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August 2019 Best of the Web

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Each month we share the best resources we’ve found to help you save more, invest better, and retire sooner.

Popular topics are building wealth, DIY investing, creating retirement income, managing risk, and limiting your tax burden to enable you to use your money to build the life you want.

Early retirement frees up the time to ponder topics that tend to get neglected during careers. So while this is first and foremost a personal finance blog, we also share articles about traveling and seeking adventure, finding happiness, enhancing health, improving relationships, and creating meaning and purpose in life.

Before diving into this month’s articles, I’d like to share a little blog news. We were nominated for a Plutus Award for Best Retirement Blog along with Retirement Researcher, Root of Good, Sightings at 60 and Social Security Intelligence. We’re honored and grateful to be nominated alongside these excellent content producers.

I hope you enjoy and get great value from our selections for this month’s Best of the Web. . .

Getting Good Advice

I started writing to become a consumer advocate after receiving horrible financial advice for the first decade of my adult life. J.D. Roth writes an excellent guide to help answer the question: Which Financial Advice Should You Trust?

Personal finance and personal health and wellness are similar in that there is an abundance of bad advice, ranging from those who are well intentioned but misinformed to those that are frauds and charlatans. Brad Stulberg provides a good overview of the best thinking on how to be physically, mentally, and emotionally well. From Outside magazine: We’ve Reached Peak Wellness. Most of It Is Nonsense. Here’s what actually works.

K.I.S.S.

Many of us make investing more complicated than it needs to be, driven by emotions and a desire for outsized returns. Russel Kinnel presents compelling evidence to keep things simple and focus on behavior in the Morningstar report Mind the Gap 2019.

Two of the leading minds in financial planning, Michael Kitces and Carl Richards debate just how simple things can be with Projection-Free Planning To Avoid a False Sense of Precision.

But Sometimes Things Are Complex

As much as we crave simplicity, some aspects of personal finance are complex. Jim Dahle tackles one of these topics, Comparing 14 Types of Retirement Accounts.

Alternative Investment Ideas

I embrace simplicity in investing and am slow to make changes to my portfolio. But I think in investing, as in life, it is always wise to continue learning and listening to alternative viewpoints.

Carla Fried examines retirement researcher Wade Pfau’s annuity research, writing A Retirement Expert Says Annuities Are Better Than Bonds for Guaranteed Income. Here’s His Argument.

Joe Weisenthal gives the best explanation I’ve seen to a phenomenon I can’t wrap my head around, writing The Non-Weirdness of Negative Interest Rates.

David Stein provided food for thought while answering a question I have always reflexively answered no. He asks Should You Invest In Gold?

Alternative Approaches to Retirement

A theme of this blog is redefining retirement, pushing back against traditional definitions of what retirement is and should be as well as the FIRE movement’s underlying assumption that we should all try to get there as quickly as possible. We’re not alone.

Dana Anspach writes FIRE isn’t the only path to a happy retirement.

Mark Miller writes How to blend work and retirement.

Food For Thought

Joe Udo asks an interesting question and provides even more interesting insight when pondering the answer to his question, with Is Financial Independence Easier for Poor Kids?

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[Contributing Editor Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. Now he draws on his experience to write about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? Chris' writing has been featured in MarketWatch, Doughroller, Business Insider and RockStar Finance. He is also the primary author of the forthcoming book Choose FI: Your Blueprint to Financial Independence. You can reach him at chris@caniretireyet.com.]

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Comments

  1. Chris, the Anspach article is completely “anti-retirement”. She advocates working into the grave, being defined by your work. She even made up a name for it: “a life well-worked”.

    Her idealistic plan involves saving 10%, spending the rest, and expecting nothing but blue skies and butterflies from one’s work: “The value of a life well-worked can be measured in monetary terms, but it is worth so much more than the dollars. There is value in the relationships you develop with the people you mentor, the clients you help, and the co-workers you share time with. There is value in honing your craft and refining your trade. And you can experience immense personal satisfaction when you become really, really good at what you do.”

    This is just horrible life advice, and really poor planning. “Enjoy your work… or else.” What happens when “or else” comes along, as it inevitably will?

    • Chris Mamula says

      I try to include articles with alternative viewpoints to our own, but with lessons to be learned. I indeed do disagree with the idea of saving 10%. I advocate for getting your savings rate as high as possible without feeling that you’re sacrificing. My wife and I always were around 50%, give or take.

      That said, I think the idea of finding work you love and don’t want to retire from is a concept that will give those who can’t retire early, or maybe ever retire securely, hope. I also think there are truths there for people like myself who work very hard to get to retirement and then decide that maybe retirement in the sense that most people think of it, no work and no earned income, wasn’t the right goal anyway.

      • There’s nothing wrong with hoping to be fulfilled by your work, and your co-workers, and your clients. Striving to be your best and etc. Hopefully everyone starts out with those goals. But eventually, and it’s not being cynical or negative to say it, life experience often proves otherwise.

        Please re-read the paragraph before the link to the Anspach article. When I initially read it, I thought you were saying that Anspach agrees with FIRE (“We’re not alone.”) which she clearly doesn’t. Upon reading the paragraph again, I see that I misunderstood your point. Actually now, I’m not sure what your point was.

    • Here is a slightly different perspective-This piece is quite a bit more popular with those pursuing, or in, traditional retirement (like myself). A lot of us have done what she is talking about-enjoyed our life along the way with saving 10-20%. We (mostly) respect those who are pursuing FIRE although we sometimes wonder if the feeling is mutual. Personally I have a huge amount of respect for Dana Anspach and like-minded retirement bloggers like Dirk Cotton at The Retirement-Café who advocate a conservative approach. She is clearly not “anti-retirement” because she offers advice to pre-retirees and retirees and I also doubt she is anti-FIRE-she would just advocate being sensible. Thanks Chris for including this piece/

  2. Ange Lobue, MD, MPH, BSPharm says

    At 82 y/o I continue to love my work and the positive responses I receive from my psychiatry and personal development clients. Helping others to enhance their relationships with themselves serves as a constant reminder of my need to “practice what I preach” in my own life. These final decades have been the best of my life despite the difficulties we all experience in a cultural system that promotes health care as a privilege rather than a right.
    Ange Lobue, MD, MPH, BSPharm
    American Board of Psychiatry & Neurology
    Academy of Television Arts & Sciences
    trinidadca@gmail.com

    • Chris Mamula says

      Thanks for sharing that viewpoint. As Larry noted above, most of us won’t find one thing we can or want to do forever. However, the idea of continuing to find ways to do something productive that gives us meaning into our later years is a powerful one, though it is contrary to what many people think retirement should be. Many people have bought into the idea that retirement means playing golf or sitting on the beach everyday. Few people will find that life fulfilling and many retirees continue to look for opportunities to give back and provide meaning and purpose to their lives and the lives of others.

  3. To add to your annuities article reference, Barron’s recently did an article that is complementary to the one cited.
    https://www.barrons.com/articles/the-top-100-annuitiesand-how-to-choose-the-best-for-you-51563580708

    I’m not a fan as annuities are another form of insurance whereas statistically speaking, they are bad bets. But if you want to trade-off higher expected returns for “guaranteed income” because it give you piece of mind, I won’t argue.

    • Chris Mamula says

      Most annuities are not only bad bets, but bad deals that are sold for high profit margins rather than bought by consumers who do their homework. However, we should be careful to not lump all annuities together. A low-cost, transparent, immediate annuity is a reasonable, and possibly optimal, decision for a significant portion of people.

      • I believe that annuities are an investment product that is sold to people and not bought by people.
        Unsophisticated people buy these. Some people do not want to want to spend the time necessary to invest in their financial education and sadly some are taken to the financial cleaners. Fees paid = money not invested on your behalf. A fool and his money are welcome anywhere. When a man with money meets a man with experience, the man with the money ends up with the experience and the man with the experience ends up with the money.

        • Chris Mamula says

          There is some truth to what you say, but to lump all annuities together as bad is simply not accurate.

          A simple, low cost, immediate annuity is an insurance product to protect against longevity risk. As such, simple math tells us that, in sum, the insurance company must take in more than they pay out. Else they would go out of business.

          If you don’t need the insurance, then you shouldn’t buy it. If you think this is a legitimate risk in your situation, then you should.

          This is no different than health insurance, homeowner’s insurance, life insurance, etc. An annuity, or any insurance product isn’t evil as long as the consumer understands what they are buying, why they are buying it, what it costs, and what purpose it serves in their financial plan.

        • Annuities are not an investment product and some highly educated and knowledgeable buy them, SPIAs in particular (which are not high fee). They are guaranteed income, and an insurance product (against longevity risk) and can have a place in people’s retirement. Mortality credits are not a bad thing. Wade Pfau at Retirement Researcher is a good source if you would like to learn more about them. In some scenarios, they can help folks do better in the long run, when devoting a portion of their assets to them (usually 25%).

      • +1 Chris. I agree as do the vast majority of academics and financial professionals with your statement:
        “A low-cost, transparent, immediate annuity is a reasonable, and possibly optimal, decision for a significant portion of people.”

  4. Kevin Knox says

    Hi Chris,

    The David Stein article is the one thing you’ve shared here that I don’t think is worthwhile. He doesn’t really have a clue about the role of gold in portfolio design

    As luck would have it, Tyler over at Portfolio Charts just published an exceedingly timely writeup on portfolios built to thrive during recessions that ends up addressing the role of gold.
    Darrow is aware of this site but in case you aren’t I think it is arguably THE most important resource on the web for early retirees interested in portfolio construction, real world safe withdrawal rates and great tools for portfolio analysis. Look throught the “Portfolios” section of the site, paying special attention to the withdrawal rate and “ulcer index” sections and I think you’ll see what I mean.

    https://portfoliocharts.com/2019/08/20/the-top-4-portfolios-to-recession-proof-your-investments/

  5. Chris Mamula says

    Thanks for sharing that Kevin. It’s an interesting piece that sheds light on how portfolios performed in recessions. Of those that did best, I’m most familiar with the permanent portfolio.

    That said, owning gold (or bonds or other commodities as all of the best performers in recessions did) means giving up a lot of upside during periods of expansion.

    We never know what the future holds, but if the past is any indicator that means leaving a lot of upside on the table.

    • Kevin Knox says

      Actually all four of those portfolios have done well in all kinds of market conditions, while avoiding the catastrophic drawdowns that all-too-often cause investors to sell in a panic. I suggest taking a more in-depth look at the Golden Butterfly, Ray Dalio All Weather and Larry Swedroe portfolios sometime. They seem to me to be ideal for retirees and offer far better SWR’s than plain vanilla stock and bond approaches.

      • Chris Mamula says

        I’m always weary when I hear “but this time is different” but with bonds I question whether this time is different. In addition to gold, those portfolios are very bond heavy. With the current yields so low, they won’t approach historical performance if the rates hold and yet if rates rise, all but short term bonds get crushed. I just don’t see the upside. And while I understand the role of gold, I just can’t get excited by portfolios with as much as 25% in gold which doesn’t produce any income and requires timing and speculation to make money. Stocks are scary given their current valuations, the prolonged bull run, and their volatility, but that’s still where I’m still keeping the bulk of my portfolio. (Full disclosure: with plans to continue to earn income so we have a very low burn rate in the event we do have a major downturn).