2. Partial Roth IRA Conversions: Converting part of your traditional IRA into a Roth IRA over time can help reduce the tax impact on your spouse later. While you’ll pay taxes on the conversion now, the Roth IRA’s future growth will be tax-free, meaning less taxable income for your spouse when they inherit it.

3. Take Advantage of the Step-Up in Basis: For non-retirement investments, your spouse can benefit from a "step-up in basis." This allows the cost basis of assets to reset to their value at the time of your death, potentially eliminating capital gains taxes if they were to sell those assets. Understanding this advantage can save your spouse from an unexpected tax bill down the road.

4. Naming Non-Spouse Beneficiaries: Another option to reduce taxes is to name non-spouse beneficiaries for some of your retirement accounts, such as your children and grandchildren. While this can lessen the tax burden for your spouse, it’s essential that these non-spouse beneficiaries understand the new withdrawal rules set by the SECURE Act. This law requires that non-spouse beneficiaries fully distribute inherited IRA funds within 10 years, which could trigger substantial tax liabilities for them if not carefully planned. Additionally, consider adding a qualified charity as a beneficiary to your IRA for a tax-free transfer gift.

You can start planning ahead with your spouse now

Planning for your spouse's financial future can be an impactful gift. While it may be uncomfortable to think about what happens if you're no longer here, taking proactive steps now will ease your spouse’s transition during a difficult time. Here are a few key actions to consider:

Have Regular Financial Discussions: Make sure your spouse understands your financial plan, knows how to manage accounts, and is familiar with where to find important documents.

Work with a Fiduciary Financial Advisor: A financial advisor can help you develop a plan tailored to your family’s situation. By understanding your overall financial situation, an advisor can provide guidance now and assist your spouse when you're no longer there. They can also help with tax projections, Roth conversions, beneficiary updates, and staying ahead of tax law changes.

Create a Clear, Organized Estate Plan: Ensure your estate plan is up to date, including wills, trusts, health care directives, power of attorney, and beneficiary designations. This will help prevent unnecessary complications for your spouse during an already challenging time.

Be Proactive About Taxes: By planning for your spouse’s future tax obligations, you can reduce the “survivor’s penalty” and give your spouse more financial security.

You’ve worked hard to provide for your family, and planning for your spouse’s financial future if something happens to you is a vital part of that legacy. While it may seem difficult to know the "right" time to prepare, we can't predict the future. Whether you're already in retirement or facing a serious diagnosis, projecting out scenarios can make all the difference for your spouse’s security.

Don’t wait until it’s too late—start planning now to protect your loved one from unnecessary financial strain.

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Social Security remains a cornerstone of American retirement planning, yet it’s often shrouded with concern and misinformation. As the dialogue about its future grows increasingly pessimistic, many people question its reliability and role in their retirement income plans. Understanding the current state of Social Security is crucial for making informed decisions about your financial future.

Perception vs. Reality:  The Role of the Trust Fund

Much of the anxiety around Social Security comes from media reports highlighting the shrinking trust fund. This often leads to the mistaken belief that the program is on the verge of collapse. But the real issue isn’t mismanagement—it's demographics. As baby boomers retire and people live longer, benefits are outpacing payroll tax revenues.

Historically, Social Security operated on a pay-as-you-go basis. Since 2010, however, benefits have exceeded payroll tax collections. To bridge the gap, the Social Security Administration (SSA) has been tapping into the trust fund, a practice that will continue until the fund is expected to run out by 2033[i]. While this sounds alarming, it doesn't mean Social Security will vanish.

Misunderstandings About Insolvency

A common misconception is that the depletion of the trust fund means Social Security will go bankrupt and cease to exist. In reality, even after the fund is exhausted, payroll tax revenues will still cover approximately 79% of retirement benefits[ii]. This isn’t a doomsday scenario; it’s a call for strategic policy adjustments.

Fixing the Funding Gap – Potential Reforms

The SSA has proposed several solutions to address Social Security’s funding gap. Here are some of the most viable strategies:

1. Increase Social Payroll Tax – Projections show Social Security's long-run deficit is 3.5% of covered payroll earnings[iii]. Raising payroll taxes by this amount—1.75 percentage points each for employees and employers—could secure full benefits through 2098, with a one-year reserve at the end.

2. Increase the Social Security Wage Base—In 2024, the first $168,000 of earned income is taxed at 6.2% each for employees and employers; self-employed individuals will pay 12.4%.[iv] Increasing the Social Security wage base can help address the shortfall.

3. Increase Full Retirement Age (FRA): Currently set at age 67 for individuals born in 1960 and beyond, the FRA dictates when retirees can claim full retirement benefits without reduction. Each one-year increase in the FRA equates to roughly a 7% cut in monthly benefits for affected retirees. Raising the FRA to 70 would reduce benefits by nearly 20% at any given claiming age.[v] This change aligns with historical precedent, as the FRA was originally 65 for most of Social Security’s history.  

4. Invest in Equities: The SSA could explore investment strategies to enhance returns, following successful models utilized by other countries like Canada or systems such as the US Railroad Retirement System.                    

These measures would require political compromise but could ensure the program’s sustainability and continued support for retirees.

Planning for a Reduced Benefit Scenario

Amid ongoing discussions about Social Security reforms, it’s essential to hope for the best but prepare for the worst—acknowledging the potential for reduced benefits if corrective actions fail to shore up funding. The looming risks of benefit cuts necessitate careful consideration alongside other retirement planning factors, including life expectancy, additional income streams, risk tolerance, inflation, and potential spousal benefits.

Consider your Options in an Ever-evolving Social Security Landscape

Despite the challenges and negative perceptions, Social Security is not on the brink of collapse. With informed decisions and potential policy adjustments, the program can continue to support retirees for many years. It's crucial to stay informed and consider the evolving landscape of Social Security in your retirement planning. We’re here to support you. Contact us to meet with an advisor and learn more about your options.

Sources

[i] Social Security Administration. (2024). The 2024 OASDI Trustees Report. https://www.ssa.gov/oact/tr/2024/

[ii] Munnell, Alicia H. 2024. "Social Security's Financial Outlook: The 2024 Update in Perspective" Issue in Brief 24-11. Chestnut Hill, MA: Center for Retirement Research at Boston College.

[iii] SSA, The 2024 OASDI trustees report. p.17.

[iv]Social Security Administration. (2024). Contribution and benefit base. https://www.ssa.gov/oact/cola/cbb.html

[v] Springstead, G. R. (2011). Distributional effects of accelerating and extending the increase in the full retirement age (Policy Brief No. 2011-01). Social Security Administration. https://www.ssa.gov/policy/docs/policybriefs/pb2011-01.html) 

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Between Fed Policy and the Presidential election, 2024 has all the makings to derail investors. While these factors introduce volatility and uncertainty, historical insights and a sound financial plan can guide those navigating the financial markets.

The year began promisingly, with the market reaching all-time highs in the first quarter of 2024. However, the start of the second quarter has highlighted the inherent unpredictability of the financial landscape. Beneath these surface-level fluctuations lies a geopolitical landscape marked by pivotal events that demand attention.

Fed policies will continue to impact market dynamics

The Federal Reserve's stance on interest rates emerges as a significant factor shaping market sentiment and performance in 2024. Speculation about potential adjustments in interest rates can significantly influence investor behavior and market dynamics. Lower interest rates can stimulate economic activity and boost equity valuations. However, uncertainties surrounding the timing and magnitude of such policy shifts add complexity to the investment landscape. At the beginning of the year, the Fed indicated it might cut rates at some point in 2024. But with inflation remaining higher than expected, it's now anticipated that there will be fewer rate cuts (if any) than initially predicted.

The "cost of admission": lessons from decades of market turbulence

Regardless of the headlines, it's fundamental to understand that the path to stock market growth is paved with bumps in the road. The following chart from JP Morgan nicely illustrates how volatile the stock market can be over short periods of time. In the chart, grey bars represent the returns for each calendar year, while red dots show the intra-year declines.

Looking back to 1980, the S&P 500 experienced an average sell-off of 14.2%, while ending positive in 33 of the 44 years measured. This inherent market fluctuation underscores the “cost of admission” for those seeking long-term gains through stock investments.

Insights from past elections: market performance amid political uncertainty

In most years, the stock market experiences growth, and this pattern holds true for presidential election years as well. However, investors should be prepared for increased volatility due to market uncertainty. Over the past four decades, election years have witnessed heightened market volatility fueled by the ambiguity surrounding political transitions. Despite this turbulence, historical data illustrates the market's resilience.

The S&P 500 has delivered a median total return of 11% over the past ten election cycles, inclusive of the 2008 Global Financial crisis. Though slightly lower than the median return of 15% across all years since 1984, this resilience showcases the market's ability to weather political flux.

Despite the uncertainty surrounding elections, historical data indicates that remaining invested through the election has proven advantageous. Once election results are announced, returns often speed up, usually boosting equity valuations and prices post-Election Day regardless of election outcome.

Leveraging a well-crafted plan for stability

During market turbulence driven by factors such as Federal Reserve policies and elections, a well-crafted financial plan acts as a stabilizing force. As we journey through 2024, it's essential to acknowledge that fluctuations are inherent in investing. Stress-testing your financial plan against various scenarios becomes vital, providing resilience in the face of uncertainty. While headlines may evoke strong emotions, maintaining a long-term perspective grounded in a robust plan aids in navigating choppy waters.

As 2024 unfolds, investors are reminded to stay committed to their financial plan's principles. By drawing on historical insights and adhering to a clearly defined strategy, investors can confidently maneuver through market volatility, knowing that their financial plan serves as their guiding star, directing them toward their long-term objectives.

Sources

1. Human Investing. (2024). 2024 Q1 Economic Update: Politics and the Market. Human Investing Blog. Retrieved from https://www.humaninvesting.com/450-journal/q1-2024-economic-update

2. Goldman Sachs. (2024, February 1). Global Macro Research. Retrieved from [https://www.goldmansachs.com/intelligence/pages/2024-the-year-of-elections-f/report.pdf]

3. J.P. Morgan. (2024). Guide to the markets: March 31, 2024.

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Many people dream of one day receiving a considerable sum of money, whether through a large inheritance, winning the lottery, or selling their business or home. Whether the windfall is expected or not, without a plan, coming into a lump sum of money can be overwhelming at first and emotionally draining once the dust settles.

We’ve all read or heard stories of lottery winners who went from rags to riches to rags again, ending in bankruptcy. [1] While most of us may not win the lottery, we may receive money from an inheritance or a gift we weren’t expecting. This news will undoubtedly stir up thoughts of grandeur on how to spend it or for those more practical, how to best protect it. Not to mention, there are also taxes to consider. It can be exciting and scary at the same time.

For these reasons and more, building a financial plan may help you avoid the pitfalls of emotional or poor decision-making by creating a roadmap. This roadmap will act as your guide, helping you stay on track and get the most out of your new-found wealth. By creating a plan, you will cover many topics that matter most to you, such as:

Assessing your short-term goals.

Has there been anything on your to-do list that you would like to check off within the next few years? Buy a more reliable car, take care of house projects, or bolster your emergency savings fund? It’s vital to assess these needs before you consider investing, as the funds necessary to cover the costs of these goals may need to remain in cash.

Paying off high-interest debt.

Do you have any debt? Our team defines high-interest debt as any loan with an interest rate of 6-8%. This is typically found in credit card debt, some student loan debt, and personal loans. It is important to aggressively pay down high-interest debt, and receiving a lump sum just might provide you with the opportunity to do so!

Building an investment plan.

Analysis paralysis can sometimes lead someone to leave their windfall as cash. Building a personalized investment plan that aligns with your goals and timeline is essential to avoid the permanent risk of holding cash. This step is one where an advisor is especially valuable to provide expertise and advice.

Treating yourself.

Receiving a windfall should not feel like a chore. As your financial plan is being built, it’s okay to add room for things like gift and travel. Not only will it make you feel good that it’s in the budget, but it will give you something to look forward to. Considering even small treats is good to do as it will help you plan to budget for bigger things like travel. According to a survey by the Harvard Business Review, 80% of people derive a greater level of happiness when spending money on experiences rather than buying material things.

You can certainly create a basic goals-based plan on your own, or you could look to hire an expert to help you with comprehensive planning. Here are three ways an advisor can help you:

1. Discuss what may be the highest and best use of your dollars.

An advisor will help you prioritize your needs and wants. While it may seem like you are set for life, without proper planning, the money can disappear fast.

2. Help decipher what is important to you.

For many, coming into a lump sum of money can be partnered with heartbreak from losing a loved one or the pain from a legal settlement. Having a discussion measuring both objective and subjective factors is essential.

3. Partner with you to help keep you accountable for your goals.

Many come into money with great intentions but fail in the execution due to a lack of responsibility, intentional or not.

See The Value of Hiring Human Investing for additional information about the advantages of having an advisor.

As always, our team is here to help. We believe receiving a lump sum requires deep consideration and understanding as it relates to your overall financial well-being. If you would like to connect with a dedicated team member to go over your options, please use this link.

[1] The Ticket to Easy Street? The Financial Consequences of Winning the Lottery

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Are you fearful a recession might be around the corner?

There’s been a lot of chatter about the state of the economy and whether we’re in a recession, or if one’s already passed. Whatever the situation, we wanted to help put things into perspective and remind you of the things you can (and cannot) control if uncertainty is on the horizon.

The widespread definition of a recession is two consecutive quarters of a decline in real GDP (Gross Domestic Product). However, the National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months." No matter which yardstick we use to measure a recession, here is what you need to know:

• Recessions are a natural part of the business cycle. There have been 34 recessions since 1857, ranging from more than five years to the pandemic-driven contraction of 2020 that lasted two months.

• Recessions do not necessarily coincide with a decrease in the stock markets.

• No two recessions are alike in cause, length, or intensity.

• Recessions are marked as a time of heavy uncertainty and an increase in job insecurity.

Planning for a recession is difficult.

Using the general definition, we won't know we are in a recession until six months after it starts. Rather than worrying about a recession (which is out of our control), investors should focus on things that they can control. When future economic uncertainties arise, here is a list of things that you can do to prepare yourself better:

1. Re-evaluate the size of your emergency fund.

The amount someone should keep on hand should correspond with their living expenses, income instability, stage of life, risk tolerance, etc. This amount is typically 3 to 12 months of living expenses. An unforeseen medical bill or a temporary lapse in employment can happen anytime. Arming yourself with a cash safety net is your first defense against debt or selling your investments during a market downturn. For more information, read our blog about understanding the role of cash in a financial plan.

2. Analyze your spending.

Watching how much you spend builds awareness of your current spending habits. Understanding essential vs. nonessential expenses will make it easier to navigate your budget if your income disappears. Bonus: a better understanding of your spending can help you spend less and thus help you save more.

3. Bolster your professional network and skills.

Prioritize efforts to develop strong long-term relationships with essential connections. You may also invest in yourself with job-related skills and by polishing your résumé to ensure you are prepared for an unanticipated lapse in your employment.

4. Assess your investment portfolio.

Recessions don't always coincide with a stock market selloff. However, ensuring your investments are aligned with your goals is essential. Before a downturn in the market is the best time to position your portfolio based on your risk tolerance, time horizon, and financial goals. If you are unsure of your investment strategy, get in touch with a financial advisor to ensure you have the formula for successful investing.

5. Review your insurance coverage.

Start with the basics. Review what you have vs. what you need.

• What kind do you have? Is your protection tied to your job?

• Do you have enough dollar-amount coverage?

• Do you need to adjust, more or less?

Remember the things you can and cannot control. Take your time to examine what you want to prioritize. While we can't predict precisely when a recession will occur, we can plan, prepare, and adjust appropriately to survive any economic storm. If you want to talk with one of our advisors, please call Jill at 503-905-3100.

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It can be agonizing to watch your portfolio decline during a down market. Our human nature is to react erratically, which can be destructive to your financial plan. While it is important to stay the course, that doesn't mean you need to be idle. There is always an opportunity to do something to better your financial house. Here are a few productive things you can do as an investor during a down market: 

Do: 

Take Advantage of Opportunity

Invest cash: Risk assets like stocks are discounted, and as such, now may be a timely opportunity to invest the cash you have on the sidelines. Yes, markets may go down further, so be prepared for additional short-term losses. When investing additional dollars, don't let a desire to time the market-bottom perfectly get in the way of taking advantage of the opportunity.

Look for opportunities to Tax-loss harvest: Tax-loss harvesting allows you to get a tax break for poor-performing investments in a brokerage account. This strategy allows a taxpayer to offset other taxable gains and potentially claim a deduction against ordinary income. This is an unseen benefit for investors who have a brokerage account and want to use poor-performing investments to lessen their tax burden. (See Tax Tips in a Down Market) 

Keep an Eye on your Financial Goals

Rebalance: Market moves can result in a drift of your account's investments. Rebalancing your investments to your desired investment strategy can restore the appropriate level of risk and return to your account. Making sure you have an appropriate amount in stocks will help you take advantage of the possible market rebound. 

Accelerate Savings: Are you systematically saving into an investment account, such as a 401(k), IRA, or brokerage account? Consider making a larger contribution now to take advantage of the opportunity. This is a similar thought process to investing cash. 

Roth IRA conversions: Stock market downturns make for an opportunity to convert traditional IRA dollars to a Roth. When you convert dollars to a Roth IRA, you are responsible to pay income tax on the conversion amount. You are trading the tax-deferred (pay taxes when you withdraw) growth for tax-free growth. Before you complete a Roth conversion make sure you understand the tax implications and talk to your advisor or tax professional. 

An example: Your IRA was valued at $10,000 and is now valued at $8,000 due to market loss. To convert your IRA to a Roth, you would pay income tax on $8,000 rather than the previous amount of $10,000. Any growth from the time of the conversion is now tax-free for qualified withdrawals.  

Stay Educated

Read a book - My favorite personal finance book is the Psychology of Money by Morgan Housel. Housel provides timeless lessons about personal finance, human behavior, and long-term investing. Give it a read and let us know what you think. 

Don’t:

Don't invest short-term cash: Strategic cash cushions do have a significant place in a financial plan. Now is a prudent time to assess your cash holdings. Never use short-term dollars to invest. 

Don't watch your account or market too closely. Staring at a screen during periods of market fluctuations can be poisonous to your emotional wellbeing. Log out, take a deep breath, and go for a walk.

Don’t panic sell - The key thing for many investors is not to panic, stick to your plan. Remember that market declines are normal. This is the price of admission for long-term returns. 

 What We’re Doing for our Clients

Our team at Human Investing continues to carry our methodical approach to help steward our clients’ dollars. Our investment analyst team is constantly looking for opportunities to tax-loss harvest and rebalance. All the while, our Investment Committee persists in our due diligence for opportunities to enhance our investment strategies. 

While it is important to stay the course, that does not mean you need to sit on your hands and do nothing. We hope to provide you with a list of constructive things you can do to better your financial plan. Please let our team of credentialed advisors know if there is anything we can do to help you navigate the current market.  

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Cash has its place in any financial plan. However, holding too much cash or cash-like investments like a CD or a Money Market account can be one of the most overlooked risks when it comes to long-term planning. 

Inflation Creates Permanent Loss  

Traditional wisdom says if you want to preserve your dollars, keep them as cash. Yes, this level of caution can help reduce short-term volatility or loss of capital. Unfortunately, unbeknownst to many investors, cash is not as risk-free as it seems. Holding too much cash long-term can come at a high price. 

 Inflation is defined by the Federal Reserve as "the increase in the prices of goods and services over time.”[1] For investors, inflation is a silent killer that, if unchecked, can permanently deteriorate their purchasing power. To stress this, see how quickly your money can be cut in half based on different inflation rates.   

View fullsize

Table 1

Source: Ycharts

Build a Diversified Plan  

Inflation requires investors to think long-term. Balancing temporary risks with combating inflation is an essential element of building a successful financial plan. 

Long-term investors who want to combat rising costs due to inflation should look to build a diversified investment strategy with an appropriate amount of stocks. While the stock market entails short-term volatility, it has never experienced a total and permanent loss. In fact, stocks have done just the opposite.  

Table 2

This graph is for illustrative purposes only. Past performance is no guarantee of future results. Data sources: Health care costs, CMS.gov; Portfolio returns, CFA Institute (SBBI®)

When Should I Hold Cash?

This is not to say someone ought to avoid holding cash altogether. Strategic cash cushions do have a significant place in a financial plan when considering both short-term and long-term financial decisions (see the barbell approach). There is no one size fits all plan. The amount someone should keep on hand should correspond with their living expenses, instability of income, stage of life, risk tolerance, etc. This amount is typically 3 to 12 months of living expenses. However, the permanent risk associated with holding too much should be evaluated, and if possible, mitigated. This starts with a deliberate and personalized plan concerning how much to hold and where to keep it. 

Decisions around cash are just as psychological as they are financial. For this reason, it can be helpful to enlist the help of a trusted partner like Human Investing who has your best interest in mind.   

Sources

[1] Federal Reserve (2016). What is inflation and how does the Federal Reserve evaluate changes in the rate of inflation?

[2] Inflation Data source from 1/1/1926-12/31/2021: Ycharts.

[3] U.S. Centers for Medicare & Medicaid Services. “Projected | CMS.”

[4] CFA Institute (2021). Stocks, Bonds, Bills, and Inflation (SSBI®) Data.

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Transitioning into retirement can be an exciting time. For many it can also be a daunting reality. We hope the following Pre-Retirement Checklist is a helpful tool as you intentionally prepare for your retirement years.

5-10 years out 

• Create a plan to pay down debt.   

• Maintain Emergency Fund – Emergencies still happen in retirement.  

• Familiarize yourself with Social Security, Pension, and/or Defined Benefit options.  

• Consider Long Term Care (LTC) options – LTC Insurance vs Self-insuring using other assets.  

• Maximize all tax-advantaged savings accounts – 2021 Contribution Limits.  

• Review your investment strategy to make sure your retirement accounts are in line with your risk tolerance and timeline.   

• Strategize how to divest from company stock.  

2-4 years out 

• Devise a retirement spending plan:   

  • Identify your retirement spending goals – basic needs, travel, one-time needs, etc.  

  • Take inventory of assets and consolidate as needed.

  • Retrieve Social Security estimates and create a strategy for taking your social security.

  • Determine and clarify your retirement paycheck replacement strategy.  

  • If you are retiring early, figure out how you will bridge spending needs prior to Social Security income, Medicare coverage, and accessing retirement accounts at age 59.5. 

  • Review deferred compensation distribution strategies.  

• Begin developing a plan for a fulfilling retirement (goals, purpose, health).  

• Practice being retired – take a long vacation in the location you plan to retire and live within your retirement budget. 

• Retirement Living Plan:  

  • Evaluate downsizing a home or relocation and the associated tax implications.  

  • If a mortgage is required, relocate while you still have the income to qualify for the mortgage preapproval process. 

• Formulate a plan to exercise your stock options. 

• Review insurance needs – potentially to cancel or lower life/disability insurance.  

< 1 Year out 

• Formulate a health care plan:   

  • Investigate Medicare, Medigap, and Medicare Advantage plans.  

  • Compare Individual Insurance policy or COBRA if you are younger than age 65.  

  • Enroll in Medicare 3 months before age 65.  

• Apply for Social Security benefits 3-4 months before you want benefits to start.  

• Determine how much monthly income you need from your portfolio to cover your expenses.   

• Analyze your retirement income plan.

• Consider a HELOC while you still have the income to qualify.  

• Update estate plan documents with retirement changes.  

• Take advantage of employer medical plans.   

Download this as a printable one-sheeter.

Planning for retirement should be exciting. Please reach out if our team of credentialed experts can help you navigate the road to retirement.

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