DISCLAIMER: This post is offered as a personal perspective on the market and the sentiment of the FIRE community & influencers as of August, 2026. This is not in any way investment advice. It’s merely a discussion of FIRE community principles and observations from the Professor – a guy that wrote his first online retirement calculator in 2000, recently retired, and has weathered a few financial storms. Always do your own research and/or consult a professional for any financial decision.
Introduction
Hey FI friend! Thanks for coming back for Part 2. If you haven’t read Part 1, you can find it here: 025 | Is “VTI and Chill” Still a Sound Strategy? (Part 1 of 2). You’ll remember from Part 1 that VTI is the Vanguard Total Stock Market Index Fund (VTSAX is functionally equivalent) and that due to its U.S. focus, diversity, low cost, and solid performance, “VTI and chill” is kind of standard FIRE community investing advice. And in Part 1, I listed some potential concerns about this strategy:
- Overconfidence in the FIRE community
- Historically high stock valuations
- AI and the 1999 dot-com bust similarities
If Part 1 left you in despair, let’s cheer you back up with positives and some strategies to counter the negatives.
If You’re Early in Your FIRE Journey
If you’re just getting started or still early in your FIRE journey, “VTI and chill” is still solid advice. I’ll give you three reasons why.
Reason 1: It’s simple, and simple gets you started.
Let’s be honest, all of this can be really overwhelming when you’re first learning it. And when people feel overwhelmed, they tend to freeze and do nothing. But it’s crucial that you get started ASAP. See 005 | The Urgency of Now: 3 Steps to Instant FI Momentum. You don’t need to understand fund types, dividends, the 4% rule, P/E ratios, or any other market lingo. “VTI and chill” just requires you to buy VTI and literally do nothing else; you’ll learn all that other stuff as you go along.
Reason 2: You have time to ride out any market downturn.
Because this money is earmarked for retirement, you likely have decades to recoup any downturn. Actually, a market downturn would be great for you because you’ll have the opportunity to buy VTI at a discount. If you’re investing each month automatically, you’ll naturally benefit from buying stocks when they’re on sale.
Reason 3: The power of compounding
Similar to reason 1, the sooner you get started the more time you have for the power of compounding to kick in. Compounding is so powerful that the human brain really can’t comprehend it without an example. See 005 | The Urgency of Now: 3 Steps to Instant FI Momentum, specifically the “The Time Tax / The Cost of Delay” section. Compounding will almost assuredly outweigh market fluctuations over longer time periods.
If you’re in this phase of your journey and feeling overwhelmed, you can probably stop reading this blog now and go relax. But if you’re up for a little more, it’s probably worth reading at least the next section.
Time to Add International? “VT and Chill”?
In Part 1, we highlighted that U.S. stocks might be overvalued based on the S&P 500 current P/E ratio of 26. According to Vanguard, VTI’s P/E ratio is currently 25. Compare that to Vanguard’s popular international fund, VXUS (Vanguard Total International Stock Index Fund). VXUS’s P/E ratio is currently 16.5. That could imply that VXUS has more room for growth than VTI. Or inferred more broadly: international stocks may currently have more room for growth than U.S. stocks.
IMPORTANT: It’s not as simple as just looking at P/E ratios. P/E is just one of many indicators that professionals use to analyze stocks. Always consult a financial adviser before making any decisions with your money.
Given this new valuation gap, adding VXUS alongside VTI could make sense. That would shift our motto a two-fund approach: “VTI, VXUS and chill”. But wait, there’s a simpler way.
VT is another widely held Vanguard fund – Vanguard Total World Stock Index Fund (VTWAX is the mutual fund equivalent). VT holds both U.S. and international stocks weighted roughly 60% U.S. and 40% International.
So, should the FIRE Community switch to “VT and chill”?
VT vs. VTI + VXUS Note: VT holds a market-cap weighted mix of world stocks in one fund. But, owning VTI and VXUS separately allows you to customize your U.S. / International allocation (e.g., 80/20 vs. 60/40) and taxable accounts may be able to claim the Foreign Tax Credit on VXUS dividends. Consult a professional for details.
Tweaking “VTI and chill” to “VT and chill” (or VTI + VXUS) may offer a nice hedge against high U.S. stock valuations, regardless of where you are in your FIRE journey.
The 4% Rule to the Rescue (Sort Of).
The 4% rule stands up historically through 1998. Check out 007 | FIRE Starter: Introduction to the 4% Rule for more on the 4% rule. Based on historical data through 1998 (which includes the Great Depression of 1929 and Black Monday 1987), if you can live off 4% of your portfolio balance for the first year, then adjust that for inflation annually, your money will last you 30 years. This is based on a 50/50 portfolio of common U.S. stocks (like VTI) and bonds. For longer retirement periods, you’ll need more.
However, factoring in market data since 1998 (especially the 2000’s “Lost Decade”) coupled with the current high valuations has led financial advisers to recommend a lower withdrawal rate, however. Morningstar, for example, suggests a 3.9% withdrawal rate to give a 90% success rate for a 30-year retirement: Morningstar: What’s a Safe Retirement Withdrawal Rate for 2026? Contrast that with the original 4% rule’s 100% success rate.
At the same time, Bill Bengen (the author of the 4% rule) has updated his research suggesting that a 4.7% withdrawal is actually safe. Note: there are other assumptions that apply in Bengen’s new research. If you’re interested in this, I suggest you grab his book: “A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More” published in 2025.
NOTE: The 4% rule and updated 4.7% rule do not account for income taxes. So, if for example, you’re pulling the 4% out of a tax-deferred account (like a 401k), you’re responsible for paying income taxes out of that 4%.
If you’re doing VTI and chill, the 4% rule is still a solid guide to use for planning retirement. As you approach retirement, however, you may want to re-evaluate the 4% withdrawal rate. Regarding the withdrawal rate that’s right for you, you’ll want to do your own research here and come to your own conclusions. The Professor’s advice: estimate on the conservative side if you’re making a retirement decision.
I used the 4% rule to decide my retirement, but our situation is a little different as Mrs. FI is still working a few more years and we won’t need the full 4% until she retires. Everyone’s situation and level of comfort is different.
Guardrails and Buckets to the Rescue (For Real)
Two things that can safeguard your retirement savings are having flexibility in your expense budget and having some cash reserves to ride out a potential market crash. The more formal names for these are the “Guardrails Strategy” and “Bucket Strategy“. Let’s discuss both briefly.
NOTE: The Bucket Strategy is a cash reserve/laddering strategy, not to be confused with the buckets from 012 | The Four Buckets: Mastering Your Investment Toolkit for FI which is referring to account types: tax-deferred, Roth, taxable, HSA.
The first (and IMO, most effective) strategy is simply the ability to reduce spending/withdrawals during market downturns. Often referred to as the “Guardrails Strategy”, there are multiple versions of this floating around. But the gist is that you decrease your withdrawal rate during market downturns and then you can safely increase it during market upturns. Without diving into specific versions, suffice to say that a 10% to 20% reduction of spending during down years drastically reduces failure risk of any portfolio. If you can’t reduce expenses, taking on part-time work to reduce required withdrawals is another option. I’ve run multiple scenarios on our own numbers that confirmed this to be true for Mrs. FI and myself.
The second strategy is simply having a “bucket” of 3-7 years of cash reserves in high-yield savings, CDs, or short term treasuries at all times. The “Bucket Strategy” usually consists of different buckets of funds for different timeframes. I prefer the simplest which is basically two buckets: a cash reserve bucket to weather downturns and a bucket of everything else which is your investment portfolio. You’ll likely encounter a wide range of opinions on the bucket strategy. Many people in the FIRE community think you’re far better off having all of your money invested at all times for maximum growth potential.
NOTE: The Bucket Strategy is a great hedge against “sequence of returns risk” – the risk that you experience a market downturn in the early years of retirement which can be devastating to a portfolio if you’re forced to sell equities at depressed prices. I may do a post on this in the near future.
I personally like the Guardrails and Bucket strategies and plan to use both. Regarding guardrails, we have some room to reduce expenses, but not a lot. So, I’d likely pick up some extra work in the case of a market downturn. Regarding buckets, we’re currently holding about 4 years of living expenses in high-yield cash equivalents and the rest is our regular investment portfolio.
PRO TIP: Many of the Monte Carlo simulators will allow you to edit the simulations with a flexible withdrawal rate and which “bucket” you pull money from during up and down times. I did this for our scenario and it really boosted our success rate. I highly suggest trying out a decent Monte Carlo simulator for yourself.
Putting It All Together
This post got a little longer than I expected, so let’s land the plane. First, to answer our question:
Yes – “VTI and chill” is still a sound strategy, IMO, with the following notes:
- Early in your journey? It’s still an outstanding choice, especially if its simplicity is the thing that gets you started investing.
- Valuation hedge: Given high US stock valuations, consider adding international exposure via VXUS or using VT for total world market coverage.
- Retirement baseline: Use the 4% Rule as a guide but be willing to consider a lower withdrawal rate especially for longer retirements.
- Risk mitigation: For leaner retirements, consider using the Guardrails Strategy and/or the Bucket Strategy.
What Mrs. FI and I are doing:
- Portfolio mix: Hedging our VTI with some VXUS (currently 80/20).
- Withdrawal baseline: Planning on a baseline 4% withdrawal rate.
- Cash reserves: Holding a bucket of ~4 years living expenses in high-yield cash equivalents.
- Guardrails plan: Prepared to reduce spending and take on light work to reduce withdrawal rates during downturns if needed.
Okay, that’s a wrap. If Part 1 left you worried, hopefully Part 2 has eased your mind while giving you some strategies to stay on track and safeguard your retirement.
As always, thank you for reading. Check out the FI calculator while you’re here. And if you like this, please share with a friend and follow us on Facebook.
See you next time, FI friend! ♥️
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