Living Off Your Money: The Modern Mechanics of Investing During Retirement with Stocks and Bonds

by Michael H. McClung

Living Off Your Money shows exactly how to live off one's savings, identifying a set of modern best practices for investing well during retirement with stocks and bonds.
It's common knowledge few people save enough for retirement. What's unfortunate is those who do, rarely invest it well during retirement. To a degree, this squanders what has been diligently saved. There are too many wrong answers and not enough right ones for retirees, and it's difficult to discern which is which. The art and science to getting it right is explained in this book.
While suitable to any dedicated reader, this book is oriented towards experienced investors, showing not only what works best, but the evidence why. It focuses on the global market data to demonstrate exactly what's right, and what's wrong, with many well-known retirement practices. Side-by-side comparisons of strategies are provided, for each step of retirement investing. Complete pragmatic guidance is supplied, adding up to everything needed to safely live off your money.

Genres: Finance, Nonfiction, Money

374 pages, Hardcover

Published April 28, 2016

Reviews

[Donna · Rating 5 out of 5]

This is the first comprehensive book I've read on this topic, and I learned a lot; it took me forever to finish as it's very technical but I highly recommend it. McClung explains how managing investments during retirement requires a different approach from the "saving" years. He covers scholarly research (plus his own theories) on asset allocation, withdrawal rates, where to pull funds from first, and whether/how to rebalance, then backtests the theories against historical data. He makes nuanced recommendations, so that you can weigh considerations around your own situation and the kind of market you're retiring into. For example, when discussing inflation adjusted SPIAs as a way to increase security, he starts by admitting that they're expensive, and not affordable for many of us; I appreciate knowing when a tool probably isn't workable for me.

I started by reading the first 3 chapters for free on the author's website which was a good way to decide whether I was interested; I didn't like the way the book (graphs) looked on my Kindle so I ended up buying a print copy.

If you're a middle class, do it yourself investor like me, this book will give you lots to think about as you try not to outlive your savings. Even if you pay a fancy pants financial advisor, I think this book would still be worth while - it can't hurt to double check the advice you're getting on something this important.

I'm a lay person (no finance background), but the analysis certainly seems credible; I'm a few years from retirement though so I haven't tried his recommendations yet.

I've heard complaints that the book reads like a textbook, but I see that as a strength, so long as you have the patience to work your way through it.

[Sarah · Rating 4 out of 5]

In this book, McClung presents an extremely detailed, mathematical, and data-driven analysis of how to draw from your investments during retirement. His approach includes how to manage the distribution between stocks and bonds during retirement, what withdrawal rate(s) you can use and how to dynamically modify the withdrawal rate, and how to distribute stocks amongst different asset classes. He also includes a long section about how to construct a guaranteed income.

I found that he has some interesting ideas and points and overall it provided great food for thought. However, there are some limitations in his approach. Although he occasionally touches on the idea of aiming for safety, his main focus is on getting the withdrawal rate as high as possible, thus often surpassing the oft-stated 4% rule. Therefore, if you care more about reaching the absolute safest withdrawal rate possible this might be less relevant. For example, his dynamic withdrawal strategies are mainly about being able to withdraw *more* when the market is doing well, which is not that interesting to me and my personal goals.

Additionally, there is a clear bias towards standard retirements, so it is not as useful for the early retiree who is looking at living off their money for 50-60 years rather than 30-40. For example, he considers success any instance where you don't run out of money. Not running out of money for a 30-year retirement is not a high enough bar for a longer retirement, where you need enough after 30 years to sustain you another 20-30!

The most useful section I found to be the discussion of harvesting strategies (how to manage the distribution between stocks and bonds during retirement). While I don't think following his strategy precisely would make sense for me, it gave me some good ideas and a better sense of the important considerations.

Overall I recommend this book if you intend to engage with it and use it as part of a diversity of reading to form your own strategies.

If you are part of the FIRE/early retiree crowd, I highly recommend checking out the Early Retirement Now blog, particularly his Safe Withdrawal Rate series (https://earlyretirementnow.com/safe-w...), for some alternative perspectives that are along similar lines but more specifically targeted towards early retirements.

[Robert Muller · Rating 5 out of 5]

This book is a real eye-opener for me in terms of the approach, which is highly data-driven and evidence-based. McClung is a VERY organized thinker and has done his homework, and there is a lot of material to follow up. I'm going to call this review "preliminary" for now until I use his downloadable spreadsheet and investigate his data sources and methods more thoroughly, but he's very convincing on first read. I do wish he would open source his software (or at least describe how he is using off-the-shelf tools, if that's what he's doing). I don't see any real description of how he builds his test portfolios from his data, for example, but I might have just missed it.

One aspect I wish was deeper is actual portfolio construction (the mix of actual funds that comprise the portfolio). He uses a set of portfolios of mutual funds and tests the hell out of them using his Harvesting score (a variation on the Sortino ratio, it looks like), but he doesn't discuss other approaches like ETFs and stock picking and assumes that once you set up the portfolio, all you do is rebalance the mix for 40 years, which I think may be a bit optimistic given the dynamism of the market.

I really like his asides to reassure you that going off-target a bit won't hurt risk all that much, and that you just need to use common sense about it all.

Even if you wind up not liking his approach and evidence-based advice, you will learn a lot from this book about how to think about retirement investment.

To be revised.

[Pcd · Rating 4 out of 5]

This book took patience. Great information, densely/dryly presented. If you try to skim, there's salient context/terminology that you'll miss.

This book goes into depth on asset allocation, 'harvesting', and mitigating risk. Lots of simulations, using a variety of historical data sources. The way they're presented is hard to understand. Whereas retirement calculators use historical data, they present results in aggregate - % success, medians, standard deviations. Here, you get the sequence results in very dense charts that are difficult for this reader to summarize in their head. I really wish the author had done that for us.

Getting to the section where the author talks about integrating guaranteed income as a potential risk mitigation is where things came together for me. This was about page 263, so there was a lot of slogging through before that. This is where the terminology and frameworks really began to come together for me. That's not an endorsement of annuities or bond ladders as much as testimony to really seeing the examples and case studies light up for me.

This is not a quick or easy read. Definitely not the first investment/retirement book I'd pick up. But if you're interested in really internalizing cost-averaging, known vs. speculative risk, overall market valuation this will help. The frameworks for settling on initial withdrawal rate and when guaranteed income make sense are really useful too.

[Cyberjoe · Rating 5 out of 5]

There’s a lot of low-quality retirement books out there with anecdotal stories. This book is very different. It is 100% evidence-based, and the author presents numerous backtested approaches to manage portfolios and withdrawals.

While this book demands above-average attention, it also comes with an Excel spreadsheet that brings the best strategy to life.

This should be mandatory reading for everyone thinking about retirement.

[Aaron Turing · Rating 5 out of 5]

This is a really good book. It describes really good ideas backed up by data in relation to how to live off your portfolio.

[Dave · Rating 5 out of 5]

Amazing book, read the entire thing.