How To Retire Early And Live Well With Less Than A Million Dollarsby Gillette Edmunds
In 1981, at the age of 29, the author of How to Retire Early and Live Well with Less than a Million Dollars began living off his investments of just several hundred thousand dollars. In the intervening years, Gillette Edmunds has made more than $5 million in investment profits. Edmunds was not an investment advisor or a commissioned mutual funds sales representative: he was a financial journalist and an individual investor.
How to Retire Early and Live Well with Less than a Million Dollars describes step by step how a retiree can live comfortably on $500,000 or less. Americans will discover that they can walk away from work in less than five years.
This is the first book to tackle these topics that is written by an actual retiree. Using simple, original investment strategies and formulas, the book shows how to assemble your nest egg and achieve steady, tax-advantaged returns every year for the rest of your life.
In Part One, the reader is shown step by step how to determine if they have enough money to retire, and if not, how to get enough. For those that have enough, Part Two shows how to divide their money into different asset classes like stocks, bonds, real estate, foreign stocks, and small business interests so they will achieve steady high returns every year. Then for each asset class, they are shown how to get the highest returns with the lowest taxes. Part Three shows those still saving for retirement how to quickly amass their nest egg. Finally, for the rare years when all asset classes go down, The Epilogue shows the reader how to prosper emotionally while waiting for the markets to come back.
From the Author
In 1981, when I was 29 years old, the company I was working for fell apart and all the employees were laid off. At the time, I did not know if my wife and I had enough investments to live off for more than a few years. Though a tax expert, I was not then an expert on investing during retirement. Not only did I not know if I had enough to last five years, ten years, or a life time, I could not find anyone else who knew. When the money started to run out or when an interesting job came along, I figured I would just go back to work. Over the years, I read books, talked to professional investors, took classes, studied every type of investment I came across, and learned to repeat my successes and stop making mistakes. My investment skills improved, and, even though my spending increased, my assets kept growing. By the time I had doubled our assets I realized I was not going back to work. How to Retire Early and Live Well with Less than a Million Dollars is the distillation of all the knowledge I gained over the last 19 years. It is my wish that no reader go through the painful learning process I endured. The system set out in this book will minimize your financial fears during retirement and maximize your serenity.
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Read an Excerpt
"Can You Retire Today?"
For anyone wanting to live off their investments, the big question is, �do I have enough to last the rest of my life?� I answer that most middle-class Americans-including me- could live comfortably on the investment returns from $500,000. Of course, the precise answer is a function of your lifestyle and investment return.
If you have $100,000 to invest and no other source of income, you will only make it if you can live very modestly. Indeed, at the level you would on welfare! An average, educated, experienced investor can reasonably expect to make 10% a year for life. This would mean $10,000 total return per year. Due to inflation, living expenses will go up over time. So some of the $10,000 must be reinvested to cover future increased expenses. Taxes must also be paid from the $10,000 income. A genius could be hired to invest the $100,000 and with luck a 20% lifetime return could be achieved. But the genius would have to be paid a genius�s wages. And most investment geniuses become average investors over 20 to 50 year periods. Few people other than beach-combers can realistically make it on $100,000.
At the other extreme, $1,500,000 is more than adequate for a family of four to live comfortably with only average investment results. Beginning with considerably less money, I and my ex-wife and our two children lived extremely well for 18 years. Between us, we now have three times as much capital as we began with in 1981.
There are five variables which determine whether or not you have enough to live on the rest of your life. The five things you need to know are:
The first four of these are reasonably predictable. The fifth, annual total return from investments, will depend on the strategy you adopt and how you are able to execute it and live with it. The higher-return strategies also involve higher risk and, for some, an emotional roller coaster.
Begin by figuring out how much cash you will need each year to pay all your expenses including taxes, money management fees, if any, and reinvestments to cover future expense increases. Then calculate the net amount of investments you have to live on. Divide the expense figure by the net investments to arrive at the annual percentage return you will need from your investment. Easy, right? Now comes the hard part.
Having calculated this target investment return, you must now invest to produce this return every year. For example, if the Thompson family needs $80,000 a year to cover all their expenses, taxes, reinvestments and money managers, and they have $900,000 in net investments, they will need to average almost 9% a year from their investments. If they follow the suggestions in Part II, they have a very good chance of living for generations off their investments. The formula for determining what investment return you will need is found in the box on page 19. Each part of the formula will be explained below beginning with your expenses.
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I found this book extremely informative and quite an educational tool. I bought this book approximately 6 years ago, and it was as valuable then as it is today. If expanding your knowledge of investment vehicles and diversification are your goals, this book is a must. Well written, with clearly explained concepts for those of us who need to be taught how to tailor investment to one's own needs and abilities.
If you are interested in a financially secure retirement (and who isn't?) this book is for you. There is no baloney here - no magical short cuts - no get-rich-quick schemes - just a rational, solid plan of action. Edmunds tells you how to:1. Determine your financial needs for retirement2. Develop and implement your plan to get there, and3. Manage your financial resources during retirement.The important thing is that you learn how to tailor a plan for YOUR wants, needs, and comfort level - no 'one size fits all' plan is imposed on you. The author also explains what financial steps you should NOT take, helping you to avoid serious mistakes that could delay or ruin your well-deserved retirement.I have read dozens of financial books on planning for or living in retirement and Gillette Edmunds' work is the cream of the crop. My biggest problem is waiting for what I hope will soon be his NEXT book!