Smarter Retirement

Last Updated Sep 9, 2009 5:02 PM EDT

If you retired in the past year, your timing was more than unfortunate. The rapidly shifting sands have altered the way we'll think of retirement going forward, and you can be sure it will never be the same again. Which is why it's so fortunate that Daniel Solin has just come out with a new book, "The Smartest Retirement Book You'll Ever Read." Dan has a true gift for making complex subjects simple, and here are a few tidbits of wisdom from this new book.

The biggest risk is not taking risk
Sure, we may have inflation on a choke chain right now, but there has to be a consequence down the line for all of this money we've been printing. Dan notes that the most conservative of portfolios are destined to be eaten up by taxes and inflation. The only thing I can think of that is riskier than keeping our nest eggs all cash is moving into and out of the stock market. Because you can bet those irrational instincts cause us to time things poorly.

The best stock pick is not to pick any individual stocks
Unless Bill Gates is reading this (and give me a ring if you are), you don't have enough money to diversify with individual stocks. The solution is indexing, though brokers will tell you that you are shooting for average. Don't believe them for a minute because the index investor trounces the professionals! Picking an allocation can be difficult but target-date retirement funds can be helpful and automatically rebalance for us. I do think, however, that we can locate assets for more tax-efficiency so I rarely use them.

Why settle for an index bond return?
Dan notes there is no free lunch when it comes to getting enhanced returns on bonds. Morningstar shows that the average bond mutual fund in 2008 lost 8.0% while the unsexy Vanguard Total Bond Index Fund (VBMFX) earned 5.1%.

How you should spend your money?
Now that you've built that nest egg, how much money can you spend? Dan does a nice job of addressing these complex issues. He will show you how to intelligently tap your nest egg to stretch it out longer. One hint -- adjust your withdrawal rates according to market conditions. Someone who retired in September last year who was in the stock market should be rethinking what their safe spend rate should be.

The Senior Trap
Dan explores the disgrace of how many in the financial field rob seniors of theirnest eggs. There are many designations that take a day or two to get, or prestigious plaques such as the 2009 Top Financial Planner Awards by the Consumer's Research Council of America, awarded to my dog Max. Dan identifies the "free meal" approach to stealing one's nest egg.

Dan leaves us with ten actionable "golden rules" that can help us retire smarter. He makes them seem very simple but just like in investing, simple retirement isn't easy. We have emotions, too many people that want to "help" us, and of course the media!

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    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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