I have read a variety of "how to" books about retirement, some of which are covered in the Library.  But this book stands out among them because it provides the reader with a very specific roadmap for determining when they can safely exit employment.

The author, a tax attorney, took his retirement in 1981 at the age of 29, and before the stock market meltdown of 1987.  So he has walked his talk and in the process, he experienced the sting of great doubt.  Instead of quitting, he remade himself and renewed his commitment to remain financially free.  And he succeeded.  His book spells out what he has learned as an investor and as a survivor.

The first chapter "Can You Retire Today?" provides the author's formula.  And it is, for me anyway, easy to follow.  Define your annual spending needs, including taxes.  Then determine how much capital you have to invest.  Project your future increases in spending . what he calls personal inflation.  And finally determine your required necessary annual return.  Let's look at an example.

 Assume that Susan needs $4,000 a month for living expenses.  That's $48,000 per year.  Plug in income taxes and let's say that brings her needs to $60,000 total.  Now compare that amount with investment capital that she has.  Assume it is $1 million.  That tells you that she must earn a 6% average return to produce $60,000 in cash flow.  But that ignores inflation, and inflation must be factored in.  3% is a reasonable amount based on historical average.  Using that, Susan would require a 9% return to both satisfy her cash needs and inflation proof her investments.

 Is 9% a reasonable expectation?  I believe it is, but the true answer depends upon what type of investing she does.  Everyone is different in this regard, but knowing yourself determines whether it is appropriate to pull the trigger.

 Assume another candidate, let's call him George, has the identical cash needs as Susan.  The only difference is that his investments add up to $500,000.  He would require a 15% average return ($60,000 / $500,000 + 3%).  Is 15% a reasonable expectation?  You'll have to ask George, but I think I would keep my day job for a bit longer, or otherwise figure out how to live on less.

 I have just explained an entire chapter in just three paragraphs.  These were the highlights, but the discussion is actually more involved.  You'll need to read the book to get those details.

 If you would like (dare?) to plug in your own numbers, using his formula, then you're in luck. I have prepared a form for just that purpose. You can plug in your data and compute a result based on one who has been walking his talk since 1981. To try it, go here.

The next two chapters serve to fine-tune the first.  He delves into the psychological issues, explains the pitfalls that you must consider, and focuses generally on defining how much is enough.  You don't want to cut yourself too close, and bad things can occur which can derail your entire plan.

Much of the remainder of the book looks at investing, defensively.  The author is a big believer in diversification, but his approach to this is somewhat maverick.  Many advisors would focus the bulk of their diversification recommendations among domestic stocks and mutual funds.  The author believes that these, taken as a whole simply have far too much correlation.  In other words, if the U.S. economy were to tank, which it does from time to time, then your retirement could be wiped out by too much concentration.

Instead, he believes strong consideration should be given to investments which are not correlated, like fixed income securities, real estate (as a landlord), foreign and emerging market stock, and sector investing such as oil and gas, REITs, and investing in closely held businesses.

I do not share all of his beliefs about diversification approach, I must admit.  But I do attempt to regularly question my own beliefs, and he was successful in that challenge.  All must be careful in assuming we have it all figured out, because it just isn't true.  The author for example states that "the probabilities of high inflation are low because most of the typical causes of high inflation are not now present in the economy and are unlikely to reappear in the future."  I agree with the probabilities, but I can sure think of a variety of political or environmental events that could change that picture in short order. And I can also remember the pain of very high interest rates we had to suffer in the 80's.  If I ever write a book, hopefully this author won't remember I said this.

The final chapter "Living Through a Crash Without Putting a Bullet Through Your Head" is the author's very personal account of his many emotional experiences throughout his "retirement career" and how he survived and strengthened.  Were it my book, I might have made it the first chapter instead of the last.  It made clear the fact that living off of your investments can indeed be heart wrenching at times.  But with courage, the right attitude, good information and patience, it beats the "9 to 5 until your 65" grinder, no contest.