With a catchy title like You Can Retire Sooner Than You Think, by Wes Moss, I was intrigued to see what this book has to offer. It was a pretty quick read and I’d like to share some highlights from the book. This review is for the Kindle version of the book, which at the time of this writing, has a 4.5 star rating with 235 customer reviews.
Before reading this book, I had not heard of Wes Moss before. He is a Certified Financial Planner in the Atlanta area and hosts a weekly radio show called Money Matters. The radio show is also available as a podcast, but I didn’t like the format of the podcast as it’s essentially the radio show with the commercials cut out.
The book starts out with the familiar question – Does Money Buy Happiness? Of course not exactly, but having enough money can sure make things easier. Moss points out that at its most fundamental level, money provides three things: safety, health, and freedom. Just about everyone on the planet can see how money can help provide safety and health (assuming you take care of yourself). Those of us in the FIRE community are probably most interested in the third variable, freedom.
Moss does point out that there is a ‘plateau effect’, where after a certain level of wealth, the level of increased happiness diminishes after some point. I tend to agree with that philosophy. Money is a means to reach your purpose, not the other way around.
Part One – Happy Retiree Basics
Given that Wes is a Certified Financial Planner, he surveyed more than 1,350 retirees across 46 states to see what makes a happy 🙂 retiree. All throughout the book, retiree (or soon to be retired) stories are provided to show ‘real life’ examples of what people are doing in their retirement and how they got there. In regards to ‘happy’ retirees, his survey showed that are active, have core pursuits, have multiple income streams, and live by the ‘Goldilocks principle‘ – not too frugal, not too spendy, just right in the middle.
Having something to do, a purpose in your life, is important once you retire. Now that you’ve saved up all the money and are financially independent, what are you going to do with your time? Identifying core pursuits is key for me and our previous post on Filling Your Time In Early Retirement shares some of the things I’m looking forward to. Do you know what you are going to do?
This section of the book does present a few odd claims that I don’t see providing much value. For example, there is a section on automobiles that discusses ditching BMW and buying the Asian brands. I suppose his clients that have BMWs are unhappy and the one with Lexus’ are happy. There are a few other statements in regards to hobbies that I don’t agree with, but I guess he is just reporting his survey findings.
Most of the remainder of Part One of the book sets up Part Two, which lays out the author’s Five Money Secrets:
- Purpose – Determine what you want and need your retirement money for
- Savings – Figure out how much money you need to save before you retire
- Mortgage – Pay off your mortgage in as little as five years
- Income – Develop an income stream from three to four sources, not just one
- Income Investing – Become an income investor
Let’s move on to Part Two of the book and say a little about each of these areas.
This chapter of the book starts off with a lengthy story of a couple that is looking to retire and all of the things they plan on doing. The reason is to show the importance of purpose – figuring out what you want and need your retirement money for. Their story provides all their financial details and how they will be able to accomplish their purpose and goals in retirement. It’s a pretty long story that boils down to: what do you want to do with your life at this point? A key point being, it isn’t about the money; rather it’s about the money providing the framework for the life you want to live.
The key point in this chapter is what Moss calls the ‘$1,000 Bucks A Month Rule’. Basically, for every $1,000 per month you want in retirement, you need to have $240,000 saved. This is based on a 5% withdrawal rate. Although the 5% rate is higher than what most plan for (e.g. the magic 4% withdrawal rate commonly mentioned), his point is that you should be able to get 4% yield as an income investor. Therefore, you are only drawing down 1% of principal per year. I understand the math he presents, but I tend to be more conservative and an inflation worry-wart. Therefore, I’m not comfortable with a 5% withdrawal rate.
A good portion of this chapter covers the 4% rule and why Moss believes that it still has merit, for those who are income investors. He is very bullish on income investing, even before retirement, and I see the value in his arguments.
The later part of the chapter discusses the TSL approach to saving: Taxes, Savings, Life. His advice is to strive for the following percentage breakdown for every dollar you earn during your working years (pre-retirement):
- Taxes: 30% to cover federal and state taxes
- Savings: 20% to 401(k) and other savings
- Life: 50% for food, housing, fun, and everything else
Money Secret #3 is paying off your mortgage early. If you’ve read some of our previous posts (Our Early Retirement Goals or More About Our Mortgage Payoff Goal), you know that we are big fans of paying off your mortgage early (if you have one). As Moss points out, paying off a mortgage by the time you retire will bring enormous peace of mind. Not too mention that there is no guarantee that the market will outperform your mortgage interest rate.
A few other suggestions include keeping your mortgage payment below 15% of your gross monthly income and the One-Third Rule. The One-Third rule is if you can pay off your mortgage with no more than one-third of you non-retirement savings, then consider writing that check today. Although we’ve thought about that in the past, we really need to work on building up our ‘gap year’ savings.
It’s all about the income streams. Moss presents the topic of multiple income streams with some nice analogies to rivers, lakes, and tributaries. Once your BIG money streams (your current paycheck income) stop, you want to have multiple income streams in place, no matter how small. Going from steady paychecks every two weeks to relying on other sources of income can be a mental roadblock for some people. I can see how the fear of not having a paycheck would lead some people to work longer than they need to.
A few potential income streams suggested in this chapter include:
- Part-time work
- Social Security
- Pension income
- Rental income
- Investment income
For us, our biggest contributor will be investment income. I suppose we will likely get some Social Security, but I’d prefer to not count too much on that. In regards to pension income, Mrs. Need2Save will be getting a small amount from her first employer out of college. Although I don’t want to rely on part-time work, I think we will have occasions throughout retirement where we do some part-time work that interests us. Then you’ve got rental income… just not sure if we are cut out to be landlords.
As I mentioned earlier, Moss is a big proponent of income investing at any age. He points out that income investing is a way to generate consistent cash flow from your investments. This is accomplished through Dividends, Interest, Distributions (DID). If you are still in the accumulation phase, you should reinvest that income. If you are in the distribution phase, you may choose to live off of the cash flow.
Moss spends a good amount of time on his bucket system. He establishes four (4) buckets for your money:
- Cash – This is your safe money. Things like CD and money market accounts that currently only pay around 1.0%
- Income – Primarily made up of bonds. Treasuries, corporate bonds, junk bonds, etc.
- Growth – A mix of stocks. Some with a focus on growth and others that pay dividends
- Alternative Income – Hybrid investments like REITs, MLPs, ERTs, etc.
You want all of these buckets to provide cash flow, although the Growth bucket may not provide much if you are targeting capital appreciation.
The Remainder of the Book
I only skimmed through the remaining chapters of the book. There are a couple chapters on managing risk, but I feel pretty comfortable in that area. If anything, I’m probably overly conservative and risk averse. The last chapter seemed to rehash the first section of the book, so I skipped it.
What action did we take after reading this book?
Honestly, not much. I did pick up a few useful tips and the analogies for the income streams was useful. I imagine the book would have been more useful if I wasn’t already involved in the FIRE community and well versed in most of the topics covered in the book.
Overall it was a decent book and at $9 for the Kindle version, it wasn’t too much to spend. At around 280 pages, there is obviously a lot of material that I didn’t cover. You may want to check out a sample of the book on Amazon to see if it can provide value for you.
Have you read any good personal finance books lately that you would recommend? If so, tell us and name 3 of the top reasons why you liked the book.