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Dear US retiree,
Warren Buffett has spent 60 years building one of the greatest fortunes in human history.
From 1964 to 2023 his company Berkshire Hathaway delivered an overall gain of 4,384,748%.
Not a typo. Four million, three hundred and eighty-four thousand, seven hundred and forty-eight percent.
The man knows something about investing.
So when he sat down to write instructions for what happens to his wife's money after he dies, the financial world paid attention.
Here is what he wrote. Verbatim. In his 2013 letter to Berkshire shareholders.
"My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund."
That is it.
No hedge funds. No private equity. No options strategies. No carefully curated portfolio of individual stocks handpicked by the greatest stock picker who ever lived.
90% in one investment.
A simple, low-cost S&P 500 index fund.
The same investment available to every single person reading this email right now.
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Why the Smartest Investor Alive Chose the Simplest Strategy.
Here is the question that stops most people cold.
Warren Buffett has access to every investment on earth. Every fund. Every private deal. Every opportunity that never gets offered to ordinary investors. He knows more about picking stocks than any human being alive.
And his instruction for his wife's inheritance is to put it in an index fund.
Why?
Because Buffett understands something most investors spend their entire lives refusing to accept.
The enemy of good investing is not ignorance.
It is the attempt to be clever.
Most people who try to beat the market do not beat it. Not financial advisors. Not professional fund managers. Not well-read retirees with Bloomberg terminals and CNBC on in the background.
Study after study shows the same result. Over a 20-year period, approximately 90% of actively managed funds underperform their benchmark index.
Not because the managers are stupid. Because the market is brutally efficient. Every piece of information that could give you an edge is already priced in before you act on it.
Buffett said it plainly at the 2021 Berkshire shareholders meeting.
"I do not think the average person can pick stocks."
The man who has spent 60 years picking stocks does not think you should try to pick stocks.
That is not an insult. That is the most liberating piece of financial advice you will ever receive.
Because it means the best investment strategy available to you requires no skill, no research, no market timing, no financial genius.
Just consistency. And patience.
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What 90% in an S&P 500 Index Fund Actually Means.
The S&P 500 is not a single stock.
It is 500 of the largest, most profitable, most enduring companies in America. Apple. Microsoft. Nvidia. Johnson and Johnson. Procter and Gamble. Coca-Cola. JP Morgan. Berkshire Hathaway itself.
When you buy an S&P 500 index fund you own a tiny piece of all 500 simultaneously.
When one company stumbles, 499 others carry the load. When a new industry emerges and disrupts the old one, the index automatically adjusts. The winners replace the losers. The future replaces the past. You never have to make that decision yourself.
Here is the historical math that makes Buffett's instruction so powerful.
The S&P 500 has returned an average of approximately 10% per year over the last 50 years.
Not every year. Some years it falls 30%. Some years it rises 25%. But the long-term average, through every crisis, every recession, every war, every period of inflation and deflation and uncertainty, is approximately 10% per year.
$100,000 invested in an S&P 500 index fund in 1974 is worth approximately $11 million today.
$100,000 sitting in a savings account in 1974 is worth approximately $100,000 today. Plus interest that barely kept up with inflation.
Same starting point. Completely different outcome.
The difference is not intelligence. It is not timing. It is not skill.
It is the decision to stay invested.
The 10% That Buffett Did Not Forget.
Buffett said 90% in the S&P 500.
And 10% in short-term government bonds.
That 10% is not an afterthought. It is the part of the strategy most people skip and most commentators ignore.
Here is what it does.
When the market falls 30% in a single year, as it does periodically, the retiree who holds 100% stocks faces a brutal choice. Sell at the bottom and lock in the loss. Or hold and watch the number on the statement get smaller every month while living expenses keep coming.
The 10% in short-term government bonds is the answer to that problem.
It does not grow dramatically. It does not need to.
Its job is liquidity. Stability. Something you can sell without loss when the market is down to cover living expenses without touching the equity portfolio.
It is the cushion that lets the 90% do its job.
Without that cushion, a bad year in the market becomes a forced sale at the worst possible moment. With it, a bad year is just noise on the way to the long-term average.
That 10% is not defensive pessimism. It is offensive intelligence.
It protects the 90% from being interrupted by short-term fear.
The Retiree Version of Buffett's Strategy.
Ruth is 69 years old.
Her Social Security is $2,100 per month. Her pension is $900 per month. Total guaranteed income: $3,000 per month.
That covers her basic expenses. Mortgage paid off. Kids grown. No debt.
She has $480,000 in a rollover IRA sitting primarily in a mix of individual stocks and actively managed funds her previous advisor recommended. She pays 0.85% in annual management fees. She watches the statements. She worries about the individual names. She wonders if she should be doing something different.
She calls her new advisor.
The conversation is short.
They restructure her IRA. 90% goes into a Vanguard S&P 500 index fund with an expense ratio of 0.03%. The lowest cost investment available to retail investors. 10% goes into short-term Treasury bills.
Annual fee savings from switching from 0.85% to 0.03%: approximately $3,936 per year.
Over 20 years at current portfolio values, that fee savings alone compounds to approximately $117,000.
She does not have to watch individual stocks anymore. She does not have to wonder if she is in the right companies. She does not have to make decisions when the market falls.
She just holds.
And every year the S&P 500 does what it has done for 50 years.
It grows.
The One Thing Buffett's Strategy Requires.
Here is the uncomfortable truth at the center of this entire conversation.
Buffett's strategy is simple. It is proven. It is available to everyone. It outperforms almost every alternative over time.
And most people will not stick with it.
Not because they do not understand it. Because human beings are wired to do something when their investments fall. To act. To protect. To move to safety.
The S&P 500 fell 38% in 2008. It fell 34% in early 2020. It fell 19% in 2022.
Every single time it fell, millions of investors sold. Moved to cash. Moved to bonds. Waited for it to feel safe again.
Every single time it recovered. And then it went higher.
The investors who held through every one of those drops are the ones who got the 10% annual average.
The investors who sold are the ones who got something far less.
Buffett's strategy is not really about which investment to choose.
It is about whether you have the conviction to hold through the moments that feel terrifying.
That conviction is not born in a bull market. It is built by understanding the math. By knowing the history. By recognizing that the fear you feel when the market falls is the same fear every investor has felt at every bottom of every market in the last 100 years.
And by knowing that every single time the people who held came out ahead.
What This Means for You Right Now.
Look at your portfolio today.
Not the balance. The structure.
How much of it is in low-cost index funds with expense ratios under 0.10%?
How much of it is in actively managed funds charging 0.75% or more per year?
How much of it is sitting in cash or savings accounts earning less than inflation?
The answers to those three questions will tell you more about your financial future than any market prediction, any analyst report, or any investment tip you will ever receive.
Buffett wrote four sentences about what to do with his wife's inheritance.
He has spent 60 years generating a return of 4,384,748%.
And his instruction was simple enough for anyone to follow.
90%. One low-cost index fund.
10%. Short-term bonds.
Hold.
That is the whole strategy.
The question is not whether it works. The math of the last 50 years is the answer to that question.
The question is whether you have the conviction to follow it.
Stay sharp.
— US Retirement Report
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This newsletter is for informational and educational purposes only and does not constitute financial, tax, or investment advice. Please consult a qualified financial advisor before making any decisions.
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