I mentioned a couple of days ago that at a conference Mike Piper offered me a copy of his book Can I Retire?. In general, I hate books. I read websites most of the day and when I’m done the last thing I want to do is more reading. However, a couple of things intrigued me about the book – I had met the author and it is 100 pages. The later is perfect for the Lazy Man audience.
I wasn’t necessarily going to review the book, but let me just say the following: I’m sending this to my mother in a few days with a note that simply says, “Read This.” I can’t think of a higher compliment I can give.
The book is geared towards the person approaching retirement age. There’s very little written for someone who is 35 like me, but as Piper mentions when you are far away from retirement there are just too much volatility to consider. However, I wouldn’t have it any other way. The book should be geared to large audience.
Can I Retire is divided into 3 sections and 12 chapters. The sections answer the questions, “How much money will you need to retire?”, “How should I manage my investment portfolio?”, and “How can I best manage taxes in retirement?
The first section was the most interesting for me. Figuring how much money you need to retire is often a very difficult thing. Piper explains why this is with a tremendous example of how even a diversified portfolio could, using past historical returns, have as much as $1,100,000 in it… or as little as $160,000 in it.
One thing that the book explained was where the 4% rule of thumb came from. For those who don’t know about that rule of thumb, check out The 4% Retirement Withdrawal Rule. I had always presumed it came from typical market returns of 7% with inflation eating up 3% of that, leaving 4% as the magic number that “treads water” so to speak. Turns out that there are two entirely different reasons. Want to know them? You’ll have to read the book. I can’t give away the milk for free as they say. If you don’t want to read the book, just go with my explanation – it’s pretty easy to understand and I’m stubbornly sticking to it.
The next section about portfolio management was solid. I agreed with everything except the role that foreign investments should play in a portfolio. He made a case that due to currency risk, there is a chance that your investment in a particular country might not be worth as much when converted into US dollars. That extra volatility is uncertainty that should be minimized. My belief on this is that one should get a very diversified basket of international stocks so your overall currency risk is minimized. If your portfolio is based largely on the US and the US dollar tanks, you will likely experience some difficulty in your planning as well. I believe that more diversification is better. If the US tanks, perhaps the gains in foreign investments and currency will offset that.
The third section covered tax strategy in retirement. I really don’t find retirement tax strategies that interesting (as opposed to the rest of personal finance, which is awesome – no sarcasm). I will say that Piper painted a great picture of how if one can manage expenses in retirement it may be possible to get away with paying very little tax. I hadn’t thought about how in retirement, costs of living might way down (especially if there is no mortgage or rent payment). This means that you might not need to tap those retirement accounts much to cover expenses and hence stay in a low tax bracket.
These are the kinds of things that are interesting to think about with 30 years to spare until I reach retirement age. You’ll find a number of similar cases in the book and for a Kindle price of less than $5, it is probably one of the better investments you can make. Piper is quick to point out that it isn’t meant as a comprehensive resource, but that’s beauty of the book. It gets you started down the path of retirement and it only takes a couple of hours to read.
Update: I forgot to mention that Mike Piper has a great investing blog that has been featured in Money Magazine and many other places. It’s a must-read.
Mike Piper says
Wow, it is quite a compliment to hear you’ve decided to share the book with somebody you care about. I hope your mom finds it helpful!
Thank you for taking the time to read the book and share your thoughts on it.
As someone who must be close to your mother’s age I thank you for this ray of hope also. As previously commented before, I had investments as diversified as I could afford: stocks, bonds, real estate,etc., international as well as U.S. As of this moment, many countries are in austerity plans, French, Italian, Spanish banks have all been demoted in ratings; I’m no longer sure about China and India; South America is an unknown to me. I feel paralyzed what to do with any money anymore and I don’t dare lose what I have. I don’t feel good about any economies anywhere. Thanks for the ray of hope.
Financial Independence says
Interesting arcticle, thank you.
Why is it a complicated thing to figure out how much money do you need to retire? Multiply you current annual expences by 40 and here you go.
Do not count on Social Security either.
I am totally agree with you on diversification. As matter of fact people in Western Europe are already dumping US dollars. And we are talking about Germany and the rest.
It is all over the news. It might sound as unpatriotic but it does make sense.
kody @ financial money tips says
Well thanks for the recommendation! although i don’t have much time i do read my books as much as possible. Thanks to you i am excited about reading this one! I also agree with you on diversification of international stocks. However i am looking forward to read what else Piper has to say about it in the book.
[email protected] says
The tax portion sounds interesting–I’ve always been fascinated with that. When it comes to retirement planning most people load their investments with tax-deferred retirement plans. While that’s the preferred route, it can lead to real problems when retirement comes, if you have substantial assets.
It would be better for people to concentrate some savings into non-deferred vehicles, such as Roth IRA’s and non-tax sheltered investments. They will provide tax diversification at retirement, which can be more important than most people think when planning.