Most people remember Ben Stein as the teacher in “Ferris Bueller’s Day Off” or from his show “Win Ben Stein’s Money.” However, he is also an accomplished economist, with a degree from Columbia and the valedictorian of Yale Law School. He worked in the White House in the 70s, and has written articles on finance for Barron’s and the Wall Street Journal.
Phil DeMuth was valedictorian of his class at the University of California, and has a master’s & doctorate degrees. He is a registered investment advisor and president of Conservative Wealth Management in Los Angeles. He has also written extensively for the Wall Street Journal and Barron’s.
This is the third book in the author’s five part series on finances. In their first, they wrote about using certain metrics to be able to “time the market” in the long term (10 – 15 years +). In the second book, they discussed the steps to create an income producing portfolio, through the use of bonds, dividend stocks and REITs. This book, written in 2005, is mostly addressed to the baby-boom generation, who had recently seen their retirement money damaged in the dotcom meltdown. The book’s concept was that, with the right steps, savings and planning, and individual could still retire comfortably.
The book starts off with some of the basic rules for retirement (Maximize your abilities, start saving early, don’t spend more than you earn, etc.) and then flows into retirement planning by decade – what you should be doing in your teens, 20s, 30s, etc. It is all sound advice, and falls in line with other things the authors have written (like Ben Stein’s “how to screw up your life” book). It finishes its first part by discussing the coming baby-boomer retirement crisis. As many of you know, a lot of boomers have not saved anything like what they will need for retirement. They only really started to do it in the 00s and this decade. That is probably why the 2007-2008 meltdown go so much press – it hurt the boomers badly.
The second part of the book goes into topics like how much you will need, how to setup a savings plan, and at what rate you will need to get your retirement money income. The charts in chapters 3 & 4 are priceless, as they show, based on typical returns, what you’ll need to save at whatever point you are at (5, 10, 15 years from retirement) and what your overall nest egg should be, based on projected lifetimes. The second section then talks about Monte Carlo simulations (to test your plan), income investing, and how to draw down your funds over your retirement. This is the heart of the book, and its best section. The only issue I have (and it’s a personal one) is that he relies a lot on bonds (his portfolio is 50% bonds, 50% stocks). In the 80s and 90s, bonds had high rates, and there were corporate bonds at 6% and 7% in the late 90s. Based on his knowledge there, I think he believed the bonds would return to that – but in our current low interest rate environment, they are only coming in around 3% – 4%.
The third section of the book discusses what to do if you haven’t got enough. It’s a bad spot to be in, but there are some alternatives:
- Immediate annuities (to guard against outliving your money)
- Relocation to a less expensive area
- Reverse mortgages
The book closes with “25 big truths of retirement planning” another list of pearls of wisdom from the authors.
This was a good one, and I refer back to it occasionally to see if I am “on track” based on his numbers.
I would rate in 3.5 stars out of 5.
Mr. 39 months