By May 30, 2012 3 Comments Read More →

The 7 Percent Solution: You Can Afford a Comfortable Retirement (Book Review)

The 7 Percent Solution

“It is better to live rich than to die rich.” — Samuel Johnson

What can we learn from financial advisors about retirement?  Can you afford to retire?  Do you build the habits that make retirement feasible?  The last thing you want to do is be surprised by the realities of retirement.

I’m working my way through the book, The 7% Solution: You Can Afford a Comfortable Retirement, by John H. Graves.  John has a 30 year track record of planning successful retirements.  He’s got a lot to share.  The beauty is, he’s put down on paper. He’s written about his best lessons learned, his best insights on what goes wrong, and what goes right, etc.  My favorite part is that he shares real stories of retirement.  This helps us see a variety of different lifestyles and models to draw from at our finger tips.  The other thing I like is that he is very open and shares how people get screwed over, and or learn things the hard way.

Personally, I’ve been given bad financial advice in the past.  It could have been devastating, but luckily I messed up while trying to do what they told me to do, and it saved my skin.  Now, I make it a point to do my own research.  I realize I have to own it.  Tony Robbins pointed this out, long ago.  He basically said, you have the most skin in the game.  Beware of folks that bet with your money, where they have nothing to lose, if you lose,  but they gain, if you gain.

With that in mind, I was very happy to read a book that’s written in plain English and keeps things simple.  I like the fact that I get years of experience at my fingertips, so I can get a taste of what retirement can look like, and how to think about it in a more effective way.

Chapters at a Glance

Here are the chapters at a Glance

  • Chapter 1 — The 7% Solution
  • Chapter 2 — Bringing Your Retirement into Focus
  • Chapter 3 — First Things First: Capturing Your Data
  • Chapter 4 — A Brief Word on Investment Advice
  • Chapter 5 — Stepping into Stocks
  • Chapter 6 — Embracing Bonds
  • Chapter 7 — Exploring Low Maintenance Investments: Mutual Funds, ETFs, and CEFs
  • Chapter 8 — The Case for Annuities
  • Chapter 9 — Unusual Income: MLPs and BDCs
  • Chapter 10 — Other Income Sources: Real Estate, REITs, Business Byouts, and Structured Settlements
  • Chapter 11 — Designing the 7% Portfolio
  • Chapter 12 — Maintaining and Monitoring Your Portfolio
  • Chapter 13 — The Taxman Cometh
  • Chapter 14 — Getting the Most from Your Retirement Years

Problems Addressed

Here is a sampling of the problems addressed by the book:

  • What habits do you need so you can afford to retire?
  • How to invest your portfolio to generate as much as a 7% distribution rate for your retirement income
  • How to design your portfolio
  • How to evaluate portfolio elements
  • How to determine your retirement income need
  • How to identify your sources of income for retirement
  • How to select a stock
  • How to save thousands in fees that bleed your retirement nest egg
  • How to evaluate, select, monitor, and manage a variety of investments from simple to complex
  • How to deal with interesting scenarios such as business buyouts
  • How to think about the reality of social security as an unfunded liability of the government
  • How to have a “stable” to back you up through the tough times

Key Features

I like the book design.  Here are some of the key features:

  • Key Strategies.   The book features key strategies at your finger tips.  Simply by flipping through the book, you can quickly learn fundamental strategies you can use.
  • Lessons Learned.  The book is rich with experience that John learned over the years of helping people plan and prepare for their retirement years.  You get the benefit of both foresight + hind-sight.
  • One-liner wisdom.  For example, Graves writes, “If you are what you eat, then your portfolio is what you invest.”  Another example is, “Knowledge of your financial reality is the starting point for all investment decisions.”
  • Worksheets.    John includes very useful little exercise that put what you learn into practice.
  • Retirement Stories.  Like I said, this is my favorite feature.  I love the fact that I can flip through real stories of real people and how they live their retirement years.  It helps paint the variety of ways that people can approach retirement and it’s another reminder of how retirement is a very personal thing.  And it’s yet another reminder of how you, and only you, have to “own” your retirement.  Don’t look to others to own it for you.

Your Retirement Bucket List

This is an example of one of the assignments in the book:

  1. When do you want to retire?
  2. Where do you want to retire?
  3. What do you want to do when you retire?
  4. How do you want to retire — in other words, what do you want your lifestyle to be?
  5. With whom do you want to retire?

Stories of Retirement

This is an example of the lead in for one of the retirement stories.  John writes:

“Dennis worked as a mechanic all his life.  His dad owned a garage in New Jersey.  His savings were made easier because he had no children.  As Dennis entered retirement, his dad passed away suddenly, leaving him with a valuable property 3,000 miles away.  After a few years of EPA issues and regulatory work, he was able to sell his dad’s garage business and keep a few hundred thousand.  he lives modestly in the home he owns freely in the Ojai Valley of California.  His career has become his hobby — a twist on the IRS assumptions.”

I’m still making my way through the book.  I’ve already done my fast pass through of the book end-to-end, and now I’m drilling back through in more detail.  It’s turning out to be very eye-opening, each time I turn the page.

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3 Comments on "The 7 Percent Solution: You Can Afford a Comfortable Retirement (Book Review)"

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  1. J. D. I’m so glad you are addressing this topic as it holds great relevance for me. I think it’s especially important for women as more divorce is occurring at later ages which can dramatically affect one’s retirement income. Women are typically in the workforce for a shorter period, which also has an impact on their income in later life. This looks like a very complete guide from a financial perspective. Thank you!

  2. Tanja says:

    Your blog is one of the best I’ve read! Thank you for sharing insight and inspiring to our own. This topic is especially important for an immigrant to the US as I am so thank you, its on my reading list!

  3. JD says:

    @ Sandra — I can relate to that. I know several people that very much match the scenario you describe.

    I plan to do a lot more this year in terms of helping people find ways to fund their life-style and to survive and thrive the financial times.

    For the last few years, outside of my day job, I’ve been helping people explore ways to make money online in ways that combine their passion, purpose, and profit. I’ve seen way too many people lose their jobs. I’m doing what I can to help them turn their passion into meaningful work and test ways that make money. I’ve learned a lot and I’ll be sharing more soon.

    @ Tanja — Thank you. I think what goes around comes around, and inspiration is contagious. We all need a lift in life, now and zen.

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