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Book report: "Work Less, Live More"
Old 11-10-2005, 11:25 PM   #1
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Book report: "Work Less, Live More"

(My apologies in advance for preaching to the choir.* This is also posted on Raddr's board.)

This subject combines Bogle, slice & dice, and SWR with ER.* It's a compromise that even Bernstein could live with.

Bob Clyatt distills the best of the board and added his personal research to ER.* Nolo is shipping the book now and he's also donating copies to libraries.* (I'm adding a copy to the Hawaii state library.)* If you're going to buy a copy, do it through Dory's link on the E-R.org website and Amazon.com will send a couple nickels to his server fund.

The book discusses lifestyle issues & questions with a bit of investing theory.* Heavy number-crunching is limited to the appendices and isn't necessary to enjoy the stories.* (We'll recognize several of this board's posters in the book.)

Bob fully retired over four years ago but began to realize that (1) he was concerned about his ER portfolio survival and (2) he still felt like working.* His compromise has been "early semi-retirement" with as much work as he wants, interrupted by family time & long vacations.* He doesn't work for a specific length of time or a certain amount of money, just enough to sleep well at night.* It's more of an avocation-- part of his "work" is researching & writing this book, drawn from the experiences of those who have fully ER'd as well as those who have compromised or even gone back to full-time employment.

He points out that it doesn't take as much as you'd expect to ER, and many do it on the mid-six figures.* While most people ER because they don't like their current employment or because they want to do other things, for many the full ER decision may be complicated by lifestyle compromises-- low-cost living areas, cashing in the home equity, and living frugally.* Some make a barebones portfolio go farther by living abroad.* Other couples have earned dual incomes for two or three decades and retire comfortably with paid-off mortgages, kids, plenty of travel, & luxury entertainment.* The two biggest challenges are affordable healthcare and beating inflation.* Lifestyles are as varied as the ERs, and boredom is more a pre-retirement fear than an ER affliction.* He doesn't tell you what to do all day, but he shows you that it's not a problem.

His research on portfolios and safe withdrawal rates is an unexpected bonus.* He studies a variety of "rational investing portfolios" by building on Bernstein & Bogle with extensive backtesting from a DFA advisor.* The portfolios are evenly split between stocks & bonds but prefer a tilt toward smaller caps, value, and international.* Additional classes can be added to the mix (REITs, commodities) or not-- it could be as simple as just buying Vanguard Wellington.* Most of the investments are index mutual funds (especially Vanguard) or low-fee ETFs.* The most diversified RIP (16 asset classes) returned 9.5% annually over 16 years with less than 8% volatility.* (The biggest problem with the backtesting is finding appropriate long-term performance data for the more exotic asset classes.)* Simpler portfolios have been backtested for much longer with lower volatility than the S&P500 or even a 60/40 S&P500/T-bill mix.* Of course Wellington goes back to the 1920s.

His SWR approach improves greatly on today's calculators.* While most of the calculators are designed to adjust withdrawals for inflation, none of them allow the user to vary the withdrawal rate.* We'd like to feel comfortable about taking out a little more money in good years or to know how much to tighten our belts in down years.* If nothing else, we'd like to rebalance by selling off winning stocks in bull markets or by drawing down bonds in bear markets.* Bob's compromise is to combine the RIP techniques with a reduced SWR during down years.* He used the DFA Matrix Book's 78-year returns and Ibbotson's Treasury data to test rolling periods from 1927 to today.* It gives you an initial withdrawal rate of between 4-5% each year -- rising and falling with portfolio performance.* In years of down markets, spending was limited to 95% of the previous year's withdrawal but picked back up in the year that the markets recovered.* While many studies argue that a safe withdrawal rate should be 2-3%, a rational investing portfolio with this withdrawal method produced survivable SWRs of 4-4.5% for decades.* A 4% SWR survived 40 years with 100% success.* Of course this success rate is tempered by referring to Bernstein's "Calculator from Hell" articles.

RIP & 95% SWR are important concepts, but they don't get in the way of the stories.* Many people have met the same ER challenges that others are struggling with, and a great lifestyle costs less than you'd think.* This book bridges the planning gap between Young Dreamers & full-time ER.
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Re: Book report: "Work Less, Live More"
Old 11-11-2005, 10:45 AM   #2
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Re: Book report: "Work Less, Live More"

My son bought the book for me for my birthday a few days ago. I am about half way through it and I think it will be of use to a lot of people. (My favorite is still Get A Life, but that may be as with Your Money Or Your Life it was the spark, not the details that counted.)
I am about half way through the book and it is challenging for me as it restructures retirement too much for me. I think the book is exactly about its title Work Less, Live More rather than retiring early. What I mean by this is I see retirement as more of a clean break from work. It the regular work world there are people who take work home, when needed I will come in early, work late or work weekends, but I will not bring work home. I know people who can work from home, I am not one of them. Retirement is that way for me. Now I understand I will be busy and maybe I may even make a few bucks for helping out a friend or giving advice but its not a job to me.
I think the advice in the book will suit the "new" structure of employment where people hold many different jobs and employeers in their career. I am with the last of the dinosaurs who worked 30+ years for the same place and will retire from it. So those folks who are going to be the vast majority can plug the advice from WLLM right into their flow of jobs and financial planning.
I think Bob will understand how this would be true for folks like me. My favorite line in the book so far: "Its a sad irony of our system that so many have no work, while others have too much."
Still have half a book to go, I'm looking forward to the Don't Blow It chapter.
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Re: Book report: "Work Less, Live More"
Old 11-12-2005, 06:57 AM   #3
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Re: Book report: "Work Less, Live More"

Quote:
I think Bob will understand how this would be true for folks like me. My favorite line in the book so far: "Its a sad irony of our system that so many have no work, while others have too much."
I think people feel that they need more money to survive. Another reason is that they feel they must put in more hours just to stay employed. This is my favorite one - they just love their work so that it is play instead.
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Re: Book report: "Work Less, Live More"
Old 11-12-2005, 09:14 AM   #4
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Re: Book report: "Work Less, Live More"

I've been reading the book for a week now.* *My interim report:* This is a Dagwood sandwich of a book.* It is filled to the brim with all sorts of good meaty information.* Not everything in the book is relevant to every reader, but I think almost anyone will find something of interest.* Pull out the stuff you like best, and set the rest aside.

For some posters on this board it will be a compilation of things they already know.* I find it just right for me right now -* it isn't over my head, but neither is it one of those books that seems to just regurgitate what everyone already knows.* * This weekend I'm hoping to have time to really absorb the SWR and portfolio chapters.

I would recommend it to anyone who has a general sense that they want to ER but are not sure if they're ready.

Yakers is correct that the general focus is on "work less" not necessarily "retire."* It really does make you think about what you want to do with your future -* gets you out of the mindset of "I hate this job, I have to get out at any cost" and into thinking about what you really want.

It is a great combination of thought provoking concepts with facts and figures.
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Re: Book report: "Work Less, Live More"
Old 11-14-2005, 01:47 PM   #5
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Re: Book report: "Work Less, Live More"

I posted this topic on a couple other boards, too, including M*'s Vanguard Diehards.

I'm reminded of why we have it so good here.* ***** has been lurking there for a while but the SWR acronym brought him out from under the bridge.* However this time he's attracted the attention (or ire) of that board's heavy hitters and 56 posts later they're still going at it... the funny thing is that even with ***** on my "Ignore Poster" list you have no trouble following the conversation.

Anyway, Bob, I guess there's no such thing as bad publicity.* At least my fellow Hawaiian resident PatPatoh is buying a copy.
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Re: Book report: "Work Less, Live More"
Old 11-14-2005, 04:00 PM   #6
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Re: Book report: "Work Less, Live More"

That was quite a storm on the Diehards board. More comments on a book review by people who had not read the book than I can believe 63 posts and still growing.

I do hope that Mr Hs comments actually lead people to read the book.
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Re: Book report: "Work Less, Live More"
Old 11-14-2005, 05:14 PM   #7
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Re: Book report: "Work Less, Live More"

Yakers,
A noble sentiment!
And I hope they buy it through the link on this board, where Amazon will give Dory a buck or so a copy to help keep the computer juice flowing.

Reading the DieHards thread is a pleasant reminder of how tranquil things are over here now these days.

As to the merits of the argument, I'll let readers decide. One thing people will see when they do read the SWR method, though, is that 'success' is measured not by whether the portfolio retains a positive balance, but by whether the portfolio balance keeps up in real terms over time.

That higher bar gives real ERs a much higher standard of safety over the long run. It does involve, however, adjusting annual withdrawals in the light of market performance over the previous year, and thus either doing a bit of belt-tightening or maybe even a bit of part-time work during lean years. You won't get an automatic inflation adjustment every year, but neither will you be sweating out a slow-motion trainwreck in your portfolio if you happen to ER during a particularly bad initial period. My sense is that real retirees do this anyway, so the method simply reflects that behavior.

This technique, coupled with having a well-diversified low-volatility portfolio, helps create better probabilities (this is all about probability, after all) that the portfolio value will keep up with inflation over time. Historically, you don't get any of the frightening scenarios where a portfolio crashes and burns down to zero (the most important bottom line we have). If you fall behind inflation by 10 percent or so over the course of 10 or 20 years, that may be depressing, but it is not catastrophic. (This happens in about 20% of the historical cases). 10-20 years is plenty of time to adjust to a decrease in real spending power of 10%.

ERs have needed something like this which gives them a very high confidence in having a reasonably good outcome, with a 4-4.5% withdrawal rate.

Ratcheting withdrawals down to 2 or 2.5% simply puts ER out of reach for too many, and is unnecessarily conservative. But using a withdrawal method which asks you to 'fiddle while Rome burns' is not what ERs need, either. I think the method presented in the book (with supporting data tables), worked out with Keith Marbach of Zunna, and tested on 78 years of historical data, is good news for ERs.
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Re: Book report: "Work Less, Live More"
Old 11-14-2005, 08:46 PM   #8
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Re: Book report: "Work Less, Live More"

Quote:
Originally Posted by davew894
I never really understood how moving to a low-cost living area is somehow a compromise.
I was talking about leaving a place you like (for example, Oahu) and having to move somewhere cheaper that you don't care for so much (e.g., anyplace with winter).
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Re: Book report: "Work Less, Live More"
Old 11-14-2005, 09:18 PM   #9
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Re: Book report: "Work Less, Live More"

Same here, with the Pacific NW -* I could sell this house, and buy a similar one in Ohio, Indiana, Iowa, or some other less-costly place and have an extra $150,000 in the bank.
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Re: Book report: "Work Less, Live More"
Old 11-14-2005, 11:28 PM   #10
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Re: Book report: "Work Less, Live More"

Same here, with San Francisco - I could sell this house, and buy a similar one in Oregon, Washington, or some other less-costly place and have an extra $150,000-300,000 in the bank.



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Re: Book report: "Work Less, Live More"
Old 11-15-2005, 08:15 AM   #11
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Re: Book report: "Work Less, Live More"



I guess we should feel sorry for the poor saps at the end of the line who who can't move anywhere and still reap a profit....
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Re: Book report: "Work Less, Live More"
Old 11-15-2005, 08:24 AM   #12
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Re: Book report: "Work Less, Live More"

You're welcome... :P
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Re: Book report: "Work Less, Live More"
Old 11-15-2005, 03:32 PM   #13
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Re: Book report: "Work Less, Live More"

Quote:
Originally Posted by Sheryl
Same here, with the Pacific NW -* I could sell this house, and buy a similar one in Ohio, Indiana, Iowa, or some other less-costly place and have an extra $150,000 in the bank.
Sure you could see and move but the real question is, would you be happy living in those states? I can't see me living there; been there done that, don't want to do it again. I could also see and move back South again and were it not for the spouse and her need to stay near family I would do so. I could get a very nice house on a lake with year-round water access and still have some significant cash to live on for quite a while.

Sometimes you just have to do what makes sense in your life without regard for the $$$ side of it. I am just glad she doesn't want to move back to CA.
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Re: Book report: "Work Less, Live More"
Old 11-15-2005, 04:22 PM   #14
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Re: Book report: "Work Less, Live More"

I am living in the Midwest now and planning to move to the North West when retirement is on the horizon.
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Re: Book report: "Work Less, Live More"
Old 11-16-2005, 06:18 PM   #15
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Re: Book report: "Work Less, Live More"

looks like my public library ordered 4 copies.
I'm number 13 in line - there is hope I might be able to read it this year
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Re: Book report: "Work Less, Live More"
Old 11-16-2005, 06:21 PM   #16
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Re: Book report: "Work Less, Live More"

My library doesn't have the book, so I bought it and will donate it to them when I've finished reading it. Thanks for the donation suggestions Nords.
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Re: Book report: "Work Less, Live More"
Old 11-16-2005, 08:35 PM   #17
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Re: Book report: "Work Less, Live More"

Just recieved my copy (QUICK shipping!!) from Amazon - very exciting as our family is going out of town for vacation on Friday. It is so nice to have a new book to read for vacation! Thanks ESR Bob - I will give my report after we return.

Happy Thanksgiving, everyone!

Jane
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Re: Book report: "Work Less, Live More"
Old 11-16-2005, 08:45 PM   #18
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Re: Book report: "Work Less, Live More"

Quote:
Originally Posted by sailor
looks like my public library ordered 4 copies.
I'm number 13 in line - there is hope I might be able to read it this year
Sailor, are you pulling our leg? Does a single library actually order multiple copies? If so, may I ask where you live?

Glad to hear people are getting shipments delivered and enjoying the book. Hey, if Sailor is right, maybe we all need to order _several_ copies to donate to our local libraries : Just make sure you order it through Dory's link at the bottom of these pages-- Amazon will get a little less but our board's server will keep getting its daily dose of computer juice... (plus vitamins, carrots and a new pair of tennis shoes)

I appreciate feedback and an open discussion of anything in the book -- good, bad and ugly -- either here or through the email address set up for the book, bob@workless-livemore.com. Since I am tasked with coming out with a new edition every few years, your feedback and corrections will help the book become better over time. thanks, all.
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Re: Book report: "Work Less, Live More"
Old 11-17-2005, 07:47 AM   #19
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Re: Book report: "Work Less, Live More"

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Originally Posted by ESRBob
Sailor, are you pulling our leg?* Does a single library actually order multiple copies?* If so, may I ask where you live?
Our state library orders multiple copies of the "Hot Picks" and, budget permitting, whatever has over 50 requests backlogged. Logging in at one branch is the same as browsing all the state's library branches; it's neat to get a book from Molokai or Hana and realize that it had to be flown in for free. My tax dollars at work!

A librarian's worst nightmare is having a book mentioned on Oprah or Dr. Phil. The mere mention of a previously unknown book or author will spike the requests by 300 or 400 a day, and that's just here in Hawaii. So, Bob, send those guys an e-mail!
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Re: Book report: "Work Less, Live More"
Old 11-17-2005, 09:10 AM   #20
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Re: Book report: "Work Less, Live More"

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Sailor, are you pulling our leg? Does a single library actually order multiple copies? If so, may I ask where you live?
Gwinnett County, Georgia - suburbs of Atlanta.
and you can check yourself: http://twain.gwinnettpl.org, search on your last name brings the book.
Four copies in transit from headquaters - and I'm down to number 8 so obviously somebody read it quickly.
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