Bests & Worsts Reviews from Amazon

The book is very well written, easy to read, informative, yet really unpractical. The author is bent on rendering a not so complex issue really Byzantine. The amount of money you need to retire so your lifespan does not exceed the one of your retirement portfolio is not that complicated of an issue. Let's say you want to retire on $100,000 a year. Assuming that you and your spouse will pull $30,000 a year from Social Security, and $20,000 a year from old defined benefit pension plans; you have a gap of $50,000. As a short cut, you can use the Dividend Discount Model to value stock. Using a conservative after tax investment return of 7.5% and a long term inflation rate of 2.5%, by dividing $50,000 by (7.5% - 2.5%) you need $1,000,000 in your own retirement funds (401K, IRAs) to retire. In reality, you need a bit less because the Dividend Discount Model assumes you live forever. However, the author ponders on the above number for over 250 pages. What if the Social Security system is semi-privatized as the Bush administration is talking about? If you are over 55, the current system is grandfathered. Given Bush momentum, Social Security reform as of now is not forthcoming anyway. How about if your employer goes bust, and your pension evaporates. Depending on who is your employer this may be an unlikely outcome. Otherwise, the Government picks up the tab and typically pays you at least 50 to 75 cents on the dollar. If this is a concern, use just 50% to 75% of your expected pension income in the calculation mentioned above. The author mentions other complications including the fallacy of using average returns in your calculations and instead using Monte Carlo simulation method. Now some mutual fund companies have included Monte Carlo engines within their retirement advice section of their websites. This is however not for the faint of heart from a quantitative standpoint. A nifty short cut around it, is to use different scenarios with overly conservative investment returns (within the calculation shown in above paragraph) to explore some "what if" worst cases. The author has also a very strange idea of what the middle class is. He clearly confuses the Easterners top deciles with annual income over $200,000, net worth in the millions, and very self-actualized and successful careers with what the middle class really is. Well, people like that really don't have to worry much about the numbers. For the author and this group, it is pretty easy to say retirement planning is a lot more than just about the numbers. If you want practical advice on retirement planning and investing, let me recommend a far superior book: "The Random Walk Guide to Investing" by Burton G. Malkiel.