Jim Otar's Book

[ducky911]

+1 Photoguy and I seem to agree completely on this so far.

I really WANT to like this book, so I re-read the first 150 pages and the last 80-100 pages last night. To me the math seemed trivial at best and left me thinking, "and...so?" His writing was tedious, disorganized, and didn't really say anything that isn't obvious IMO. He didn't summarize enough and to me he did not seem especially insightful. I especially loathed his initial examples like the guy who retired with a million dollar portfolio and withdrew $60K/year starting at the great depression, and didn't vary his withdrawals. 6%? Ya think? Who would DO that? It's as though he was writing his book in the 1990's when everyone was wearing rose-colored glasses.

OK, OK, don't beat me up for this post. I'll try reading the middle of the book again tonight. I am really, really trying to keep an open mind. Maybe I was in a negative mood.

Thankyou i thought i was in the minority.

You can retire on on million with 60 k a year if you buy an annuity from Jim.

I felt like i was reading a big sale pitch or watching an infomercial. Make it real hard and people will hire an advisor.

If you look at the web site that was giving the free pdf it has much of the same info.

I for one am not drinking the coolaid.

 

[misty57]

I had similar feelings although admittedly I read only the first ~100 pages. Will get around to the rest one of these days. I realize a lot of people really like the book. And for $6, you can't go too wrong. But I wouldn't spend $50 for it.

I thought it was going to be a good book after quickly thumbing through the pages. Lots of equations, tables, and figures. Cool. But I found the presentation to be somewhat unpolished. Better editing would have been useful.

I guess I would have to agree with you on that point.

I also have to admit that there was a point in my reading that I wondered if it was just going to end up being a 500+ page pitch for annuities, and I'm sure that there are some that might feel that way, depending on which zone they are in. I just glossed over all the annuity stuff and moved on in using the material to help me determine what our ISWR should be when DH retires and for that, I found it to be very helpful - more so than anything else that I have read.

We have spent many, many years saving and we want to be a little bit more liberal with regard to spending in retirement while still being a little bit more conservative with our AA. Otar helped me see that we could do this and still not run out of money; FIRECalc confirmed it.

 

[LOL!]

Here is an earlier thread on the book from a few years ago: http://www.early-retirement.org/forums/f28/otar-unveiling-the-retirement-myth-45922.html

A theme of the 2012 thread (this thread) seems to be "Oh yeah, we already know all that." Of course you do. His book has been out a while and most of the ideas have percolated into the blogosphere and this forum.

From that other thread:

A main theme throughout the book is that quite a bit of retirement success can come from being "lucky". Lucky with your sequence of returns, lucky with your sequence of withdrawals, lucky in the year you retire, and so on. A successful full-term retirement of 30 years cannot be predicted ahead of time because not everyone lives at the median results. In order to overcome "bad luck", one must have a larger starting portfolio than many people (but not FIRECalc users) expect and/or a lower sustainable withdrawal rate (SWR) that goes with that.

 

[W2R]

Here is an earlier thread on the book from a few years ago: http://www.early-retirement.org/forums/f28/otar-unveiling-the-retirement-myth-45922.html

A theme of the 2012 thread (this thread) seems to be "Oh yeah, we already know all that." Of course you do. His book has been out a while and most of the ideas have percolated into the blogosphere and this forum.

From that other thread:

Some of my posts from that other thread (the one that you started, and linked to above):

I guess I am lucky because I missed the "free" stage, and so I have only seen the one chapter which was still provided for free. I was not impressed. I take it that the rest of the book is much better. If/when I can skim through some of the rest of it at B&N or Amazon, if I like it then I might buy it for full price. But otherwise, no way. Cheap is nice (free is nicer!), but my time is worth something too.

Otar is probably a very bright and insightful engineer. Who am I to say he isn't? However engineering expertise doesn't necessarily imply expertise in other areas, and like many very bright and talented people, Otar may have assumed otherwise and may not realize where the boundaries of his expertise lie. That is what I meant by poor judgment.

I've got to say that the 8% withdrawal rate which he mentions (among others) is simply out of the question for me personally, whether or not my portfolio increases during the first four years! Others may differ.

According to this paper in which he discusses the zones, I am one of those cautious green zone types.

The idea that anyone posting negatively about this book changed their mind due to the passage of time would be as ridiculous as saying that his ideas have drastically altered opinions in "the blogosphere" and forum, IMO. I don't even agree with many of his ideas (such as those concerning the supposed lack of effectiveness of diversification and rebalancing), and didn't back then, either. And certainly the idea of an SWR was discussed on this board ad nauseum before that book was introduced here by "LOL!".

I did get a copy of the book less than a week after my last post there, read it at that time, and was unimpressed. There were many posts on that thread by "LOL!" and others who were enamored with the book at that time and probably still are. When it was brought up again, I re-read it and had the same personal opinions as I did the first time and re-posted them on this thread with more detail. Nothing too hard to comprehend, here.

I'm sure "LOL!" and others who love the book probably adore it still and that's fine, too. What would a discussion board be without varying opinions? But some of us, including me, tend to agree with ducky911 and even think the book is almost an ad for Otar's annuities:

You can retire on on million with 60 k a year if you buy an annuity from Jim.

I felt like i was reading a big sale pitch or watching an infomercial. Make it real hard and people will hire an advisor.

If you look at the web site that was giving the free pdf it has much of the same info.

I for one am not drinking the coolaid.

 

[Ed_The_Gypsy]

Numbers is hard.

Barbie

 

[unclemick]

Numbers is hard.

Barbie

I'm glad I retired in 1993 before I "knew' a lot of this stuff. But then I went thru a period of 'unemployed slacker with a cheap SOB attitude'. Discovering this forum I instantly transformed into a warm and smarmy ER - often blowing myself a kiss in the mirror. Or something.



heh heh heh -

 

[REattempt]

Active management....

I think the perspective that Jim is advocating active management to be wrong....in his conclusion to the entire book, here is one of his "tenents":

"The average person has little or no hope of achieving anywhere close to index returns. Most mutual fund managers are either no different than the average investor, or worse. There are plenty of ETF's available. You can put together a well-diversified portfolio with four or fiver differnet ETFs. I prefer broad based fundamental index funds."

YMMV.

 

[Ed_The_Gypsy]

And I agree I was startled at the first few examples until I realized they were 6% WR's, unrealistic to be polite.

The "6%" did not just fall out of the sky.

At one time 6% was widely touted as a sound SWR, as many here will recall.

I suspect Mr. O. wanted to kill that idea up front if a reader was still entertaining 6%.

 

[Major Tom]

The "6%" did not just fall out of the sky.

At one time 6% was widely touted as a sound SWR, as many here will recall.

I suspect Mr. O. wanted to kill that idea up front if a reader was still entertaining 6%.

I only wish that 6% was a safe WR. I'd be living in hog heaven right now

 

[Midpack]

I only wish that 6% was a safe WR. I'd be living in hog heaven right now

For 30 years, 6% would have been safe 48.6% of the time without Soc Sec, and 82.9% of the time with $16K/yr in Soc Sec. No recommendation, just what FIRECALC returns...

 

[misty57]

The "6%" did not just fall out of the sky.

At one time 6% was widely touted as a sound SWR, as many here will recall.

I suspect Mr. O. wanted to kill that idea up front if a reader was still entertaining 6%.

Before I read URM, I had no clue what was considered "safe" or sustainable anymore. Otar's information about the luck factor in light of what had happened to the market in 2008 was very telling. We've decided on a ISWR of less than 2.5% and have a little extra on the side that we can spend throwing caution to the wind.

 

[Major Tom]

For 30 years, 6% would have been safe 48.6% of the time without Soc Sec, and 82.9% of the time with $16K/yr in Soc Sec. No recommendation, just what FIRECALC returns...

Midpack, you've just given me a whole new way of looking at WR's.

Firecalc tells me that with my AA, a WR of just over 7% will give me a success rate of 12.5%!

Do I feel lucky? Well, do ya, punk?

 

[Finance Dave]

I found it here: http://www.retailinvestor.org/pdf/JimOtar2.pdf

Thank link appears to be dead for me, are you folks still seeing it?

 

[Major Tom]

Thank link appears to be dead for me, are you folks still seeing it?

Post 42 in this thread will tell you what happened to it.

 

[seraphim]

Doesn't he even mention Fire Calc?

If he mentioned FireClac he couldn't sell his $99 spreadsheet.

Fore those needed free and compatible Microsoft Office Suite, use OpenOffice.org: it's a open source clone developed for Linux and ported to windows, and the authors consistently update and there's online support for users (third party).

 

[Midpack]

Midpack, you've just given me a whole new way of looking at WR's.

Firecalc tells me that with my AA, a WR of just over 7% will give me a success rate of 12.5%!

Do I feel lucky? Well, do ya, punk?

Nope...

 

[Finance Dave]

For those looking for the free version of the book as listed in the second link in this thread...Jim asked them to remove the link and the book from their site.

They removed the link and the file.

Ah, thanks. Sometimes I don't read all the pages of posts LOL.

 

[moguls]

Just finished Otar's book. A good read and worth the $5.99, but a couple of comments.

First off I agree that his frequent use of 6 (sometimes 5%) WR is out of line for most, if not all members of this forum.

For fixed income he mosty uses the 6mo CD rate +1%. That seems a little low for the entire fix income portion of a portfolio.

And, he rather consistently uses a 2% managment fee. Wow, who's paying that? And what would his SWRs look like with a more modest fee structure?

Finally, he really seems to like annuities. Even for the senarios for the guy who is in Otar's "green" zone, his senarios mostly involve using annuities.

Just my 2 cents worth.

 

[LOL!]

Otar is Canadian. Many Canadian's pay MER's in the 2%. They do not have enlightened low-expense-ratio providers of financial services. Europe may be even worse.

SPIA's are a great way to shift longevity risk to an insurance company. Once again, Otar is Canadian. He doesn't really address the fact that in the US, Social Security is essentially an inflation-adjusted SPIA that helps insure against longevity risk.

 

[Midpack]

Finally, he really seems to like annuities. Even for the senarios for the guy who is in Otar's "green" zone, his senarios mostly involve using annuities.

He certainly talks about annuities a lot, but I didn't read the "green zone" the way you did. While I hope to avoid buying an annuity, if I find myself in the gray or especially red zone, I think an annuity has to be a very serious consideration. YMMV

 

[stevelb]

I agree with Midpack. See the chart on page 470 of the book. Also @ page 471:

Conclusion:
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]If you are in the green zone, then any reasonable income allocation strategy works. If you want additional income security, you can build ladders for annuities, VA–GMWB’s and VA–GMIB’s. The rungs of the ladders can be one year apart or several years apart. You have the freedom to choose any strategy that makes sense. [/FONT]
[FONT=Times New Roman,Times New Roman]You do not need any miracles and you do not need to take unusual risks. Ordinary market index within a balanced portfolio provides a lifelong income, and then some. If you do not like the risks of the equity markets at all and you don’t like annuities, in many cases a bond portfolio will give you all you need, provided that your are in the green zone and don’t live beyond age 94. [/FONT]

Happy that I am in the Green zone!!! I have learned quite a lot from this book and only wish Mr. Otar would publish more of his knowledge as time changes some of his findings and viewpoints.

[/FONT]

 

[Fttaw]

I missed this thread but found Jim's book through LOL!'s post #18 in this thread:
http://www.early-retirement.org/forums/f28/modeling-options-for-early-retirement-61988.html

I shelled out the $5.99 and found it well worth it. The discussion about the equity to bonds ratio (its not critical) was eye opening and worth the cost of admission just for that section. I'm not a big fan of math and I admit there were many times I glossed over sections, but the way it was written really did seem to allow some skimming while still getting the general idea.

I read it on a Nook and much of the formatting of charts were lost so if your local library has it, you may prefer the hard copy format. The charts do look fine when I open the pdf on my computer though.