Live It Up Without Outliving Your Money

"Completely expanded and updated, Live it Up Without Outliving Your Money! Second Edition is the financial roadmap that people are looking for. Based on the author's experience in the financial services sector since the mid-1960s, including more than 30 years as an investment advisor and money manager, this plain-talking book gives readers simple strategies to add between $1,000 and $10,000 to their monthly income in retirement, and without taking any of the dumb risks of the past."

"This reliable resource motivates readers to take the first steps to change their financial situation; presents multiple strategies for withdrawing money during retirement; and exposes the marketing tricks perpetrated by financial institutions. This book also includes added focus on newer issues such as ETFs, REITs, estate planning, IRA withdrawals, and updated allocation strategies." (Publisher's Description)

About the author
Paul Merriman is founder of Merriman Inc., a fee-only Investment Avdisory firm in the Seattle area. He is a widely respected expert on mutual fund investing. Paul is editor of FundAdvice.com, an educational website dedicated to investing in no-load mutual funds. In 2000, FundAdvice.com was named in Forbes' "Best of the Web" issue. Paul also hosts Sound Investing, a podcast named in 2008 as the "Best Money Podcast" according to Money Magazine. The program provides investors with unbiased information on mutual funds and other money issues.

Paul is also the author of 3 other books: Investing For A Lifetime, Market Timing with No-Load Mutual Funds, and  Financial Fitness Forever: 5 Steps to More Money, Less Risk, and More Peace of Mind.

Table of contents

 * Introduction
 * Chapter 1 Why Investors Fail
 * Chapter 2 Stress vs. Success: A Tale of Two Investors
 * Chapter 3 Lessons From Smart People
 * Chapter 4 The Psychology of Successful Investing
 * Chapter 5 Who Are You and What Are Your Goals?
 * Chapter 6 Your Ideal Portfolio
 * Chapter 7 Profit From Real Estate and Small Companies
 * Chapter 8 Value: Owning What Others Don't Want
 * Chapter 9 Putting the WOrld to Work For You
 * Chapter 10 Controlling Risks
 * Chapter 11 Meet Your Enemies: Expenses and Taxes
 * Chapter 12 Putting Your Ideal Portfolio to Work
 * Chapter 13 Withdrawals: When Your Portfolio Starts Paying You
 * Chapter 14 Hiring an Investment Adviser
 * Chapter 15 Your Action Plan
 * Chapter 16 My 500-Year Plan
 * Appendix A Ten Lessons I Learned From John Bogle
 * Appendix B Resources

Reader review of 1st edition
Paul Merriman has written this book as a summary of the most important topics he teaches in his retirement preparation seminars. Its main focus is to help the reader develop a well-diversified investment portfolio, what he refers to as The Perfect Portfolio. Along the way Mr. Merriman discusses a number of investing-related topics such as why many investors fail, the psychology of successful investing, proper methods for estimating yearly living expenses and a starting retirement portfolio size, and how to safely withdraw funds during retirement. All the chapters are clearly written and contain many useful insights that are unique to his book.

Paul Merriman’s 10 Steps to a Perfect Retirement Portfolio do not actually form the organizing principal for this book’s chapters. Rather, they are presented and briefly discussed in the book’s Introduction. The 10 steps are:


 * 1. Determine how much you will need to live on in retirement.
 * 2. Determine how much you would like to live on in retirement (Live It Up budget).
 * 3. Determine your tolerance for taking risks.
 * 4. Determine all your decisions based on what’s probable, not what’s possible.
 * 5. Determine the kinds of assets that will give you the returns needed to achieve your goals.
 * 6. Combine those assets into a portfolio that’s tailored specifically for you.
 * 7. Learn to recognize and control the expenses of investing.
 * 8. Understand tax planning so you can minimize what’s lost to taxes.
 * 9. Establish the right withdrawal plan so you will not run out of money.
 * 10. Put everything you do on automatic pilot.

One of the most useful suggestions from the book is to develop two retirement living budget estimates: a basic needs budget and a higher Live It Up budget. The basic needs budget contains just the necessities of life and represents the money that must be available before actually retiring. The Live It Up budget contains the maximum desired yearly spending; if enough financial resources are available to sustain this higher budget lifestyle, then retirement need not be delayed.

Paul Merriman spends 1/3 of the book explaining The Perfect Portfolio, which is a well diversified investment portfolio containing U.S. and international stocks and bonds. Like many knowledgeable investment advisors, Mr. Merriman recommends that index mutual funds be used for retirement savings. He specifically recommends that half of the stock mutual funds be dedicated to international (non-U.S.) companies. He is also a strong believer in having a large holding of small company mutual funds, both U.S. and international. He recommends that people nearing and in retirement have 40-50% bond mutual funds in their portfolio. Mr. Merriman does not recommend that the typical person utilize "alternative" investments such as commodities or real estate trusts. In order to make his advice more practical, he includes a chapter discussing which mutual funds from the major fund families (Vanguard, T.Rowe Price, Fidelity, Charles Swab) can be used to closely approximate The Perfect Portfolio. Although this reviewer finds it doubtful that future investors would achieve the historical annualized returns of The Perfect Portfolio (13.1% when the 1st edition of this book was written), it is probable that broad diversification will act to maximize the returns that are actually achieved.

This book also includes an excellent chapter on how to successfully withdraw living expenses during retirement. Paul Merriman’s advice is that a yearly withdrawal of about 5-6% of the portfolio will allow spending that falls between the basic needs budget and the Live It Up budget. Unlike some authors that recommend a 4% withdrawal that is uniformly increasing with inflation, Mr. Merriman recommends reducing withdrawals when the investments are doing poorly and increasing them again when they are once again growing. This gives a variable living budget that, when properly designed, swings between his two budgeting limits. He has included many examples showing how this approach to withdrawals helps the retiree better withstand the worst possible case: retiring into a stock market recession.

As good as this book is, it does not cover every topic of importance to retirement planning. For example, details of tax-advantaged retirement plans (e.g. 401k, 403b and IRA plans) are not discussed. This is not a particular problem since many other retirement planning books are available which cover these items in great detail. But many other retirement planning books are weak exactly where this one is strong: in describing in detail how to assemble a well-diversified investment portfolio. I highly recommend reading (or better, studying) this book, and supplementing it's information via other retirement planning resources where appropriate.