No. of Recommendations: 3
"Is now the time to Sell High?"

Here's a cautionary tale.

Failed Retirement Case Study

Perhaps the most well-documented and widely discussed early retirement plan failure belongs to Rob Bennett, a self-proclaimed financial advisor and career counselor based in Purcellville, VA. Bennett hit the trifecta by making all three of the errors listed above. He is a frequent contributor to several investing and retirement planning discussion forums posting under the screen name "hocus". His early retirement plan is laid out in great detail in a robust collection of long-winded posts on these forums. To the extent that we believe he is being truthful about the status of his retirement plan, it provides a wonderful teaching tool.

Bennett famously quit his high-paying job with accounting firm Ernst & Young in August 2000 to retire on a $400,000 nest egg invested entirely in fixed income securities. The fact that Rob was only 43 years of age at the time, lives in the Washington D.C. area, and heads a household with a stay-at-home Mom and two small boys made the decision all the more baffling to those who understand the risks and perils of an early retirement plan that might require funding 50 or 60 years of living expenses.

Prior to his retirement, Rob collected some 20 binders of information on saving, investing, and retirement planning. This accumulated research and his special "spidey sense" led him to sell all his stocks in 1996 (just before one of the greatest bull markets in history) and put everything in CDs and US Treasury securities. Mr. Bennett's self-professed ignorance of mathematics led him to believe that an ill-defined market timing scheme would secure his family's future much better than a diversified portfolio of equities and fixed income securities.

The last six years haven't been kind to the Bennett household. Their annual living expenses have increased at a rate far higher than inflation (as measured by the CPI.) In 2005, they had annual expenses of $38,000 which amounted to almost a 10% withdrawal from their $400,000 nest egg -- a clearly unsustainable rate. Indeed, Bennett recently lamented that he lacks the money to take his two small boys to Disney World.


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