The Essential Retirement Guide Book

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I can not stress enough how valuable this book is for your retirement planning comfort.  It’s like the author, Frederick Vettese, is my long-lost Canadian brother.

“When Howard turns 65, the mortgage should be fully paid off and child-raising costs should also drop to zero.  Similarly, employed-related costs and retirement saving would cease. The only expenditure that is not personal consumption that continues will be income tax and the tax bill will be much lower in retirement.

To maintain their pre-retirement PERSONAL CONSUMPTION (emphasis mine) Howard and Barb need retirement income equal to 30 percent of final pay.” (Page 23)

And case-study scenarios just like this continue throughout. But it’s not just case-studies, it’s the actuarial observations that makes this book so fascinating.   Vettese is the chief actuary of one of the top 5 defined benefit pension providers in North America.

Actuary = math and pensions = retirement.  Add the two together and you have someone who knows a thing or two about the actual math that goes into retirement.  Vettese has seen it, shoot, he LIVES it in his work!

Ironically, it’s that focus on the actuarial side that get some negative reviews on Amazon:
L. Keenan
2.0 out of 5 stars
Waste of money
September 2, 2019
Format: Kindle Edition Verified Purchase
Waaaay too many actuary numbers, and far too little application, and nothing if you are middle or low income. There are a lot better books out there.

Kathryn Valentine
1.0 out of 5 stars 
Not worth the money
July 31, 2018
Format: Hardcover Verified Purchase

Are you kidding me???

The reason that I so love this book is it’s appeal is beyond just the typical target audience for retirement planners; The wealthy.  EVERYONE can gather critical information from this BECAUSE the focus is not on your asset base but rather your spending needs come retirement.

In fact, Vettesse discusses this explicitly when he uses a case-study of Ashley and Steve who aren’t saving anything now. But not to fret. In the last 7 years before they retire they’ll be able to put a lot of money away.  Why?  Because their spending needs have dropped off a cliff when their mortgage is gone and the kids are out of the house.

“Throughout their working lives, they lived within their means.  the amounts they set aside were modest until their final few years before retirement.

Things improved markedly once the children were gone and the mortgage paid off.  Comparing age 56 to age 60, 35 percent of their grass pay is freed up, part of which will be used to increase retirement savings.  For the last 5 years before retirement, 57 percent of gross income is available for gross consumption…

You may be thinking that Ashley and Steve should have saved more for retirement in their early working years so they would not have to save so much in their last 7 years of work.  That would simply have made a bad situation worse in t their early years…” (page 27).

These are not case studies geared towards the upper elite.  These are case studies we can all relate to. In fact, I relate to Steve and Ashley 100%.  We’re always told to save, save, save and save some more.  10% isn’t enough! 15% is nice…but 20% is the magic number.

What “Experts Say”

Most experts say your retirement income should be about 80% of your final pre-retirement salary. That means if you make $100,000 annually at retirement, you need at least $80,000 per year to have a comfortable lifestyle after leaving the workforce.

Ahhh, the experts….what would we do without them? Unfortunately, because this level of insanity has so deeply permeated our culture we find:

$1.7 million is what many folks think they need to retire according to this Schwab survey..  Do you have that kind of scratch in your retirement accounts? I certainly do not.  I imagine most of you don’t either.  So, are we doomed?   Of course not.

Thankfully, along comes Vettese, again a real-live retirement planning actuary to tell us:

  • Saving 10 percent a year is not a bad rule of thumb if you could follow it, but there will be times when you cannot do so and it might not even be advisable to try.
  • Most people never spend more than 50 percent of their gross income on themselves before retirement; hence their retirement income target is usually much less than 70 percent.

And, my favorite:

“Retirement planning is difficult enough without having to contend with misinformation. Unfortunately, much of the advice that is dispensed is either unsubstantiated or betrays a strong vested interest.”

And then we dive into the book, we find chapters such as this.

“Chapter 15 A Gentler Approach to Saving:
Path 1: Pain Now, Gain Later
Path 2: Smooth and Steady Improvement”

hmmmm….what does this remind you of? Indeed, the consumption smoothing reality approach long advocated by Larry Kotlikoff and Scott Burns.

Consumption Smoothing

Consumption Smoothing is the crazy idea, seemingly beyond the ability of the “experts” to comprehend, that once your kids are gone, your house is paid off and you no longer have earned income, your expenses will drop.  Your actual CONSUMPTION may increase a bit, for a short period of time while you’re catching up with some pent-up demand. But over time, you probably spend the same amount of discretionary income throughout your life.

I like to grill.  I grilled 5 times a week 10 years ago, I grill 5 times a week now and I will grill 5 times a week in 10 years.  Other than the price of meat, not much has or will change.

We try to go to one Boston Bruins game a year.  We did that 10 years ago. We did it 2 years ago and we’ll do it again in the next few years.  Ironically, when the kids are gone, we’ll probably still do it but it will cost less as we won’t need 6 tickets, only 2.

See how this works?  Do you really, REALLY, think suddenly you’re going to change your lifestyle dramatically the minute you punch the clock the last time? How you live is ingrained in who you are. Yeah, again, you may splurge a bit right out the gate in retirement but in a few short years, you’re most likely to be right back to where you were. It’s WHO you are after all.

So, while your consumption will most likely remain the same, your discretionary spending if you will, other expenses will not; in my case, and yours too most likely, they will drop substantially.

Best Way To Understand Information

On a side note, I bought the actual printed version of both books I site here.  You should too. Books like this are not a Kindle purchase. You really need the physical thing in your hand. It allows you the ability to highlight. Put the book down and think and take notes.  While I suppose the Kindle allows a similar experience it’s simply not that same. You know it and I know it.   In fact, researchers have done studies to show that people who “who used longhand remembered more and had a deeper understanding of the material.”

Don’t Fall For What the “Experts” Say

I will never understand who gets labeled an expert in any field. Seems academics get that label by default, which is odd to me because many academics are steeped in theory, not reality.

When it comes to actual boots-on-the-ground retirement planning, I’m not sure there is a better expert than the chief actuary of one of the largest pension providers in North America. That is who Frederick Vettese is. Now, upon reading his book, you may not agree with his conclusions when it comes to you specifically.  That is absolutely acceptable. You know your situation better than anyone.

But when it comes to retirement planning in general I simply don’t see how one can not read a book like this, or Kotlikoff’s, or even my own and not come away with at least the take of “hmmm…could we have been wrong this whole time?”



P.S. Don’t forget, my Retirement Planning course is ON SALE until the end of the year.  50% off!  That’s right, 50%!!!   You also get a 30-day no questions asked money back guarantee.  So, if retirement is on your mind, why not buy this?

Click here for more info.

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