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_by_the_Bay]

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]

now reading Ray Lucia's book

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 . 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]

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_by_the_Bay]

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

 

[mathjak107]

my entire strategy is fidelity monitor/ fidelity insight news letters meets ray lucia's buckets. for me its a perfect marriage. the numbers work out so you never ever worry about selling stock in a down market, it gives you real numbers as to how much for living now, how much for the next 7-14 years and the stock portion can be just as aggressive as if you were 20 years old.

the thing i like is i can hand tailer a different portfolio for each time frame.

i use banks ,cd's ,momey markets and soon guaranteed indexed annuities for bucket 1

bucket2 is fidelity monitors income and preservation model portfolio plus an international bond fund , fidelity strategic income and my un-listed reit generating 8-1/2% thrown in.

3 is divided up between fidelity monitors growth and income model and fidelity insights growth model.

what can i say, its been financial bliss for years since going this route. i like structure and i like real amounts rather than just a hodge podge of say 60/40

 

[2B]

Hey! What can I say about a guy that recommends annuities, load mutual funds and high fee/illiquid REITs. Nothing good.

The "keep enough cash to meet a few years expenses" is pretty basic and obvious advice. As for "never selling in a down market" you can never know when a "down" market is the best you'll see for 10 years. "Down" has a way of becoming "lower still."

I found his books to be superficial and obvious. The "buckets" concept has some interest except it's a rehash of asset allocation with a little market timing thrown in.

If you contact RL, you'll find he's happy to create a plan, sell you some stuff and take a nice fee for the trouble. To broaden his impact, he has "affiliates" in many cities so he doesn't miss a rube.

 

[SamHouston]

Hey! What can I say about a guy that recommends annuities, load mutual funds and high fee/illiquid REITs. Nothing good.

The "keep enough cash to meet a few years expenses" is pretty basic and obvious advice. As for "never selling in a down market" you can never know when a "down" market is the best you'll see for 10 years. "Down" has a way of becoming "lower still."

I found his books to be superficial and obvious. The "buckets" concept has some interest except it's a rehash of asset allocation with a little market timing thrown in.

If you contact RL, you'll find he's happy to create a plan, sell you some stuff and take a nice fee for the trouble. To broaden his impact, he has "affiliates" in many cities so he doesn't miss a rube.

Ouch...

 

[mathjak107]

i have to disagee on quite a few points 2b. i never heard him recommend any high fee funds , i own an un-listed reit, which i couldnt be happier with. its averaged over 17-1/2 % over almost 7 years and pouring off 8-1/2 % in income. . its not one of the ones he mentions on his website but i would never have even looked at owning one if it wasnt for him discussing them.

as far as annuities, well i dont want to start another annuties discussion but all annuities are not alike. im finding definite purposes for some types.

i intend to even add 2 types which are very low fee, have guaranteed floors of return and are indexed linked. i can add another 1 to 1-1/2% in return to my cash bucket by utilizing them. again ,ideas i took from reading his book.

 

[Rich_by_the_Bay]

Like mathjak I find some value in the book. In addition to what's been cited, I like the idea of self-annuitizing your cash account (in 7-year chunks, for example) rather than sipping and rebalancing all the time. It provides peace of mind in the form of predictability (you don't have to transfer funds from stocks or bonds every year or two), and reduces the temptation (in fact the obligation) of fiddling and rebalancing often.

I also like the division of assets in buckets which correspond to the time each asset type requires to virtually assure profitability. That is, stocks will likely sit 14 years, bonds 7 years, and cash just a few years on average. Left alone for those durations, it is unlikely any will be tapped before they have grown well, at least by historic standards. Buckets help novices like me keep good boundaries in that regard.

So I don't see anything revolutionary compared, say, to Frank Armstrong's and others' approach but Lucia's methodology resonates with me. I feel I understand it, I like its simplicity (though it can get complex if that's your thing) and it's flexible if necessary. You can be aggressive or conservative within this framework.

I do not plan untraded REITs, annuities, or anything with a front end cost, and it still works for me. Each to his own.

 

[ziggy29]

I found his books to be superficial and obvious. The "buckets" concept has some interest except it's a rehash of asset allocation with a little market timing thrown in.

This pretty much nails it. The asset allocation piece is obvious -- allocate (say) five years of withdrawals to ultra-safe stuff, another 5-10 years in 'medium' risk/return stuff and the rest in equities. That, I think, is a very sound plan -- most specifically it helps prevent a need to sell equities in a down market and keeps enough 'safe stuff' to weather most bear markets -- and makes more sense than fixed percentage allocation recommendations. If you only need 1% of your portfolio per year for retirement income, you don't need 40% in bonds and cash! On the other hand, someone with a typical 3-4% withdrawal rate might be well-served with a simple percentage allocation such as 60/40.

The "market timing" aspect comes because at some point you need to move some of your 'bucket 3' money (the stocks) into the safer buckets as you burn the contents of bucket 1. This is the part I would struggle with, I think. There might be different mechanical ways to do this (which would be good for me because I'd rather not make an emotional decision about when to sell some equities). That might be a strategy that sold a certain amount from Bucket 3 depending on how much Bucket 3 rose in a 6-12 month period. For example: Up less than 5% a year, don't move anything; up 5-10%, move 5% into Bucket 1/2; up 10-20%, move 8% into Bucket 1/2, et cetera.

And then you may also have to make the same decision with Bucket 2 and when the transfer to Bucket 1.

This adds guesswork and perhaps emotional decision-making into the maintenance of a 'bucketized' portfolio...but as far as a concept goes, it's very sound.

 

[hogwild]

I have both of Ray's books. I am currently reading the second book for the second time.
I highly recommend that you read the first book to get the "buckets" concept down. You may not need the second book, especially if you don't buy into the concept. The second book drills down a little deeper. I don't particularly care for the interview method he uses, but that's a matter of taste.
I do plan to follow the buckets concept for post retirement (about a 19 months from now). Of course, it is partly asset allocation, but it is more than just that.
For those not familiar with Ray, you can listen to archives of his show here:
Business TalkRadio.net - The Ray Lucia Show

The archives allow you to skip all the commercials.

 

[mathjak107]

i can tell you this, if it wasnt for the discipline and definite structure of the buckets i would have found it very difficult to invest as aggressivly as i can and do in bucket3. left to a traditional 60/40 hodge podge i would have gone more growth and income funds than growth funds at this point.

my bucket 3 is still a full blown growth portfolio.

 

[Brat]

I too am using the bucket approach in managing our IRAs.

Fidelity called yesterday and requested we come in as DH will be at in required minimum distributions starting next year. So, I put his traditional IRA total in a spreadsheet and unless the market tanks by 12/31 our distributions next year will increase by 25% above what we have been withdrawing. Oh!!!

OK, we are cheap retirees and pinch every penny before we spend it, our withdrawals have been less than 4% so far and my bucket 1 was based on that behavior. So, that means that I need to increase the size of bucket 1 from a 4-gallon to a 5-gallon size because our withdrawals will be larger.

Selling the house next year will also increase our interest income. Humm. As my grandson might say, time to pull out my handy-dandy notebook and make a plan.

 

[mathjak107]

what i like about rays idea of utilizing both a fixed rate tax defered annuity with guaranteed floor and a index linked variable annuity with capital guarantee is you get the best of both worlds unlike a bond.

if rates rise the fixed rate annuity gets re-adjusted every year to the higher rate. if rates drop you have the guarantee of the min rate set but the index linked annuity should do good as when rates fall unless its a full blown recession stocks do very well bolstering your rate.

overall i have a plan for utilizing these in bucket 2 to enhance the return of the" relatively safe money"

 

[Rich_by_the_Bay]

what i like about rays idea of utilizing both a fixed rate tax defered annuity with guaranteed floor and a index linked variable annuity with capital guarantee is you get the best of both worlds unlike a bond.

With the usual disclosure that buckets hold no magic and are not for everyone...the bucket concept accommodates people like you who are interested in more complex or strategic type of investing, but also people like me who are considerably less sophisticated in our decisions and choices. I plan primarily on short term bonds for B1, Wellesley and a dollop of TIPs for B2, a total mkt, traded REIT fund, and Total intnl for B3.

Either way, keeping B1 burning and annuitized in one form or another, keeping your cotton pickin' fingers off B2 for about 7 years, and basically letting the big dogs run for 14 years in B3 is good discipline for me. Other than a light rebalancing once in while, it's pretty maintenance-free if you want it to be.

 

[mathjak107]

thats why i like the idea of treating each bucket as its own little portfolio hand tailored for that requirement. simple to do, easy to track , even easier to see where adjustments are needed.

i used to do the 1 big hodge podge right up uintil about 2 years ago, and after trying the bucket stratagy i was very happy with how it worked for the next phase of our lives. "its no longer about maxamizing gains and growing richer, now its about not getting poorer

 

[ferco]

Rich In Tampa

Is there a reason for using Wellesley instead of Wellington for Bucket II?

Also, if one were actually in ER would a CD ladder work better than short term bonds for Bucket I?

Are you planning for a Bucket I duration of 4, 5, 6 or 7 years and what is your rationale?

Ferco

 

[mathjak107]

Rich In Tampa

Is there a reason for using Wellesley instead of Wellington for Bucket II?

Also, if one were actually in ER would a CD ladder work better than short term bonds for Bucket I?

Are you planning for a Bucket I duration of 4, 5, 6 or 7 years and what is your rationale?

Ferco

short term bonds are better in bucket 2, anything that can change principal value shouldnt really be in bucket 1. cd's money markets, the bank are all great bucket 1 types

 

[2B]

Like mathjak I find some value in the book. In addition to what's been cited, I like the idea of self-annuitizing your cash account (in 7-year chunks, for example) rather than sipping and rebalancing all the time. It provides peace of mind in the form of predictability (you don't have to transfer funds from stocks or bonds every year or two), and reduces the temptation (in fact the obligation) of fiddling and rebalancing often.

I do not plan untraded REITs, annuities, or anything with a front end cost, and it still works for me. Each to his own.

The concept of timing and "level of certainty" is what I see as the best concept from his books. When I read his first book, I got all excited that this was a new approach with a higher certainty of success. When I actually started looking at how my assets were set up, it didn't change anything. As I looked at it in more detail, it seemed just an obvious part of asset allocation and cash flow planning.

Of course, being me, I quickly dropped any thought of including closed end REITs or fancy annuity products. I do not willingly lose liquidity or pay front end fees. There are publically traded versions that create the same result that won't leave you trapped if you need the cash or lose faith in your asset management.

In past annuity discussions I kept repeating (perhaps ad nauseum ) about self-annuities with CDs or govt paper yielding a better return than your local insurance company annuity and with a higher credit rating. I also have never accepted the concept of giving away principal for "income you can't outlive." I've seen the damages of inflation and the impact of defaults too many times to trust a smiling salesman.

I'll repeat Rich's comment of "to each his own." Mathjak is certainly into a lot more of the sophisticated investment products than I would feel comfortable with but we all get to plan for our own futures. Mathjak is also playing in a different financial league than I am so I might become more "sophisticated" if my assets enlarged suddenly.

 

[Rich_by_the_Bay]

Rich In Tampa

Is there a reason for using Wellesley instead of Wellington for Bucket II?

Also, if one were actually in ER would a CD ladder work better than short term bonds for Bucket I?

Are you planning for a Bucket I duration of 4, 5, 6 or 7 years and what is your rationale?

Wellington is a fine choice, too. I went with Wellesley only because it is a little more conservative for my Bucket 2 mindset (at 35:65 versus 65:35). For B1 short term bonds are one of the options which even Lucia recommends; while there may be some gentle fluctuation of principle, in the Vgd STF Bond fund this is minimal and the incremental increase in returns makes it very comfortable for me.

A CD ladder would work well, though I prefer not having to futz around with it, add a rung every year, split among institutions to seal your FDIC coverage, mild loss of liquidity, etc.

I chose a 7 yr duration for B1 and B2 because it is conservative (a good thing for my temperament) and the arithmetic with a 4-4.5% SWR puts you about 50% in equities which is my target. Perhaps more importantly, if you buy in to the safety-means-time-in-the-market approach for each asset class, that puts you in very confident historic boundaries. That is, bonds are very safe if held for 6-7 years; stocks the same over 12-15 years, and cash shouldn't be subject to much fluctuation at all.

It's interesting how the same framework is good for naive conservative investors like me and also for the mathjaks of the world who prefer a more active or sophisticated investment style. It suggests to me that the basic tenets are sound.

That's how I look at the Bucket approach. I've contemplated this quite a while, and have a spreadsheet model using Present Value calculations for B1 and B2 balance allocation. This seems to meet my needs, but I'm always open to suggestions.

 

[mathjak107]

the different stratagys are less about how much money you have and more about opening our eyes to other types of invsetments. GULP!yes even those that may have a charge for the price of admission.

as savey investors we have been well trained to close our eyes to things that have a price of admission and yes i was guilty too.

case in point was if you read our discussion on un-listed reits. would there be not one of us who would not have given up less that 1% a year to get 7% interest during the early 2,000's when bonds and money markets were under 1% at times. and to get an amazing capital gains distribution a few months ago when the property was sold. all with as much risk as a quality corporate bond .

we run at the word annuities, but the new low cost ones while stinky stock investments because of charges and fees they work great to bolster income from bonds money markets and cd's with hardly anymore risk.

key word is risk... and we have lots of products out there that work well when used outside the box of what they were designed for so you spend an extra 6 cents or so and get back an extra 7-8 cents[....... not much in the world of stocks but that could be an extra 20% in the fixed income world