Misgivings Regarding Otar's "Unveiling The Retirement Myth"

[Which Roger]

I've read the first few chapters of Otar's "Unveiling The Retirement Myth" and have some serious misgivings. I'm interested in hearing what others who have read this think, particularly whether things get better later on and he addresses these issues.

The message I've gotten so far is that luck is the overriding determinant of a portfolio's survivability. He devotes chapters to explaining why the other factors that the conventional wisdom says are important (asset allocation, diversification, rebalancing,...) really don't matter much. There are two major problems with his analysis. First and foremost, he uses a 6% withdrawal rate (plus high expense ratios) in most of his examples. Any investor who is sophisticated and interested enough to pick up the book already knows that 6% is excessive and that anyone who chooses that path is at the mercy of lady luck and will more likely than not die broke, regardless of how the portfolio is structured. An analysis of the other factors using a reasonable withdrawal rate would have been much more meaningful, and I think that analyzing the conventional wisdom in the context of unconventional wisdom (i.e., an excessive withdrawal rate) is misleading.

Second, he is mixing a factor over which we have no control (luck) with factors over which we do have control (asset allocation, diversification, rebalancing). But providing analysis using a withdrawal rate that is doomed to fail prevents him from showing the effect of the other factors.

Finally, in the chapter on rebalancing, he recommends rebalancing in presidential election years. This smacks of confusing correlation with causation, and he must know better than that.

 

[W2R]

This post will get some emotional responses, I am sure! I'd guess that the majority of our members could be said to attend the virtual "Church of Otar" and think he can do no wrong, but I don't care for his book either. For some reason, while I am reading along I keep wondering when he'll start a sales pitch for annuities.

I prefer other investment books that I have read. Some of those I like are included on the Bogleheads book list. They mention William Bernstein, Larry Swedroe, Rick Ferri, and John Bogle as acceptable authors, and I like their works.

 

[Options]

You lost me at "I've read the first few chapters"...Unless I misunderstood, you haven't read the book in its entirety (if I misunderstood, please forgive the misunderstanding). I read all of the book more than a few times. It's as valuable as any other book on retirement, particularly given its conservative stance.

What's interesting to me--and been helpful at the same time--is the conservative and/or safety first approach that Pfau, Bernstein, Otar and others take. It's helped make me more conservative (and safe, presumably) as a result.

 

[Which Roger]

You lost me at "I've read the first few chapters"...Unless I misunderstood, you haven't read the book in its entirety (if I misunderstood, please forgive the misunderstanding). I read all of the book more than a few times. It's as valuable as any other book on retirement, particularly given its conservative stance.

What's interesting to me--and been helpful at the same time--is the conservative and/or safety first approach that Pfau, Bernstein, Otar and others take. It's helped make me more conservative (and safe, presumably) as a result.

Correct, I've only read the first few chapters, which raised my concerns, and thus my comment in the original post that "I'm interested in hearing what others who have read this think, particularly whether things get better later on and he addresses these issues." Based on your reply, it seems that things may indeed get better.

 

[mrfeh]

I read the book earlier this year.

I found it interesting, especially in that it contradicts some rules of thumb and accepted practices. I think it is useful that people understand (especially those that have saved and planned for retirement according to "the rules") that a bad sequence of returns can lay waste to a good plan.

I also found it interesting that he is much more likely than the average "expert" to recommend SPIAs.

I'm not saying all other advice should be thrown out in favor of Otar's...just that it's useful to read another well contemplated opinion. Finish the book and let us know your thoughts.

 

[LOL!]

The use of 6% was a criticism when the book first came out. It is only used for illustrative purposes, so not to worry.

The threads when the book was first known to the forum have some reviews.

Here is one from 2009: http://www.early-retirement.org/forums/f28/otar-unveiling-the-retirement-myth-45922.html

And luck does play a MAJOR component in decumulation, so no way getting around that.

 

[ImThinkin2019]

I read the entire book and consider it another good perspective on retirement planning. I think Jim Otar is a smart dude.

I especially like the fact that he's conservative.

The reason he brought up annuities is for those people who don't have enough assets to weather a period of "bad luck" investment returns. In those cases, he suggests offloading the risk to an insurance company in return for a guaranteed income stream.

All that being said, I did not use his retirement planner. I did my own thing.