Ray Lucia's new book

[modhatter]

Who has read it? I have read his first book and wondered if the second one was different enough to buy. Don't remember the name of it. Any new information or ideas in his second book? I actually looked for it in the book store yesterday, but they only had his first book. Thought maybe it hadn't come out yet.

[Rich_in_Tampa]

Quote:

Originally Posted by modhatter Who has read it? I have read his first book and wondered if the second one was different enough to buy. Don't remember the name of it. Any new information or ideas in his second book? I actually looked for it in the book store yesterday, but they only had his first book. Thought maybe it hadn't come out yet.

I browsed it yesterday: Ready, Set, Retire.

Much the same stuff, a bit better explained. Still alot on fixed annuities and nontraded REITs, which I skipped over.

[Jake46]

Frankly, I don't think it adds much. It's got this interesting dialog with an imaginary couple who are clients. But I'm sorry I bought it.
Jake46

[smileydog]

I have not read the previous book but I about half way through "ready set retire". Ray Lucia has some non-conventional ideas that I am in the process of trying to sort through :confused:. I would be curious to know if anyone on this board has tried any of his methods. I'm still in the preparation phase - several years away from totally pulling the plug so I'm open to new ideas. The part about having a cash cushion sounds right on but I am nervious about any sort of annuities - although they may be right in some situations.

[SamHouston]

Quote:

Originally Posted by Jake46 Frankly, I don't think it adds much. It's got this interesting dialog with an imaginary couple who are clients. But I'm sorry I bought it. Jake46

Same here...I've read about 2/3 of it now but I can't seem to get motivated enough by what I've read to pick it up and read the last 1/3. It's very repetitious and the imaginary couple idea was great for a while but it all started to sound very "canned" after a while. It's like the man is talking with a couple of trained parrots. I grew bored with the whole thing.

[Rich_in_Tampa]

I agree, Sam. His second, Ready Set Retire, book is of little added value. Still, I like and have adopted some of the concepts of his Buckets of Money book in my personal planning.

For example, I like the idea of setting aside cash enough in B1 to self-annuitize for xx years (6 or 7 in my case) which encourages you to leave the Buckets 2 and 3 untouched for a while. In the first book he implies that you burn through B1, then move on to do the same for B2; in the second book he admits that all the while you do a little light rebalancing annually and never drop below 2 years of expenses in B2.

In the end, it's all just a traditional 4% SWR / "don't sell low" approach, but the mechanics of doing so are elegantly laid out and minimize the human temptation to monkey around with your holdings too often and too much.

For me, it's shaping up as a Bogle meets Lucia hybrid .

[Brat]

I'm with Rich here.

Every investment author has their own approach. From each I learn something of use. I like his 'bucket' way of structuring assets in retirement, no other author has discussed the concerns of a retired investor.

Do I swallow his advise hook, line and sinker? NO, but no different than that of any other advisor. I am not sold on un-traded REITs or load mutual funds (he thinks they supress trading, not that they have higher returns). For some retired folks an immediate annuity as a part of an investment strategy may make good sense, it depends.

Whether you think his buckets hold water or not, I think it works for many of us.

I gave this book to my brother (who is retired) for his birthday. If he doesn't want it he can re-gift it back to me.

I listen to his radio show on the web. There is no doubt that he knows a lot about a lot of financial matters and is one of the more knowledgable authors/commentatiors overall.

One of the reasons I gave it to my brother is that he has a SO who can help him filter Ray's opinions. Would I have given it to my Dad who would not think it through? No way!

[mathjak107]

i follow his bucket strategy. works great for me. i found the 2nd book to be very dry reading as it basically contains the how to and nuts and bolts the first book was missing. i skipped quite a few parts and i really like ray but i just couldnt get thru some of the chapters without loosing interest.


i did get some good ideas from the book,particulary using market indexed annuties with guarnateed floors and rates to enhance not your stock mix which they do pretty crappily but your income bucket.

the extra kicker in good market times and the guaranteed floors in bad times can acually add a full point or more to to your cd,money market and bank buckets

[WilliamG]

What rules of thumb do you use/plan to use in re-balancing buckets along the way? I currently have a 50/35/15 asset allocation that I like to think of somewhat in a bucket structure. Would a time independent re-balancing strategy using allocation ranges not work here? E.g,
Stock 45-55%
Bond 30-40%
Reserve 12-18%
You live out of reserve and then quarterly evaluate ranges and only shift between buckets when out of range.

[Rich_in_Tampa]

Quote:

Originally Posted by WilliamG What rules of thumb do you use/plan to use in re-balancing buckets along the way? I currently have a 50/35/15 asset allocation that I like to think of somewhat in a bucket structure.

Careful - a true bucket system is very different from a "bucket sorta like these are my buckets" system when it comes to rebalancing.

For example, in a true bucket system, your cash bucket is intended to shrink by 4% a year or so, burning up completely in the process. You basically don't rebalance into it other than every 7 years or so (or whatever your selected interval is).

There is some rebalancing between buckets 2 and 3, but that is intended to be light. Finally, you do rebalance within bucket 3 in the traditional way - when it's well out of kilter, or every year or two.

[WilliamG]

Thanks for the reply Rich. Yes, I just got off Ray's web site after running his demo and I see your point.

Still, I kinda like this approach. Rebalancing on ranges allows the long and intermediate allocations (buckets) to run a little bit without a mechanical rebalancing on time while also not letting the overall portfolio get too strangely disproportioned. If you route most dividends and interest to bucket 1, rebalances should be infrequent but hopefully the min-max on each bucket will cause a shift at opportune times (rather than when a clock runs out) .

[mathjak107]

dividends and interest are already figured into sustaining bucket 1. the origional capital you put in is say 7 years less what ever the interest and dividends you would accumulate over time. to make things work all you need as an example is 4% on bucket 1, 5% on bucket 2 , 7-8% on 3 .

your risk now only need match the buckets goal.

[ziggy29]

Quote:

Originally Posted by WilliamG What rules of thumb do you use/plan to use in re-balancing buckets along the way? I currently have a 50/35/15 asset allocation that I like to think of somewhat in a bucket structure. Would a time independent re-balancing strategy using allocation ranges not work here? E.g, Stock 45-55% Bond 30-40% Reserve 12-18% You live out of reserve and then quarterly evaluate ranges and only shift between buckets when out of range.

Ray Lucia's "buckets" don't allocate fixed percentages to asset classes, but "years of income."

Someone who only needs 1% of their retirement portfolio might only have 5-10% of it in Bucket 1, whereas someone who needs 4% of it might keep 20-30% in Bucket 1.

This probably makes more sense than a traditional fixed allocation such as 70/30 or 60/40; someone who needs only 1% per year probably doesn't need 40% in bonds and can easily afford a more aggressive mix. As I (and others) said before, though, the fly in the ointment is that there is an element of market timing to this in terms of deciding when to move from Bucket 3 to Bucket 2, and from Bucket 2 to Bucket 1.

[mathjak107]

good point , we are talking years worth of money in allocations between buckets not in terms of gains. this strategy is not about gains, its about meeting the goal you need to sustain the income you need. theres a big difference . i only need to achieve 7% annual average return to meet my goal so i can pull the income i want. i dont have to put any more capital than needed to do this at risk. i can run each of buckets 1 and 2 a full 7 years each. i never have to sweat if this time the drop thats coming will be year 2000 again.

[modhatter]

I am reading the book now, and I can tell you that there is one point that I didn't like. Ray states in his book on a couple of occasions that the future gains for the stock market are probably not going to equal what they did in the past and estimates total returns more along the 6.5 to 7% range.

Yet when he makes his comarisons of using the traditional 4 or 5% withdrawl method compared to his bucket stratagy, he always uses a 10% gain in bucket # 3 with a substantial ending balance to demonstrate what good shape you will be in at the end of 14 or 15 yrs.

I feel this is misleading, and he needs to be consistant with his numbers in his probable scenerios. Over all, I am not critisizing the book or stratagy. I think it is a very conservative and safer withdrawel plan for retired investors. But you always hope that the author for the book you just paid good money for is on the up and up, and truly believes in what they are advocating, and not just compiling words to make millions off another book.

But in all fairness, I have not finished the book, and I may have missed something. So stay tuned and I'LL BE BACK.

[ats5g]

Does Lucia, or even Grangaard for that matter, provide any actual historical simulations to back up their claims that the bucketing approach is better than X,Y, or Z approach? I read "The Grangaard Strategy" and "Buckets of Money" and have yet to see this data.

Anyone?

- Alec

[mathjak107]

Quote:

Originally Posted by modhatter I am reading the book now, and I can tell you that there is one point that I didn't like. Ray states in his book on a couple of occasions that the future gains for the stock market are probably not going to equal what they did in the past and estimates total returns more along the 6.5 to 7% range. Yet when he makes his comarisons of using the traditional 4 or 5% withdrawl method compared to his bucket stratagy, he always uses a 10% gain in bucket # 3 with a substantial ending balance to demonstrate what good shape you will be in at the end of 14 or 15 yrs. I feel this is misleading, and he needs to be consistant with his numbers in his probable scenerios. Over all, I am not critisizing the book or stratagy. I think it is a very conservative and safer withdrawel plan for retired investors. But you always hope that the author for the book you just paid good money for is on the up and up, and truly believes in what they are advocating, and not just compiling words to make millions off another book. But in all fairness, I have not finished the book, and I may have missed something. So stay tuned and I'LL BE BACK.

based on rays calulations to make my plan work he figured 4% on bucket 1 ... 5% bucket 2......... 6% bucket 3a growth and income...... and bucket 3b is 8% . i dont remember seeing 10% used in any calculation,. i only remember him refrencing the fact that the markets have returned around 10% on average

[WilliamG]

"dividends and interest are already figured into sustaining bucket 1."

That means bucket 3 & 2 dividends are routed to bucket 1 rather than re-invested? Regardless, it still seems like some method to gradually/ sporadically move money to bucket 1 over time without waiting for it to completely deplete would be desirable.

[mathjak107]

Quote:

Originally Posted by WilliamG "dividends and interest are already figured into sustaining bucket 1." That means bucket 3 & 2 dividends are routed to bucket 1 rather than re-invested? Regardless, it still seems like some method to gradually/ sporadically move money to bucket 1 over time without waiting for it to completely deplete would be desirable.

bucket 1 dividends and interest are figured initially in bucket 1. the other buckets can compound. i find the easiest way to refill buckets is whenever you have some nice gains take some profits out of 3 and refill 1 and 2 restoring them to another 14 year time frame.

[WilliamG]

"i find the easiest way to refill buckets is whenever you have some nice gains take some profits out of 3 and refill 1 and 2 restoring them to another 14 year time frame."

Well then you're doing what I would feel more comfortable with. Somehow you must decide when to pull the trigger on plumping buckets to another 14 year timeframe, but basically the buckets are just another manner of crafting a portfolio's allocation.

ps - have read a couple of articles lately recommending less rather than more re-balancing activity. the buckets seems to be an approach which will result in relatively infrequent tinkering which I think is probably a good thing.