The U.S. Debt Downgrade

Hi, Tom here.

Hope you're having a great week and a fantastic start to summer.

This week, we’re diving into the U.S. debt downgrade—and what it means for your retirement plan. The news broke Friday, echoing exactly what we covered in last week’s edition: the world is changing, and so is the way we need to plan and invest.

Let’s unpack what happened—and why it matters.

The Headlines Are a Mirror

Late last Friday, Moody’s downgraded U.S. debt.

It wasn’t the first time. And honestly, with everything going on, it wasn’t all that surprising.

Over the past few weeks, I’ve reviewed hundreds of surveys from new readers. Nearly every one of them says some version of this:

• “I want to lower my taxes.”

• “I want to know how to pull money out smartly.”

• “I want more income that doesn’t require more work.”

If you’ve been following along for a while, you’ll know—people largely want the same thing:

To enjoy their retirement—without being punished for doing the right things.

They’re not alone. We’ve surveyed thousands of you in the past six months. The themes are loud and clear. And with 10,000 Americans retiring every single day, that chorus is only getting louder.

So what does that have to do with Moody’s downgrade?

Let’s zoom out for a second.

Most people assume that large corporations carry the weight of funding this country.

They don’t.

Here’s a chart of the U.S. government’s revenue sources:

Roughly 88% of federal revenue comes from individual Americans—through income tax and Social Security contributions. Less than 9% comes from corporate taxes.

Sure, some business income flows through personal returns—but the point remains:
You and I are keeping the lights on.

Next chart:

• The purple line represents U.S. government revenue over the past decade

• The pink line shows U.S. GDP (our economic output)

• The blue line is the U.S. government’s interest expense

• The green line is inflation

Key takeaways:

• Federal revenue has been flat for over a decade

• GDP has increased substantially

• Inflation, while cooler, remains sticky and high

• And interest costs—the price of carrying our national debt—are surging

In other words: Americans got wealthier. But America didn’t.

Turns out flat income and rising debt are a problem after all.

That’s the gap Moody’s just downgraded—and it’s a mirror to the economic backdrop you’re building your retirement in.

The Rules Are Changing—And You're Likely A Target

The U.S. government can keep borrowing, taxing, and punting tough decisions down the road.
You and I can’t.

You have to retire in this environment. You have to make withdrawal decisions. Choose between Roth or traditional. Decide when to sell the house or fund the remodel.

And you have to make those decisions while all of this is unfolding around you.

I lost my crystal ball a long time ago—but here’s where I believe the puck is heading:

Higher Taxes in Retirement

Policy is following the math. As I mentioned earlier, Americans’ net worth has exploded over the past decade. And with higher interest rates, more retirees are generating more taxable income.

That’s a setup for higher taxes in retirement.
The time to plan is now—not when you’re already retired.

I wrote about this months ago, but it bears repeating: Tax savings compound just like investment returns. Small actions taken early can unlock meaningful advantages later. Don’t overlook this fact.

Retirement Accounts Are Becoming Less Reliable

Here’s a personal example:

In my 20s, I worked hard and saved what I could into my Roth 401(k). My goal was simple: build a tax-free legacy for my kids. Let the money grow, untouched. Pass it down and let them benefit over their lifetime.

That plan worked—until the SECURE Act passed.

Now, non-spouse inherited IRAs must be emptied within 10 years. That long-term, tax-free legacy?

Gone.
Still useful? Absolutely.
But worth far less than it used to be.

And that’s just one change. In the past few years, we’ve seen:

• RMD age increases

• Roth 401(k) rule changes

• Backdoor Roth strategies facing increased scrutiny

• Ongoing debate around capping IRA balances

None of this is random.
It’s a directional shift in retirement policy.
These accounts still offer real value—but the assumptions behind them must evolve.

Higher Rates Are Here to Stay

This is, in my view, the heart of Moody’s downgrade.

Interest rates are no longer artificially suppressed like they were in the 2010s. They’re higher—and in many ways, they’re back to normal. But that “normal” has major implications for how your retirement works.

• Bond yields are materially higher. You can now build income into your portfolio from assets that, not long ago, paid nearly nothing.

• Housing strategy gets more nuanced. Owning a $1.3M home is one thing—but what you’ll move into might be just as expensive. Home equity is real, but it’s not liquid and lacks practicality.

• Cash flow must be planned. Liquidity isn’t just convenience—it’s strategy. It can either move you forward or quietly drag you down.

Higher rates aren’t a blip. They’re the new baseline. And that means the way you plan has to evolve, too.

The World Is Shifting—Your Plan Should, Too

At Fjell, we’re building plans for the next 10–30 years—not the last 10.

Even for families in their 70s, with statistically not a lot of time, this matters.

Modern retirement plans should have:

• Multi-year tax projections, not just tax returns

• Strategic, long-term contribution and withdrawal plans

• Investment strategies that reflect where markets are headed

• Estate planning scenarios that assumes rules may shift again—and soon

We’re also reminding clients of something important:

While government revenue has stagnated, GDP has grown meaningfully.

If you own a business, real estate, or long-term investments—you’ve probably done well. That’s a win.

And while I’m deeply interested in politics and grateful to live in a country like ours, I understand why Moody’s issued the downgrade.

The challenge now is this:
How do you keep what you’ve built, use it wisely, and pass it on intentionally?

Because like I said last week:
You’re retiring in a world that’s different from the one you built your wealth in.

A world of shifting legislation.
Of political and personal volatility.
Of complex trade-offs between today’s comfort and tomorrow’s legacy.

Downgrade or not, that’s why having a modern plan—built for today’s environment, not yesterday’s rules—matters more than ever.

Two ways we can help you take the next right step:

• BluePrint — Our flat-fee financial planning engagement. Designed for individuals and couples who want expert guidance without a long-term commitment. We’ll help you clarify your goals, assess your risk, and map out a plan to retire on your terms. If you’re looking for high-impact financial advice—fast—this is the place to start. Let’s start with a quick conversation.

• Bergen — Our flagship wealth management offering for those with $1M+ in investable assets. We work with financially successful families navigating retirement, transitions, and legacy decisions. Bergen is more than portfolio management and traditional advising—it’s about helping you reduce complexity, optimize income, minimize tax drag, and helping make sure your financial life fully supports your values, family, and goals. Let’s have a conversation.

You’ve done the hard work to build your wealth.
Now it’s about protecting it, putting it to work, and making sure it supports the life you’ve earned.

Let’s map out the next move—together.

Talk soon,
Tom