Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life

by Laurence J. Kotlikoff

Increase your spending power, enhance your standard of living, and achieve financial independence with this “must-read” guide to money management (Jane Bryant Quinn). Laurence Kotlikoff, one of our nation’s premier personal finance experts and coauthor of the New York Times bestseller Get What’s Yours: The Secrets to Maxing Out Your Social Security, harnesses the power of economics and advanced computation to deliver a host of spellbinding but simple money magic tricks that will transform your financial future. Each trick shares a basic ingredient for financial savvy based on economic common sense, not Wall Street snake oil. Money Magic offers a clear path to a richer, happier, and safer financial life. Whether you’re making education, career, marriage, lifestyle, housing, investment, retirement, or Social Security decisions, Kotlikoff provides a clear framework for readers of all ages and income levels to learn tricks like:
Money Magic’s most powerful act is transforming your financial thinking, explaining not just what to do, but why to do it. Get ready to discover the economics approach to financial planning—the fruit of a century’s worth of research by thousands of cloistered economic wizards whose now-accessible collective findings turn conventional financial advice on its head. Kotlikoff uses his soft heart, hard nose, dry wit, and flashing wand to cast a powerful spell, leaving you eager to accomplish what you formerly dreaded: financial planning.

Genres: Nonfiction, Personal Finance, Finance, Money, Economics, Self Help, Audiobook

320 pages, Hardcover

Published January 4, 2022

Reviews

[Lawrence Nah · Rating 2 out of 5]

As the vast majority of advice shared in this book is meant for the typical US American Citizen, ranging from tax advice and retirement contribution options very specific to what one would face in the US; it is of no value to international readers like me.

Oh yes the author also does use the book as a way to heavily promote his researched based financial software for personal finance.

Last chapter about the 50 secrets of money magic is likely the most useful piece of information, albeit it simply being a summary of the preceding chapters. I'll buy the last chapter for a tenth of the price and rate 4 stars solely for that last chapter.

[Subjuntivo Subjuntivo · Rating 2 out of 5]

I dare you to find a secret here.

[Penny Monjeau · Rating 4 out of 5]

Lots of great information, lots of math!

[carl theaker · Rating 3 out of 5]

I like to take a look at a new finance book occasionally, see if there’s something new going on. Author Kotlikoff takes a different angle in that he is and economist as opposed to those who take the standard ‘financial advisor’ classes. In this way he provides a bigger picture for organizing your life and finances.

One thing he emphasizes is that even brilliant economists can’t predict the market, and sure enough he uses an inflation rate in his examples of 1.5%. Even though this book was published in 2022, I know he wishes he had it back to make some adjustments for the current 40 year high inflation rate in the US right now. Something even he could not forsee, so his warning about the market is right on target.

He covers a lot of subjects, so there will be chapters you can leave out or read lightly as you may not need them, such as career planning, choosing a college, paying for college, etc. I read and liked his previous book on the vagaries of the US Social Security system. This is a good read whether you are starting off on a financial life or keeping up on current trends.

[Ali Khaledi · Rating 5 out of 5]

I have read the book twice, and I found it very helpful. I have to add I have read many books on similar topics; still, the book taught me some new things. That author uses humor skillfully to deliver his points home. I highly recommend it for those who care about managing their money properly, especially those with a little gray hair here and there.

Most of the chapters are tailored toward older individuals (50 or older). There are some chapters at the end for younger individuals, where Larry talks about college. A better organization would have been to start by talking about things relevant to younger individuals. Maybe Larry could have started by talking about money strategies for the first 20 years, then 20-40, and so on. Instead, Larry starts by talking about retirement, social security, etc.

[Leslie · Rating 4 out of 5]

Thanks to NetGalley and Little, Brown Spark for the digital galley of this book.

I’m a huge personal finance nerd. I am constantly trying to figure out how to make the money I have work for me. I spent almost ten years without a raise, so now that I’m starting to get caught up on my income level, I want to increase my saving and make sure that money isn’t lost to inflation.

Kotlikoff is an economist, which gives this book an edge of many personal finance books. Through an economic lens, he shares what many of us are doing wrong with our finances, and how we can get the most out of it no matter where we are starting from. Thirty years from retirement? Great, he’s got some great tips to help ensure you get everything that’s coming to you at retirement and how to plan smartly for it. Retiring in five years? It’s not too late. There are things we all can do, and as he reminds us, starting now is better than starting next year.

There’s an extensive section on Social Security (which even SSA employees don’t understand and can often give bad advice about), one on investing, marriage, kids, etc. It’s pretty dense, but I learned things in this book that I’ve never heard in personal finance books before, and as someone with an amateur interest in economics, I appreciated the lens this book provided.

You may not find it as intriguing as I did if you’re not a finance nerd like me, but you’re very likely to learn something that will help you in the long run. It’s out now wherever you get your books.

[Coco · Rating 3 out of 5]

I got this book after signing up for the software program. But you don’t need the software to benefit from the book.

It is not a basic investment book that shows a table promising multi millions if you invest 100 per month from the age of 25. If you have graduated from those basics I recommend you give this book a try.

In fact this book delves into the intricacies of US social security and other retirement topics that can be dry at times but I find it to be a good intro in your middle years nonetheless. Also some topics on life choices. Author is generally conservative with some points I agree and some I don’t but overall a good intermediate level book if you can look pass the dryness.

[David Brush · Rating 4 out of 5]

I really enjoyed this book despite its flaws. There was a great discussion/primer on social security benefits and a good level of detail overall on the topics covered. However, Kotlikoff focuses every single decision through the lens of finance and sometimes suggests making absurd calculations, like what percent living standard reduction would you be willing to accept to stay in a bad marriage. It's a bit hard to quantify that obviously, and probably not the best way to live your life in general.

[Sierra Bennett · Rating 3 out of 5]

A lot of information were things I already knew and it just didn't seem all that relatable and doable, especially with investing and retirement. A lot of good in theory ideas but hard for lower income people to accomplish or do.

[Suzanne · Rating 4 out of 5]

It's one of the better financial books I've read. Not everything is applicable to me/everyone, and I personally don't agree with everything the author said, but there are some very interesting ideas and scenarios to consider.

[xmilkshakex · Rating 3 out of 5]

Some really useful info on how money strategies work, but also, I am nowhere near 60, and I am not planning on getting divorced anytime soon (has never held hands romantically yet).

[Pete Klein · Rating 4 out of 5]

Easy read and valuable but simple ways to improve your financial strategy.

[Rayfes Mondal · Rating 3 out of 5]

Some good life advice about choosing a career. But otherwise too conservative about investing. T-bills and I-bonds are safe but are more about wealth preservation than wealth building.

[John · Rating 2 out of 5]

He has interesting ideas and obviously knows his stuff, but this book gets into the weeds in a lot of places for no good reason.

I like a financial book with a lot of details, but his examples just muddy it up for the average reader.

[Christian Crowley · Rating 3 out of 5]

I skimmed through this book in about 2.5 hours (while I was supposed to be doing my taxes), and I like some of these ideas, like using inflation-rated Treasury investments to guarantee your bottom-end future cash-flow, and using stocks to offer the potential for upside gains. I also like how the author lists his top-50 tips in the last chapter, to refer back to in future, along with 6 recommended periodic checkups (esp. savings rate, investment portfolio, and insurance coverage).

I am not yet convinced about the wisdom of paying off low-rate loans (mortgage, student loan); I'd prefer to put my marginal dollar into a mutual fund, as I feel like the expected return is higher there.

Maybe I'm missing some of the author's main lessons!

I'm also not convinced that it's better to delay collecting social security benefits. For someone who only lives to age 78 they'll earn more if they
* start at age 62 and collect 16 years of the 70% reduced benefit (equivalent to 11.2 payments)
* than if they start at age 67 and collect 11 payments of the 100% benefit
* or start at age 70 and collect 8 years of the 124% max benefit (equivalent to 9.9 payments)
* You'd have to live to age 83 to earn more by delaying benefits until age 70

This ignores life-expectation statistics: the average 62-year-old is currently expected to celebrate their 82nd birthday. So it may be worth waiting after all. Especially if you work a few more years and earn a relatively high salary, as your social security benefit is based on your top 35 years of earnings.

What about the opportunity cost of missing out on early payments? If the recipient invests those payments and earns 3% above inflation each year, someone who only lives to age 82 will earn more starting benefits at age 62. They'd have to live to to age 89 to earn more by delaying benefits until age 70. The higher their return, the longer they'd have to live to earn more by delaying benefits. There's also a chance that benefits might change in the future. It would be a pity to delay benefits only to have the program is cut.

The author stresses the economist's approach of maximizing lifetime consumption. I'm an economist too, and I'm more interested in maximizing lifetime happiness. So if someone would be happier with lower consumption and more free time, it makes sense for them to retire earlier (and maybe start their social security benefits of they need to).

I feel some of the chapters could be cut, like "Marry for money", and most of the job-search and housing chapters.

[Carol Bakker · Rating 3 out of 5]

A slightly abridged opening:

When I started college, I hoped to become a doctor. But a frog derailed my plans. The frog and I came eye to eye in a biology lab as I injected it with death serum, sliced open its chest, checked its pulse, declared it dead, and proceeded to rub its tiny heart back to life. For the next two hours, it was kill-resurrect-record. By the end of the lab, I was majoring in economics.

Larry, I would have given your book four stars until I read your advice to marry for $$ and to assume you will get divorced.

That is not to say that a future spouse's monetary situation is irrelevant. Age 19, I got scammed by a missionary selling dinnerware and crystal on a 24 month-payment plan. Curt told me curtly he wouldn't marry me while I was in debt. I paid the loan off in four months.

There were refreshing ideas: a plumber may net more in a lifetime than a doctor. Do not borrow for college. Pay off your mortgage. Consider moving to a state without estate or inheritance taxes.

Kotlikoff's advice on Social Security Benefits was lifted verbatim from his book, Get What's Yours, but repetition is the key to mastery, so I didn't mind reading it again.

He closes with a stunning jeremiad that gives an overview of the book:

We Americans are financially quite sick. As a group, we undersave, underinsure, under-diversify, pay for bad investment advice, rely on dying early, retire too soon, take Social Security at the first chance, free far too little trapped equity, borrow to invest in stocks, convince ourselves that stocks are safe long-term, live house poor, marry assuming we'll never divorce, divorce assuming we'll maintain our living standards, borrow to attend colleges we don't finish, pretend love is all there is, ignore our housing and job markets, get duped by conventional financial planning, underutilize and mismanage our retirement accounts, buy highly complex financial products carefully designed to con us out of our money, and routinely make lifestyle decisions without knowing their true living-standard prices. And far too often we disassociate. We treat our personal finances as someone else's problem — namely our future selves who can damn well take care of themselves!

[David · Rating 3 out of 5]

breezy, confident writing style. Lots of stuff you will have heard (not sure it's a "secret" that you would be wise to contribute at least enough to your retirement account to secure any available employer match, that you need to consider longevity risk and inflation risk in planning retirement, or that working remotely frees you up to consider living in a less expensive housing market), but some nonintuitive or fresher points -- he's for example opposed to life cycle investing strategies predicated on taking less risk as you get older and thinks that poor people should be more heavily invested in equities than rich people.

Some of it is boring as a book to read but likely useful to keep around as a reference. I gather he has another entire book about social security complexities, and even the chapter on it here is pretty detailed, so that might be worth a look if relevant for you.

I guess it's the economist in him, but he's strikingly committed to the bit in terms of viewing everything thru the money lens. Runs the numbers on things like marrying someone who is better off unless you prefer someone else by at least X percent, contemplating divorce by considering exactly how much you would pay to be quits of this spouse, etc.

if he writes an update, I'd like to hear from people who have followed, or tried to follow, the advice. For example, the college cost tip of going to an inexpensive (e.g., community college) place and simultaneously taking a bunch of online courses taught by faculty from expensive elite universities and scoring grades/certificates -- has anyone done that successfully? It's literally impossible in my field as there are no widely accepted, meaningful certificates, but even in the areas (seems as if computers would be the main one, and indeed he uses putting together a "dossier" for IBM as his example) for which it is possible I'd be curious as to whether those who try it complete the task (I believe dropout rates from online courses are huge) and then end up happy about having done so.

[Isaac · Rating 4 out of 5]

I know Larry from his frequent appearances on Glenn Loury's podcast. I generally find him a bit abrasive, sort of a know-it-all and always slinging his website/software, but he also throws out some pretty interesting ideas. This book is very much like those appearances maybe with a higher ratio of interesting ideas to abrasive comments.

A lot of this book seemed targeted at people close to retirement age with whole chapters on maximizing social security, determining when to retire and so on. There were also chapters that seemed more targeted to younger folks; picking a career, going to college, getting married and getting divorced. Some of that content made me tune out a bit, but for the most part I felt like I got some new tools in my pocket to deploy with my kids, when I get closer to retirement or if I lose my job or my wife leaves me.

The main chapters of interest to me were the chapters on home ownership, investing and tax/saving/retirement accounts. Those also ranged from pretty mundane (pay off your house, move in with your parents), to a bit crazy (the less money you have the more you should gamble in the stock market).

The book gets a bit technical and he moves real fast. He does this clever trick where he compares clones of a person and then tweaks one or two variable (Roth vs. Traditional IRA say) to see how that impacts their living standards over the years. It's pretty effective (though a bit hard to follow, at least on audio), and some of the conclusions are really counterintuitive.

I didn't come away with a ton of immediately actionable advice, but I feel like I have a better idea of the types of life events to keep an eye on that might change my retirement calculus.

[Unleash The Knowledge · Rating 5 out of 5]

SHOW ME THE MONEY!!

Who remembers this classic line from Jerry Maguire with Tom Cruise?

The concept of money fills our minds on a daily basis to answer questions like:

- How do I get more of it?
- How do I keep more of it?
- How do I not lose it?

There are only a few people I turn to when it comes to learning more about money.

Mainly when I am knee-deep in research on how to make more, lower my risk, and inch towards living my ideal life.

Laurence Kotlikoff is one of my go-to people.

He is one of our nation’s premier personal finance experts and the co-author of the NYT bestseller, Get What’s Yours: The Secrets to Maxing Out Your Social Security.

Now, he is back with his latest book, Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life.

Money Magic has something for every reader who is at a different part in their life.

Whether it is:

- Preparing for retirement
- Getting married
- Buying their first home
- Heading to college
- Getting divorced (unfortunately)

My favorite part is the structure of this book and how Laurence covers tons of helpful real-life situations in his book.

Like moving back in with your parents to save up cash and get ready to buy your first home.

Swipe through to see some of the awesome, eye-catching chapter titles.

Don’t they make you want to read the book?!

Grab a copy today!

[Steve Brock · Rating 5 out of 5]

As Stevo’s Novel Ideas, I am a long-time book reviewer, member of the media, an Influencer, and a content provider. I received this book as a free review copy from either the publisher, a publicist, or the author, and have not been compensated for reviewing or recommending it.

This book was Stevo's Business Book of the Week for the week of 1/9, as selected by Stevo's Book Reviews on the Internet and Stevo's Novel Ideas. Increase your spending power, enhance your standard of living, and achieve financial independence with this “must-read” guide to money management (Jane Bryant Quinn).

Kotlikoff uses his economist's training to help the reader plan their economic future, whether they are starting or nearing the end of their work life. His best advice for me is about planning for retirement, but I also enjoyed reading his section about graduating from college debt-free.

No matter your age or circumstances, though, what resonates through the book is the need to plan for your economic future. The earlier the better.

Find more Business Books of the Week on my Goodreads Listopia page at https://www.goodreads.com/list/show/9..., and find many more reviewed and recommended books and products by searching for me on Google.

[Leah · Rating 4 out of 5]

This book is interesting because it contains advice that is often the opposite of conventional wisdom (i.e. stocks are riskier the longer you hold them, taking money from an IRA to pay off a mortgage can be a good financial move.) With that said, there were times that it felt like I was listening to a word problem in high school math class (If Jenny has $60K in investments that have an average rate of return of 7% and an annual inflation rate of 3%, how many pies can Jenny bake with the money she makes from her investments, adjusted for inflation?--Not an actual example, but you get the idea...) and my brain had a hard time following/trying to do the math in my head (I was listening to the audio book.) Also, I would have liked to see a more chronological organization/structure. The first chapter discusses how to choose a career, and then the next chapter jumps straight to maximizing Social Security benefits--that's a big jump! Despite these minor quibbles, however, I really did enjoy listening to this unique, economics-based take on personal finance.

2023 Reading Challenge Category: A book with a rabbit on the cover

[Colin · Rating 3 out of 5]

The author has a point: the financial advice industry does not necessarily have your best interest in mind and there are solid reasons why. On top of that, the financial advice industry does not produce results. In this book, we are presented the view of the more neutral Economist. I always remember President Truman's comment about wanting to meet a one-handed Economist - Economists often say "well, on the one hand...and on the other hand..." But in this book there are more clear conclusions. The conclusions are based on Economic theory but the major ones are pretty mundane: save money, live below your means, etc. He is very adamant about not taking on ANY debt for college - it is not just a terrible investment, but 40% don't even finish. This means crippling loans with no result. Buy I Bonds and TIPS. There was some engaging discussion on rebalancing retirement funds based on expected spending each year. Each chapter ends with a bulleted "recap" list. If you trust his reasoning, might be better to just read the last recap list.

[William Yip · Rating 4 out of 5]

It's probably not the author's fault since the subjects are so convoluted but the chapters on social security and retirement accounts were confusing and hard to understand. He dismissed bonds when they serve as a good ballast for a portfolio heavy in stocks, bond index funds and ETFs have bonds that mature across a spectrum of time, and short-term bonds have larger yields when interest rates rise. He didn't discuss the importance of staying physically healthy through exercise and diet as a way to decrease costs in one's lifetime.

That said, the author provided plenty of good advice: live with someone to split the costs of rent or a mortage, food, and utilities; understand the cost of divorce; obtain all the benefits possible from social security including receiving payments after turning 70; don't retire too early; control expenses and debt; find a career one enjoys but others dislike or don't know about; take into account a romantic partner's wealth or lack thereof.

[Jim Kucharczyk · Rating 5 out of 5]

I've read a few of his articles and use his software, I find Mr. Kotlikoff's approach novel, stimulating and resonant with my own experience. He is an engaging writer, has a breezy and irreverent style that keeps the reader engaged. He uses lots of examples - some real, some stylized - to illustrate his concepts, and he uses them effectively. He has a knack for breaking complex topics down into more easily digestible and understandable slices.

This book covers the gamut of financial decision making from graduating college and launching a career through the pros and cons of renting or buying a house to saving for retirement and maximizing Social Security. I was most interested in the retirement parts, I will be sending copies of the book to my millennial kids. The tips and tricks he offers up are well worth the price of admission.
Highly recommended.

[Mark Zodda · Rating 4 out of 5]

Very engaging and different perspective on personal finance matters. While an underlying theme in the book is an advertisement for Kotlikoff's financial planning services and software, it is worth wading through those to get his different approach to some common personal and money management issues. While I think that his ideas don't all fit together nicely, it is worthwhile to see how he approaches common financial problems and where his advice seems to differ from that found in most other money management books. I'm not sure I understand or accept the utility of his dollar cost analysis to staying married versus divorce, but it is interesting nonetheless. Overall, definitely worth the cost of admission. Recommended.

[Tim · Rating 3 out of 5]

A solid personal finance primer that covers a lot of ground, has some counter-intuitive advice, and is written in an engaging and humorous way. It seems best for someone who's facing a transition point in their financial life - just getting started in their career, thinking about housing, thinking about divorce, or getting close to retirement. The major caveat in the whole book is that it's written from an economist's perspective (it's in the title), and that comes with the requisite note that most people are not rational actors and don't make decisions the way economists think they should. That doesn't mean the advice in the book is bad, it just means it's a book for a relatively narrow audience.

[Shirl Kennedy · Rating 3 out of 5]

There's a lot of good information in here, but there is SO MUCH information (that will likely be irrelevant to you) that you'll find yourself skimming. Also, much of what is discussed here is geared toward the upper middle class rather than the "average Joe." And the chapter about marrying a rich person is ludicrous. If you're approaching retirement age, I highly recommend Kotlikoff's previous book, Get What's Yours: The Secrets to Maxing Out Your Social Security as well as Get What's Yours for Medicare: Maximize Your Coverage, Minimize Your Costs by Philip Moeller, one of Kotlikoff's coauthors on the Social Security book.

[Becky · Rating 4 out of 5]

I love reading personal finance books, and I recently read Mr. Kotlikoff's book on Social Security. This book was even better: it contained much of the same (incredibly valuable) info as the SS book, but with added information about how to balance spending (from which accounts) during retirement.

I was fortunate to find his SS book (at a used book sale!), thus avoiding the costly mistake of taking my Social Security next year at age 62.

I thought the chapter on investing was a bit hard to understand. It might be it was just a bit too basic, since it wasn't in terms of "invest in mutual funds" but primarily discussed the stock market, in general, vs Treasury bonds.

[Byron Snapp · Rating 5 out of 5]

The author presents ideas that go counter to many investment books and strategies. The author is very conservative (much more so than me and I usually think of myself as on the more conservative side when it comes to money management and investments). He is primarily focused on reducing longevity risk (planning for 105 year life, don't take early retirement) and increasing your living standard floor (focused more on downside risk than upside gain). Overall I really enjoyed the difference in perspective and it gave me plenty of things to think about. I thought he explained his reasoning pretty well even if I (or books from other people I've read) disagree with some of his points.

[Rachelle · Rating 5 out of 5]

Money Magic... well detailed and concisely explained financial journey explained for employees in their working years, nearing retirement, while navigating loans, investments, divorces, savings, and Social Security concerns. I expected a dry financial read, but this book is surprisingly simple to understand, each concept broken down into easy to comprehend messages and examples of imaginary couple or individual scenarios. I thought I knew enough about finances, but this book is incredible and definitely expanded my knowledge.