Book Review: The Number– What is a Safe Withdrawal Rate?
Every once in while, a really great book comes out. If you only read one financial book this year, I highly recommend The Number by Lee Eisenburg. In a nutshell, The Number is about formulating your personal retirement strategy not just the monetary nest egg. What makes this book so unique is that it isn’t written by an investment guru or anyone remotely involved in the financial industry.
For those who just want to mechanically calculate The Number for themselves, go to the appendix in the back of the book and in about ten minutes you’ll crank out your answer. But that isn’t really what the book is all about. The Number is based largely upon what is going on in the United States and the issues facing everyone and their eventual retirement. While the book’s landscape is south of the border there are a lot of similarities to Canada and even a few direct references. The book is written in three parts.
Part one focuses on where you are. The retirement landscape is changing. One chapter deals with “Debt Warp” whereby he states “our whip it out credit card culture makes it so easy to buy stuff that people delude themselves into thinking that they are more affluent, better set for the future, than they are”. It’s time to step back and get a handle on our financial plan.
Part Two is about putting things in order. He lays out a particular scenario of a family as he calls them his crash test dummies. It’s intended to show us just what might happen, if we continue to do what we do. Were living longer and that may mean “Put at its crudest, the advances in medicine are enabling more of us to achieve senility.” He writes about Mr. Four Percent. This in a nutshell, is his recommendation for a safe withdrawal rate for retirement funds. Forget about using long term average returns of say seven or eight percent, because if you start your retirement during a bear market, the long term average could draw-down your portfolio into an unrecoverable state.
Part Three discusses how retirement has changed and it’s no longer retire at 55 and sit around. It’s simply a transition from one potentially long-term career focus to possibly a whole new set of choices. Again, this is what sets this book apart from all other books I have ready. You have to set aside some time to discover what it is you’re really going to do with the rest of your life. When you figure that out, The Number for you will have meaning.
If you plan to retire in the next 10-15 years, this is a must read.
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