No. of Recommendations: 2
I just finished reading Gillette Edmunds' How to Retire Early and Live Well. It's one of the best books I've read on the subject. I've posted a detailed review on the Retire Early site, see link:

For those of you who missed it, Gillette posted a comment on this board a few weeks back. It's reproduced below.



Gillette Edmunds wrote in post #2379,

I certainly enjoyed Scott Burns article in Worth. There were, however, several flaws in his reasoning. Both the 80% "rule" and the 5% withdrawal rate are flawed. If you can only spend 5% of your assets during retirement and your expenses are as high as 80% of your pre-retirement income, you need a lot of money to retire. Fortunately, retirement expenses can be much lower than working expenses. There are no business expenses, no social security taxes, you can live soley on capital gains and thereby never pay higher than 20% rates, you don't have to add to savings,generally you have a fixed mortgage payment and will pay it off before retirement or in the early years, your children have become self supporting and so on. In addition,you can withdraw more than 5% of your assets. The 5% concept makes sense for surviving a series of bad stock market years. And despite what the last five years have been like, there will be a future time when there are a series of bad sotck market years. Burn's article referred to the early 1970s that theoretically wiped out anyone retired on an all stock and bond portfolio. But anyone in the 1970s who had a half stock, half real estate portfolio would have done fine. With better asset class diversification, you can withdraw more. For example, with a portfolio of U.S. stocks, real estate, emerging market stocks, treasury bonds, and producing oil and gas interest you could withdraw 8% a year with little risk.

What happens during retirement is you adjust your income and expenses to meet current realities. I retired in 1981 and within a few years I was making much more and spending much more than I did working. It turned out I had better investing skills (and luck) than I did working skills. Some people have the opposite and find themselves making terrible investment decisions in retirement and having to go back to work.

Early retirement is also different than retirement at 65. If you retire early you can take more investment risk. If things go bad you can get a part time job or even a full time job. You also may find fun work and it turns out to pay well too and just do it because you like it. In later retirement, particularly if you have health issues, going back to work is not an option. But your money also does not have to last as long.

I advise people not to retire early unless they are in a position to grow their investments during retirement. If they are worried about money all the time and cutting back on all their expenses, generally they would be happier working.

There is much more to say on this topic and I will try to get back to this site soon. My book on this subject, HOW TO RETIRE EARLY AND LIVE WELL WITH LESS THAN A MILLION DOLLARS is just now coming out on, etc. and will be in the book stores after February 15. I have sent it to FoolMart and hopefully they will list it there too. I have to go fix dinner right now. But one final thought. Don't get divorced in retirement. You think you have all your finances in order and then your assets get cut in half or worse and your expenses increase. It was the tizzy from the divorce that forced me to put every thing I knew down on paper which then turned a book.
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