Those who wish to educate themselves about retirement planning have a lot of books to choose from. Most people, however, have the bandwidth to read maybe one or two books on the subject. The challenge becomes how to pick the best comprehensive guide.
A good choice is “Your Complete Guide to a Successful and Secure Retirement” (Harriman House) by Lawrence Swedroe and Kevin Grogan, experts in retirement planning. It covers every major aspect of retirement, and the authors helpfully draw upon specialists in each subject area and provide references for readers interested in learning more about a specific topic.
Some of the most informative topics are investment planning strategy, portfolio maintenance, preparing your heirs, retirement planning issues specifically for women, and the dangers of financial abuse, especially as people age.
The book identifies significant errors to avoid. One that many retirees don’t appreciate is “sequence risk” — the failure “to consider that the order of returns matters.” Returns on a portfolio are not constant, and systematic withdrawals during bear markets can cause the value of the portfolio to fall to unsafe levels. A later chapter details strategies that will give you the greatest chance of ensuring that your assets will last your lifetime.
Other potential planning errors are underestimating your income requirements during retirement; being too conservative; failing to provide for a spouse; underestimating the importance and need for diversification; and underestimating inflation risks.
One of the most important issues in retirement is asset allocation. This is the primary determination of the expected return and risk of a portfolio. The chapter devoted to asset allocation, both before and during retirement, covers reasons to increase equity exposure as well as reasons to reduce it. For example, some of the reasons to increase equity exposure are long life expectancy, high level of job stability, high risk tolerance, the need for higher returns to reach financial goals, and access to multiple streams of stable income. Reasons to reduce equity exposure are the opposite: high net-worth investors and retirees in the later stages of retirement have less of a need for a high equity exposure. This chapter also discusses factors such as U.S. equities vs. international equities, emerging markets, small-cap vs. large-cap stocks related to historical risk patterns.
The book also comprehensively covers Medicare; the proper roles of annuities and insurance, including long-term care options; health savings accounts, which have many tax advantages; and when to consider reverse mortgages. Reverse mortgages can be a relatively expensive means of borrowing, yet even an expensive reverse mortgage may be appropriate for individuals who place a greater value on remaining in their home and maintaining their independence. In the appropriate situation, these mortgages can be a valuable tool allowing you to maintain a higher standard of living than person would otherwise be able to do, while remaining in the home.
A chapter on “Women’s Unique Retirement Issues” notes several challenges many women face: lower earnings; longer expected life; fewer years of earned income; lower confidence about investing skills; lower likelihood to marry after a gray divorce (divorce over age 50); greater susceptibility to elder abuse; and the statistical likelihood to dying single, divorced or widowed. This chapter emphasizes that women can mitigate the impact of these factors with the right knowledge and actions. Included is a financial empowerment checklist which will increase retirement preparedness.
An essential chapter is devoted to estate planning. The core estate planning documents are discussed, including the durable power of attorney for health care and living will, durable power of attorney for finances, a pour-over will, and a discussion of the advantages of revocable trusts and the use of irrevocable trusts. The importance of selecting a competent estate planning attorney is emphasized. A related chapter, “Preparing Your Heirs,” lists questions that can help determine if your heirs are prepared.
The book is not all about financial matters. The authors discuss topics not generally covered in retirement planning books, such as aligning your activities consistent with your life purpose, volunteering, maintaining healthy relationships, and growing through mental activities. All of these activities have played a significant role in my retirement over the last 20 years. I recommend this book highly.
(Article written by Elliot Raphaelson)