Bill Perkins made the most important argument in personal finance in a decade: money you die with is money you wasted. He is correct. The lifecycle consumption model — the same theory that underpins every pension fund on earth — says exactly the same thing. The optimal plan consumes the endowment. Terminal wealth is zero. But "spend it down" is a direction, not a navigation instrument. Without a funded ratio, you cannot know when decumulation can begin, how fast you can go, or what happens if the world changes between now and the end. Perkins has the destination. This series provides the map.
The Argument That Changed the Conversation
Bill Perkins's Die With Zero made an argument that the entire accumulation-obsessed financial industry found uncomfortable: the purpose of money is to fund experiences, and experiences have a time value. A dollar spent at 35 on a hiking trip with your children buys a fundamentally different — and often richer — experience than the same dollar spent at 75. Dying with a large estate means you traded irreplaceable experiences for a pile of money that outlived its purpose.
The FIRE community received this with a mixture of enthusiasm and anxiety. Enthusiasm because the argument validates the early in early retirement — stop accumulating, start living. Anxiety because "spend it down" collides with the 4% rule's core promise of portfolio survival. If you die with zero, you have, by definition, not survived to a safe withdrawal endpoint with money remaining. The two frameworks appear to contradict each other.
They don't. The contradiction is an artefact of measuring in the wrong units.
Merton Got There First (1969)
The core insight in Die With Zero is not new. Robert Merton established the lifecycle consumption optimisation in 1969 and refined it in 1971. The result is unambiguous: the optimal consumption plan for a rational agent with finite life, no bequest motive, and access to complete markets is to consume the full present value of their endowment — financial wealth plus human capital — over their remaining lifetime. Terminal wealth is zero. Not approximately zero. Exactly zero. Every dollar of remaining wealth at death represents a failure of optimisation: utility that was available and not consumed.
Perkins states this in the language of experiences and regret. Merton stated it in the language of stochastic calculus and dynamic programming. The conclusion is identical. The mathematics, however, matters — because the mathematics tells you how.
Where "Spend It Down" Breaks
Perkins's argument has three structural gaps that the funded ratio fills:
Gap 1: When Can I Start?
"Spend it down" assumes you have enough. But enough is not a number — it is a ratio. Enough means your assets, valued at the no-arbitrage discount rate, cover the present value of your remaining consumption liability with sufficient margin.
The funded ratio answers this directly:
| Funded Ratio | Interpretation |
|---|---|
| < 100% | You do not have enough to fund the plan. Decumulation is premature. |
| 100% | Fully funded. You can — at today's rates — purchase the full consumption stream. The option to begin exists. |
| 100–110% | Funded with thin margin. Begin decumulation cautiously. |
| > 110% | Surplus. Spend the excess — Perkins is right, sitting on surplus wastes utility. |
Without this measurement, "spend it down" is a leap of faith. You cannot know whether you've crossed the starting line.
Gap 2: How Fast?
Even if you know you are above 100% funded, you need a rate of decumulation that adjusts to changing conditions — interest rates, inflation, mortality, portfolio performance.
The 4% rule gives a fixed rate. Die With Zero gives no rate at all — just the instruction to reach zero by the end.
The funded-ratio framework produces a dynamic decumulation path:
Where is current wealth, is the prevailing real yield for maturity , and is the survival probability to age . This updates every period. When rates rise, the liability falls, the ratio improves, and you can spend more. When rates fall, the opposite. The path is self-correcting — you hit zero at death because the formula continuously recalculates the consumption that exhausts the endowment over the remaining horizon.
This is the Merton consumption rule in discrete time. It is what pension funds use for decumulation. It is what Die With Zero needs and does not have.
Gap 3: What If the World Changes?
Perkins's framework is silent on states of the world. What if inflation spikes and your purchasing power erodes? What if rates collapse and your surplus evaporates? What if you experience a bad-beta loss — a permanent impairment that no recovery can fix?
The funded ratio moves in real time. It absorbs every shock:
- Inflation surprise: Your liability (real spending) is unchanged, but your nominal assets buy less. Funded ratio drops — unless your portfolio has positive inflation beta (Posts 6).
- Rate collapse: Your liability PV rises (future spending is discounted at a lower rate). Funded ratio drops — unless your portfolio has matching real-rate beta (Post 7).
- Bad-beta loss: Portfolio value falls permanently. Funded ratio drops with no self-correction (Post 4).
The dashboard from Post 10 — funded ratio plus three betas plus duration gap — gives you a real-time early warning system. You don't just "spend it down" and hope. You monitor the ratio, adjust the consumption path, and know at every point whether you're on track to die with zero or die with a shortfall.
The FIRE Community's Die With Zero Problem
The FIRE community has an accumulation culture. The milestones are $100k, $500k, $1M. The celebrations are wealth numbers. Nobody celebrates "97% funded." Nobody posts "I lowered my duration gap by 3 years."
Die With Zero challenges this culture by saying: stop accumulating, start living. But the community has no tool to know when to flip the switch. So the message becomes either:
-
Premature: Someone at 85% funded stops saving and starts spending, believing they have "enough." They don't — not at the no-arbitrage rate. The 4% rule told them $1M was the number. The funded ratio says they need $1.1M.
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Ignored: Someone at 130% funded keeps saving, driven by the wealth instinct, because no measurement tells them they passed "enough" two years ago. They are accumulating money they will never spend. Perkins would call this a tragedy. The lifecycle model calls it a failure of optimisation — surplus wealth that could have been converted into living.
The funded ratio resolves both failure modes. Below 100%: keep going. At 100%: the option exists. Above 110%: exercise it. Above 130%: you are wasting time and utility — Perkins is unambiguously correct, the money should become experiences.
The Bequest Motive Changes the Equation
Perkins handles bequests by carving them out early: decide what to leave, fund it separately (e.g., life insurance or a ring-fenced pot), then die with zero in the consumption account.
This is structurally correct in the funded-ratio framework. A bequest is a separate liability with its own maturity (your expected death) and its own present value. Add it to the total liability:
Then compute the funded ratio against the total. If you're at 115% funded against consumption alone but want to leave $200,000 to your children, your effective funded ratio — against consumption plus bequest — might be 98%. You're not funded yet. Keep going.
This is precisely what pension funds do when they have multiple liability streams — retirees in payment, deferred members, active members. Each liability gets its own PV. The total is summed. The funded ratio applies to the aggregate.
Die With Zero without a bequest motive: terminal wealth = $0. Die With Zero with a bequest of $B: terminal wealth = $B. The math adjusts cleanly. The instinct remains: beyond the consumption liability and the bequest, every additional dollar is waste.
"Why Not Just Buy an Annuity?"
Perkins's practical implementation path for Die With Zero leads naturally to life annuities — pool the mortality risk, guarantee income to death, eliminate sequence risk. The FIRE community will ask: if the goal is income certainty to age 92 and terminal wealth of zero, why build a TIPS ladder and track a funded ratio? Why not buy a single-premium immediate annuity and be done?
Three reasons. First, annuities are nominal — most US annuity contracts are not inflation-adjusted, which means they fail the most basic test of consumption hedging. The real purchasing power of a fixed annuity erodes by 2–3% per year; after 20 years, it buys half what it does today. Second, annuities are illiquid — once purchased, the capital is gone. Healthcare shocks, family obligations, and spending needs you did not anticipate at 60 cannot be funded from an annuity. Third, annuities carry credit risk — the insurer must remain solvent for 30+ years, and state guaranty funds typically cap coverage at $250,000. A TIPS ladder delivers the inflation protection and certainty of an annuity without surrendering control or liquidity — and the funded ratio tells you whether you need to supplement it.
The surplus in the funded ratio framework — the funded ratio above 100% — is the precautionary buffer for the uncertainties that make a pure Die With Zero path unrealistic. Healthcare shocks. Long-term care. Family obligations that emerge after retirement begins. Holding some surplus is not a failure to optimise — it is the rational response to incomplete markets. The funded ratio makes this explicit: it tells you how much buffer you have, and when the buffer is large enough that further accumulation truly is waste.
The Ultra-Wealthy Exception
One class of investor should not die with zero: the ultra-wealthy.
As Peter Mladina of Northern Trust has argued, ultra-high-net-worth investors have already fully hedged consumption. Their surplus portfolio — stocks, private equity, real assets — exists for wealth transfer, not spending. The buy-borrow-die strategy (never sell, borrow against the portfolio, step up cost basis at death) is a tax optimisation on dynasty capital. Terminal wealth is not zero. Terminal wealth is maximum.
That is a different objective function. It is the one the wealth management industry is built to serve. It is not your objective function — unless your consumption is already 100% funded and your surplus is larger than your remaining lifetime spending. If you are reading this series, you are almost certainly not in that category.
For you, the mass-affluent investor compelled to take risk to fund retirement, the objective is Perkins's: consume the endowment. The funded ratio tells you how.
A Worked Example: The Die With Zero Decumulation Path
Sarah, age 60. Retired. $1,200,000 portfolio. Social Security PV: $320,000. Total assets: $1,520,000.
Consumption target: $55,000/yr real, to age 92. At a 2.3% real TIPS yield, mortality-weighted: liability PV = $1,150,000.
Funded ratio: $1,520,000 / $1,150,000 = 132%.
Sarah is over-funded by 32%. She has $370,000 of surplus wealth. Under the Die With Zero philosophy, this surplus should be deployed into experiences — travel, family, donations, living larger — not hoarded.
The framework produces a dynamic decumulation path. Each year, total spending = core consumption ($55,000) plus a surplus budget proportional to the funded ratio above 100%. Each year, the funded ratio is recalculated against a shrinking liability (fewer years of spending remain) and the actual portfolio balance (assets earn the real yield minus total withdrawals). The following table illustrates the path under a constant 2.3% real return assumption:
| Age | Assets | Liability PV | Funded Ratio | Core Spend | Surplus Spend | Total Spend |
|---|---|---|---|---|---|---|
| 60 | $1,520,000 | $1,150,000 | 132% | $55,000 | $20,000 | $75,000 |
| 65 | $1,310,000 | $1,020,000 | 128% | $55,000 | $16,000 | $71,000 |
| 70 | $1,070,000 | $870,000 | 123% | $55,000 | $12,000 | $67,000 |
| 75 | $800,000 | $700,000 | 114% | $55,000 | $8,000 | $63,000 |
| 80 | $510,000 | $490,000 | 104% | $55,000 | $2,000 | $57,000 |
| 85 | $250,000 | $250,000 | 100% | $55,000 | $0 | $55,000 |
| 90 | $55,000 | $55,000 | ~100% | $55,000 | $0 | $55,000 |
| 92 | $0 | — | — | — | — | — |
Numbers are illustrative. The actual path recalculates annually based on prevailing TIPS yields, portfolio performance, and updated mortality probabilities. The key dynamic: the liability PV shrinks as the horizon shortens, which supports the funded ratio even as assets are drawn down.
The surplus budget is highest early — when Sarah is youngest, healthiest, most able to enjoy it. It declines as the surplus is consumed. By 85, the surplus is spent and she's on the baseline consumption path. At 92, terminal wealth is zero. This is how the Merton consumption rule works in practice: the formula continuously recalculates the spending that exhausts the endowment over the remaining horizon.
Perkins is right that experiences have a time value no formula can capture — a trip with your grandchildren at 65 compounds in memory for decades; the same trip at 85 may not happen at all. The funded ratio cannot measure this. What it can measure is whether you can afford the experience. The philosophy says don't defer. The mathematics says here is exactly how much surplus you have, and here is the path that exhausts it optimally.
Die With Zero + The Funded Ratio
| Die With Zero Says | Funded Ratio Provides |
|---|---|
| "Spend it while you're young enough to enjoy it" | When you can start: funded ratio ≥ 100% |
| "Don't die with too much" | How much surplus you have: funded ratio − 100% |
| "Money has a time value for experiences" | The dynamic path: consume surplus early, core spending throughout |
| "Carve out bequests separately" | Bequest as a separate liability with its own PV |
| "Stop accumulating when you have enough" | Exactly when "enough" arrives, priced at the no-arbitrage rate |
The two frameworks are not in tension. They are complementary. Die With Zero provides the philosophy: life is finite, money is instrumental, dying rich is dying wrong. The funded ratio provides the engineering: the measurement that tells you where you are, the dashboard that tells you what's at risk, and the consumption rule that tells you how fast to go.
Bill Perkins changed the conversation about retirement from "how do I survive?" to "how do I live?" That is the right question. The funded ratio is the quantitative answer.
Your money exists to fund your life. Not to survive you. Know your funded ratio, spend your surplus, and die — as Perkins insists and the mathematics confirms — with zero.
Next: more posts as the conversation develops. Subscribe to get them as they publish.
This is Post 11 of The Funded Ratio — a series on amifunded.com applying pension fund mathematics to individual retirement portfolios. Built on the Campbell-Viceira (2002) intertemporal asset allocation framework, the lifecycle consumption theory (Merton, 1969; 1971), and Bill Perkins’s Die With Zero (2020). The dynamic decumulation formula is a discrete-time application of Merton’s optimal consumption rule. No financial advice is given. All methods use publicly available academic research and market data.