Book Review: The Bogleheads’ Guide to Retirement Planning

This was a book that I did not ask for.  Wiley has been sending some books unsolicited.  I’m not glad on all of them, but I am glad they sent this one.

Much as I admire Jack Bogle, I am not a Boglehead.  Low fees?  Yeah.  Diversification without overdiversification?  Sure.  Asset allocation?  Top priority.  Passive investing?  Best for most of us, but not me.  Quantitative methods don’t work?  Sorry, they do, if done right.  And aside from all that, I think (unlike Jack) that unhedged foreign bonds are a core part of asset allocation, especially if used tactically.  (Buy them when little looks good in domestic fixed income, like now.)

But in skimming/reading this book, I came away impressed with the acumen of those that call themselves “Bogleheads.”  They are not just dittoheads, but people who have thought hard about the retirement planning process for average individuals.

There is a decent amount of advice on tax planning.  What sorts of vehicles will make sense for most people?  How much can be contributed?

There is a decent amount of data on the usefulness of insurance, and it tends to follow my understanding of matters:

  • Avoid combination products unless you have a specialized tax planning need.  Keep savings separate from protection.
  • Don’t forget disability and health insurance.
  • Immediate annuities can be a useful replacement for some of the bonds in a retiree’s portfolio.

A small amount of the book deals with investing proper, but what is there is good, if simple.  It posits fund investing and passive investing, which again, is best for most people.

Another part of the book deals with the neglected liquidation phase.  How to do it?  What to tap first?  When should one file for Social Security, and what games can be played there?

Finally, the book considers what can go wrong in life (divorce and other disasters), and how to bounce back; also, how to find a good professional to help you with your specific needs, which “one size fits all” does not cover.

Quibbles

The book really does not deal with the troubles that will come in Social Security, Medicare and federal/state/corporate pension plans.  Also, by its nature, tax law is ephemeral in the US — in an era of rising structural deficits due to entitlement programs, who can tell what the tax situation will be 20 years out?  23 years ago, after the passage of the Tax Reform Act of ’86, who would have thought that we would create something materially worse in complexity terms than what TRA ’86 replaced?  Rates are lower, though, but I don’t see it staying that way for long.  We can look at Roths, but will the government preserve the tax-free treatment if things really get tight?

Also remember that this is a single purpose book — retirement, though they have some good sections on insurance and investing.  For a good, short, all purpose book on personal finance, consider Easy Money: How to Simplify Your Finances and Get What You Want out of Life.

Summary

That said, I found it to be a useful guide for average people that might not be up on the nuances of strategy for retirement that an average person might use.  Wealthy people should retain specialized advisors, because they will be aware of strategies that would not make sense for average people.

This was a book that I skimmed half and read half, because I’m familiar with the material and would just check aspects of sections that I was familiar with to see if they got it right.  If you want to buy it, you can find it here: The Bogleheads’ Guide to Retirement Planning.

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