"Can I Retire?" -- A Gem

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"Can I Retire?" -- A Gem

Postby Taylor Larimore » Sun Nov 28, 2010 2:17 pm

Hi Bogleheads:

"Can I Retire" is the seventh easy to read and understand book by Boglehead, Mike Piper, webmaster of The Oblivious Investor. Few (if any) books contain so much sound investing advice in so few pages. These are excerpts:
"If you're unsatisfied with your purchase for any reason, let me know, and I'll be happy to provide you with a refund of the current list price of the book."

"It's likely that at retirement age, you will have more assets than you've had (or will have) at any other time in your life."

"The complexity involved with a retirement-stage portfolio is far greater than that of an accumulation-stage portfolio."

"Most investors do not need a financial advisor if they're willing to take the time to learn all the ins and outs of managing a portfolio.

"From what I've seen, most investors never actually take the step of creating a concrete plan."

"There's no viable alternative to sitting down and calculating how much income you are going to need."

"Because of the negative effects of volatility and inflation, it's important to use a starting withdrawal rate that's lower than the return you expect to earn on your portfolio."

"4% is typically thought to be the highest starting withdrawal rate that you can use for a 30-year retirement."

"Reliably earning above-market returns is extremely difficult. Attempting to do so involves taking on significant risk of underperforming the market."

"Many annuities are a raw deal for investors. That said, one specific type of annuity can be an extremely useful tool for retirement planning: The single premium immediate annuity (SPIA).

"For the most part, I'd suggest steering clear of variable annuities.

"Check the financial strength of the insurance company before purchasing an annuity."

"Know the limit for guarantee association coverage of annuities in your state."

"Study after study has shown that low-cost mutual funds tend to outperform high-cost funds."

"Because of their low-costs, broad diversification, and transparency, index funds and ETFs are excellent tools for constructing a buy and hold portfolio."

"By buying just three (total market) index funds, you could have a portfolio consisting of thousands of companies from across the globe."

"If you left your job at age 55 or older, and you plan to retire prior to age 59 1/2, you may want to postpone rolling over your 401k until you reach age 59 1/2."

"Your own risk tolerance, age at retirement, expected lifespan, ability to cut spending or return to work, and several other factors will play a role in determining your own appropriate allocation."

"The unfortunate truth about asset allocation is that nobody can say ahead of time which allocation is best."

"Rebalancing more frequently than once per year is likely to be harmful to performance."

"Volatility is not a good thing for a retirement portfolio."

"TIPS are ideal for the bond portion of a retirement portfolio because they protect against inflation."

"In order to reduce currency risk, it's probably a good idea for a U.S. retiree to keep the majority of her stock holding in U.S. stocks."

"If you're currently in a lower tax-bracket than you expect to be in later in retirement, you may be able to save money by converting your traditional IRA (or a portion of your traditional IRA) to a Roth IRA."

"The question of which account to withdraw from is largely a function of tax brackets and how you expect your future tax rate to compare to your currrent tax rate."

"Strategically planning which accounts to spend from first can reduce your overall tax burden throughout retirement."

"A financial planner who is knowledgeable about tax planning and Social Security planning has the potential to save you a great deal of money."

"Asset location is the process of determining which investments to keep in which accounts."

"From a tax standpoint, it's beneficial to tax-shelter your bonds before tax-sheltering your stocks. Why? Because stocks are already more tax-efficient than (taxable) bonds."

"Remember: With very few exceptions, even the most tax-efficient investments are better off in a tax-sheltered account than in a taxable account."

"In taxable accounts choose tax-efficient investments whenever possible."

"Higher turnover always leads to higher costs in terms of commissions and bid/ask spreads. And, if you're investing in a taxable account, higher turnover leads to higher taxes as well."

"For it to make sense to invest in municipal bonds, they must offer a higher after-tax yield than Treasury bonds of a similar maturity."

"Owning balanced funds and target date funds in a taxable account is generally not a good idea for a handful of reasons."

"In taxable accounts, if you have a large unrealized capital-gain built up in a tax-inefficient investment, it may not make sense to sell that investment in order to your your money into something more tax-efficient."

"My hope is that the books in the "100 pages or less" series can help readers achieve clarity and understanding of topics that are often considered complex and confusing."


Thank you Mike Piper

More Investment Gems
"Simplicity is the master key to financial success." -- Jack Bogle
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Postby mickeyd » Sun Nov 28, 2010 2:28 pm

Thanks Taylor. As usual, a great addition to the "collection."
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Postby LH » Mon Nov 29, 2010 1:24 am

If you left your job at age 55 or older, and you plan to retire prior to age 59 1/2, you may want to postpone rolling over your 401k until you reach age 59 1/2."


Why is this? Is it easier to get money out of the 401k? Is this a reference only to traditional ira? since if one rolls to a tIRA, then converts to a Roth IRA, then it would not matter right? Or are there other issues as well?

thanks,

LH
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Postby Index4Life » Mon Nov 29, 2010 1:50 am

"Rebalancing more frequently than once per year is likely to be harmful to performance."

What about allocating regular contributions from your paycheck in a way that brings you back to your desired asset allocation on a regular basis (i.e. every 2 weeks). Is this inferior? I thought this method makes sense from a tax perspective, since you do not need to sell holdings to rebalance; it is already done for you as you make your contributions.
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Postby kaneohe » Mon Nov 29, 2010 1:53 am

LH wrote:
If you left your job at age 55 or older, and you plan to retire prior to age 59 1/2, you may want to postpone rolling over your 401k until you reach age 59 1/2."


Why is this? Is it easier to get money out of the 401k? Is this a reference only to traditional ira? since if one rolls to a tIRA, then converts to a Roth IRA, then it would not matter right? Or are there other issues as well?

thanks,

LH


check out "Legislative Loopholes" section here http://money.cnn.com/2000/07/31/pensions/q_retire_withdrawals/
Appears you can withdraw 401K funds after age 55 w/o penalty (vs 59.5 for IRA). If you rolled to TIRA , then Roth, you'd have a 5 yr clock (from opening of 1st Roth) and/or age 59.5 threshold for no penalty......my understanding is that the age threshold was put in place to "level" the Roth and TIRA playing fields. See this neat table from fairmark.com

Roth IRA Rules
Table Approach
Posted by KAWill
Date: Oct 11, 2010 02:27pm

Roth IRA Distribution Table

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD NOT MET

Contributions: Tax-No; Penalty-No
Conversions: Tax-No; Penalty-Yes (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes ;Penalty-Yes

UNDER AGE 59.5
FIVE YEAR CONVERSION HOLDING PERIOD MET

Contributions: Tax-No; Penalty-No
Conversions: Tax-No; Penalty-No (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-Yes

OVER AGE 59.5
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA

Contributions: Tax-No; Penalty-No
Conversions: Tax-No ;Penalty-No (Taxable Portion)
Conversions: Tax-No ;Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-No

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

No Taxes
No Penalties
Last edited by kaneohe on Mon Nov 29, 2010 10:26 am, edited 1 time in total.
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Postby Learn2earn » Mon Nov 29, 2010 3:53 am

Taylor,

How did you get to be so smart?
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Sailing (and investing)

Postby Taylor Larimore » Mon Nov 29, 2010 8:44 am

Hi Learn2earn:

Taylor, How did you get to be so smart?


Most posters on this forum are more intelligent than I am. Investing is a lot like my other hobby--sailboat racing.

Here's how to become a winning sailor (and investor):

* Learn from the experts. (No one has more practical experience than Jack Bogle)

* Never think you are smarter than other sailors. (You're not.)

* Never think you won't make mistakes. (The best sailors have run aground many times.)

* Read good books about sailboat racing. (I've read hundreds of good books about investing.)

* Have a plan before starting. (Successful investing is exactly the same.)

* Have a good crew and learn from them. (The Bogleheads are a very good crew.)

* Follow your plan. (Stay-the-course)

* Gain experience. (At age 86 I have lot's of that.)

* Luck plays an important part. (The same as investing.)

* Help newcomers and others to the sport. (Read my "Gems.")

* Have a good time. (Have a good time.)
"Simplicity is the master key to financial success." -- Jack Bogle
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Postby Ed 2 » Mon Nov 29, 2010 9:30 am

Life is a mirror, if you frown at it, it frowns back; if you smile, it returns the greeting.
Thank you Taylor.
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Postby ObliviousInvestor » Mon Nov 29, 2010 9:40 am

Thanks for the kind words about the book, Taylor! :)

And thank you, kaneohe, for fielding that question regarding Roth distributions after a conversion.
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Postby abuss368 » Mon Nov 29, 2010 6:41 pm

Taylor,

Excellent advice and very well written.

Thanks.
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Interview:

Postby Barry Barnitz » Tue Nov 30, 2010 1:26 pm

Hi:

Author Mike Piper discusses his book, Can I Retire?, with Nanette Byrnes:


Mike Piper, creator of the popular Oblivious Investor blog, has just published his latest book — his 7th — called Can I Retire? It is a compact 99 pages, but focuses on two big issues. First, how much we’ll really need in retirement. Second, the complexities of managing our retirement savings once we actually stop working. That second challenge turns out to be a much more elaborate job than saving the money in the first place.

Part of a series of books in which Piper tries to boil down the most important elements of a topic to 100 pages or less, Can I Retire? manages to avoid being overly general by picking a few critical issues to really zone in on. Numerous examples help bring his discussions down to earth.

I found quite sobering the totals people need to save even for modest levels of spending in retirement, but I suspect that’s part of the point.

The book left me curious about Piper, a young author, and his interest in tackling a topic 40 years into the future for him. He recently took time out to answer a series of Portfolioist questions in an email interview. Here are edited excerpts:


Can I Retire? Mike Piper, the Oblivious Investor, Tries to Help You Find the Answer.

regards,
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Mike Piper's Interview.

Postby Taylor Larimore » Tue Nov 30, 2010 1:58 pm

Hi Barry (and Mike):

Thank you for your link to Mike's interview with The Portfoliost.

Bogleheads appreciate Mike's ending comments:

The Bogleheads forum is fantastic. It’s got several hundred very active users who are well-informed about all sorts of aspects of personal finance. I can’t think of any better place to get answers to specific investment questions or to get a second opinion on your portfolio.


Thank you Mike. I notice that our WIKI has added you to its list of recommended books and authors.

http://www.bogleheads.org/wiki/Category:Books_and_Authors
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Interview:

Postby Hondo » Tue Nov 30, 2010 3:00 pm

Wow, I didn't realize Mike was so young. He's gained a lot of wisdom in those 26 years!

Barry Barnitz wrote:Hi:

Author Mike Piper discusses his book, Can I Retire?, with Nanette Byrnes:
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Re: Interview:

Postby ObliviousInvestor » Tue Nov 30, 2010 3:49 pm

Thanks for linking to the interview, Barry. It was a fun experience, and I think Nanette did a great job coming up with questions.

Taylor Larimore wrote:I notice that our WIKI has added you to its list of recommended books and authors.http://www.bogleheads.org/wiki/Category:Books_and_Authors

Thank you to anybody who was involved in that decision! It's an honor to be on that list. :)

Hondo wrote:He's gained a lot of wisdom in those 26 years!

I keep trying to tell my wife that! I don't think she's buying it. :|
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Postby WorkToLive » Tue Nov 30, 2010 4:47 pm

"There's no viable alternative to sitting down and calculating how much income you are going to need."


This is my favorite quote! I participate on some less knowledgable forums and everyone wants a rule of thumb, but there can't be a rule of thumb for how much money you will need in retirement. Will you have a mortgage? Will you want to travel extensively? How much do you want to support your children and grandchildren? I realized very early on that the only way to create a viable retirement plan was to figure out my income needs. Of course, the vagaries of health care expenses and taxes muck it up, but you have to start somewhere. Thanks for the post, Taylor.
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Postby DLS724 » Tue Nov 30, 2010 7:17 pm

I keep trying to tell my wife that! I don't think she's buying it.

Well, if the book sells well then she should be able to buy herself a new dress instead.
I have ordered my copy in order to help her reach her goal.
I look forward to its imminent arrival.

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Postby ObliviousInvestor » Tue Nov 30, 2010 10:28 pm

DLS724 wrote:
I keep trying to tell my wife that! I don't think she's buying it.

Well, if the book sells well then she should be able to buy herself a new dress instead.
I have ordered my copy in order to help her reach her goal.
I look forward to its imminent arrival.

DLS


Thanks for buying the book. I hope you find it helpful. :) (And if you don't, I'm always eager to hear suggestions for improvements.)
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Postby LH » Wed Dec 01, 2010 10:43 pm

is there a kindle or e-book option available?
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Postby ObliviousInvestor » Wed Dec 01, 2010 11:30 pm

LH wrote:is there a kindle or e-book option available?

At the moment, there is no kindle version, as I wasn't sure whether or not there would be significant demand. If you'd like to email me though (mike at oblivious investor dot com), I'd be happy to get a pdf out to you.
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