Solin - The Smartest Retirement Book Youll Ever Read

THE SMARTEST
RETIREMENT BOOK
YOULL EVER READ

Also by Daniel R. Solin

DOES YOUR BROKER OWE YOU MONEY?

THE SMARTEST INVESTMENT BOOK YOULL EVER READ

THE SMARTEST 401(K) BOOK YOULL EVER READ

THE SMARTEST
RETIREMENT BOOK
YOULL EVER READ

Daniel R. Solin

A PERIGEE BOOK

A PERIGEE BOOK

Published by the Penguin Group

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Copyright 2009 by Daniel R. Solin

Cover design by Elizabeth Sheehan

Text design by Tiffany Estreicher

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PRINTING HISTORY

Perigee hardcover edition / September 2009

Perigee trade paperback edition / August 2010

The Library of Congress has cataloged the Perigee hardcover edition as follows:

Solin, Daniel R.

The smartest retirement book youll ever read / Daniel R. Solin.

p. cm.

A Perigee book.

Includes bibliographical references and index.

ISBN: 978-1-101-13369-9

1. Retirement incomeUnited StatesPlanning. 2. InvestmentsUnited States. 3. Finance, PersonalUnited States. 4. Older peopleUnited StatesFinance, Personal. I. Title.

HG179.S55238 2009

332.024014dc22

2009014075

PRINTED IN THE UNITED STATES OF AMERICA

10 9 8 7 6 5 4 3 2 1

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To all of my colleagues who continue to fight the good fight: The tide is turning.

The (Tall) Tale of Dr. Ivan Jenner

If you cant explain it simply, you dont understand it well enough.

Albert Einstein

Ivan Jenner was a German engineer whose fascination with the elevator industry brought him to the United States in 1902.

Dr. Jenner, who held a doctorate in mechanical engineering from the prestigious Universitt Karlsruhe, had followed in his familys tradition; his father and grandfather were both engineers.

In school he studied the work of Elisha Graves Otis, the founder of Otis elevators. After graduation, Dr. Jenner accepted a job with Otis and moved to the United States, where the company was based. His first assignment was to plan the design and installation of six vertical hydraulic elevators in the Flatiron Building in New York City.

In 1910, Dr. Jenner left Otis and established himself as an elevator consultant, quickly becoming well known for his expertise in the burgeoning industry.

One day he received a call from the owner of one of New Yorks largest high-rises. The building manager was inundated with complaints about the long wait for elevators. A number of elevator companies had been approached to study the problem, but the quotes just to do the analysis were prohibitively expensive.

Now tenants were threatening to leave. Could Dr. Jenner assist? There was much at stake.

Dr. Jenner was sure he could solve the problem. He asked for an up-front retainer of $1,000. He offered a full refund if the complaints did not stop.

The building manager agreed: He was ready to do whatever was necessary to appease the tenants. He figured he would be spending much, much more to implement the proposed changes.

Dr. Jenner went to work, studying all aspects of the elevators in the building. The elevators were working perfectly, and their response efficiency was state of the art. The solution to the complaints came to Dr. Jenner almost immediately.

What must I do? the owner asked.

Dr. Jenners answer: Install mirrors next to the elevators on every floor.

The owner followed this suggestion. The complaints stopped.

I made this story up.

But this tale does illustrate some points that are important to retirees and those planning for retirement.

The financial industry and employers have their own agenda.

They are determined to push expensive products down your throat. The fact is that simple, commonsense solutions are often better than complex, costly ones.

Keep this one concept in mind as you start the retirement journey: The advice you receive from many retirement experts is distorted, misguided, and, as often as not, self-serving.

The goal of this book is to give you the tools youll need to identify and easily resolve the issues you will confront in retirement, from investing to estate planning.

My recommended solutions are no more complicated than Dr. Jenners.

Authors Note

I am not affiliated with any of the fund families in the recommended portfolios in this book. I recommend funds managed by Dimensional Fund Advisors to my investment advisory clients but receive no compensation from that firm for doing so.

PART ONE

Rethink Retirement Investing

How you invest during retirement is as critical as how you invest in preparing for retirement. Things are never as simple and automatic as they once may have beenyou worked hard, saved, and then sat back and collected your benefits. You cant rely on someone else coming up with the cash youll need once you stop working.

CHAPTER 1

Deflating Inflation

Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.

Sam Ewing, humorist

R etirees should be as concerned about investing their retirement nest eggs as they are about withdrawing from themthe 2008 market crash exacerbated these concerns and makes this issue even more critical.

Fortunately, Smart Investing before or during retirement is not difficult. While youll hear lots of ballyhoo about the special investment needs of retirees, the basic investment rulesthe Smart Investing rulesare the same for everyone, no matter what their age or stage of their investing lives.