First, I believe that something like our current Medicare taxes will be imposed on investment income. I don’t know if that will be the 1.45% that is now assessed on employees’ wages, or the 2.9% total, and I don’t know whether it will be imposed on otherwise tax-deferred investment income being earned witin IRAs and 401(k)s. I also don’t know if it will be imposed on the total distributions from IRAs/401(k)s, but I can’t imagine it would generate enough revenue otherwise.

Second, even after the housing crash, many homes of people nearing retirement have huge built-in capital gains (mostly inflationary). And the year you sell your home to move into more suitable retirement housing, you will be one of those “rich” people who is expected to heavily subsidize the health care of the rest of the nation through higher tax rates. Add that to the sunset next year of the reduced capital gains tax rate and add various state and local new or higher taxes, and people who need to sell a home for retirement (or a business) will take a real hit.

Third, the mandates being added to insurance plans (must cover preventive care, no annual or lifetime caps, must cover “wellness” and substance abuse treatment, etc.) are going to cause health insurance premiums to skyrocket in the previously pretty affordable individual market. The self-employed are going to face some real sticker shock. I’m estimating my premiums – currently $305 a month – could rise by 150% or more. For 32 years, I’ve calculated carefully whether it pays for me to buy coverage for all the “bells and whistles” and learned it does not. Now, I’ll be forced to regardless – basically a 150%+ tax on my health insurance premium, and a big hit to my retirement budget.

Finally, although I share Trent’s distaste for the “financial apocalypse” books, we do seem to be heading into a perfect storm of unsustainable deficits and debt, growth- and wealth-killing government policies, underfunded public pensions, and nearly worldwide demographic stress (longer old age and fewer replacement workers). Assuming 8% real investment growth seems pretty optimistic, especially with a conservative asset allocation including 50% bonds, while a more aggressive allocation carries a much higher risk of loss of principal.

That “12x” rule is absurd. You would need to earn 10% to pay expenses and keep up with inflation. One down year in the market, and you’re totally screwed.

I don’t have a lot of knowledge of insurance, but simply on the basis of that first rule, you should absolutely not be recommending this book for anyone.

We don’t have teens, we don’t pay Social Security, our cars are near junkers (but run well), and fully paid for. We do still have a mortgage. And most people should plan on paying for two long-term care insurance policies, which we are not.

Not everyone will end up in our boat, but many of you will. I strongly suggest that you plan for it!

While medical expenses can go up, other expenses, like paying for additional food, electricity, clothing, etc. for your teenagers, typically go away. Consider if you won’t have a mortgage (maybe 10% of your current income), won’t have to save for college anymore (say 5-8% of current income), may not need two cars (2% of current income), may be able to downsize the house, etc. all of which can seriously reduce what you need when you retire. Assuming you’re going to spend more than 20% in health care above and beyond what you are currently spending is a lot, especially with many of the other decreases in there and frankly, if you have all the conditions SLCCOM mentioned, you’re not likely spending your money on expensive vacations or other luxuries at that point anyway.

While medical expenses can go up, other expenses, like paying for additional food, electricity, clothing, etc. for your teenagers, typically go away. Consider if you won’t have a mortgage (maybe 10% of your current income), won’t have to save for college anymore (say 5-8% of current income), may not need two cars (2% of current income), may be able to downsize the house, etc. all of which can seriously reduce what you need when you retire. Assuming you’re going to spend more than 20% in health care above and beyond what you are currently spending is a lot, especially with many of the other decreases in there and frankly, if you have all the conditions SLCCOM mentioned, you’re not likely spending your money on expensive vacations or other luxuries at that point anyway.

Finally, these are just guidelines to get you started. You need to adjust for your future and your wants, and you’ll adjust along the way. Just don’t be freaked out and do nothing. Start small, start early, build and adjust it as you go.

This book is focused on the consumer segement of the population rather than savers. It does nothing for the people striving to retire early and offers average advice for the normal path to retirement.

This book is focused on a very narrow segment of the population: those that consume rather than save.

The book lays out a process, a way of approaching the issue. I think it a good starting point, but one needs to adjust for their own comfort. Me, I’ll ignore Social Security, and assume 4%. So I need 20X to replace my income at 80%.

Joe