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Download Wealth Odyssey: The Essential Road Map For Your Financial Journey Where Is It You Are Really Trying To Go With Money? epub

by Larry Frank Sr.

What are you trying to do with your money? Few of us take the time to analyze our financial needs and goals to answer that pressing question. In Wealth Odyssey, author Larry R. Frank Sr. uses his extensive financial background to provide a universal road map that will help you determine the wealth you need to support your chosen lifestyle. Frank discusses such topics as: The Wealth RuleThe Earning-Spending-Saving FormulaUsing debt wiselyRisk management Wealth Odyssey is a practical, no-nonsense guide that will help you develop a personal definition of wealth and create an effective strategy for long-term financial success.
Download Wealth Odyssey: The Essential Road Map For Your Financial Journey Where Is It You Are Really Trying To Go With Money? epub
ISBN: 0595337201
ISBN13: 978-0595337200
Category: Business
Subcategory: Personal Finance
Author: Larry Frank Sr.
Language: English
Publisher: iUniverse, Inc. (February 23, 2005)
Pages: 168 pages
ePUB size: 1891 kb
FB2 size: 1938 kb
Rating: 4.7
Votes: 997
Other Formats: lrf lit lrf rtf

I was a little surprised to see Frank advocate a 5% maximum safe withdrawal rate (SWR) versus a 4% SWR. Most research (Bengen and The Trinity Study) indicates that 4% (with annual inflation increases) is about as high as you should go over 30 year withdrawal periods.

Frank states he does not like the 70% to 80% income replacement ratio rule-of-thumb advocated by the AON/Georgia State surveys. He says he doesn't have any clients who want to take a 30% reduction in spending when they enter retirement.

Frank advocates the approach of calculating actual current spending versus the 70-80% rule-of-thumb. He uses the easier approach of gross earnings minus (SS + fed taxes + state taxes + savings) to get actual spending. This approach is much simpler than keeping records on all the budget line items you have expenses for.

Frank correctly emphasizes the pay yourself first rule. If you have your savings automatically deposited in your 401K via payroll will meet your savings goals. If you try to save the money you have left over at the end of each will always run out of money and therefore have no savings.

My favorite story for why to pay yourself the US government. The Government was concerned that people would not be able to pay their income taxes if there was an annual tax bill they started automatic payroll deduction to make sure they got their money first. Why not use the same trick our Government does to make sure you get your money saved?

Frank also applies his same 5% SWR to figuring out how much life insurance you need. A 5% SWR equates to 20X the income level you need. If you need $60K of income to support your family if you die.....and you have no significant assets accumulated yet.......then you need $60K x 20 = $1.2M in life insurance. This is a much more accurate method than utilizing the insurance industry rule-of-thumb of 6 times you annual income.

Frank briefly mentions the need for estate planning, but I was surprised he did not at least cover the most widely used estate planning tool.....marital bypass trusts. My favorite book for estate planning is Kraemer's 60-Minute Estate Planner.

He also briefly mentions immediate annuities as a tool to insure against living too long. He should have followed up and recommended low cost immediate annuities from Vanguard or Berkshire. He should have also mentioned the option of inflation indexed immediate annuities......which allow your immediate annuity to increase the payments to you based upon inflation.

I like his recommendation to pay yourself first automatically (payroll deduction).......then you don't have to worry about boring and time consuming monthly budgeting. I have used this approach for 30 years with great success in regards to meeting my savings goals. I target having a $0 balance in my checking account at the end of the month....which means I met my savings goal and my expenses were less than my income.

Frank argues that since large corporations hire many experts to manage their defined benefit pension plan....individuals should hire qualified experts to manage the accumulation and distribution phases of their financial lives.

Being a big fan of low cost index funds, I was disappointed Frank did not mention them. He does include Burton Malkiel's book A Random Walk Down Wall Street (which recommends index funds) in his recommended book section.

I enjoyed Frank's road map diagram. I have read over 200 books on investing.....but I can not recall ever seeing a graphic showing the short term income/expenses.....the increase in net worth by reducing dept and savings...and the distribution of wealth at retirement. Usually, the most common graphic you see is either a retirement portfolio being exhausted during retirement......or a Monte Carlo graph showing the probabilities of you outliving your money.

All in all, an easy to read book, and nice linking of the text explanation to the road map diagram.

In this age of full disclosure, it can be noted that I am the author and publisher of the book INDEX MUTUAL FUNDS: HOW TO SIMPLIFY YOUR LIFE AND BEAT THE PROS. This book is an introduction to the concept of index funds is and is sold on Amazon. I am also a contributing author to the book THE BOGLEHEADS GUIDE TO RETIREMENT PLANNING available from Amazon with an estimated release date of October 2009. I have also written 21 short stories on investing which are also available on Amazon.

If you are interested in learning more about investing, read some of the books below. They cover the range from the basics of index fund investing to asset allocation, and to the use of immediate annuities.

The Richest Man in Babylon
Bogle on Mutual Funds: New Perspectives for the Intelligent Investor
The Millionaire Next Door
The Four Pillars of Investing: Lessons for Building a Winning Portfolio
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition
The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life
The Bogleheads' Guide to Investing
Update to Chapter 3 - The Wealth Rule:
Current research has refined, and is continuing to refine, a sustainable withdrawal rate for retirement. How does such a withdrawal rate need to change with the markets of 2007 and 2008? Up until 2009, sequence risk (bad market sequences for retirees living on their portfolios) was not widely researched. My website (BetterFinancialEducation) has links to current research applying the dynamics of time which has launched a second generation (the first generation was based on static time frames and "initial" withdrawal rates developed) perspective on withdrawal rates and portfolio distributions using terminology such as "current," target end age, dynamic, based on probability of the person and of the portfolio. The difference between first and second generation thought is that second generation thought recognizes that the withdrawal rate can increase as you age, in addition to an inflation adjustment. My colleagues and I have refined the decision rules to aid retirement decision making during poor markets based on probability of failure. We have also introduced modeling that, for the first time, includes integration of longevity statistics so that the distribution period is also dynamic (rather than fixed as in first generation models). I keep my website up-to-date with current research in the increasingly important area of sustainable retirement income.

The Wealth Rule in the book still applies. What is now different is that, rather than a fixed 4% for example, the withdrawal rate changes based on age. This is because, as you age, the distribution period gets shorter; thus, the withdrawal rate may increase as you age. My colleagues and my research is currently ahead of software programs, however developers are looking at our research to integrate it into software. Simultaneous calculations of "Probability of the Portfolio" (markets) and "Probability of the Person" (longevity) is new. The application of the resulting withdrawal rate, based on this most recent research, to the Wealth Rule still applies. Links to the research is on my website BetterFinancialEducation.

I wrote the book to be timeless. It does not matter what the markets have done, are doing, or will do. It does not matter about the economy either. The book lays out planning principles that shows, through a visual Road Map, how the common personal financial planning topics relate to each other.

The binding component? Wealth. In other words, net worth. Also, it does not matter what others are doing. It only matters to know if what you are doing may help you reach your goals.

Many people think investing or saving does that. Investing or saving is how you do it. But, what is missing is the why! Without knowing the why, every little market or economic hiccup will throw you off. The difference is going on a voyage on a raft, or a sail boat. Saving or investing on it's own is rafting across the ocean. Currents and wind and random storms provide no confidence where you might end up. Sailing across the ocean is better with rudders and sails that you adjust in order to reach your destination. A plan provides both a destination and a method to evaluate where you are on your way there. If you don't know where you are on your financial odyssey today, you're rafting, not sailing. You're missing a plan, that not only says what the destination is, but tells you where you are along the way. A plan does not need to be complicated and thick. They should be simple, understandable, and tell you at any point in time how you are doing. The plan doesn't change just because the markets or economy does. That's rafting ... letting currents set where you go.

Wishing you all the best on your personal wealth odyssey.

Once you understand these nuances, the following books are helpful in addressing how you reach your goals through a sensible and structured investing approach:
The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between by William J Bernstein
The Four Pillars of Investing: Lessons for Building a Winning Portfolio by William J Bernstein
The Successful Investor Today: 14 Simple Truths You Must Know When You Invest by Larry E Swedroe