This article was updated on April 1, 2000.
The selections below attempt to answer the philosophical guestion, "Should I retire early?" Your author didn't need to do much research in this area -- he's been ready to retire early since age 25.
Retire Early has yet to review a book that gets essentially everything right on the subject of early retirement, but Gillette Edmunds', How to Retire Early and Live Well comes very close. This is a very personal book by a former tax attorney and journalist who retired in 1981 at age 29. He details what he has learned about "living off his investments" and provides some personal examples of how to ride out the ups and downs of the market.
The first chapter "Can You Retire Today?" shows you how to calculate how much you'll pay in taxes, how much accumulated capital you'll need, what to expect in terms of inflation, and finally, how much you can safely withdraw from your portfolio in retirement. The author's formula for calculating your "targeted investment return" is your annual withdrawal as a percentage of assets plus inflation. So a retiree drawing $50,000 per year from a $1 million portfolio who assumes inflation is 3%, will need an 8% targeted investment return. That's not much different than most of the studies I've seen pegging the "95% safe" inflation adjusted retirement withdrawal at no more than 4% to 5% of assets for an equity/fixed income portfolio. Edmund's writes, "There have been hundreds of studies over the years of returns for different asset classes." (p. 51) Yet, he offers no references to support his recommendation of an "8% targeted investment return" from a portfolio of "three to five noncorrelated asset classes." This is one of the few shortcomings of the book.
Chapter Two discusses several early retirement pitfalls like "outliving your nest egg", the burden of taxes, and the difficulty of finding a trustworthy investment advisor. Retirees will greatly benefit from heeding these warnings.
The third chapter discusses the question "How Much More Do You Need?" Edmunds point out that investment returns, rather than sophisticated tax planning, are they key to how early you'll retire. He also points out that "too much house" and "too much stuff" can also keep you from retiring early. Your personal residence, furnishings, automobiles, and other "toys" are not income producing assets that you can use to fund early retirement. If you have "too much house" the author advises to "downsize now and invest the excess in a retirement portfolio." (p. 35) You want to avoid the rush at some later date when your fellow baby boomers attempt to do the same.
To read the complete review of How to Retire Early and Live Well, click here.
The Joy of Not Working : A Book for the Retired, Unemployed, and Overworked.
by Ernie J. Zelinski
Click here to order The Joy of Not Working : A Book for the Retired, Unemployed, and Overworked. Today!
Ten Speed Press, 3rd Edition 1997, 224 pp.
This book by former engineer and "Doctor of Leisure" Ernie Zelinski shows how to survive and prosper without tieing yourself to the corporate millstone. Being an engineer myself, I can identify with Zelinski's description of the hidebound, anal retentive management culture that thrives in many large bureaucracies. He lost his job as an Engineer at an electric utility company at age 29 after his boss took exception to his "unapproved" 10 week vacation. Zelinski enjoyed the extended vacation so much that he decided to avoid full-time employment in the future. His philosophy of "Less Work and Better Living" should be attractive to many.
Retire Early rating:
Retire Early--And Live the Life You Want Now:A 10-Step Plan for Reinventing Your Retirement
by John F. Wasik
Click here to order Retire Early and Live the Life You Want Today!
256 pages, 1st Edition (January 2000)
Henry Holt & Company, Inc.
Consumers Digest editor John Wasik takes on the subject of "how to retire early," in this very readable volume Retire Early--And Live the Life You Want Now: A 10-Step Plan for Reinventing Your Retirement. Drawing on some of his own thoughts and experience along with the stories of several retirees, he gives some excellent, real life, examples of what folks contemplating early retirement should be thinking about.
Wasik breaks down the process into 10 easy steps:
- 1) Focusing on How Your Retirement Will Be Different
- 2) Your Financial Portrait: Balancing Your Spending with What You Need for Early Retirement
- 3) Get the Life You Want Now by Structuring an Income Stream
- 4) Choosing and Setting Up Your New Prosperity Plan
- 5) Creating Your Own Private Utopia
- 6) Fully Funding the Vehicles to Get You Out Early
- 7) How to Retire Early Even if You Have Kids at Home
- 8) Making Your Money Last as Long as You Do
- 9) Finding a Full Life after Leaving Full-Time Work Behind
- 10) Putting It All Together and Launching Your Personal Pursuit of Happiness
Step One talks about how the "New Prosperity" will allow many Americans to retire early if they desire. He writes, "Fortunately, we live in the golden era of retirement vehicles." That's very true. Many folks' IRAs haven't just grown; they've exploded in value beyond all imagination or expectation. I know mine has.
In Step Two, Wasik outlines his concept of the "P factor", as in prosperity. He advises assigning a value (1 to 10, A to F, the scale you choose doesn't matter) to all your possessions and expenditures. All the better to discover if you are spending your treasure on the things that make you most happy. This "P factor" method is very similar to the more rigid calculation of "Life Energy vs. Earnings" advanced by the late Joe Dominguez in
Your Money or Your Life. Both authors stress the need to make your own personal cost/benefit analysis of what you're spending and decide where your values lie. I particularly liked the chart on page 33 of Wasik's book that lists "Sample Living Costs by Area." Many people don't realize that housing costs vary much more than salaries for most occupations as you move from city to city. The author's thoughts on the merits of a late-model used car are also right on the mark. There's a high likelihood you'll need to downsize your lifestyle or move to a lower cost area to retire early.
Retire Early rating:
For the complete book review published on January 15, 2000, see link: wasik.html
You Can Retire While You're Still Young Enough to Enjoy It .
Click here to order You Can Retire While You're Still Young Enough to Enjoy It . Today!
Dearborn Financial Publishing, 1999, 204 pp.
This book by attorney/author Les Abromovitz tackles the question "Are you sure you want to retire early?" among others. While engaging at times, it doesn't offer much in the way of specifics as to how to get there. You'll need to look elsewhere for comprehensive coverage of how to reduce living expenses, invest your money, and manage your IRA/401k withdrawals.
I liked Abromovitz's warning about how to find financial advice without engaging the services of a financial planner. (Page 65.) This is the first book I've read that calls attention to the fact that many radio and TV "financial types" actually pay for their own broadcast time. Some of these shows are little better than infomercials. We're heading for the day when you'll be as likely to find objective financial advice on radio and TV as you are in one of those seminars held in a hotel ballroom.
On a lighter note, one reviewer on Amazon.com questioned the relevance of this book "to the average guy." Author Abromovitz splits his time between homes in Florida and Pennsylvania, collects royalties from nine books, and is a personal injury attorney. If he runs short of money in retirement, he can just sue somebody.
A witty review to be sure, but Les Abromovitz is not a personal injury attorney and has never sued anyone, personally or professionaly. Like many authors who fall short of the status of a Stephen King or Tom Clancy, Abromovitz reports that "the royalties from my books didn't help us retire any sooner. A few are out-of-print. We were lucky to buy an early-bird dinner with the royalties from a few of them."
Saving, investing, and living below your means are still the surest path to early retirement.
Retire Early rating:
Starring Ron Livingston and Jennifer Anniston, directed by Mike Judge
VHS Video, 90 minutes
Click here to order Office Space Today!
This is the best movie I've seen on the subject of "Why you should retire early?" Director Mike Judge captures the sheer lunacy of working in a corporate environment. From abusive bosses to mind numbing "busy work", many readers will see much of what goes on in their own workplace in this movie.