It’s been a long time since I put a Ben Stein and Phil DeMuth book through the patented Amateur Financier review process, but here we are, and it’s time to put them back through the wringer. Yes, if you write a personal finance book, sooner or later you will find that yourself in my steely gaze, and if you write more than one book, expect to find yourself a repeated target. Which brings us right back to the book in question.
Yes, You Can Still Retire Comfortably!
Summary
The book is divided into three main parts. The first one, called Yes, You Can Still Retire Comfortably! (creative, no?), starts with 21 basic rules of retirement (including things like spending less than you earn and maxing out your retirement accounts) and a decade by decade guide to your financial life, providing advice for every age bracket from teenagers up to (and beyond) retirement. Consider it a shorthand version of Yes, You Can Get a Financial Life! (the other book I’ve read from Stein and DeMuth).
The first official chapter of the book details the coming problems with retirement planning for Baby Boomers (and Generation X, and although we aren’t mentioned, Generation Y, as well): Social Security is running out of money and company pensions have all but disappeared, taking out two of the three traditional ‘legs’ supporting retirement nearly nonexistent. The third and final leg, personal savings, is still around; the only problem is, most people aren’t saving enough to supplement these programs, to say nothing of saving enough to supply all of their retirement needs. The second chapter covers the importance of saving in order to save yourself. The book recommends several ways to cut down your spending, including eating out less, buying used cars, and owning your own home.
The second part of the book (entitled How Much to Save and How Much to Spend) attempts to go into more depth on how to get your finances in order. The third chapter provides a ‘back of the envelope’ (in the author’s terms) guide to how much you should be saving at each stage of your life, making a number of assumptions about your life, your investments, and your eventual age at retirement. The fourth chapter is similar, allowing you to choose from a number of options, not only those above, but things like how much you expect to get from Social Security (if anything) and from a pension (again, if anything). Once you know how much to save, the fifth chapter covers what to use as your investment. (Stein and DeMuth recommend index funds, of equal parts Total US Stock market, Total Foreign stock market, Total US Bond market, and TIPS.)
Now that you have your portfolio set up, it’s time to let you in on the retiree’s paradox: if your portfolio is set up properly, you will have plenty of money later in your retirement, as long as you can live on relatively small portion in the beginning (when you’re the youngest and most eager to go crazy with your retirement funds). The last two chapters in this section address two different methods of getting income in your retirement. The first is by setting up an income portfolio, with REITs and high-yielding dividend stocks (or appropriate funds) in place of the stock index funds mentioned above. The second is information on how to draw down a non-dividend fund, which provides information on safe withdraw rates at different time stretches until the end of your retirement and at different margins of safety. It finishes with an interesting discussion of how the advantages of dollar-cost averaging while you are saving for retirement end up biting your rump due to negative dollar cost averaging during retirement, and suggest market timing as a possible solution (selling stocks when they are overpriced, and bonds when they aren’t).
The third part of the book is called If Everything You Have Isn’t Enough, and covers three possible contingencies to make your money stretch further. The first option they bring up is immediate annuities, where you turn over a lump sum of money to an investment company and receive a regular payout in return. The second is to relocate, either to a less expensive part of the country or to a less expensive country (they recommend several, including Mexico and Costa Rica). The third option presented is to take out a reverse mortgage to draw down the equity in your house. All have potential, although will require significant research before you can safely choose one (or more than one) to make your savings carry you through retirement.
The final part of the book covers 25 Big Truths of Retirement Planning (yes, the authors do seem to like their lists). Then they go over about a half dozen different retirement withdraw methods that have been suggested, subjecting them to the economic conditions of the Great Depression (and the three decades that follow), to ensure how well a one million dollar portfolio would have performed during that time frame. Their method of using a balanced portfolio, rebalancing yearly, and using the safe withdraw numbers they provided earlier was a success in this regard, although a few other methods had some promise (and many more simply crashed and burned).
Pros
-Easy To Personalize Advice: Of all the books I’ve read about investing and retirement, this is first one that’s essentially a financial planner in book form. If you go through the worksheets provided at various points along the way, you’ll create a reasonable financial plan for yourself, without the need to bring in an expensive planner. It’s one of the only books I’ve read that didn’t fall back on a single number when telling people how much to save for retirement (or even worse, just telling you to ’save as much as you can’).
-Well Supported Information: The calculations and figures presented are well supported by research provided in the book, and the claims made by the authors are backed up, either by historical fact or repeated standardized testing protocols. The level of backing provided by the authors for their arguments is rare in other books, and it helps to back their credentials as sources of information well worth giving a listen.
-Very Thorough: There aren’t many aspects of planning for retirement (or finding money in retirement if you didn’t start planning early enough) that aren’t covered in this book. From creating a personalized investment and savings plan to drawing down your accumulated funds, there’s enough advice to help people gain a handle on their money. From getting started investing to using your funds to provide for your retirement, there’s a wealth of information for all types of people.
Cons
-Conservative Leaning: I know I said this in my last review of a Stein/DeMuth book, but well, here it is again. Although the conservative bias isn’t TOO noticeable after the first chapter (which details many of the ways the government has failed in the authors’ eyes, and also takes a crack at Al Gore), it does occasional tint the advice in the book. Whether that is enough to make you skip this book is up to your individual politics, I suppose.
-Sometimes Confusing: As sometimes happens when trying to follow a rather complex train of thought, it’s possible, even likely that you’ll lose the thread of conversation or fail to completely understand the point. Unfortunately, the book doesn’t make much effort to clarify or resolve the more complex issues it tackles, so it’s possible that you’ll end up missing something if you don’t have a decent monetary background.
-Occasionally Insulting: Besides the aforementioned conservative slant, there are some parts of the book that are simply insulting. Negative comments about the lower class, lawyers, and the average worker (among others) are expressed, with varying levels of justification. You might just find yourself (or someone in your family or circle of friends) being backhandedly insulted in the course of the book.
Overall
While it has a few flaws (due more to the authors’ politics than the book’s other contents), Yes, You Can Still Retire Comfortably!
Related Websites
Seasons
on June 22 2010
Great post thanks for sharing.