Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Misgivings Regarding Otar's "Unveiling The Retirement Myth"
Old 09-10-2014, 12:21 PM   #1
Full time employment: Posting here.
 
Join Date: Jun 2013
Posts: 620
Misgivings Regarding Otar's "Unveiling The Retirement Myth"

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.
__________________

__________________
Which Roger is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-10-2014, 01:44 PM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,860
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.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 09-10-2014, 01:54 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
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.
__________________
Options is offline   Reply With Quote
Old 09-10-2014, 02:25 PM   #4
Full time employment: Posting here.
 
Join Date: Jun 2013
Posts: 620
Quote:
Originally Posted by Options View Post
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.
__________________
Which Roger is offline   Reply With Quote
Old 09-10-2014, 03:44 PM   #5
Recycles dryer sheets
 
Join Date: Jul 2013
Posts: 388
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.
__________________
mrfeh is offline   Reply With Quote
Old 09-10-2014, 03:51 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
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: Otar: Unveiling the Retirement Myth

And luck does play a MAJOR component in decumulation, so no way getting around that.
__________________
LOL! is offline   Reply With Quote
Old 09-11-2014, 06:14 AM   #7
Recycles dryer sheets
 
Join Date: Nov 2013
Location: Hartford
Posts: 103
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.
__________________

__________________
ImThinkin2019 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2011 ORC Otar Retirement Calculator Help REattempt FIRE and Money 3 06-02-2011 07:58 PM
Unveiling the Retirement Myth by Jim Otar nico08 FIRE and Money 3 01-08-2011 04:04 PM
Otar: Unveiling the Retirement Myth LOL! FIRE and Money 140 12-24-2010 10:39 PM
Potus Budget Plan Unveiling on 2/23 crazy connie FIRE and Money 30 02-22-2009 03:21 PM

 

 
All times are GMT -6. The time now is 07:52 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.