"YES, YOU CAN STILL RETIRE COMFORTABLY!"BOOK REVIEW
The authors stress the frighteningly real danger that you will run out of money in your old age. They are rather eloquent on the subject: • "Keep in mind that no matter what, you don't want to be old, weak, ill and poor." • "No sacrifice made while you are young or middle-aged is too great if it helps you avoid the worst possible fate: penury in old age." (Well, being in prison is pretty bad, too. And being totally alone.) • "When you've got no money, people can see right through you. Even the bus driver treats you with silent contempt." (Bus drivers ALWAYS treat me that way.) • "If you're old enough to have sex, you're old enough to save for retirement." • "If it doesn't hurt, you're probably not saving enough." • "Be able to say no to people who ask for money, even if they have the same last name as you." • "Here's a little fashion secret that we guarantee will make you look thinner, more beautiful, more interesting and nearly irresistible to the opposite sex: Have a lot of money in the bank. You'd be amazed what a turn-on having money is." • A "huge truth" about retirement planning: "If you want a guarantee, buy a toaster." One question they zero in on: How much can you withdraw every year from your nest egg -- without running out of money? They acknowledge that 4 percent a year (adjusted yearly for inflation) is the most sensible amount, but they point out that if your nest egg gets scrambled soon after you retire, you should cut back. They suggest, sensibly, that every five years into retirement you reset your withdrawal amount -- to start taking more (if your portfolio has done nicely) or less (if not). And that you change how much you have in stocks vs. bonds if the allotments are more than 10 percentage points away from the original. I also liked the erudition of the authors. What other financial books throw in references to Cassandra, Sisyphus and Dr. Pangloss? And "Poor Richard's Almanack"? I also happen to like their wise-alecky style. "When you're 90, you may not feel like scaling Kilimanjaro -- a few premium cable channels and a bag of Cheetos ought to take care of it." As for retiring to a cheap place abroad, they warn that these places may be overrun by "dumpies": Destitute Unprepared Mature Persons. (Formerly "yuppies.") I heartily approve of almost all of their recommendations: They fondly mention Vanguard, TIAA-CREF, T. Rowe Price and Fidelity. Some other notable stuff in the book: They recommend a few different investment portfolios. One is called the "couch potato": 50 percent in a total stock-market index fund along with 50 percent on a total bond index fund. (I prefer Vanguard's Balanced Index Fund, which is 60-40.) Another is the "thinking man's couch potato" portfolio, which is 25 percent in the total U.S. market, 25 percent in the total U.S. bond market, 25 percent in foreign stocks and 25 percent in inflation-indexed bonds. A little confusingly, they also recommend an income portfolio -- and think people should own both. But every year, you should sell part of the couch-potato portfolio for cash. The income portfolio: bonds, 30 percent; inflation-protected securities, 30 percent; high dividend-paying stocks, 20 percent; and real estate investment trusts, 20 percent. This has a greater exposure to stocks than the couch-potato portfolio (60-40 versus 50-50), but I agree with the authors that it might be more stable. What I didn't like: • Their endorsement of variable deferred annuities. These are expensive; they typically have long-lasting early-withdrawal penalties; they are usually inappropriate for older people, who typically need money now. (Ben Stein confesses that he's a member of a group whose members include the National Association for Variable Annuities.) • A gratuitous slap at former Vice President Al Gore (they actually use the word "doltish"), along with approving references to the current occupant of the White House. • A plug for a business partner of Stein's, Raymond Lucia. • Careless writing and careless editing. They misuse pronouns, referring to an insurance company as "they"; they never explain a mutual fund's "expense ratio"; they use "comprise" instead of "compose" (p. 119); "re-evaluating" instead of "revaluating" (p. 129); and they misspell "excruciating" (p. 205). There's at least one dangling participle ("When buying a fixed annuity, it's generally best ..."). And what the heck is "a superannuated retirement" (p. 141)? They also maintain that half of all employees will experience below-average life spans. Nobody at all lives to the average? But this is nonetheless an unusually valuable book and an entertaining one.
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