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How To Retire Early and Live Well With Less Than A Million Dollars [Book Review]

February 2nd, 2012 | Posted by Global Investors

I enjoy reading older books about early retirement; I seek to learn from their experiences, but I also look for ways in that their perspective is colored by their own time period. For instance, a book written in the 80s¹ – an era of high inflation – would likely assumed that interest rates would be moderately high forever, at least in the 5% range. The tendency to extend recent trends into the future is unavoidable, and something you should consider when reading or making forecasts today.

This is a review of How To Retire Early and Live Well With Less Than A Million Dollars by Gillette Edmunds, a book published in 2000 that was recommended to me by a reader. Edmunds was a former tax attorney and financial journalist who retired in 1981 at age 29.

Unreasonably High Expected Returns
Remember that for both the 1980s and the 1990s, the average annualized total return of the S&P 500 for both decades was around 18% a year. Imagine two decades of such returns, all before the dot-com bust and the housing bust. Edmunds retiring in 1981 turned out to be some of the luckiest timing possible. As a result, a major criticism of this book is the continued expectation of high stock returns going forward. The quoted excerpts below are taken verbatim from the book:

Can you retire today? His answer is that “most middle-class Americans, including me, could live comfortably on the investment returns from $500,000.” Perhaps, but with currently-accepted safe withdrawal rates of 3-4%, this would only create $15,000 to $20,000 a year in income. Instead, the book promotes withdrawals rate of 8-10%, which would have left many nest eggs completely wiped out from 2000 to 2010.
“An average, educated, experienced investor can reasonably expect to make 10% a year for life.”
“Anyone should be able to produce a 7.75% return.”

I bet these assumptions sounded reasonable, perhaps even conservative, in 2000 but they are just bad jokes today.

Owning Non-Correlated Asset Classes
Edmunds tells us not to time the markets, ride out temporary market drops, and to maintain low investment costs. He advises you to hold a variety of “non-correlated” asset classes such as:

Real Estate
Foreign Stocks
US Large Stocks
US Small Stocks
Emerging Markets Stocks

Edmunds believes that these asset classes are on different business cycles. When one is going up, the other is going down. However, I don’t like the term “non-correlated”, as very few asset classes have negative correlations these days. Low or minimally correlated is a better term. As we saw in the recent financial crisis, when the poo hits the fan correlations can go back to 1 (everything goes down together). However, I agree with the general asset allocation advice of holding different asset classes with minimal correlations. He counts as an early proponent of not holding too much in US stocks (no more than 1/3rd of total portfolio), and an equal amount in foreign stocks (also use for 1/3rd of your portfolio).

I did have an issue with the lack of supporting evidence as to why these assets and not others, as we only get weak arguments like “after owning bonds for about five years, I realized that a portfolio of five different high-return asset classes that excluded bonds had both high predictability and high returns”. I’m sorry, but making a conclusion to stop holding bonds after 5 years of data is just plain bad advice and makes him come off as egotistical.

He ends the book with a philosophical epilogue with the usual “money isn’t everything, enjoy life with family and friends” material. I don’t mean to belittle the importance of this factor, just that I didn’t really learn anything new from it. He does come off as well-intentioned and talks about the effect of his divorce. Despite its flaws, I found this book worth the read as it encompasses the overall philosophy of one person who had been successfully retired for 20 years. Just remember he had a very strong tailwind of high returns, and adjust your own expectations accordingly.

Other “early retirement” books that I’ve reviewed:

Chase Freedom® Visa – $200 Bonus Cash Back” border=”0″></a> 
 
<a href= How To Retire Early and Live Well With Less Than A Million Dollars [Book Review] from My Money Blog.

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Obama, Democrats Set $60 Million Fundraising Goal For June

June 2nd, 2011 | Posted by Global Investors

WASHINGTON — President Barack Obama’s key fundraisers are being asked to raise $60 million for the president’s re-election campaign and the Democratic Party by the end of June.

Two people familiar with the fundraising goal said it was part of a presentation in Chicago on Wednesday to top Democratic fundraisers. The two spoke on condition of anonymity because they were not authorized to discuss the private meeting publicly.

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Magal Signed a $35.5 Million Contract to Suply an Integrated Security System for the 2012 African Cu

June 1st, 2011 | Posted by Global Investors

Magal Security Systems, Ltd. (NASDAQ: MAGS, TASE: MAGS) today announced
that it has signed a $35.5 million contract for a turnkey project, to provide
a fully integrated security system, covering multiple sites, for the African
Cup of Nations Football Championship to be held in January 2012 in West
Africa.

The project will cover football grounds, the stadium and the Olympic
villages for the participating teams. The full solution will be networked and
integrated into several command and control centers by Fortis – Magal’s state
of the art Physical Security Information Management (PSIM) system. A built in
hierarchical structure… View full post on Live News from PR-USA.net

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US Labor Department announces about $20 million to fund state-run programs aimed at improving employ

June 1st, 2011 | Posted by Global Investors

The U.S. Department of Labor today announced the availability of approximately $20 million to fund programs that will improve education, training and employment opportunities for adults and youth with disabilities. A solicitation for grant applications is published in today’s edition of the Federal Register.
The Disability Employment Initiative is a joint project of the Labor Department’s Employment and Training Administration and its Office of Disability Employment Policy. Programs to be funded will serve individuals who are unemployed, underemployed and/or receiving Social Security disability benefits. The goals of the project are to improve coordination and collaboration across… View full post on Live News from PR-USA.net

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Stop & Shop Donates $1 Million in A+ School Rewards to More Than 3,100 Schools in the Northeast

May 28th, 2011 | Posted by Global Investors

The Stop Shop Supermarket Company LLC announced it will distribute $1 million to local schools in the Northeast as a result of its A+ School Rewards Program.
In its second year, more than 3,100 schools in the Northeast will benefit from Stop Shop’s A+ School Rewards which provided customers with an easy tool to raise money for local schools. The program allowed customers to designate the points they earned for every dollar spent at Stop Shop to the school or schools of their choice by registering their Stop Shop Card… View full post on Live News from PR-USA.net

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CGI Awarded US$5.7 Million Contract to Advance the CONNECT Nationwide Health Information Exchange Ga

May 27th, 2011 | Posted by Global Investors

The Federal Health
Architecture (FHA), under management of the Office of the National
Coordinator for Health Information Technology (ONC) in the US
Department of Health and Human Services (HHS), has awarded CGI Federal
Inc. (CGI), a wholly-owned U.S. operating subsidiary of CGI Group, Inc.
(NYSE: GIB) (TSX: GIB.A), a one base year contract worth US$5.7
million. The contract includes four one-year options that can be
executed to support FHA’s CONNECT Nationwide Health Information
Exchange (NHIE) Gateway Solution.

CONNECT is the most widely adopted open source gateway used by public
and private entities to exchange health information in a secure,… View full post on Live News from PR-USA.net

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Rent the Runway Raises $15 Million in Venture Capital from Kleiner Perkins Caufield & Byers

May 24th, 2011 | Posted by Global Investors

Rent the Runway, the leading online destination for dress, accessory and bridesmaid dress rentals, has raised $15 million in venture capital from Kleiner Perkins Caufield Byers (KPCB). At only eighteen months into business, the investment from KPCB signals the extremely fast growth of the online designer dress and accessory rental business. Prior to KPCB’s $15 million investment, Rent the Runway received more than $16 million from Bain Capital Ventures and Highland Capital, including seed funding pre-launch from Bain Capital Ventures in early 2009.

Jennifer Hyman, Rent the Runway CEO and co-founder stated, “The success… View full post on Live News from PR-USA.net

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Twitter Buys TweetDeck For $40 Million: REPORT

May 24th, 2011 | Posted by Global Investors

Twitter has acquired TweetDeck, an application for organizing the display of tweets, for more than $40 million in a mix of cash and stock, according to sources close to the deal.

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Liz O’Connell: A $6.1 Million Score Possible in Preakness Stakes Contest

May 21st, 2011 | Posted by Global Investors

Kentucky Derby winner Animal Kingdom sits as favorite for winning the Preakness Stakes, in what could be a bid for the first Triple Crown sweep in 33 years.
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