Larry Swedroe, Chief Research Officer of Buckingham Strategic Wealth:
Whether you’re planning to retire, or are already retired, Jane Bryant Quinn’s How to Make Your Money Last: The Indispensable Retirement Guide is one of the best “investments” you can make. Ms. Quinn is one of the leading journalists in personal finance. She clearly cares deeply about helping individuals find the right answers and avoiding being sheared like sheep by the wolves that populate the investment landscape. Her writing is crystal clear, making technically difficult concepts understandable for the layman.
Her book begins with the important question, “Now that you can do whatever you want, what do you want to do?” She notes that while learning how to stretch your available assets and “rightsize” your life are the first steps toward retiring well, it’s important to make sure that when you retire from your job, you don’t retire from life. You must fund new challenges that will fulfill you both emotionally and intellectually while keeping you well contacted to society.
The first chapter discusses the five states of retirement: Preretirement, the Honeymoon, Disenchantment, Reorientation, and Stability.
The second chapter is about rightsizing (finding that happy place where the annual income you expect matches or exceeds your annual spending) your life noting that “you’re never afraid to open your bank statement when you’re living within your means.
Chapter 3 focuses on making the right decision about when to take social security, emphasizing the important point that far too many fail to consider — the role of social security as longevity insurance. This chapter, in particular, is extremely well done.
Chapter 4 is all about helping you make the right choices when it comes to health insurance.
Chapter 5 is about pension plans and making smart decisions about whether to take them as annuities or as lump sums.
Chapter 6 is about “buying your own pension” — an in-depth examination of the role of annuities, both immediate and deferred. Quinn raises all the right questions and gives you the information needed to make the right decisions. As always, she tells it straight, recommending against the slew of bad products produced by the insurance industry, recommending avoiding expensive and complex variable annuities — they are products meant to be sold, never bought. She also shows you how to deal with the issue of variable annuities if you already own one.
Chapter 7 is about getting the most out of retirement plans such as 401(k)s, 403(b)s, 457s, traditional IRAs and Roth IRAs. In addition to providing advice on how to best use these vehicles, she also provides advice on the investment choices within them — recommending you stick with low-cost, passively-managed funds like index mutual funds and index ETFs. She also covers the issue of rolling over corporate plans when you retire. The chapter also discusses the important issue of withdrawal strategies — the order from which accounts to withdraw funds. Other topics covered include making sure the beneficiaries are correct and how to “stretch” IRAs as long as possible.
Chapter 8 explains how to set the right spending (withdrawal) rate, addressing the issue of is 4 percent still the right general answer and is it the right one for you. This chapter is one of the best and provides various strategies you can use to choose the right spending figure, one that will minimize the chances of your outliving your assets while still allowing you to enjoy the fruits of your labor.
Chapter 9 is about “investing for income.” Here again, Quinn’s advice is dead on. She notes: “Nothing endangers your lifestyle more than to pile into “income investments.” Her recommendation on bonds is to stick with traditional high quality, transparent, safe fixed-income investments like Treasuries, CDs, and for mutual funds to use low-cost, indexed investment-grade bond funds. And for equities, her recommendation again is to limit choices to low-cost passively managed funds like index funds. She also discusses the role of target-date funds, with the key being that the asset allocation of the fund should match your own risk profile — your ability, willingness and need to take risk. There’s also a good discussion of the “bucket” approach, which some investors find provides psychological benefits that help them stay disciplined (avoid panicked selling) in bear markets. And finally, there’s an excellent discussion on the products you should avoid such as non-traded REITs, private placements, business development companies, life settlements, funds of hedge funds, and absolute return funds.
Chapter 10 is about using your house as a “piggy bank.” There’s an excellent discussion about the choices you have about downsizing, renting versus owning, moving to a lower cost of living area, and moving to a continuing care or retirement community. In addition, there’s an excellent discussion about the potential role of reverse mortgages. While these are complex products, Quinn does her usual great job of explaining all the pros and cons.
Chapter 11 is about life insurance and the role it can play in retirement. The chapter addresses the issues of what to do with existing policies and how to best use cash values in policies. There are many complex issues and Quinn provides the answers as well as explaining where to go to get good, unbiased advice in a world filled with biased salespeople.
The final chapter provides a helpful checklist of 18 things to do preretirement and throughout retirement. There really is no more trustworthy financial journalist than Jane Bryant Quinn, and her new book is really a tour de force of the financial issues you’ll face in retirement. I highly recommend it.