You Can Retire Sooner Than You Think - My Book Review

TITLE: You Can Retire Sooner Than You Think
AUTHOR NAME: Wes Moss
AUTHOR CREDENTIALS: Radio Host, Financial Planner and Author
GENRE: Personal Financial Planning
NUMBER OF PAGES: 288
PUBLICATION DATE: 03 June 2014

SYNOPSIS/SUMMARY:

"If you think you need to win the lottery or work until you’re 75 to retire with financial stability, Money Matters host Wes Moss has very good news for you. You Can Retire Sooner Than You Think reveals the secrets for ensuring a successful retirement—sooner rather than later.

After conducting an intensive study of happy retirees to learn the financial practices they hold in common, Moss discovered that it doesn't take financial genius, millions of dollars, or sophisticated investment skills to ensure a safe, solid retirement. All it takes is five best practices:

• Determine what you want and need your retirement money for
• Figure out how much you need to save
• Create a plan to pay off your mortgage in as little as five years
• Develop an income stream from multiple sources
• Become an income investor

Getting on the fast track to a great retirement is a lot simpler than the retirement professionals would have you believe. You Can Retire Sooner Than You Think provides the proven-effective, five-step formula for creating the retirement of your dreams." - Amazon

He says we can all do this, no need for special skills or a degree in mathematics. Follow his five steps and you will achieve retirement success with his proven effective method. Let's pop the hood and check things out.

$1000 a Month Rule

The book is filled with a lot of formulas and financial jargon. He introduces us to a new rule of his called the 1,000 Bucks a Month Rule. Meaning if you want to have at least a thousand bucks a month to spend in retirement then you need to save up $240,000.

In my own retirement case I would like to have $3000 bucks a month in retirement income. Moss is saying I would need to have saved up $720,000 for retirement.

In the United States where Moss lives and works the generally accepted amount for retirees is $500,000 to have a happy retirement. Taking that amount into consideration then, most retirees only need to amass a total of $480,000 to generate that 2K per month in income.

Keep in mind that all these totals would work in concert with any government pension income you may have coming in. Pensions like Social Security in the US and for Canadians we have our Canada Pension Plan and Old Age Security.

What Moss's guideline goes on to suggest is that if you have a little more retirement income other than what the government gives you, let's say it's $400 per month, then you need to have saved up almost a million bucks. 

240 X 4 = 96. That would be 960 bucks per month which is close to a million dollars to achieve that amount. Keep in mind the assets have to be liquid so you could sell them within 48 hours if you needed the cash.

This is a rule designed by a famous financial planner named William Bengen. He states that retirees should be able to draw 4% a year from their portfolios for at least 30 years and not run out of money. I'm not going to include any inflation adjustments for simplicity of calculations.

Where Moss differs from Bengen is that he bumps up this number to 5%. He thinks in today's environment you should be able to generate portfolio returns of 5% a year. The money would come from a combination of interest and dividends and other distributions giving you income from a diversified balanced portfolio. This is where Moss gets his 5% target.

Let's say I have my $240,000 saved up and now I'm ready to draw income from that using Wes's 5% rule. The investments would spin off $12,000 a year for me. 12,000/12 = $1000 a month.

Is it possible to get a 5% return? I wouldn't settle for anything less than that so I'm happy to see Moss suggest a higher number. I don't think it's even that risky considering today you would go broke very quickly leaving your money in savings accounts, buying bonds or worse yet GICs.

He is a big fan of income investing and so am I. When you check out the investing landscape and start looking at where to put your money you can see that investing in high quality blue chip dividend paying companies like utilities, telcos and banks you can achieve at least a 4% return. Combine that with some higher yielding stocks and REITs (Real Estate Investment Trusts) and you'll get pretty close to your 5% target.

I always keep a little of my savings in fixed income which today only yields 2-3%. I consider this my safety net should things go sideways.

Some of Moss's other gains to get him to his desired 5% target come from growth. The assets appreciate in value so they generate capital gains which cam fluctuate either way. This is a long term plan so you should be able to safely ride this out during retirement.

He further suggests that your nest egg if properly invested in these income generating investments will more than outlast Bengen's 30 year 4% withdrawal rule. You need to remember you can always sell one of your investments and generate more cash that way.

The rest comes from growth or capital gains, which year by year will fluctuate or even be negative, but over the long haul can be another 1 to 3% on top of the more assured yield from income investing. At worst, it may involve cutting slowly into capital but as long as your income investments are generating by themselves 3 or 4%, Moss assesses that such a nest egg would easily outlast the average 30-year retirement time frame.

I also love the fact Moss recommends you pay off your mortgage as soon as possible. My wife and I paid off our house in 11 years. It takes discipline and a bit of sacrifice but it will leave you with so much more cash flow in retirement. Another big concern Moss has is over annuities. He's not a big fan and suggest people not turn over their savings to an insurance company.

There’s plenty of other stuff in the book but I’ll close with just two more points.  Moss believes retirees should have completely paid off their mortgage before retiring and he’s not a big fan of annuities to supplement retirement.

I like his recommendations as an income investor because I've tried to steer my portfolio in this direction when I was planning my own retirement. This is a great book that should be on the shelves of everyone nearing retirement or planning their strategy very soon.

Do you believe in becoming an income investor for retirement?