Updated on 07.10.10

Review: The Smartest Retirement Book You’ll Ever Read

Trent Hamm

Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest.

solinDaniel Solin’s series of The Smartest X Book You’ll Ever Read have turned me off for their title alone, and thus, to this point, I’ve not read them. The title set off a big “questionable investment planning” warning light inside my mind and, with a lot of other options to choose from, I just kept passing on books in this series.

As is often the case, though, a long-time reader emailed me and strongly encouraged me to give this specific book a shot, mostly because he felt it addressed retirement savings from new angles that he hadn’t considered before.

I do enjoy reading personal finance books, particularly ones that add new ideas to familiar topics, so I headed out to my local library and picked this one up. I do have to say that it did include some ideas and angles on retirement savings that were certainly intriguing and provided food for thought.

Let’s dig in.

One | Rethink Retirement Investing
Right off the bat, Solin makes the vital point that if you don’t protect your portfolio against inflation, you’re going to run out of money much sooner than you would like. Inflation is a force that constantly pushes against your retirement savings, making every dollar you save today worth less when you retire. This is a particular problem for conservative investors who would like to keep their money low risk and “safe” – they won’t lose money, but they’ll often earn at a rate lower than inflation, which means the real value of their money is actually decreasing over time. The best solution, then, is to balance the two – keep a healthy portion of your money in stable things (like cash or CDs or savings accounts or treasury notes), but put some of it into other things with more growth potential that can keep your overall portfolio ahead of inflation.

Two | Stocks Made Simple
Individual investors shouldn’t invest in individual stocks (unless it’s just for fun) because the risk is just too great. You don’t want to bet your retirement on one company lest it turn out to be the next Enron. Instead, you want to mix it up: invest in broad-based index funds, some of them with lower risk and some of them with higher risk. So, for example, your overall portfolio might be 1/3 in cash or treasury notes, 1/3 in a total stock index, and 1/3 in an international total stock index. The key is to buy index funds for your investments – they spread out your risk while also keeping the fees very low. (I do this myself – I have my money with Vanguard.) Obviously, as you move closer to retirement, you’re going to want less of your money at risk, so over time you’ll migrate more and more to cash and treasury notes and less and less in stocks. One easy way to do that is to just buy “target retirement funds” which automatically handle that transition for you (again, making sure that these “target retirement funds” are made up of low cost index funds).

Three | Bonds Made Simple
Bonds are a great way to get solid returns in your portfolio with relatively low risk. Solin recommends that most investors should have at least some of their retirement money in a broadly diversified, low-cost bond index fund. It’s important to remember, though, that bonds aren’t riskless. They have less risk than stocks, but they’re not entirely free of risk. Solin also suggests that investors worried about inflation should not buy TIPS (Treasury Inflation-Protected Securities) because they’re very volatile and they earn very poorly in times of low inflation (like right now, for example).

Four | Cash Made Simple
You should never keep cash in a bank that doesn’t have FDIC insurance, and you should make sure that your cash savings never exceeds the FDIC insurance cap (currently $250,000). Solin encourages searching around for banks if you’re just looking for a place to sock away your cash savings (I suggest using BankRate).

Five | Annuities Made Simple
Solin is a big fan of immediate annuities – annuities in which you give a cash sum to an investment house and receive payments for the rest of your life from them. He argues that they greatly reduce the risk of outliving your money, even if the returns aren’t stellar. Another option is a charitable annuity, where you give a lump sum to a charity and they issue you payments for the rest of your life – this ensures that your annuity lump sum winds up in the hands of a charity you care about instead of a business. If you do get an annuity, though, Solin recommends a fixed rate annuity, not a variable rate one – they carry too much risk. Your annuity should have a fixed rate, period.

Six | Mining Your Money
Do not trust historical returns when you’re trying to figure out how much you can safely withdraw from your retirement each year. Instead, you should simply focus on withdrawing as little as you can get away with each year. Solin suggests aiming to withdraw between 2% and 4% of the total each year – I think that’s a great target (he offers some more math-intensive guidelines as well). He also offers a few exceptions to that “2-4%” rule that involve market timing, a subject that I don’t agree with him on (I don’t think market timing is usually a good move).

Seven | Simple Steps to Stretch Your Money
When you start taking withdrawals, withdraw from your taxed accounts first (like any ordinary savings or investment accounts), then deferred retirement savings accounts (like a 401(k)), then Roth IRAs last. Why? The longer money stays in a tax-deferred account, the longer it has to grow in value without Uncle Sam feeding off of it. If you have a 401(k), Solin recommends rolling it over into an IRA if you can because this gives you more control and the ability to utilize lower-cost investments. He also thinks converting your IRA to a Roth IRA (and everyone with an IRA can do this in 2010) is a good move for almost everyone, but particularly high income earners.

Eight | Social Security and Pensions: Critical Choices
If there is any possible way to delay taking Social Security, do it. If you can wait until you’re older, you’ll get higher payments for life. It can also adversely affect the quality of life of a spouse that survives you. Also, don’t bank everything on a pension because, as we’ve seen recently, companies sometimes aren’t 100% reliable in paying out the pensions they’ve promised. If you do have a pension, avoid taking the lump sum option (if you have it) and take monthly payments instead.

Nine | Is Sixty-Five the New Fifty?
People are living longer lives and staying healthy much longer. What this means, to put it simply, is that if you retire at the traditional retirement age, you’re going to have to cover many more years than the generations before you had to cover for themselves. The solution, of course, is a simple one: work longer. Turn your early “retirement” years into a continuation of your career or the crest of a second one. Don’t rely on age discrimination laws to help you, either – everyone is responsible for keeping their skills up and building their own paths.

Ten | Financial Lifelines for Desperate Times
What if you’re running out of money? A reverse mortgage (meaning you give your home’s deed to someone else and in exchange you receive regular payments) is an option, but it should be your absolute last one. Why? They’re expensive – they’re loaded down with tons of fees and you’ll get nothing close to what your home is actually worth out of it. Instead, seek other options. The AARP is a spectacular resource for the elderly, as are local churches and civic organizations.

Eleven | Care Costs
One of the major costs a person often has in retirement is medical care. Before you even consider retirement, you’ve got to know what your medical care options are when you retire. Is there any continuing coverage from your current job? Can you make ends meet with Medicare? Do you need long term care insurance? Solin spends quite a few pages on long term care insurance and basically argues that the lower your net worth is at retirement, the better an idea long term care insurance is (because if you have more money, you can pay for more care out of pocket).

Twelve | The State of Your Estate
Everyone needs a will, but a will has severe limitations that can hurt you if you’ve spent a lifetime building wealth. A better option for people with a high net worth that wish to pass on their money is to set up a living trust, assign their assets to that trust, and receive payments from that trust until they pass away, at which point their instructions for further management of the trust (i.e., who gets the money) is followed. Also, older couples are very well served by having prenupital agreements that specify that some assets get left to children when one member of the marriage dies.

Thirteen | Wolves in Sheep’s Clothing
If you need financial advice, be careful – there are a lot of sharks in the water. Avoid people who are offering you free things (like lunch) to listen to their pitch. Instead, seek out assistance on your own terms. Look for financial advisors who are fee-based, can explain things clearly, and aren’t seeking to constantly beat the market (such people often wind up way over their heads and you’re left holding the bag).

The book closes with a large handful of appendices and additional documentation for many of the points made in the book.

Is The Smartest Retirement Book You’ll Ever Read Worth Reading?
I think The Smartest Retirement Book You’ll Ever Read is a very strong retirement book for high income earners – the people who aren’t having to make hard decisions about whether to save for retirement or accomplish other life goals. It pretty much assumes you’re going to be socking away plenty and that your questions revolve around where to put it.

If you’re in that group, The Smartest Retirement Book You’ll Ever Read is a very worthwhile read. Solin keeps an eye on the real world (inflation, business failure, etc.) and explains the logic behind every move he recommends in a very clear and straightforward fashion.

If you’re really hitting your income stride and are looking for some sound advice on what investments to put your retirement money in, The Smartest Retirement Book You’ll Ever Read is a pretty strong choice for a good read, in my opinion.

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  1. Dalrock says:

    Good stuff. On immediate annuities (SPIAs) one should consider inflation protection. I think Vanguard used to link to one offered by AIG. I’m not sure if this product exists any more. I think I read that TIAA Cref offered something similar. Worth looking into at least.

    Also, there are similar products which insure you against running out of money if you live to a specific age. They don’t get a lot of press but they seem like something people should consider. Basically you are buying longevity insurance.

  2. Carey says:

    I don’t get all the concern about inflation eating away at your retirement savings. You can’t avoid inflation. And the only way to mitigate it, obviously, is to do whatever you can to earn a higher return on your savings… which you should be doing anyway. So what’s the point?

    I don’t ignore inflation, but I don’t worry about it either. It’s like getting older – it’s inevitable, so stop worrying about it.

    Most of this book seems like common sense – especially section four, “Cash Made Simple”. Of COURSE you should put your savings in an FDIC insured bank. Are there really any banks out there that aren’t FDIC (or NCUA) insured? Is this something that people really need to be told?

    I agree with the author that it’s not wise to buy TIPS. Any protection you get from inflation is negated by the premium you have to pay to buy the bond – a premium priced in by other buyers who are probably a lot smarter than you.

  3. Sheila says:

    What does “keep 1/3 of your retirement portfolio in cash” mean exactly? Is “cash” an option within a 401(k) or IRA?

  4. DIY Investor says:

    I’m a Solin fan. Your readers might enjoy the talk he gave to Google employees on “The Smartest Investment Book You’ll Ever Read”. In my opinion it is very wise advice for investors. In the talk you’ll hear how he chooses his titles.


  5. Sri says:

    Another great review! I like that you outlined it – something that I should reserve or request in my library.

  6. When people reaches the age of retirement not all is financially secured. There are those who still need to find a way on how they will be financially secured. This article is really great because it would allow people who are in the age of retirement to know more about ways on how to earn after retiring. This article is not only important for people who are in the age of retirement but for everyone else because they can easily plan what they would do in the future or in the near future.

    This is a great article! Thanks!


  7. Jack says:

    I’m certainly not a financial guru, but it seems to me that when people talk about investments not keeping up with inflation, they often fail to take into account the wonderful joys of compounding.

    I also see that you put Treasury Bonds into this category, yet the Vanguard Long-term Treasury Fund has returned 8.27% since inception (1986) & 11.25% year to date. Based on the DJIA’s performance over the past 10 years, most index stock funds have probably lost money, whereas investing in treasury bonds would have gotten you an average of 7.84% per year.

    I know that what you write about above has been the standard thinking for several years, but I can’t help but think we’re in new times. The crookedness of big-business continues to be exposed, and I can’t help think that there are too many “black swans” out there that can turn things on their head (once again!).

  8. Romeo says:


    I suppose the 1/3 of your retirement portfolio in cash means to have 1/3 of your investment in an index fund comprised of treasure bonds. A great way to take advantage of the 1/3, 1/3, 1/3 rule but taking out the guess work is a Lifecycle fund. A Lifecycle fund is usually managed such that the closer to your retirement age the more invested the fund is in government bonds and notes.

  9. almost there says:

    Sheila, yes you can have cash in an ira or 401(k) but it is called a money market account. Most 401(k)s don’t give a cash option. I opted for the target retirement funds for my Ira much to my dismay.

  10. First I would like to note on #8 the statement that if you have a pension don’t take a lump sum but spread it out. My question is if a company like GM can go Bankrupt, wouldn’t the pension fund be wiped out too? I would rather take my chance with the lump sum. Also, I thought I would note I have changed my strategy a bit lately in regard to tax deferring my 401K. If you get taxed on it you can take it out without penalty and of course with no tax since you have already paid it. The beauty is you still get the company match. The reason why I am doing this is that I would rather have the portion I can pull out which is my own money completely liquid. This is primarily due to this new economy and being prepared for the unexpected. Looking at things way in the future may not apply these days.

  11. deRuiter says:

    The advice about turning your traditional IRA into a ROTH this year is superb. Anywone with financial savvy is doing it this year because there is no penalty. Yes, you must pay income taxes on the money (DO NOT PAY THE TAXES WITH THE MONEY IN THE IRA, PAY WITH OTHER SAVINGS!) Income taxes and other taxes are going to EXPLODE onto the scene beginning Jan 1,2011. Paying the relatively low income taxes of today, instead of the monstrous, punitive taxes which are kicking in Jan 1, you will save tons of money. Every taxpayer is going to be crushed come Jan 1. The reason our puny economy is not doing worse, is because mid and high earners are paying the taxes on their traditional IRAs this year to shelter income. There is a lot of this conversion happening, and the taxes from it are flowing to the US Treasury. Corporations are doing the same thing, shifting profits from next year to this year. As a result our economy does not look as pitiful as it is. Come Jan 1, 2011, all this activity will be over, and the real conditon of our economy, which will worsen due to the higher taxes, will probably tank, collapse, become a depression. A president of the United States who has to go with teleprompter on TV and announce that he is pro business, is NOT! The administration drive to nationalize all industry and business does not favor capitalism. Nationalized health and cap and tax, bans on American oil productin are intended to whittle America down to size by impoverishing American producers (workers.) Folks, shift your traditional IRA to a Roth this year and protect yourself from the punitive taxes which are arriving in less than six months. Redistribution of wealth, here we come. If you’re planning to sell investment property, or expensive assets, SELL THEM BEFORE JAN 1, 2011. Take your profits before the insatiable governemtn takes them from you next year.

  12. Carey says:

    deRuiter – your comment would have been fine without the tin-foil hat stuff. Your knowledge on the IRA conversion is sound, but your political ignorance is staggering.

  13. Kate says:

    Why does it have to be so hard to save for retirement…IRA, 401(k), mutual funds, annuities, Roth and then get into this versus that. It should not have to be so difficult, which leads me to believe that is part of the reason why so many people don’t do it or delay doing it. I’m not saying that people shouldn’t be held accountable for not doing it, though. It just shouldn’t be so difficult.

  14. WendyH says:

    It also doesn’t hurt to play “what if” your retirement doesn’t go as planned.
    re Eleven: Don’t forget regular medical care costs for spouses not yet to retirement age – my FIL needed to retire early because of a disability, and my MIL (who had already retired early) ended up going back to work just to get affordable medical coverage.

    re Twelve: if you have a spouse and children, and have property that you want to keep in the family, please consider a trust or living will or something simlilar so that it isn’t considered an asset to be sold to pay for medical care. Especially important with diminished mental capacity of the owner! I have a neighbor who is spending lots of money on lawyers right now trying to keep the family property (he is 5th generation).

  15. mashford says:

    The comments on TIPS being too volatile is new …
    -Many advise TIPS for inflation protection
    -Is he talking about TIPS funds or buying TIPS directly?

  16. Georgia says:

    Trent – the limit of $250k on FDIC insurance is just the minimum. You could insure over 2.5 million in one institution when the limit was $100k. The $250k is per account and per person. You/Spouse can have 2 accounts in your individual names and one in joint. That’s $750k right there. Then you can set up one acct. per child with you as joint & your wife on another joint. For you, that’s now up to a total of $2,250k. Then there are trust accts., POD accts., etc. I guess no one informs the customer anymore. We had this all explained when we started work at the Savings & Loan.

    There is a possibility that it has changed some, because it’s been 24 years since I worked there. But don’t panic until you have went on the govt. website and read the info on this.

  17. Andy says:

    There seems to be a slew of retirement/investing books out now as authors and experts seek to leverage the fear folks feel (real and perceived) from the financial crisis fallout. The advice above seems solid, but really nothing new. Still if it is well written and easy to understand it is better than most.

  18. Angel says:

    Thank you for this article. It touches on the basics, but some of us need the basics! :)

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