Taylor Larimore and the Monster Mistake That Ate Middle-Class Wealth

Taylor Larimore and the Monster Mistake, Fright Scene #1 — In the Lair of the Gentleman Goon

Taylor Larimore is one of the co-authors of the book The Bogleheads’ Guide to Investing. He posts daily at the Vanguard Diehards discussion board at Morningstar.com.

Taylor Larimore and the Buy-and-Hold Monster

The Vanguard Diehards board is a high-potential board. Lots of smart people post there. The Vanguard Diehards board is a goon board. Lots of goons post there. The Vanguard Diehards board is a goonishly wonderful board or a wonderfully goonish board, depending on your point of view.

Taylor Larimore is the board’s signature poster. He does indeed engage in a good bit of goonishness. Mention the merits of long-term timing and Taylor Larimore will put up a post with 20 quotations from experts dismissing the idea of short-term timing. He often refers to posters who put forward questions about valuations to which he is not able to respond effectively as “trolls.” He says nothing about the ruthlessly abusive posting of another co-author of his book, Mel Lindauer.

Taylor Larimore ain’t no Mel Lindauer, however. Taylor Larimore is a nice goon, a gentleman goon. I get the sense that Taylor Larimore would be happy if goon tactics were not needed to block honest and informed discussions of the effect of valuations on long-term returns. Lindauer (and a good number of others, to be sure) respond to the call of The Great Goon in the Sky with relish. Not Taylor Larimore. He does what needs to be done, or he at least sanctions others doing what needs to be done, but he does so without any show of enthusiasm. Good for him (kinda, sorta).

Taylor Larimore and the Monster Mistake, Fright Scene #2 — The Magic Words That Must Be Spoken to Break the Witch’s Spell

Taylor Larimore did something the other day (this article was posted in June 2007) that made my eyes pop out in shock and amazement. Since the early days of The Great Safe Withdrawal Rate Debate, we have been plagued by goon posters who want to defend the conventional investing model of today but who are too aware of the pitfalls of trying to do so in reasoned debate to be willing to engage in straight-talk discussions. Hostility comes through loud and clear, but we miss out on the learning experience that often follows from honest expressions of discontent. Word games are a dishonest means of communicating displeasure. Taylor Larimore went beyond word games on an important investing question the other day.

A poster noted that even experts inclined to defend the conventional model acknowledge that valuations are too high today to justify realistic expectations of solid stock returns on a going-forward basis. For example, William Bernstein (author of The Four Pillars of Investing) puts the long-term return of stocks at 3.5 percent real, a number not sufficiently higher than the return that can be obtained from purchasing Treasury Inflation-Protected Securities (TIPS) to justify the far greater risk involved in owning stocks.

Larimore said: “Short-term (10 years or less), it doesn’t matter. Long-term, I believe stocks will continue to grow — as they have for 200 years.”

That statement shows Taylor Larimore to be less than well-informed about today’s investing realities. It’s not a word game response, however. It’s an honest uninformed statement. That’s a lot better than the alternative. That’s a whole big bunch better than the word games we have come to expect from defenders of the conventional model who do not possess the personality or character deficiencies necessary to descend into the ranks of the card-carrying Goons.

Get Rich Quick Will be the Death of Your Retirement Dreams

By talking straight, Taylor Larimore gave us something to work with. He offered the hand of kindness to those of us seeking an understanding of how long-term investing really works that is both honest and informed.

Taylor Larimore and the Monster Mistake, Fright Scene #3 — The Long and Winding Road Through the Dark and Lonely Forest

What Taylor Larimore said gets to the heart of both what’s right about today’s dominant investing model and what’s wrong with it too. How stocks perform over the next 10 years “doesn’t matter,” says Taylor Larimore. That’s a bit strongly stated for my tastes. But what Larimore is saying here is a lot more true than it is false. He is putting his finger on the legitimate breakthrough of the now dominant model.

Investors used to worry about the short-term. What distinguished a bull from a bear was that a bull expected stocks to do well over the next 10 years and a bear expected stocks to do poorly over the next 10 years. Today’s smart investor (the one at least smart enough to buy into the “Stocks for the Long Run” model, a gravely flawed model that is a step above what came before it) doesn’t care whether stocks are going to do well or poorly over the next 10 years. Most of today’s investors are (or at least profess to be) long-term investors. Their focus is on what will happen over time-periods of longer than 10 years.

Larimore did something very important in the words quoted above. He defined for us what he means when he uses the phrase “investing for the long-term.” Most defenders of the “Stocks for the Long Run” model fail to do this. They advise investing for the long term, but don’t say what that means. Is three years the long term? Five years? Ten Years? Fifteen years? What? Larimore suggests in the words quoted above that the 10-year mark is where the short-term ends and where the long-term begins.

That’s just what we need to know to be able to point to some figures that will scare most of today’s middle-class investors right out of their pants.

Taylor Larimore and the Monster Mistake, Fright Scene #4 — Those Horrible Dreams of Walking Around in Public with No Clothes On

Most of today’s investors have never stopped to consider how long the “long term” really is. Most are not going to be able to wait 10 years to see good returns from their stock investments. You can tell that by reading the posts put to the Vanguard Diehards board. Many indexers are expecting to see good returns from stocks in five years or less. The odds are not good.

By setting forward a definition of the long-term that requires that investors wait 10 years to see their trust in today’s conventional advice pay off, Taylor Larimore is suggesting an exceedingly generous means of assessing the value of that advice. It’s probably only one in five of today’s investors who will be able to wait 10 years for stocks purchased at today’s prices to provide a satisfactory return. Under the Larimore rule, that would be good enough.

The historical stock-return data tells us that in all likelihood 10 years is not going to be nearly enough. Stocks are not priced today to provide a good return in 10 years. Stocks are not priced today to provide a good return in 15 years. Stocks are not priced today to provide a good return in 20 years.

Fear of Losing Money
How about in 25 years? That’s a definition of the much anticipated “long run” that makes sense, according to the historical data. Those who purchase stocks today will by the year 2032 have received a strong enough annualized real return to justify their investing choice, in the event that stocks perform in the future anything at all as they always have in the past.

Most of today’s investors with dreams of coming out okay in “the long term” are walking around in public with no clothes on. Even worse, they don’t know it!

By putting forward a definition of “long term,” Larimore has given them a tool for figuring out for themselves what they need to know. Those with a sincere interest in investing effectively for the long run can check the historical data to determine whether Larimore’s 10-year rule makes sense. They will learn that it does not. Learn that important lesson, and you are well on your way to getting about the business of putting some clothes on and winning back your investing self-respect.

Taylor Larimore and the Monster Mistake, Fright Scene #5 — The Salesmen With a Desire to Drink Our Blood

It cannot be that easy, can it?

We’re talking about the Stocks-for-the-Long-Run Investing Model, the dominant investing model of our day. I am saying that the whole thing crumbles apart in our hands if we merely work up enough of the spirit of self-assertion to say to the kind and generous and saintly experts: “Oh, please, sirs, could you give us sad figures so entranced by your superior wisdom some little sense of what it is you mean when you say that we need to be willing to wait for the long term for stocks to pay off?”

The usual response is: “Shut up and eat your gruel if you know what’s good for you, sucker boy! You pay the bills, and that’s all you’re good for. If we Experts have any questions we want to have directed at us, we’ll be sure to let you know. For now, the Great Oz has spoken!”

Taylor Livermore did better than that in the comments he put to the Vanguard Diehards board the other day. He put a number to the sleazy long-term promise. It’s like a 20-year-old boy on the make telling his girl that he will still love her in the long term if only she will give him everything he wants in the here and now. Why is it that those making promises that involve the phrase “the long term” are so reluctant to discuss specifics? Why is it that so many loves sealed by vows re what will happen in “the long term” in the real world cannot survive much past next Saturday night?

What is it that a stock “expert” is “expert” in? Selling stocks! It’s not an accident that they never get specific about the meaning of the phrase “the long term.” That sort of thing comes off to the boys and girls in the club as being so darned unprofessional. It’s safer being vague than being unprofessional.

Fear and Greed. Mosstly Fear

For everyone except the schmucks and schmuckettes left the job of paying the bill. Oh no! A terrible thought just occurred to me. Some of them might be listening in!

Taylor Larimore and the Monster Mistake, Fright Scene #6 — The Schmuck Who Came Back from the Dead

Taylor Larimore has played the role of the Schmuck before. He talks about it in his posts to the Vanguard Diehards board. He says that he fell for just about every investing hardsell that came down the pike. Until he discovered Saint Jack. That’s the day he died and went to investing heaven, where the motives of all those who become wealthy on the commissions obtained from completing stock transactions are pure.

Uh — good point, Taylor. Um — outstanding post!

I don’t think it works that way. Warren Buffett says that, if you’ve been playing poker for 20 minutes and you haven’t yet figured out who the patsy is, there’s a good chance that you are the patsy. The historical data tells us that the patsy is the guy who believes that, for those who purchase stocks at today’s prices, the long term is 10 years. Taylor Livermore is the patsy. Again.

Taylor Larimore and the Monster Mistake, Fright Scene #7 — A Sh-Sh-Shiver and a Sh-Sh-Shake

Is he a bad guy? I don’t think so (I do think he has done bad things, of course). I think he sincerely wants to do well for the people who post to the Vanguard Diehards board and for the people who read his book. I think he is too trusting a soul for his readers’ good. I think he has fallen for a line again, as he himself acknowledges he has before. I think he has fallen in with a bad crowd that has persuaded him against his better instincts that goon tactics are needed to “protect” the salesmen from the questions that the goons all know they cannot possibly respond to effectively.

The Bogleheads Guide to Retirement

Millions will suffer busted retirements. Millions more will see large portions of their life savings go “poof!” And you wonder why Scooby-Doo gives us a shiver and shake? Scooby’s no Schmuck. Scooby and those meddling kids know the score. They know to run at the sighting of an absurdly high P/E10 level.

It’s a terrifying reality. You do what the experts tell you to do. You buy the stupid stocks and you never dare to ask a single question about the prices you are asked to pay even though you do notice that they seem a trifle high. Then, as all around you are selling, you stick to your buy-and-hold guns for ten long years. And what do you find at the end of this journey into the heart of darkness? No Scooby Snack!

You gave me a scare with your frightening look into the realities of long-term investing, Taylor Larimore. Like my boys Timothy (age seven) and Robert (age five), I enjoy being scared. Do it again! Do it again!

Boy Disease, and How Suze Orman Helps

Boy Disease and How Suze Orman Helps, Lesson #1 — Trying to Be Like Donald Trump Cannot Be the Answer.

I’m a guy and I suffer from boy disease from time to time. I also enjoy moments when I am able to see through the fog.

Boy Disease and How Suze Orman Helps

There’s nothing wrong with the male personal finance advisors. They have their place. They do a job that needs to be done and they do it well.

There’s a reason, though, why a good God created men and women and then implanted in them a drive to overcome the frustrations and figure out a way to live together in peace. Men as a general rule possess access to some pieces of the puzzle and women as a general rule possess access to other pieces of the puzzle.

If almost all personal finance advisors were women, many of us would sense that there was something lacking. Most of us sense that there is something lacking in the money advice we hear in a world in which almost all personal finance advisors are men. That’s a big reason why Suze Orman is so successful. She brings a different perspective to the table.

Boy Disease and How Suze Orman Helps, Lesson #2 — Deciding Whether to Pay Off the Mortgage is Not a Numbers Exercise.

A good number of years back, I used to listen to a radio program dealing with personal finance questions that was hosted by Bruce Williams. It was a good show. But it used to make me a little nuts when someone would ask whether it was a good idea to make extra mortgage payments. I rented at the time, so the question had no personal significance. But the patness of the answer he always gave annoyed me. He would always ask what the interest rate was and then roll off numbers purporting to show whether paying off the mortgage was a good idea or not.

The idea was that, if the mortgage called for a low interest rate, it was dumb to pay off the mortgage. The bank had given you a good deal and you should take advantage of it to the fullest.


The numbers side of things is indeed part of what you need to think about when deciding whether to reduce your mortgage or pay it off entirely. Bruce Williams was bringing value to the table. But even in those days, when I was not exactly what you would call money smart, I could see that the advice he was giving was too narrow.

Bruce Williams suffered from boy disease. We boys love to play with numbers, heaven help us all. Money topics invite this sort of thing, of course. Dollars can be counted. Most money questions can be reduced to numbers exercises by those who feel more comfortable talking about numbers than that icky emotions stuff. I bet Bruce Williams smiled every time the “Should I make extra payments on the mortgage?” question turned up. He knew the answer to that one. He had answered it so many times that he could work through the calculations in his head.

He knew half of the answer. That’s the truth of the matter.

Suze Orman often wears a black leather jacket on the photos taken for her book covers. Is that cool or what?

Boy Disease and How Suze Orman Helps, Lesson #3 — Feel the Tension.

Pennies and Nickles and Dimes and Quarters
Henry Higgens had it made before that Eliza Doolittle individual showed up with her large brown eyes and that song about how having lots of chocolate to eat would be heavenly. He was living a boy’s dream. He had no one running about trying to improve him. He didn’t need women.

Except he did, right? It’s always the way, isn’t it? Our apartments get too messy for us to continue to kid ourselves that we are okay by ourselves and we dial somebody’s telephone number. We complain about what follows, but we knew when we dialed the number where things were likely headed.

We like the tension. We need the tension. The point of life is to work through these sorts of tensions.

This site is entitled “PassionSaving.com.” There’s a tension between those two words. Passion is the girl word, saving is the boy word. One is emotion, one is practical. One is exciting, one is grounded. One takes you who knows where, one is predictable.

Girls aren’t better than boys and boys aren’t better than girls. Both are better when they are working out the tension that comes up when they are placed in the same room and told to figure things out. Guy money advice works but it does not work as well as guy money advice mixed up together with girl money advice.

Lots of my titles are like that. With “Retire Different!”, “Retire” is the boy word and “Different!” is the girl word. With “Practical Dreamers,” “Practical” is the boy word and “Dreamers” is the girl word. With “Investing for Humans,” “Investing” is the boy word and “Humans” is the girl word.

The titles are like that because life is like that. A radio station that played only Bruce Springstein would get boring fast. A radio station that played only Joni Mitchell would get boring fast. We need to see more Joni Mitchell lyrics in our personal finance books.

Suze Orman has written a few such lyrics. Good for her.

Boy Disease and How Suze Orman Helps, Lesson #4 — Playing “Cowboys and Indians” Can Get You Killed.

One of my favorite stories about kids is about a mother who didn’t want her little boy playing war games. It was okay for him to play with dolls. She instructed all the relatives not to buy him guns. One day she caught him holding a Barbie as if it were a gun and pretending to shoot his little brother with it and then blow off the smoke sent up by the gunpowder.

I don’t think there is ever going to be a world in which boys don’t play with guns. I think that runs deep. I don’t think that you can learn the answer to every personal finance question by playing “Cowboys and Indians,” however. For some of them, you need to play dress-up. For some of them, you need to play school. For some of them, you need to pretend you’re Patty Duke and that dancing the Hot Potato makes you lose control.

Suze Orman knows how to dance the Hot Potato, I presume. Bruce Williams, I’m not so sure about. Donald Trump, I’m not so sure about. Charlie Munger can tell a joke good enough that I would repeat it to friends, but I’m not sure that even Charlie Munger can dance as mean a Hot Potato as Suze Orman. It’s possible that I’m wrong about that one. Many have made the mistake of underestimating Charlie Munger.

Suze Orman is in the possession of a good bit of money. I read somewhere that she invests it in ultra-safe stuff. That makes sense, right? Why take chances when you already have more than you are ever going to need?

How many boys can bring themselves to publicly acknowledge investing in sissy asset classes? Donald Trump has more than he will ever need too. He’s always out to make that next score, though, isn’t he? Boy disease.

Boy Disease and How Suze Orman Helps, Lesson #5 — It’s Not the Meat, It’s the Motion.

Men and Women and Money

It’s mostly boys who post to discussion boards. Boy are too loud and girls are too smart. “My portfolio is bigger than yours!” “No, mine is bigger!” Too much of that, and the Cool Girls move along to a more promising spot.

The truth is, discussion boards were made for girls. What is it that girls like to do most? Talk, right? (Are there any generalizations that I have failed to include at this point?) Discussion boards are for talking, right? So what’s the problem?

The problem is the boys. We had lots of girls participating in the early days of the Motley Fool board. That was when we talked about “soft side” stuff. Calling that stuff the “soft side” of early retirement was an insult that some of the Dumb Boys came up with. We were talking about the real stuff, the difficult stuff, the important stuff. We would still be talking about that stuff if some of the Dumb Boys hadn’t freaked.

The Dumb Boys at the Vanguard Diehards board are always bringing up the matter of “credentials.” They seem to think that there’s some kind of badge that you can put on that makes all of your money advice work. The Cool Girls know that anyone who has money knows something about what to do with money and that those who are are always holding out their badge are probably doing it because they fear that they don’t have what it takes and are about to be found out.

Girls take in information in different ways than boys. The girls’ ways are better, in my assessment. I think that Suze Orman can teach us something about those better ways that even a boy who graduated from the most famous school and who manages the biggest fund in the universe cannot.

Boy Disease and How Suze Orman Helps, Lesson #6 — Bad Savers Are Not Bad People.

Effective Savers are often like reformed smokers. We all want to know how they did what they did. We just cannot stand the judgmental tone that they adopt when talking about it.

This is a pet peeve of mine. If you save well, consider yourself blessed. It gives you a big edge. It doesn’t make you morally superior.

Girls as a rule (there are lots and lots of exceptions, to be sure) are better able to show sympathy when trying to help those who need help. Too many boys struggle with this. My sense is that they see life as a battleground (we need that perspective at times, to be sure) and feel that they have to make use of any edge they come to possess.

There are people who can listen to what Suze Orman has to say who cannot listen to what boy personal finance advisors have to say because of the way they say it.

Boy Disease and How Suze Orman Helps, Lesson #7 — The First Step in a Learning Process is Admitting You Don’t Know Something.

Boys have a difficult time asking a stranger for directions. It’s a cliché observation. It became a cliché because there are so many cases in which it is so.

Money Is An Emotional Topic

Is the ability to appear vulnerable before others an important credential for a personal finance advisor?


That’s one more basket for Suze Orman and the rest of the Girl Money Advisors Team.

Boy Disease and How Suze Orman Helps, Lesson #8 — Slower Is Better.

There was a fellow who wrote me to tell me that my site stinks because there are too many words and not enough direct instructions as to what he is to do to win financial freedom early in life.

He has a point. I’m not saying different. I have a thing going with words and everybody has limited time to devote to this money stuff.

I’m distrustful of the seemingly unquenchable desire for money “tips,” however. The problem with tips is that they go down easy but they don’t stick to your insides. You learn more about life reading one novel of substance than you do working your way through ten of those magazines with all the dizzy pages filled with tips and quizzes and sidebars. Any learning experience brought on by spending time with that sort of thing doesn’t last.

I hope that, as we see more women money advisors, we will see a greater willingness to go deep in our explorations of why at some times we know just what to do with our money and at other times we feel like a klutz on a first date.

It’s not a man who is the most successful money advisor alive today on Planet Earth. It’s Suze Orman. You go, girl!

What I Like and Don’t Like About Robert Kiyosaki

Some love Rich Dad Poor Dad Author Robert Kiyosaki. Some can’t stand him. Why is it about this this guy that provokes such strong reactions?

Set forth below are five things I see as positives and five things I see as negatives.

Robert Kiyosaki

The first thing I like about Robert Kiyosaki is that he is talking about my favorite personal finance topic–how to win financial freedom early in life.

Robert Kyosaki is hugely successful. The Rich Dad Poor Dad book has remained on the bestseller lists for years. He has sold over 20 million books. He offer all sorts of spin-off products and services–games, seminars, tapes, consulting. The guy is an industry unto himself.

There are some in the Financial Freedom Discussion-Board Community who sneer at his success, suggesting that anyone that successful must be all sizzle and no steak. I don’t buy it. To become that successful, Robert Kiyosaki must have been heard by a lot of people to be saying something worth listening to.

There was an album title once that argued something to the effect that six million Elvis Presley fans couldn’t all be wrong. Robert Kiyosaki is the Elvis Presley of personal finance.

Let’s agree that Robert Kiyosaki is not without his flaws. Still, there just has to be something important and real in his message too. Otherwise, there is no way that it could have hit the spot for so many readers. The biggest thing that sells books is word-of-mouth praise for them. I think it is fair to say that Robert Kiyosaki is winning a lot of positive word-of-mouth reviews. So the Robert Kiyosaki phenomenon needs to be taken seriously.

I think that the thing that Robert Kiyosaki has going for him is much the same thing that the Financial Freedom Discussion-Board Community has going for it. We have seen how people react at our boards when we keep our discussions focused on how to attain early retirement through more effective saving or investing or career change strategies. They go nuts. They love that stuff. I think that Robert Kiyosaki is tapping into the same desire for new approaches to money management issues that has been driving the success of our discussion boards for the past six years.

In short, I think this guy is one of us. He says some things that most of us don’t say, and he fails to say some things that most of us do say. But he is directing his energies to addressing the same basic questions. He is seen by many people who are frustrated with the conventional work and money rules to be offering a more rewarding path to follow. That’s a good thing, and, to the extent he has offered real help to those people, he should be recognized as having done so.

The second thing I like about Robert Kiyosaki is that he rejects outright a lot of the conventional money management advice.

I once read a quote by Robert Kiyosaki that I liked a lot. He said something to the effect that, unless one-third of your readers don’t like you, you are doing something wrong. It sounds funny to put it that way, but there is a good bit of truth in that observation.

There have been two phases to my posting career on our boards. The pre-May 13, 2002, version of “hocus” (that’s the screen-name I use when posting to our boards) was one of the most loved posters in the history of the Motley Fool boards. The post-May 13, 2002, version of hocus is one of the most controversial. It’s the same guy writing the posts, of course. The difference is that on May 13, 2002, I reported accurately what the historical stock-return data says about safe withdrawal rates. I was the first poster in our community to do that, and there are a good number in our community who were happier not knowing what the data really says. So I stirred things up more than a little bit with that post. I think it is fair to say that I got people’s juices flowing with that one.

Unconventional Money Advice I think that was a healthy development, both for the community as a whole and for me as a poster. The community needed a little shaking up at the time; our conversations had grown stale. And I needed to stretch myself a bit. Things had reached a point where people were giving recommendations to my posts without even thinking about them, perhaps without even reading them. Since the May 13, 2002, post, it’s been different. I get as many boinks on the head now as I used to get pats on the back. But people are reading my stuff with care again and people are arguing about on-topic stuff again, and we are growing as a community again. So I think we had to go down that road.

Robert Kiyosaki shakes things up. He rejects the conventional advice to get a good education and to get a safe job and to stay out of debt and to invest for the long-term. I don’t think he is always right in the criticisms of the conventional advice that he puts forward. But I think he serves a good purpose in questioning ideas that too many have too readily come to put their faith in. The ideas that are rooted in something real will withstand his attacks. Those that are not deserve to fall, and Robert Kiyosaki will be doing a good thing if the push he gives to them causes them to do so a little sooner.

The third thing I like about Robert Kiyosaki is that he is entrepreneurial.

One of the things that bugs people about Robert Kiyosaki is that he makes so gosh-darned much money offering personal finance advice. It’s hard for me to relate too much to this one. If the guy offers products and services of value, he should get compensated for it. If there is no value in what he offers, I don’t see how he has managed to get so many to buy. It’s not easy persuading people to part with their money. I have a hard time finding too much fault with those who manage to pull it off, so long as they are not doing anything outright fraudulent.

One entrepreneurial thing Robert Kiyosaki does is to sell a game that teaches people his approach to money management, and to advertise the game in his books. Good for him. It’s hard to make money selling books because people have little time to read today and most are not accustomed to paying too much for the few books they do buy. Robert Kiyosaki is essentially using his books as advertisements to sell higher-margin products and services.

There are lots of people who would turn up their noses at paying $20 for a book who would gladly part with $100 for a game teaching much the same lessons. If people would rather obtain their money management insights through games than through books, why shouldn’t Robert Kiyosaki package the information in the form in which those people would like to obtain it? He’s meeting a strongly felt need for money management insights packaged in non-book form. How can that be viewed as a bad thing?

The fourth thing I like about Robert Kiyosaki is that he gets people talking.

Let’s say that Robert Kiyosaki doesn’t have all the answers. I personally do not believe that he does. He at least seems to possess a talent for asking some provocative questions, does he not? He gets people talking.

A writer is not always required to provide the answers to the questions he raises, in my view. Sometimes a writer does a good thing just by getting a conversation started. The old money management rules do not work. People don’t save effectively. People don’t invest effectively. Something needs to change. Kiyosaki is not providing all the answers, but the conversations he is sparking are getting others to come up with new ideas. I see that as a positive.

The Truth About Money

I think that we are in a transition stage in our thinking about how to manage our money effectively. The old rules used to make sense. It used to be that, if you got a good job, you just needed to hold onto it and all would be well. I don’t think that is so anymore. I think that is why there is such a thirst for Robert Kiyosaki’s insights. I think that a good number of the conversations that he is getting started are someday going to lead to someplace good.

The fifth thing I like about Robert Kiyosaki is that he hits on an important point in the distinction he draws between possessions that constitute assets and possessions that constitute liabilities.

Robert Kiyosaki makes a big point in his Rich Dad Poor Dad book of the importance of distinguishing assets from liabilities. He doesn’t explore the question with enough clarity or depth, in my view. But he is on the right track in making the point that the distinction is one of significance. It is a point that I hope we will be addressing with more clarity and depth in the discussions that we hold at our boards in days and weeks and months and years to come.

The first thing I don’t like about Robert Kiyosaki is that he is a tease.

i have read several of Robert Kiyosaki’s books and have been tempted to buy more of them. But he has a tendency to promise and promise and promise to address something and not get around to doing it for many paragraphs and pages and chapters and even books. That is frustrating and annoying.

There are useful things to be learned from reading the books, in my view. But it should not take so much time and effort to learn them. The tease factor in Rich Dad Poor Dad is way too high, in my estimation. And it is also too high in those of his others books that I have either read or skimmed.

This tease factor is a stone cold drag, in my view. My advice to Robert Kiyosaki is to just say it.

The second thing I don’t like about Robert Kiyosaki is that he does not make it clear to what extent Rich Dad Poor Dad contains elements of fiction.

Is rich dad a real person? Is poor dad a real person? Are they totally real or partly real and partly fictional?

The answers are not entirely clear in my mind. They should be. I see nothing wrong with the idea of using fiction to convey money management insights. But it is important that fiction be labeled fiction clearly enough so that everyone reading it knows that that is what it is.

The Truth About Saving The links at the bottom of this page indicate that a good number of people have doubts in their minds as to the extent to which the Rich Dad Poor Dad book contains fictional passages. That troubles me.

The third thing I don’t like about Robert Kiyosaki is that he underplays the risks inherent in many financial freedom strategies.

I’m all for raising doubts in people’s minds about the value of the conventional advice on how to save and of the conventional advice on how to invest and of the conventional advice on how to advance in one’s career. And I understand that it sometimes takes strong language to break the inertia that causes people to stick with established ways of doing things.

That said, there is a danger in going too far, in suggesting that the road less traveled is an easy road. The road less traveled is often not an easy road. Many people who do things differently enjoy big rewards for doing so, but many other people who do things differently endure big hardships for doing so.

I think that Robert Kiyosaki sometimes underplays the risks inherent in his money management strategies. I think that is a disservice to his readers. People need to know the downside of a money management approach they are considering before they can make an informed decision as to whether to go with it or not.

Robert Kiyosaki’s job is not just to persuade. It is to inform too. I think there are times in the Rich Dad Poor Dad book when the persuasion effort takes center stage and the informing project obtains less attention than it merits.

The fourth thing I don’t like about Robert Kiyosaki is that he charges too much for his game and sometimes promotes his products too heavily in his books.

It’s one thing to be entrepreneurial. It’s something else to take advantage of people’s enthusiasm for the idea of learning how to win financial freedom early in life. It’s not always clear where to draw the line. But I think it is fair to say that Robert Kiyosaki offers a lot of products and services, cross-promotes them a lot, and perhaps charges more for some of them than it is neccesary for him to charge. If he doesn’t cross the line, he sometimes travels closer to the line that I think it is necessary to go.

The books are generally not too expensive. But the game I mentioned above is offered at a surprisingly high price. I can see why he needs to earn a nice markup on the game to permit him to create the books and still have the overall business generating a nice profit. But does the game really need to cost as much as it does? I have my doubts.

The Truth About Investing It sometimes seems that the world is divided into two classes of people: (1) those who possess no entrepreneurial skills whatsoever and who therefore are not able to create successful business enterprises; and (2) those who are unable to see the need for reasonable limits on their monetization strategies. I am glad that Robert Kiyosaki is successful because, if he were not, lots of people who have learned things from him would have never been exposed to his ideas. That said, it is my sense that he could turn down the volume on the money machine a few notches and thereby interest an even larger group of middle-class workers in his ideas.

The fifth thing I don’t like about Robert Kiyosaki is that he is too dismissive of the safety-first approach followed by Poor Dad.

Risk-taking is not always good. Playing it safe is not always bad.

I think there are many middle-class workers who think they are playing it safe but who are really taking on more risk than they realize because the rules of the money-management game have changed in ways that make strategies that appear on the surface to be safe to in reality come with a good bit of long-term risk attached to them. Robert Kiyosaki is doing a good thing by shaking up the thinking of a lot of people on these sorts of questions.

He is wrong, though, to be as dismissive as he sometimes is of the play-it-safe-and-conventional approach. There are reasons why many follow that path. In some cases, people question whether their skill sets are such that they can be effective risk-takers. In some cases, people are concerned about the effect that their decisions to embrace risk might have on their families. In some cases, people are too busy to do the research needed to take on risks in an informed way, and so an idea that they are open to gets put on the back-burner for a long stretch of time.

Overcoming Obstacles to Success Making the case for risk-taking is a good thing. Selling it too hard can be a mistake. That’s the Practical Dreamer’s way of looking at things, in my view.

To learn more about Robert Kiyosaki’s financial freedom ideas, please check out his web site. 

John T. Reed is a critic of Robert Kiyosaki.

Rob Bennett’s Weaknesses as a Money Advisor

It’s come to my attention that there are some unnamed others (oh, it’s possible I’ll name him once a little later on, for the benefit of the newcomers) in the Retire Early community attracting those Google spiders with articles arguing that “Rob Bennett is a Bad Father” and “Rob Bennett Doesn’t Invest in the Things That I Think He Should Invest In” and “Rob Bennett Doesn’t Always Take the Trash out the First Time He is Asked to Do So” and all other sorts of jibber-jabber. I figure, why shouldn’t I get in on the action? Outside of the poor girl who accepted his ring, no one knows better than I do about the weaknesses of this Rob Bennett individual, eh?

Rob Bennett’s first weakness as a money advisor is that he’s a Numbers Dunce.

Even a cosmic idiot like John Greaney (there, I did it!) gets to hit a line drive every now and again. He says that I am afraid of “Big Scary Numbers.” He’s right. Numbers are hard things, cold things, scary things. I think I’ve got good cause to be afraid of them.

Rob Bennett writes about investing but acknowledges that he does not know it all. Is that permitted? Does it hold me back in the work I do handing out advice to unfortunate passers-by as to how to save and how to invest and how to advance in their careers and all such? It does. Numbers come up a lot in writings about money topics. I could move faster and extend my reach to topics that I now hesitate to touch if I had greater confidence in my skill with numerical calculations.

There’s another side to the story. I read a book once about the Myers-Briggs personality assessment tool. It said that those who are especially skilled in one department (let’s say “Thinking”) tend not to be skilled at all in its alternative (“Feeling” is the alternative to “Thinking,” in the Myers-Briggs system). If that’s so, then it may be that I possess a great strength in the “Feeling” department that rules out me having much strength in the “Thinking” department (those who possess strong numbers skills tend to be Thinkers, not Feelers).

There are lots of people writing in the personal finance field who are strong Thinkers. I believe that we need more with strength as Feelers to even things out a bit.

Of course, I would, wouldn’t I?

Rob Bennett’s second weakness as a money advisor is that he’s slow to act.

You might have noticed that my post on the morning of May 13, 2002, has caused a bit of a stir at several of the Retire Early boards. There were a good number who questioned me when I suggested that perhaps we should be taking valuations into account when calculating safe withdrawal rates (SWRs). I think it would be fair to say that I have been vindicated on that one by the work that our community has done in the five years since.

I now sometimes wish that I had come forward sooner. I was reasonably confident that the Old School SWR studies were analytically invalid back in late 1995. Perhaps if this matter had been brought to the table sooner, things would not have turned out the way they have. Perhaps people would have been more open to acknowledging their errors if they hadn’t given bad advice to so many based on their earlier understanding of the realities. Perhaps the discussions would have been just as nasty, but we would have worked our way past the nasty part by now had I come forward back in 1999 or 2000. Perhaps some of the people who began retirements in the late 1990s or early 2000s that are likely to go bust somewhere down the road would have not acted so imprudently had we began our valuation discussions a few years earlier.

Woulda, coulda, shoulda, right?

I wanted to be absolutely sure on that one. My lack of skill with numbers made me doubt myself just a tiny bit, and the hostility that arose whenever the subject of valuations came up made me reluctant to move forward on something re which I wasn’t entirely sure. Perhaps I was right to hold back for a bit, perhaps I was wrong. I don’t think it’s possible to say for sure.

It is possible to say for sure that I am generally slow to act, however. The Myers-Briggs people would describe me as “methodical.” That’s generally a good trait in a money advisor. You want your money advisor to be sure about what he tells you. Like many things down here in the Valley of Tears, however, being methodical has its drawbacks. There are times when I am probably too cautious, when I sense that something is so but hold back from saying it in direct and clear terms because I am not yet entirely sure. If you read something I wrote and notice a case where you think that might be what’s going on, you might want to ask a question at the blog and see if you can prompt me into exploring the implications a wee bit more than I am personally inclined to at the moment.

Rob Bennett’s third weakness as a money advisor is that he didn’t study this stuff in school.

Rob Bennett -- The fellow who discovered the analytical errors in the Old School safe withdrawal rate studies -- and has the scars to prove it! I don’t have zero background. I took five accounting courses, two economics courses, and one statistics course in college. I have a law degree and a masters in the law of taxation. I wrote for tax newsletters for nine years and worked for one of the big accounting firms (as a lobbyist and a Writing Center Director) for nine years. I’ve been writing on a daily basis at our boards for close to eight years and have become familiar with just about every topic that comes up in discussions of putting together a successful plan for early retirement. Still, I don’t have a piece of paper with a fancy seal and writing in Latin that indicates that I am a true “Monius Expertatum.”

Does that hurt me? Yes. If I had the degree, I would be better able to put what I know into context. I would know more about the entire literature of personal finance, not just the parts that focus on early financial freedom (I’ve studied those on my own). The big benefit of getting a degree is that you are forced to study things you are not inclined to study on your own. That broadens you.

It’s not only by taking courses that we learn about a field of knowledge, however. I’ve learned things on our boards that are not discussed in textbooks. The textbooks focus on the ways that most people go about saving. Many of our community members don’t do what most people do. They want to retire early, so they follow strategies that lead to greater success than the strategies discussed in the textbooks. I’d like to have a degree in the field. But I’m proud to have learned what I’ve learned just the way I’ve learned most of it, by talking it over with you and thousands of others trying to do the remarkable things that you are trying to do.

Rob Bennett’s fourth weakness as a money advisor is that he talks too much.

I post long. Always have, always will. Those who don’t like long posts flipped off this channel a long time ago. Those who don’t mind so much are stuck with me. It looks like we’re pretty much hitched-up, fellow Passion Saver. Let’s make the best of it!

I think long posts are just fine. The stuff we’re talking about here is important stuff. We need to include caveats. We need to explain our thinking. We need to put forward multiple strategies for achieving whatever goal it is that is under discussion. Long posts are appropriate in Retire Early World.

The downside is that long posts really do turn a lot of people off. People want their money insights delivered fast, just like their pizzas. That’s doubly true on the internet. There’s one that I wrote on buy-and-hold investing that clocks in at 8,000 words. I mean, come on. It’s my understanding that that’s a felony in several of the southern states. There are lines that civilized people do not cross.

There are times when I probably go on too long. I’ll try to watch it. I think that we need to explore the ins and outs a good bit. But I sometimes probably need to rein it in some.

Rob Bennett’s fifth weakness as a money advisor is that he’s stuck in the 60s.

The Goons make fun of just about everything I say. Over on the Vanguard Diehards board, they attacked me once for saying that I liked the Honeymooners television program. They said that that showed that I beat my wife and kids. To the moon, Goon! They never make too much of a big deal out of the fact that most of my song references are from the 60s and early 70s. That’s something I view as a true weakness. It seems to me that, if you are going to be sticking song lyrics into your personal finance material, you should at least make an effort to keep things fresh.

Rob Bennett -- Developed the Valuation-Informed Indexing strategy, an approach that the academic research shows beats Buy-and-Hold in 102 of 110 of the 30-year periods in the historical record

I don’t have the time for music today that I had back then. That’s the thing. The sand is passing through the hourglass too quickly.

Rob Bennett’s sixth weakness as a money advisor is that he focuses on emotions.

This is my greatest strength. I include it in my list of weaknesses because it can be counted as a weakness too, depending on what you were hoping to find here when you filled out the form and paid your dues.

Sometimes at the blog someone will ask a basic practical question, like “so how exactly is it that one buys one of these TIPS or IBonds things that you are always going on and on about?” Asking one of those sorts of questions is the best way to shut me up. I usually have a vague idea as to the answer. I’ve purchased TIPS and IBonds myself, so I of course have some idea as to the procedure that needs to be followed.

My experience is limited, however, and I am just smart enough to know that there are complexities that comes into play in the money area even when completing the most seemingly simple of transactions. So I prefer to have other people respond to those sorts of questions. If no one else picks up the ball, sometimes I will. I don’t feel that I possess much expertise on the practical/technical side, however. I make an effort to include warnings to that effect whenever I respond to one of those sorts of questions.

This is a true weakness. It would be nice if I were The Answer Grape and I could tell you whatever you wanted to know about any money question without having to consult notes. I can’t, though. Part of the reason why I got out of the accounting firm is that it was clear to me that I could never rise to the top competing with tech-heads (I mean no disparagement — these people do important work). I think that God meant for them to do what they do and for me to do what me do. What we do. What us do. Oh, you know what I’m getting at. What I do!

Rob Bennett’s seventh weakness as a money advisor is that he cares too much.

I care about this stuff intensely. You probably don’t think of that as a weakness, and usually it’s not. It’s possible to care about something too much, though. A mother can so much want to protect her child that she doesn’t let him cross the street by himself even when he’s old enough to do so. Even caring can become a bad thing when taken to an extreme.

I get the sense that a good number think that I shouldn’t talk to the Goons at all. I talk because I care. I care about them and I care about what they have done to us and I care about what it is in human nature and in the investing project that makes the Goon phenomenon a reality in Retire Early World in the year 2007. My heart tells me that we can learn more by caring and trying to understand than we can by ignoring and cowering in fear.

It may be that there are things that my heart is not able to take in. Or it may be that my heart is spot on. Time will tell the tale. Please put this one down as a possible weakness.

Rob Bennett’s eighth weakness as a money advisor is that he’s an egomaniac.

Rob Bennett -- the most severe critic of Buy-and-Hold Investing alive on Planet Earth today (and not a fan of most other Get Rich Quick approaches either) That’s what my wife tells me. She says: “Rob, I love you, but you are an egomaniac.” She’s supposed to be the one who tells me things that others won’t tell me. That’s her job. It’s because of her straight-talking ways that she was the one who got the ring.

It’s not just Boo either. The Goons one time put something up on some internet dictionary saying that “Hocomania” should be accepted as a new word. There was a guy who objected that the term was being used to further a smear campaign. Then he provided background on The Hocomania Phenomenon. He said that I make “grandiose” claims about the power of analytically valid safe-withdrawal-rate studies to help people invest successfully for the long run.

It’s grand claims! I make grand claims, I’ll give you that. Not grandiose. There’s a difference.

I don’t think I have a big head. I think our community has done wonderful work, work that will in time have revolutionary impact in both the saving area and the investing area. That’s my sincere take.

If you ever suspect that I’m getting carried away in something I am saying, please know that my wife (who really does love me bunches and bunches and who is loved by me bunches and bunches in return) thinks that I have a case of Big-Head Disease and that there’s some fellow on the internet who is generally not biased against me who seems to agree with her. I’m just going to keep on doin’, but I want you to know that you are not the only one who has ever pondered these questions.

Rob Bennett’s ninth weakness as a money advisor is that he can’t go deep.

I’m a let’s-review-the-basics-again guy. Don’t come to me looking for tricky or advanced strategies. My aim is to get the basics precisely right.

I find no fault with those who look at the tricky and advanced strategies. I can’t go there, that’s all.

I think we serve up the basics darn good here at www.PassionSaving.com. And I think the basics are important. So I make no apologies re this one. I provide fair notice, however, that I cannot go deep. God did not provide me with the required skill set. God has spoken and that’s that.

Rob Bennett’s tenth weakness as a money advisor is that he has both too much money and too little money.

I worry that I have too much money for many moderate-income workers to feel comfortable with the money advice offered here. These are my people and I want to hear from them. Not everyone can make the amount of money that I made in my legal jobs, but the principles that I employed to save large chunks of that money are principles that can work well for those with more modest incomes. Please don’t hold it against me that for a few years I made a six-figure salary.

Rob Bennett -- author of "Secrets of Retiring Early" I take worse hits from the other side, of course. The Goons argue that I have not too much saved but too little, that I never should have left my corporate job until I had enough saved never to need to work again. That’s dumb. I don’t need you to worry for me cause it’s my life. Go ahead with your own life — leave me alone!

They have a tiny sliver of a point, though. People come here looking for advice on how to win financial freedom early in life. Wouldn’t it be better if I possessed complete financial freedom?

In one sense, yes. In another sense, no.

We’re still in the learning stage re this Retire Early/Financial Freedom thing. None of us yet has all the answers. I learn more from our interactions as a result of the reality that I have not yet been delivered to the promised land than I would if I had millions in the bank and couldn’t figure out any way to spend it all in one lifetime.

I wish I had more. That much is fair to say. That would be better for me. I think it’s better for you that I don’t. I think we all learn more watching me struggle and squirm under the pressures imposed by the forces trying to stop me (all of us, really) from reaching The Up Escalator.

Could be!
Who knows?
There’s something due any day;
I will know right away,
Soon as it shows.
It may come cannonballing down through the sky,
Gleam in its eye,
Bright as a rose!

— “Something’s Coming,” West Side Story
Music by Leonard Bernstein, lyrics by Stephen Sondheim


The Retire Early Lifestyle Site

The first thing I like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is that the “20 Questions” page offers a concise introduction to the Retire Early concept.

This page explains that: “At the age of 38 [in 1991], Billy and Akaisha packed it up, sold everything, retired, and moved to Nevis, a 36 sq. mile island in the Caribbean. From there they started traveling and haven’t looked back.” It then offers the Kaderlies’ take on the questions most frequently asked by those hearing about the Retire Early concept for the first time.

The Retire Early Lifestyle This page provides a nice introduction to what our movement is all about. Asked if they are wasting their lives, the Kaderlies note the opportunities for volunteer work and for learning new things that open up to those who overcome paycheck dependence early in life. Asked how their friends reacted on learning of their plans, they say that “our retiring early challenged the belief system of everyone we know.” Asked what they do about health insurance, they reveal that they rely on a high-deductible catastrophic coverage plan.

These questions all merit more in-depth responses, and the Kaderlies no doubt provide more in-depth responses to many of them in their The Adventurer’s Guide to Early Retirement CD-ROM (I expect to review the CD-ROM at some future date). I think it was a good idea to build a page containing only the briefest of responses to these common questions.

It is easy for newcomers to the movement to be intimidated by the amount of information there is to process before taking the big step of handing in a resignation to a corporate or government job. The “20 Questions” page provides a helpful overview for those who want to dip their big toe into the water before deciding whether all this early retirement jizz-jazz is worthy of further exploration.

The second thing I like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is what the Kaderlies say about why they pursued the CD-ROM project even when they faced difficulties in bringing it to completion.

After commenting that completing the project was hard work, they note that “creativity has a place.”

Precisely so.

There are some segments of our community in which “work” is viewed as a four-letter word. What a bore!

There are certain types of work that we all want to escape from, to be sure. That’s the point of winning financial freedom early in life.

But I don’t have the sense that most community members want to avoid all productive activity from the day they hand in their resignations forward. Note the tag line at the top of the home page of this site: “Winning Financial Freedom to Do the Work You Love.” We are not a movement dedicated to avoiding work so much as we are a movement dedicated to becoming free to do the right kinds of work (which includes some activities more commonly thought of as “play” than as “work).

The Kaderlies found that completing work on The Adventurer’s Guide to Early Retirement was the right kind of work for them to be doing in their retirement. So they stuck at it. Community members seeking to learn some lessons from their financial freedom quest reap the benefits of their insights and the Kaderlies got to experience that good feeling inside that comes from completion of important and meaningful work. A win-win.

The third thing I like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is that it reveals that the Kaderlies published their guide to early retirement in an unusual format–a CD-ROM.

Double Income No Kinds (DINKS) The Kaderlies explain that they were finding that they were not able to accomplish what they wanted with their guide by publishing it in the conventional book format. For example, they wanted to include photos of places they had visited in their travels. They determined that publishing numerous photos in a book would be prohibitively expensive.

They decided to apply some independent thinking to the project. They note that that comes naturally to early retirees. I very much agree.

The Retire Early idea shocks many people when they first hear it. The reality, though, is that some form of early retirement makes good sense in many circumstances. The hardest part of the journey is applying independent thought to see that it makes sense and thereby to overcome the skepticism so many express about the idea.

One lesson I have very much taken to heart as a result of putting together my Passion Saving plan is that it is important to question conventional thinking in many areas of life. It is possible to get carried away with that sort of thing. There are usually good reasons why certain ideas come to be accepted by majorities. In the right circumstances, though, there can be a big payoff to checking things out for yourself. Independent thinking is very much a distinguishing trait of Financial Freedom Community members.

The fourth thing I like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is that the Kaderlies make the case for their decision to retire early on efficiency grounds.

The Kaderlies note that, when they were both employed, they had lots of money coming in but little time to enjoy it. Their decision to retire early meant a drop in buying power but an increase in time to enjoy the things that money allows one to obtain.

Many people become so accustomed to the struggle to gain more money that they come to believe that it is always a good idea to trade one’s time for money. It isn’t. The discovery that that is so is the discovery that drives the Retire Early movement.

The fifth thing I like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is that the Kaderlies stress how making changes to just three spending categories can make a big difference.

The Kaderlies rediscovered something that Paul Terhorst (author of Cashing in on the American Dream) learned a good number of years back. Three expenses–housing, cars, and taxes–dominate the budgets of many middle-class workers of today. Make dramatic cuts to those three, and you may not need to do all that much else to gain financial freedom many years sooner than would otherwise be possible.

The first thing I don’t like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is that the Kaderlies were DINKs (double-income, no kids).

Frugality as a Lifestyle Choice They can’t help it, of course. We all are what we are. And there are benefits in reading another story of how a DINK couple attained financial freedom early in life.

Still, I think the need is greater for the other kind of Retire Early story, the kind in which a married couple with a moderate income and with the responsibility of raising children pulls off some version of the Retire Early dream.

Those stories are different sorts of stories, of course. We don’t all have the same options open to us. But we do have moderate-income workers with children telling their stories at our discussion boards. So there are versions of the Retire Early dream open to non-DINKs. We need to place more focus on those types of stories in days to come and less on the types of stories we hear from Terhorst/Kaderli types, in my view.

The second thing I don’t like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is that the Kaderlies adopt a glib tone in their discussions of the risks of early retirement.

Handing in a resignation from a good job at an early age is a risky business. That’s the primary reason why most people react so skeptically when first hearing of the Retire Early concept.

We need to explain why the risk in some circumstances need not be an insurmountable obstacle. But we make a mistake to underplay the risk, to suggest that people should just take a chance and that things will likely work out for the best.

The Kaderlies were lucky. They invested heavily in stocks and they retired in the early 90s, when stocks were about to begin the biggest run-up in prices that has ever been experienced in the U.S. market.

Other early retirees will not be so lucky. They should not let the risks of early retirement stop them from exploring the concept. But they should be prudent in their planning. They should give the risks serious consideration before taking any irreversible steps.

The third thing I don’t like about the Retire Early Lifestyle site (RetireEarlyLifestyle.com) is the over-simplification I feel the Kaderlies engage in when they argue that planning an early retirement is “not rocket science.”

It’s not rocket science. The statement is literally true.

Get It Done But there is a lot that you need to look into before reaching the point where you can responsibly hand in a resignation from a good job at an early age.

The time I spent putting together my plan was a great learning experience. I didn’t know much more than the conventional wisdom on saving and on investing and on career advancement before I began putting together my Retire Early plan. It was the process of thinking hard enough about these topics to put together a plan that had a decent chance of working in the real world that helped me develop many of the strategies that I write about at this site.

I wouldn’t want to deny that sort of learning experience to anyone. Planning an early retirement is not rocket science. But there are a lot of things that need to be worked through in the process of putting together a successful plan. And doing that is a good part of the fun that makes early retirement so enriching a life experience.

Don’t hand in a resignation without spending a good bit of time putting together a plan and then examining it from ten directions looking for any possible holes in what you have put together. There’s no better way to develop true expertise in the money management project.

What I Like and Don’t Like About the Retire Early Home Page

The first thing that I like about the Retire Early Home Page site (RetireEarlyHomePage.com) is that it is this web site that put our movement on the map.

I describe myself on the home page of the PassionSaving.com site as the “founder” of the Financial Freedom Community. It was my posts on the Passion Saving approach to money management that caused the Motley Fool board (our first discussion board) to take off and generate a level of excitement that pulled in hundreds of fine posters and made that board in its day the most exciting on Planet Internet. All of the boards that have come since were essentially spin-offs of the Motley Fool board.

The Retire Early Home Page

That said, it was John Greaney, the owner of the RetireEarlyHomePage.com site, who was first on the scene. Greaney’s site went up in 1996. I don’t recall precisely when it was that I discovered the site, but I know that it was a good bit before the day he started the Motley Fool board (that was in May 1999). My guess is that it was sometime in 1998 when I discovered his site.

RetireEarlyHomePage.com is an extremely popular site today. Between 30,000 and 40,000 aspiring early retirees per month visit either the site or the discussion board associated with it. The general media rarely devotes much in-depth attention to the topic of early retirement. So many visitors to the Retire Early Home Page are learning for the first time about the life-altering ideas that those of us in the Financial Freedom Community have been exploring on a daily basis for some six years now (this article was written in January 2006). The Retire Early Home Page is a high-impact web site.

It wasn’t always so. The ideas explored at the site were always big ideas. But there was a time when the site did not touch the lives of 30,000 to 40,000 aspiring early retirees each month. When I discovered the site sometime in 1998, I entered the term “retire early” into a search engine and then went looking through pages and pages and pages of results before I got to a site that said something new on the topic, something that mattered. I was a reader of the Retire Early Home Page before being a reader of the Retire Early Home Page was cool!

I remember my reaction on finding the site. The first thing I did was to print out every article, hole-punch the pages, and create a new binder to add to my bookshelves of 30 to 40 binders dealing with financial freedom topics. Then I excitedly told my wife about this cool new site I had found that was devoted solely to examination of the topics that we had been talking about on those two-hour Saturday-afternoon walks we had been taking together for several years at that point.

One of the hardest things about putting together a plan to win your financial freedom early in life is that it can be a lonely endeavor. It was a more serious problem six or seven years ago than it is today. You rarely heard people talking about early retirement on television or in the newspapers, and in all likelihood your friends didn’t think it a realistic goal. All human beings have a need for verification from others that goals they are pursuing are realistic. When we fail to obtain that, it makes it hard to continue overcoming the obstacles that inevitably must be overcome in bringing a plan for early retirement to fruition. Discovering the Retire Early Home Page confirmed for me that my financial freedom goals were reasonable goals to pursue. That meant a lot to me at the time.

My sense is that it still means a lot for a lot of people today. I think it would be fair to describe John Greaney as the most abusive poster in the history of the internet. He has done great harm to a number of Financial Freedom Community boards with his vicious smears of fellow community members. Even today, though, there are a good number of community members who support him. Why? I think a big reason is that many community members felt emotions when discovering the Retire Early Home Page similar to the emotions I felt when discovering the Retire Early Home Page.

Anger Is Not a Sound Long-Term Investing Strategy

Greaney was not the founder of our community. He is the least community-minded guy who ever posted to a Financial Freedom Community board. But Greaney did start the first web site that focused on the topic of early retirement and that achieved enough success to permit large numbers of community members to find out about us. And he did start the Motley Fool board, the board that is the granddaddy board of our movement. Greaney, despite all his faults, played a big role in bringing lots of people into our movement and introducing lots of people to the Retire Early concept.

The Retire Early Home Page put our movement on the map. We all owe a debt to John Greaney for that, and we always will.

The second thing that I like the Retire Early Home Page site (RetireEarlyHomePage.com) is that it focuses on the topic of safe withdrawal rates.

A high percentage of the articles appearing at the Retire Early Home Page deal in one way or another with the safe withdrawal rate topic. On first impression, that seems odd. Aspiring early retirees need to learn how to advance in their careers so that they can earn enough to retire early. Aspiring early retirees need to learn how to manage their money effectively. Aspiring early retirees need to learn how to prepare and maintain and reformulate budgets. Aspiring early retirees need to learn alternate ways of finding purpose in their lives after they stop doing so by earning a paycheck that puts food on the table. So what is it with all the safe withdrawal rate jizz-jazz that resides at RetireEarlyHomePage.com?

It’s not jizz-jazz. Safe withdrawal rates matter.

The reason why the outside world has not yet caught on to the importance of the safe withdrawal rate topic is that most people in the outside world are not seeking financial freedom early in life. Aspiring early retirees worry about things that most middle-class workers do not worry about too much. Because we are planning to hand in resignations from corporate jobs and then depend on earnings from our investments to cover our costs of living, we focus on the ability of our investments to generate income streams. Safe withdrawal rate analysis is really income-stream analysis.

Exploring investment questions by focusing on the income streams generated by investments is a powerfully effective way of doing so. Aspiring early retirees are not odd to place so much focus on the safe withdrawal rate topic. We have discovered something of great power because of our unusual financial goals, goals which require us to look at questions that many outside the Financial Freedom Community never feel a need to examine in any depth.

John Greaney Is Aces in the Eyes of Many One of the things that excited me about the Retire Early Home Page when I first discovered it was its focus on safe withdrawal rates. I had been studying the safe withdrawal rate question for several years at that time. I knew as soon as I looked at the safe withdrawal rate analysis set forth at the site that Greaney had gotten the number wrong (the safe withdrawal rate study published at the Retire Early Home Page site fails to include an adjustment for changes in valuation levels), but I didn’t see that analytical error as being of primary importance at the time. The most important thing was that the Retire Early Home Page was bringing the concept of safe withdrawal rate analysis to the attention of a lot of people. That was (and is) a good thing.

The third thing that I like about the Retire Early Home Page site (RetireEarlyHomePage.com) is that it has brought hundreds of fine community members into our movement.

Most of what I learned about early retirement from John Greaney I learned in the first few days after printing out copies of all the articles at the Retire Early Home Page. He has occasionally made valuable on-topic contributions to our boards. But he generally saves his best stuff for publication at the site. He only adds a new article to the site once every two months. Most of what he has to say about the topic of early retirement he said at his web site when he first set it up.

That doesn’t mean that the Retire Early Home Page stopped providing me benefits a few days after I printed out the articles from the site and devoured the insights contained in them. I have continued reaping benefits from the site ever since. How so? I benefit from the insights provided by the hundreds of posters who discovered our movement through the Retire Early Home Page and then became valuable posters at one of the various Financial Freedom Community discussion boards.

I learned about real estate investing from FoolMeOnce. I learned about the flaws of the Federal Reserve’s stock valuation model from BenSolar. I learned about living overseas as a means of attaining Retire Early goals sooner from Wanderer. I learned about the struggles of moderate-income workers from Ariechert. I learned about the political battles one can get caught up in serving on the board of a charitable organization from Arrete. I learned about how to set up a storage business as a means of earning an income in early retirement from GolfWayMore. And on and on and on and on.

The greatest benefit of the Retire Early Home Page to our movement has not been the information contained at the site. It has been the ability of the site to attract new posters into our community. John Greaney does not get primary credit for the contributions of these other posters, of course. But he does get partial credit, in my eyes. He built the infrastructure that attracted a good number of effective posters to our community, and those posters attracted other posters. The end result has been a whole heap of Retire Early insights informing the writings of Rob Bennett (and the writings of hundreds of other Financial Freedom Community members too, of course).

The fourth thing that I like about the Retire Early Home Page is that it speaks in a special way to a particular branch of our movement, a branch in which early retirement is sought largely as a means of escaping life responsibilities that are perceived as a distraction from hedonistic pursuits.

Early Retirement Can Be a Terrible  Mistake There are all sorts of reasons why people seek early retirement. I sometimes half-jokingly refer to myself as “the anti-Greaney” because my motivations for seeking financial freedom early in life are so different from John Greaney’s motivations for doing so. I wanted to escape corporate employment to spend the remaining years of my life doing truly meaningful work. Greaney describes his quest as a quest to partake in “sloth and debauchery.” We have some things in common–we both have limited patience for pointless staff meetings. But there are more issues on which John Greaney and I are in disagreement than there are issues on which we are in agreement. Our thinking proceeds from fundamentally different premises as to how to achieve some measure of happiness in our time spent walking through this Valley of Tears.

My aim with PassionSaving.com is to provide material that will be useful for members of all branches of our movement. Inevitably, though, the focus here will be on the stuff that seems most important to me. You are not going to see too many articles at this site helping you on the road to “sloth and debauchery.” You are going to see a good number of articles aiming to help get you on the path to spending the remaining years of your life immersed in meaningful work experiences.

I wish that the Retire Early Home Page had not been the first big web site focusing on financial freedom topics. It embarrasses me when people look at that site and come away concluding that all aspiring early retirees are on a quest for “sloth and debauchery.” Still, there are a good number of community members who relate well to the John Greaney understanding of what early retirement is all about. Those people deserve a site of their own, and the Retire Early Home Page meets the need.

An argument can be made that the existence of the RetireEarlyHomePage.com site frees me from having to write too often about the “sloth and debauchery” aspects of the Retire Early experience. That’s probably a good thing for all concerned!

The first thing that I don’t like about the Retire Early Home page site (RetireEarlyHomePage.com) is that the fact that it put our movement on the map has given John Greaney an influence on our boards that has been greatly detrimental to them.

I have been an active participant in the Financial Freedom Community since its earliest days. I am here to say that John Greaney is in no way, shape, or form representative of our typical community member. Most community members are not on a quest for sloth and debauchery. Most community members do not feel contempt for their employers or for the idea of work in general. Most are repulsed by the abusive posting practices that Greaney and his supporters employ to block reasoned debate on scores of issues which Greaney does not want to see discussed at our boards.

The Financial Freedom Community is a wonderful community full of wonderful people sharing wonderful insights. There will always be a number of people who will take the wonderful idea of early retirement and transform it into something ugly. It’s been our great misfortune that the leader of the group most inclined to doing that was the first to set up a web site and thereby gained an influence in our movement that in other circumstances he never could have hoped to have gained for himself.

Those of us who want to see the movement grow and thrive in days to come need to make special efforts to let newcomers know that the Greaney segment of our community is not at all what the rest of us are about. We can’t do anything about the fact that some pursue early retirement for the wrong reasons. We do need to let fellow community members who are pursuing constructive goals know that they are not alone, that there are lots of us who are pursuing early retirement for perfectly healthy and constructive and life-affirming reasons.

The second thing that I don’t like about the Retire Early Home Page site (RetireEarlyHomePage.com) is that it focuses too much on the safe withdrawal rate topic.

Censorship on the Internet Safe withdrawal rates are important. But they are not the only thing that are important. I like it that the Retire Early Home Page highlights the safe withdrawal rate topic. I don’t like it that it ignores so many topics that are also important to the Retire Early experience.

I noted above that it was my posting on the Passion Saving approach to money management that brought the Motley Fool board to life in December of 1999. The Motley Fool board had achieved limited success even before I began posting on the Passion Saving concept. There is a lot of interest in the Retire Early topic, and I believe that any board with the words “Retire Early” in the title is likely to achieve a good bit of success so long as the site owner follows reasonable board moderation practices. Until I began posting regularly on the Passion Saving approach to money management, however, most posts at the Motley Fool board dealt with either the safe withdrawal rate topic or other technical aspects of the Retire Early experience.


I like safe withdrawal rate discussions. I have participated in lots of them in recent years. But I think it is a terrible mistake to lead newcomers to our movement into thinking that the path to a successful early retirement is figuring out some sort of mathematical puzzle. Nothing could be further from the truth. Nothing could do more to turn off the sorts of people we most need to attract to our movement.

Any middle-class worker working in one of today’s industrialized economies can retire early. That’s my belief. The key thing that holds most people back is that they don’t think that it is possible and they thus don’t see much point in even exploring the option. The key thing we need to do to expand the reach of our movement is to show people why early financial freedom is a truly achievable goal for just about all middle-class workers. We need to show them how much they stand to gain by becoming one of us.

Discussing safe withdrawal rates doesn’t do that.

By no stretch do I say that we should put the safe withdrawal rate topic on a back-burner. Our safe withdrawal rate findings of recent years are breakthrough stuff, and I very much hope that we will be exploring those findings in considerable depth in days and weeks and months and years to come.

I think that it is highly unfortunate, however, that our first web site suggests to newcomers that our core concerns are technical concerns. The Retire Early Home Page gives a false impression of what we are about with its excessive focus on safe withdrawal rates. Safe withdrawal rates really do matter. But a lot of the so-called soft-side topics matter more, in my estimation.

The third thing that I don’t like about the Retire Early Home Page site (RetireEarlyHomePage.com) is that it puts forward false claims about what the historical stock-return data says about safe withdrawal rates.

Not only does the Retire Early Home Page place too much focus on the safe withdrawal rate topic. The claims it makes about safe withdrawal rates are demonstrably false. The reasons why are explored at other sections of this site.

How the Retire Early Movement Got Its Start I am worried not only that hundreds of thousands of early retirees are going to suffer busted retirements because of the false safe withdrawal rate claims put forward at RetireEarlyHomePage.com. I worry too that the failure of those retirements will reflect poorly on our movement as a whole.

When stock prices go down, there will be many in the general media dismissing the Financial Freedom Movement as a Bull Market fad. I don’t think that is fair. I believe that there are numerous reasons why many middle-class workers have begun a quest for achieving financial freedom early in life, and I don’t believe that a downturn in stock prices is going to cause most of us to give up that quest.

The unrealistically bullish investing advice put forward at the Retire Early Home Page plays into the hands of those who do not want to see our movement grow, in my view. I can see how people could come away from an examination of the investing advice offered at RetireEarlyHomePage.com believing that a good many of us are not serious about our financial freedom quests. That bums me out.

The fourth thing that I don’t like about the Retire Early Home Page site (RetireEarlyHomePage.com) is that it is not a frequently updated site.

I rarely look at the Retire Early Home Page anymore. John Greaney rarely adds new material to it. When he does, it is usually a new look at some issue already addressed at his site at some earlier time. I have brought this up at our boards from time to time and the response I inevitably get from Greaney supporters is that Greaney has already explored all of the important Retire Early topics. It’s not so! Not even close!

My sense is that our movement is only now beginning to come to grips with how many topics need to be covered for us to understand what it takes to put together successful Retire Early plans. I can’t imagine us running out of fun things to talk about for years and years and years.

John Greaney has lost interest in the subject of early retirement. That’s my take. Because he has lost interest, the Retire Early Home Page is a dying site.

Most of our community members love on-topic debate. If you check the list of most-recommended posts at the Motley Fool board, you will see dozens that carry some version of the message “Why can’t we ever discuss on-topic stuff here?” There are hundreds of Retire Early topics that we have not yet discussed in even a cursory way, and there are thousands of aspiring early retirees who have demonstrated a keen interest in engaging in such discussions.

Planning an Early Retirement Is Fun for Those Who Are Responsible and Realistic The only reason why we don’t do so at a number of our boards today (the Early Retirement Forum, where Greaney rarely posts, is the exception) is that a good number show a misplaced deference to Greaney that causes them to feel that it is in some way “rude” to discuss Retire Early issues that Greaney has indicated he would like to see taken off the table.

It’s not rude!

Our community has been going though growing pains. The Retire Early Home Page helped bring us together as a community. We now need to get over whatever sentimental attachment some community members feel towards John Greaney for the role he played during our formative years and get about the business of taking our movement to new and even more exciting places. We owe it to ourselves to do so and we owe it to newcomers to our movement to do so.

The Retire Early Home Page served a good purpose in its day. But it’s gotten old and cold in recent years. Looking at it today gives me a “Been There, Done That” sort of feeling. Those of us who have been around for awhile will always look back at our discovery of the Retire Early Home Page site with some fondness. But we are too young and frisky a movement to be using up too much of our emotional energies looking backward. The Summer of 1999 is over and it’s not ever coming back.

The Retire Early Home Page will always be an important part of our past. I do not expect to see it become an important part of our future.

Does John Greaney Believe His Own Safe Withdrawal Rate Claims?

John Greaney (he posts in the Financial Freedom Community as “Intercst”) is by far the most abusive poster in the history of our movement. I think it would be fair to describe him as the most abusive poster in the history of the internet (this is certainly so if the damage done by the abusive posting engaged in is viewed as the most important consideration in the assessment).

John Greaney As I Like to Think of Him -- A Fun-Loving Retire Early Guy

Even going back to the Golden Age of the Motley Fool board (a board started by John Greaney), Greaney had his rough edges as a poster. It was my post of May 13, 2002, putting on the table the question of whether changes in valuations affect safe withdrawal rates (“The Post Heard Around the World”) that caused Greaney’s transformation from a moderately abusive poster into the out-of-control one that he is today. So it is clear that the discussions held during The Great Safe Withdrawal Rate Debate caused Greaney to lose confidence that he could defend his safe withdrawal rate claims (posted at a study published at his web site, RetireEarlyHomePage.com) in reasoned debate. For a long time now John Greaney has been engaging in deliberate deception of fellow community members and of readers of his web site by failing to correct his now-discredited safe withdrawal rate claims.

The safe withdrawal rate is a mathematical construct. It’s not the norm even for those given to deception to aim to deceive on the results of a numerical construct. What the heck could this guy (and his supporters, of which there are still a good number) be thinking?

Emotional Pain in Acknowledging the Obvious Realities

My take is that it is not so much what he is thinking. It is what he is feeling that holds the key to solving this mystery. Greaney’s behavior demonstrates that he knows he got the number wrong. But Greaney experiences emotional pain when he considers acknowledging that he got the number wrong.

Calculation of the safe withdrawal rate is no ordinary numerical calculation. It is a numerical calculation that has implications reaching in a hundred directions. It is because of what we learned during The Great Safe Withdrawal Rate Debate that we have been able to begin developing a new approach to investing, Valuation-Informed Indexing. It is because of what we learned during The Great Safe Withdrawal Rate Debate that we were able to reveal the critical flaws in the Stocks-for-the-Long-Run Investing Paradigm (while also affirming key insights of the paradigm that do stand up to scrutiny).

A “paradigm” is “a model.” It is a way of thinking about something that encompasses many interconnected insights joined together in a single system of thought. The Stocks-for-the-Long-Run Paradigm has been dominant for 20 years now, and it will be some time before investors are able to accept that there are serious flaws to that paradigm and that it needs to be replaced by something new (my tentative name for the paradigm to come is “The Realistic Buy-and-Hold Investing Paradigm, or, more simply, “The New Buy-and-Hold”).

Our safe withdrawal rate discussions have not led us to abandon only our old and confused ideas as to what withdrawal rates are safe in retirement. They have caused us to begin a quest to learn what the historical stock-return data really says, a search to find out what sorts of investing strategies are really most likely to work for long-term buy-and-hold investors.

Internet Friendships Lost

I see this battle of the investing paradigms as the most compelling aspect of The Great Safe Withdrawal Rate Debate. We are seeing a change in how aspiring early retirees think about how to invest successfully take place before our eyes day by day, thread by thread, post by post.

It is an exciting process to watch when our community is doing its best work. It is a painfully embarrassing process to watch when our community’s most abusive posters take control of the field. We are seeing both the best that the new internet discussion-board communications medium has to offer and the worst that it has to offer at the same time.

One puzzle that often presents itself in the course of our discussions is — Why is it that John Greaney and his supporters do not acknowledge the errors made in the RetireEarlyHomePage.com study? What possible purpose could be served by continuing to deny the obvious realities that can be verified by anyone caring to check what the historical data says for himself or herself? The obvious realities are that the 4 percent withdrawal rate identified in the study as “100 percent safe” is at moderate valuation levels indeed a rough approximation of the true safe withdrawal rate, at low valuations a number two percentage points or even more lower than the true safe withdrawal rate, and at high valuations a number two percentage points or even more higher than the true safe withdrawal rate.

The question I often find myself wondering about as the discussions proceed and as the abusive posting continues is — Why the deception? Do the Greaney supporters not see how bad it makes them look in the eyes of fellow community members? Why not simply acknowledge that the data says what the data says and focus instead on an argument that it is reasonable in some circumstances to withdrawal a percentage of one’s portfolio a good bit higher than the “safe withdrawal rate” (as that term is defined in the safe withdrawal rate literature)?


Arrete Comes Close to Telling It Straight

There was a post the other day at the Vanguard Diehards board that caused me to take the time to organize the thoughts I am presenting here and to see if I could gain some insight into what is behind this exceedingly strange phenomenon.

A poster who goes by the screen-name “arrete” put up a post arguing that the withdrawal rate that will work for a retirement beginning today (for those going with a high-stock portfolio allocation) is likely to be a number somewhere between 2 percent and 5 percent. Those numbers are roughly correct. The low-end withdrawal rate possibility was indeed about 2 percent a few years back, at the top of the recent stock-price bubble. Valuations have dropped a bit since then, and the safe withdrawal rate today (for a portfolio of 80 percent S&P stocks and 20 percent short-term Treasuries) is a number somewhere between 2.5 percent and 3.0 percent. So the range of possibilities that arrete put forward with her assertion that a withdrawal of something between 2 percent and 5 percent is likely to work is indeed in the ballpark of the range you would get from performing an analytically valid examination of the historical stock-return data.

Where the arrete post went off the rails was in its suggestion that all withdrawal rates between 2 percent and 5 percent are equally safe. Arrete is one of the lead Greaney supporters in our community and she has never acknowledged that Greaney got the number wrong in his study. So it appears that she feels compelled to suggest that there is no way of knowing whether a 2 percent withdrawal is any safer than a 5 percent withdrawal.

The Retire Early Community Is Split in Two

The idea that all withdrawal percentages between 2 percent and 5 percent could possibly be equally safe is of course absurd. But that is the sort of claim that Greaney supporters feel compelled to make when they acknowledge that the historical data shows that withdrawal rates higher than 2 percent (at today’s valuations, higher than about 3 percent) may well not work, in the event that stocks perform in the future somewhat in the way in which they have always performed in the past. Arrete cannot acknowledge that there is a greater risk to taking a 5 percent withdrawal than there is to taking a 2 percent withdrawal because to do so would be to acknowledge that Greaney got the safe withdrawal rate number (defined in the Greaney study as the withdrawal that works in a worst-case scenario) wrong in his study.

I think it is fair to say that Greaney supporters have not been able to come up with any logically coherent way to present their case, and that that is why they have relied almost exclusively on deceptive and abusive posting as their means of “responding” to posts that report accurately what the historical stock-return data says.

Again, why do they do this? What possible payoff is there in engaging in deceptive and abusive posting when there is no hope of ever showing that the data says something that it does not in fact say? It’s one thing to condemn abusive posting, something I believe all responsible community members need to do, given the great damage that Greaney and his supporters have done to a number of discussion boards that at earlier times served as outstanding learning resources for aspiring early retirees. It’s something else to come to an appreciation of some of the emotional motivations behind the abusive posting we have all had to endure in recent years. I certainly do not want to be perceived as excusing it. I would like to understand it better. Why does this strange phenomenon in which posters continue to defend nonsense gibberish assertions (such as the claim that a 2 percent withdrawal and a 5 percent withdrawal are equally safe) persist?


Our Safe Withdrawal Rate Findings Change Everything

I believe that a big factor is the scope of change required in an investor’s thought processes by acceptance of our safe withdrawal rate findings of recent years. Paradigm changes do not take place in a week or a month or a year. New ideas catch on gradually. People first begin to have doubts about the old idea, and then become open to consideration of the new idea, and then over time become firmly convinced of the merits of the new idea. It doesn’t happen in a flash. It takes time.

Those following the ongoing safe withdrawal rate discussions on the various Financial Freedom Community boards are watching the death of the Stocks-for-the-Long-Run Paradigm take place in real time. We are also watching the birth of the paradigm that will replace it, a paradigm that I have tentatively named “The Realistic Buy-and-Hold Paradigm.” It is a new type of buy-and-hold investing that we are developing, an approach to buy-and-hold investing that really makes sense.

John Greaney and his supporters are not emotionally prepared for this transition. My sense is that most Greaney supporters enjoyed some investing success during the days when the old paradigm was unquestioned and they have come to feel a great emotional investment in the now-discredited tenets of the Stocks-for-the-Long-Run paradigm.


What Investing Advice Would John Greaney Give His Best Friend?

Retire Early Home Page

Say that John Greaney were to go to dinner with his best friend, and his best friend were to tell him that he is planning to hand in his resignation from his job within a few weeks and that he used the safe withdrawal rate study published at John Greaney’s web site to put together his retirement plan. Would John Greaney tell even his best friend that the safe withdrawal rate study published at RetireEarlyHomePage.com got the safe withdrawal rate number right? I can do no more than guess, of course, but my guess is that John Greaney’s advice to his best friend would be to go ahead and make use of the numbers put forward in that study.

Why? Why would I expect John Greaney to engage in deception on the safe withdrawal rate question even when speaking to his best friend?

The reason I say this is that I believe that John Greaney has in his own mind justified his deceptions. I personally do not think they can be justified. The John Greaney deceptions have done great harm to thousands of aspiring early retirees and are likely to do great harm to hundreds of thousands more in days to come. But I believe that John Greaney at least tries to persuade himself that his deceptions might not cause so much harm after all.

How does he do this? I believe that John Greaney justifies his safe withdrawal rate claims using a logic not too far off from the logic used in the arrete post noted above. John Greaney knows that the historical stock-return data does not say what he says it does. But he also knows that it is at least possible that a 4 percent withdrawal rate really will work for retirements beginning at the valuation levels that apply today. In fact, there is about a 50 percent chance that such retirements will survive 30 years. I believe that John Greaney has to some extent (not entirely) persuaded himself that the deceptions he has put forward are not such a big deal because there is roughly a 50 percent chance that the retirement plans constructed pursuant to his false safe withdrawal rate claims might survive all the same.

It is indeed possible that this could happen. No one knows what sort of returns sequence we will see in the next 30 years. It could be that the retirees taking John Greaney’s advice will get lucky and that their retirements will survive. The deception, of course, is that the fact that these retirements have about a 50 percent chance of surviving 30 years does not justify referring to them as “safe.” Retirements that have only a 50 percent chance of working out are risky retirements, not safe retirements. The words “safe” and “risky” are not synonyms. They are antonyms.

My personal guess is that John Greaney not only would tell his best friend to follow his now-discredited safe withdrawal rate claims. I think it goes even farther than that. I think that John Greaney himself follows his own now-discredited safe withdrawal rate claims. I don’t believe that he has altered his own investing theories despite all that we have learned over the course of The Great Safe Withdrawal Rate Debate.

Protecting Free Speech on the Internet

John Greaney knows that his old investing beliefs do not stand up to reasoned scrutiny (if he did not know this, he would not have made a decision to walk down the dark path of becoming such a highly deceptive and abusive poster). But he has not yet been able to bring himself to let in the learning experience that appears before his eyes every time he looks through the Post Archives of any of the Retire Early boards at which the question of what the historical data really says about safe withdrawal rates is discussed.

It is an exceedingly strange phenomenon, is it not?


Investor Reactions Are Too Emotional for Markets to be Efficient

The reaction to our safe withdrawal rate findings that we have seen on the part of John Greaney and his supporters serves as an important demonstration of why stock markets cannot be truly “efficient.” For markets to be efficient, investors must employ reason in making their investing decisions. What we have seen during The Great Safe Withdrawal Rate Debate shows that reason is not the primary driver of many investing decisions. Reason is an important factor for most investors. For many, however, emotions are primary and reason is used largely as a means of supporting decisions primarily emotional in nature.

The hardest job faced by an investor seeking to invest successfully for the long term is to rein in the emotions that so often serve to undermine long-term investing success. The Stocks-for-the-Long-Run Investing Paradigm offered important clues for how to go about doing this. Specifically, the old paradigm favored buy-and-hold investing strategies. The most important task before us in developing the Valuation-Informed Indexing approach to investing is learning what it takes to form realistic hopes of sticking to a long-term buy-and-hold investing strategy.

We have seen a good bit of deception evidence itself during the course of The Great Safe Withdrawal Rate Debate. It is not only deception of others that we are seeing. We are seeing a good bit of self-deception too. That reality holds important clues that we need to be mindful of in developing a new and more realistic investing paradigm to replace the old and discredited one that appears now to be in its dying days.

John Bogle’s Big Mistake

Everything I’ve ever known to be right has been proven wrong.
I’m drifting along.

— Dylan, “Hattie Moore”

Element # 1 to John Bogle’s Big Mistake — Buying the Market

Indexing is buying the market. The benefit is that, if the market does well, the index does well. The risk is, if the market does poorly, the index does poorly. The indexer ties his fate to the fate of the market as a whole.

John Bogle's Big Mistake

John Bogle recommends indexing. He urges the middle-class investor to tie his fate to the fate of the market. That’s the essence of his investing approach.

Element # 2 to John Bogle’s Big Mistake — Being Satisfied with Not Beating the Market

Is it a good idea for the middle-class investor to tie his fate to the fate of the market?

John Bogle makes a compelling argument that it is. The case is built on the evidence of the historical stock-return data. U.S. stocks have for a long, long time been providing a long-term annualized return of about 6.5 percent real. With that sort of return available to those who buy the market, is there really any need to take on the effort and risk associated with trying to beat the market?

Bogle makes a good case that obtaining market returns is in many cases good enough. I see no reason why those who possess the skill and energy and time needed to beat the market should not aim to do so. For most of us, though, I am persuaded that market returns are good enough. Indexing provides a means for the average investor to do exceedingly well without devoting much time to learning sophisticated strategies.

John Bogle’s breakthrough insight — that a long-term real return of 6.5 percent is available to those willing to follow the simple step of buying the market — represented a revolutionary advance in our understanding of what it takes to succeed at investing. It’s hard to beat the market. It’s easy to match it. And matching it promises highly appealing long-term returns.

Element # 3 to John Bogle’s Big Mistake — When the “Long-Term” Kicks in Makes All the Difference.

Step Three is a doozy. This is where John Bogle’s investing approach goes from being something that is a boon to the middle-class investor to being something that may well be the middle-class investor’s downfall.

Stock Investing in the News

The long-term return on U.S. stocks is 6.5 percent real. How long do you have to be willing to wait to be realistically assured of obtaining a 6.5 percent return? How far out is the “long-term”? It depends.

On what?

On the valuation level that applies at the time you make the stock purchase.

Buy stocks at reasonable prices, and you can be reasonably assured of obtaining a 6.5 percent real return within 10 years. Buy stocks at sky-high prices (like those that apply today — this article was posted in February 2007) and you might have to wait for 30 years or more to get a return anywhere even remotely in the neighborhood of 6.5 percent.

Most middle-class investors can wait 10 years. Most middle-class investors cannot wait 30 years or more. We cannot afford to be investing a large portion of our live savings for a promise that will remain unfulfilled for three decades. Many of us will need to sell if we do not obtain our expected return for 30 years or more. The John Bogle investing approach does not work at times of high valuations.

John Bogle’s breakthrough insight — that buying the market provides good enough returns — is a half-truth. Define “long-term” as meaning a time-period of 30 years or longer, and it is rooted in an historical reality. In practical terms, however, the Bogle claim is as much false as it is true. Most indexers of today are not prepared to wait 30 years to obtain the appealing returns promised by advocates of this investing approach.

Element # 4 to John Bogle’s Big Mistake — A Hope That It Will Be Different This Time Offers Little Comfort

John Bogle is aware of the effect that valuations have on long-term returns. Here are some words from a John Bogle speech on reversion to the mean: “Reversion to the mean is the rule, not only for stock sectors, for individual equity funds, and for investment strategies that mix asset classes, it is also the rule for the returns provided by the stock market itself.” That’s a big problem for indexers.

Jack Bogle's Mistake

If stocks provided 6.5 percent real each and every year, the conventional approach to indexing would be a sound investing approach. Stocks do not provide 6.5 percent real each and every year. There are times when stocks provide returns far greater than that. Following those times come times when stocks provide returns far less than that, pulling the long-term return back down to 6.5 percent real. It’s because we have time-periods in which stocks are providing returns of far less than 6.5 percent real that Bogle’s investing approach (conventional indexing) does not work.

Bogle’s blunder comes in the words following those quoted above. Bogle’s response to the reality of reversion of the mean (and the lower returns at times of high prices that go with it) is to offer up a wish, a hope and a prayer that it might turn out different this time. He says: “Since the market’s 15% return in the decade ended in 1998 was the third highest in all history, one can only hope that the full might of RTM [Reversion to the Mean] does not strike again.”


The appeal of indexing is that it is a rational approach to investing, an approach rooted in what we learn about how to invest from studying the historical stock-return data. Bogle is with these words leaving the world of reason and logic and entering the world of emotion. Sure, we can “hope that the full might of RTM does not strike again.” Can we count on it though? Dare we assume it when putting together our investment plans? Is it reasonable for us to put our hopes for safe retirements at risk on these sorts of hopes?

We cannot count on it. We dare not assume it. It is not reasonable for us to put our hopes for safe retirements at risk on these sorts of hopes. In all likelihood, we are going to see Reversion to the Mean again. In all likelihood, returns are going to be far less than what most indexers are expecting. In all likelihood, John Bogle’s investing approach is going to be proven a failure in its first real-world test.

John C. Bogles Mistake The test of Bogle’s approach was not the wild bull market that came to an end in early 2000. The first real test began in that year and will continue for the length of the secular bear market. Indexing works only for those who practice buy-and-hold strategies. Only those prepared for what is to come can reasonably be expected to be able to hold through a secular bear. Indexers who are counting on unjustified hopes that it will be different this time are not properly prepared for the price jolts ahead of us.

Bogle’s breakthrough was in taking a rational approach to the art of investing. He did something very important when he did that, in my view. Bogle’s big mistake was in abandoning reasons and taking comfort in wishes, hopes and dreams when faced with the reality of what Reversion to the Mean translates into for the typical follower of his investing approach.

Bogle properly determined the return for time-periods of over 30 years to be 6.5 percent. He acknowledged that Reversion to the Mean requires 10-year and 20-year returns at times of high valuation to be a good bit less than that. Bogle’s big mistake was in failing to calculate how much less and to share with indexers how much less.

Element # 5 to John Bogle’s Big Mistake — Thinking Prices Would Never Climb This High

My guess is that Bogle possessed a foggy idea of the error he was committing at the time he committed it. He is familiar with the historical stock-return data. He understands the importance of the Reversion to the Mean concept. My guess as to why he did not explore the implications of Reversion to the Mean to the long-term success of his investing approach is that he did not anticipate stock prices ever going as high as they have gone today. Please understand that that is only a guess.

To appreciate the magnitude of John Bogle’s mistake, you need to read Robert Shiller’sIrrational Exuberance. Bogle has not put indexers at risk of suffering small losses. He has put them at risk of suffering huge losses. There have been three times in the history of the U.S. market when we have traveled to the la-la land prices that apply today. The average price drop experienced on those three occasions was 68 percent. In the event that stocks perform in the future anything at all as they always have in the past, millions of indexers (and millions of non-indexers influenced by the arguments made on behalf of indexing) stand to lose large portions of their life savings as a result of John Bogle’s big mistake.

Understanding Stock Investing

Element # 6 to John Bogle’s Big Mistake — The Error is Encapsulated in the Phrase “Stay the Course!”

“Stay the Course!”

It’s John Bogle’s favorite bit of investing advice. It’s the key strategy followed by conventional indexers.

It is poor advice.

Please think back on what we have determined by working through the first five steps of Bogle’s big mistake. Indexing makes sense. Bogle’s discovery of a way to obtain good-enough returns with little need to spend lots of time on investing or to take on unappealing levels of risk was revolutionary stuff. But there is a big practical problem with indexing — remain heavily in stocks at times of high valuations and sooner or later you will get killed.

The obvious moral is — Whatever you do, do not stay the course. Yes, buy the market return when buying stocks. But, no, don’t even think of going with the same stock allocation at all times.

If you stay the course with a high stock allocation, you are almost sure to someday be wiped out. No one knows precisely when that next 68 percent price drop is coming. However, if you believe that the historical data provides useful guidance on how to invest for the long-term (the indexing concept is rooted in this belief), then you know that it is coming. So you must step aside. You must lower your stock allocation at times when the risk is greatest.

Would it be possible to stay the course with a low stock allocation? It would be possible, but it would not be financially rewarding. It is unlikely whether most middle-class investors can bear overall portfolio losses of more than 20 percent without suffering the feelings of panic that cause buy-and-hold strategies to fail. So stock allocations of much greater than 30 percent are dangerous at times of high valuations (when the possibility of a price drop of something in the neighborhood of 68 percent becomes too real to ignore). Staying the course with a stock allocation

The Big Fail of Buy-and-Hold Investing

of 30 percent might work in the long run. But keeping your stock allocation at so low a level is giving up an awful lot of money at times of moderate and low valuations.

John Bogle’s “Stay the Course!” advice just flat-out does not make sense. Bogle’s admonition to “Stay the Course” is dangerous advice.

Element # 7 in John Bogle’s Big Mistake — “Stay the Course!” is Generally Interpreted to Mean Something Other Than What Bogle Intends for It to Mean

Everyone makes mistakes. The Bogle mistake should never have become such a big deal. In the ordinary course of events, this mistake would have been corrected, and that would have been the end of it.

The Bogle mistake has not been corrected. The primary reason, I believe, is that “Stay the Course!” sounds like very sensible advice indeed. To those who do not think it through carefully, it sounds as if Bogle is advising us to stick with our investing strategies long enough to see them pay off.

The reality is that Bogle is arguing for precisely the opposite course of action. When Bogle says “Stay the Course!” he is not telling us to stick with our investing plans. He is telling us to permit them to be altered in dramatic ways.


Say that you are trying to steer a boat through the ocean. You have checked a map and know that all you need to do to reach your destination is to continue sailing straight ahead. In short, you need to “Stay the Course!” You notice a change in the winds and in the currents. What is your response? Do you hold the wheel firm in the face of these changes or do your make gentle turns to the left or to the right to counter the effects of the changing conditions about you?

You make gentle turns, of course. An informed understanding of what it means to “Stay the Course!” is that it requires reasonable responses to changed conditions. When valuations change, the “Stay the Course” investor needs to change his stock allocation to keep his risk profile consistent with what he determined it should be back when he set his initial allocation.

Buy-and-Hold Is Dead

Bogle does not advocate Valuation-Informed Indexing (at this time!). When he says “Stay the Course!” he means to stick with the same stock allocation, not to stick with the same risk profile. He is recommending that you be consistent with the thing that does not matter (your stock allocation percentage is just a number) while being inconsistent with the thing that determines the long-term success or failure of your investing plan (it is essential that you keep your risk profile stable).

The phrase “Stay the Course!” makes a great deal of sense. Bogle’s use of it (that it requires maintaining a fixed allocation percentage in the face of dramatic changes in the riskiness of stocks) makes zero sense. The result is that Bogle’s mistake has gone uncorrected for a good number of years now. People don’t see the error because the phrase “Stay the Course!” possesses a good bit of surface appeal. Only those who possess a deep understanding of the message of the historical stock-return data are able to appreciate the danger of Bogle’s mixed-up formulation of it.

Indexing works. The conventional approach to indexing does not work. The sensible way to index is to change your stock allocation in response to dramatic changes in the price at which stocks are being sold.

Jeremy Siegel Is a Dangerous Individual

Jeremy Siegel wrote one of the ten most important investing guides ever written, Stocks for the Long Run. All those seeking to attain financial freedom early in life would do well to read it. I haven’t read his later book, The Future of Investing. but my understanding is that it argues in favor of investing in stocks that pay high dividends. That’s good advice. So there’s a lot that I like about Jeremy Siegel.

Jeremy Siegel Is a Dangerous Individual That said, I believe that Jeremy Siegel is a truly dangerous individual. Here’s why.

Jeremy Siegel is dangerous because he is the single individual most responsible for the out-of-control bull market of the 1990s

If you are a regular reader, you know that I am not a fan of bull markets. Bull markets destroy middle-class wealth (not immediately, to be sure, but down the road that’s always their ultimate effect). Jeremy Siegel developed an approach to stock analysis of such great power that it played a significant role in fueling the most out-of-control bull market in U.S. history. Now, that’s some dangerous stuff!

What Jeremy Siegel did was to make investing analysis scientific. Too many investing claims are subjective in nature. People hear six different “experts” giving six different viewpoints that all conflict with each other and have no idea what to make of it all. Jeremy Siegel cut through the nonsense by looking to something objective to make his points — the historical stock-return data. Many looked at the data before Siegel came along, of course. But he did so in an exhaustive way, giving added power to all his findings by setting them forth in a book that appeared to evidence a deep and complete understanding of the objective realities.

Investors want to believe in bull markets. Their common sense tells them to hold back, that the story being told is too good to be true. But there’s a weakness in human nature that makes us all want to believe in the Get Rich Quick scheme. At the time when Siegel’s book came along, the early 1990s, many investors were already inclined to listen to the devil whispering in their ears. They needed some sort of authoritative rationalization to justify doing so. Siegel gave it to them. Siegel is the dealer who got us hooked on the nasty drug that caused the ugliest price run-up ever.

I don’t think he meant to do this. Siegel is a human like all the rest of us. He got caught up in the enthusiasms of the moment for the same reasons that caused many others to do so. He sampled the drug himself before he started pushing it on us. Still, he played a big role. If you like bull markets (what are you doing here? — just kidding!), you need to give Siegel credit. If you hate them (comrade!), he’s one of the figures on which you need to pin the most blame.

Jeremy Siegel is dangerous because he takes the Efficient Market Theory seriously.

The Efficient Market Theory assumes (there’s a big difference between assuming something and showing it to be so) that investing is primarily a rational endeavor. Honey, we forget the people! So long as stocks are owned by humans, stock investing will remain primarily an emotional endeavor. Jeremy Siegel rooted his research in a false premise.

Stocks for the Long Run

The result is that most of what he says about stocks is both important (because it really is critical to mine the historical data for objective insights) and wrong (because Siegel’s approach ignores the reality that the human owners of stocks at times bid their prices up to absurdly “inefficient” levels).

The best example of this is Siegel’s assertion that: “The superiority of stocks to fixed-income investments over the long run is indisputable.” There’s an important investing truth being conveyed here. It really is so that investors who commit to holding stocks for the long run greatly diminish the risks associated with them by doing so. No one has made this point more effectively than Siegel, and he deserves great credit for having done so. Still, the assertion is ultimately a half-truth. It is as much in error as it is accurate.

To understand why, you need to see why it is that holding stocks for the long run diminishes their risk. It is because stock prices become far more predictable in the long run. Stocks are risky in the short run because you have little idea what your stock investment is going to be worth in the short run. In the long run, you can know, at least to a reasonable extent. But making stock prices predictable by holding them for the long run does not always render stocks a “superior” investing class. What happens when long-term stock returns are predictably poor (because prices are too high)? In those circumstances holding for the long term renders stocks an inferior choice, not a superior one.

It is Siegel’s belief in the Efficient Market Theory that caused him to miss this. He looked at the returns provided by stocks over the very long term (30 years and longer), saw how wonderful they are, and concluded that stocks are superior. In the real world, investors need to see some evidence of good performance within 10 years or so or they give up on their stocks and end up selling at the worst possible time. When stock prices are high (as they are today — this article was posted in July 2007), the likely 10-year return on stocks is poor compared to what can be obtained from far safer investment classes. For those able to wait at least 10 years to see a good return but perhaps not much longer, stocks are very much an inferior investment choice today.

If the market were efficient, it would not be possible for stocks ever to be bid up to such absurd levels as they were in the late 1990s. The market really is inefficient. The late 1990s really did happen. Siegel got it wrong. Stocks are sometimes inferior.

Jeremy Siegel is dangerous because he takes too much comfort from his worst-case-scenario finding.

There’s a sentence in Jeremy Siegel’s book in which the truth about the long-term risk of holding stocks purchased at high prices almost hits him in the face. He says: “The fact that stocks, in contrast to bonds or bills, have never offered investors a negative real holding period return yield over periods of 17 years or more is extremely significant.”

Important Investing Books

He means for that to be reassuring. Viewed with a brain cleared by some distance from the madness of the 1990s, it’s not so comforting. It is asking an awful lot of stock investors to expect them to be able to wait 17 years to see even a penny of positive return. I’ve communicated with thousands of middle-class investors on discussion boards. Most are not able even to imagine the possibility that it could take them 17 years to obtain the first penny of return on their stocks.

I wish that Jeremy Siegel had worded things differently. I wish that he had said: “The historical data shows that there is a real possibility that you may need to wait 17 years just to break even on your stock investment — be careful out there.” Putting it that way wouldn’t have stopped the bull market in its tracks. Perhaps it would have slowed it down a bit. Slowing it down a bit would have been the more responsible thing to do.

Jeremy Siegel is dangerous because his worst-case scenario number is calculated improperly.

It’s not just that Jeremy Siegel took some bad news (that there is already an instance on the record in which it has taken stock investors 17 years to break even on their investment) and phrased it in such a way as to make it sound like good news. The reality is that the 17-year number is by no means the true worst-case scenario.

There have only been two times in modern stock-market history that we have been at the sorts of valuation levels where we have been since the mid-1990s. In one of those cases, it took 17 years for stock investors to break even. Does the fact that in two spins of the wheel we have already seen a case in which it took 17 years to break even show that it is unlikely that it will take more than 17 years to break even on the third spin of the wheel? By no means! Determine the worst-case-scenario using an analytically valid methodology (one that takes valuation levels into account) and you will see that it is entirely possible that it will take 22 years or even longer for stock investors to break even this time. Honey, We Forgot the People and Thereby Got the Number Wrong!

The true worst-case scenario is a lot worse than it has been portrayed to be by Jeremy Siegel in his book Stocks for the Long Run.

Jeremy Siegel is dangerous because he understates the value proposition offered by safe asset classes.

The statement above in which Siegel notes that there is at least one case on the record in which a safe investment class did not provide a superior return misleads the casual reader into thinking that it is not possible for investors of today to lock in a more promising deal from safe investments. There was a time not too long ago when Treasury Inflation-Protected Securities (TIPS) were paying a guaranteed annual return of over 4 percent real. That beats going with stocks and possibly waiting 22 years or longer to break even by a whopping margin.

Best Investing Books

The 4 percent TIPS were not available at the time Siegel wrote his book. So he certainly cannot be blamed for not making his readers aware of that particular investment opportunity. However, it is fair to blame him for the manner in which he set up the comparison between stocks and safe investment classes.

Safe investment classes have a wonderful characteristic not shared by stocks. With stocks, you must be willing to hold for the long term or you face the possibility of taking on huge losses because of the short-term volatility of this asset class. The same is not at all so with the safe investment classes. If you are not able to find a good return on a safe investment class, you can always take a not-good-return for a short time-period and then switch out to a better deal when one comes along. Siegel’s comparison assumes the same “lock-in” for both stocks and non-stock investment classes, but most asset classes do not require an investor lock-in to the extent that stocks do.

Jeremy Siegel is dangerous because he fails to reveal the warning signs of when stocks offer a poor long-term value proposition.

Given Siegel’s belief that stocks are always a good long-term buy, it is hardly surprising that he fails to tell us what to look for to determine when they are not. Still, this is a huge omission. Middle-class investors have a pressing practical need to know when they need to lower their stock allocations a bit because of the increased risk associated with buying overpriced stocks.

If you want to know about what Jeremy Siegel failed to tell you, please take a look at the Stock-Return Predictor (see the tab to the left of this page). By entering various valuation levels into the calculator, you can determine when the long-term return offered by stocks is amazing, when it is just strong, and when it is not so hot (the default results show that today it is not so hot).

If you want to review objective research of the type performed by Jeremy Siegel but in an analytically valid way (that is, incorporating the effects of valuations into the analysis), please take a look at John Walter Russell’s Early-Retirement-Planning-Insights.com site. Mind-blowing stuff!

Jeremy Siegel is dangerous because he overstates the risks of stock ownership while also understating it.

Historical Stock Return Data

It’s not just that Jeremy Siegel paints stocks with too rosy a glow. The other side of the story is that, by ignoring the effects of valuations, he at other times paints stocks with too dark an overcast.

Siegel improprerly suggests that stocks are almost sure to provide a positive return to those willing to hold their shares for 17 years. I can do even better than that without needing to engage in any fudging of the numbers. Using the Stock-Return Predictor, I can report that, if you purchase stocks at moderate prices (when the P/E10 level is 14), you can be virtually certain of a positive return in 10 years!

Stocks are an amazing asset class. Long-term stock prices are highly (but not precisely) predictable. Jeremy Siegel is responsible for those two powerful investing insights.

Stocks are not always the best asset class for the long run. When prices get too high, you want to lower your allocation to stocks to avoid the huge hit you are likely to take if you fail to do so and to position yourself to buy when prices return to reasonable levels. Jeremy Siegel got just enough right to be persuasive and just enough wrong to be dangerous.

Read Jeremy Siegel. Study John Walter Russell. Siegel’s book is the rough first draft. Russell’s web site is the classic work that will pay us rewards for return visits for decades to come. Now we know what really works for the long run and it’s not to put your money in stocks and forget about it.

John Walter Russell’s Early Retirement Planning Insights

John Walter Russell’s Early Retirement Planning Insights site presents exciting and innovative research on what the historical stock-return data really says about how stocks perform in the long term. If you have money invested in stocks and are hoping to win financial freedom early in life, this is a site not to be missed.

Early Retirement Planning Insights

It wouldn’t surprise me too much if my most important contribution to the Financial Freedom Discussion Board Community turned out to be putting on the table the topic that enticed our most valuable Numbers Guy–John Walter Russell (he posts as “JWR1945”)–into active participation in the community. His Early Retirement Planning Insights web site is a godsend for those trying to make sense of the safe withdrawal rate issue. Here’s a link: Early Retirement Planning Insights

I did prelimary work on development of the Data-Based Safe Withdrawal Rate Tool back in late 1995/early 1996, when I was putting together my plan for “retirement” from corporate employment. I ain’t no numbers wiz, and it was not my plan at the time to become a writer of books on early retirement planning. So, once I knew enough about what the historical stock-return data says about how stocks are likely to perform in the future, I dropped the safe withdrawal rate project for a time and went on to researching other questions I needed to resolve in doing my own early retirement planning.

In the time between then and May 13, 2002, when I put forward The Post Heard Around the World, I continued to make use of the Data-Based Safe Withdrawal Rate Tool and learned new things about it when I came across articles discussing the historical stock-return data and checked them for accuracy. But I never was able to achieve much precision in my findings because I lacked the statistical abilities needed to do so.


A Call for Help from a Numbers Guy

For a variety of reasons, I decided in early 2002 that the time had come to put the question of the analytic validity of the REHP study (the safe withdrawal rate study published by John Greaney at the RetireEarlyHomePage.com site) on the table. One of the things I was looking for was help from some of the Numbers Guys in our community in adding the statistical precision to my safe withdrawal rate findings that they had been lacking until that time. Our community had employed safe withdrawal rate analysis in our early retirement planning for some time, and I expected that there would be Numbers Guys in the community who could greatly enhance the Data-Based Safe Withdrawal Rate Tool.

John had not participated much in our community prior to that time. I believe that he had put forward two or three posts. But he became interested in the safe withdrawal rate topic from the very first days of The Great Safe Withdrawal Rate Debate. On Day Four, he put forward a well-received post entitled “Hocus Is Really Onto Something!” and on Day Six he followed that one up with one entitled “Hocus Started It All (and I’m Having a Ball!)” That was, as Bogey might have put it, “the start of a beautiful relationship.” I was looking for a Numbers Guy willing to do some service for our community, and, boy, did I ever find one!

It is not possible to overestimate the contribution that John has made in the three years since. For those three years he has been working a full 40-hour work week doing research to benefit aspiring early retirees trying to learn what the historical data really says about safe withdrawal rates. He has put forward thousands of posts on this topic and was by far the most important contributor to the board that I believe will someday be recognized as the most influential in the history of our movement–the Safe Withdrawal Rate Research Group board. His work has generated countless early retirement planning insights of great power, for the most part stuff that appears nowhere else in the personal finance literature. He has taken on lots of personal abuse for the work he has done, having been smeared every which way to Kingdom Come for reporting accurately what the data says. And he has never been paid a dime for the fine work he has done for us!


Why Discussion Boards Matter

Financial PlanningIt’s a truly amazing story. When I tell people in the real world about the ugly posting tactics we have witnessed during The Great Safe Withdrawal Rate Debate, the reaction that I usually get is a rolling of the eyes. Many people have little respect for discussion boards as a communications medium. They ask me “Why do you put up with that junk, why do you even waste your time?” My response is always to point to the example of John Walter Russell. You don’t think that this new internet disucussion-board communications medium has the potential to change the world of personal finance in days to come? Take a look at the posting record of this one individual and try to make the case with a straight face.

If the tactics used by REHP study and FIREcalc (the retirement calculator presented at Early-Retirement.org) supporters represents the worst that the internet has to offer, the contributions of this guy represent the best. In my hopeless optimism about our movement, I convince myself that the REHP study supporters represent our past and that JWR1945 represents our future.

The best way to tap into Russell’s work product today is to pay a visit to the web site linked above, Early-Retirement-Planning-Insights.com. John was forced to put up the web site just so that people would continue to have access to his research when REHP study supporters demanded that the 3,600 posts of the Safe Withdrawal Rate Research Group board be deleted from the NoFeeBoards.com site. The site owner “ES” was reluctant to take down his most popular board, and in fact vowed not to on a number of occasions, but some of the REHP study supporters are a bit over the top in their choice of tactics for “winning” internet debates, and they–well, let’s just say they made him him an offer he couldn’t refuse. The bottom line is that the Safe Withdrawal Rate Research Group board was taken down and John’s Early Retirtement Planning Insights web site went up.


Confirmation of Findings Needed

I try to persuade myself that it’s for the best. I don’t really think so because, as good as John’s research is, I need to see a lot more feedback on it from the entire commununity before I will feel comfortable in saying that it all holds up. I know that John has always been responsive to questioning of his methodology (in stark contrast to Greaney), so I possees a reasonable amount of confidence that he “got it right.” But the reality is that John is reporting what the historical data says not just on safe withdrawal rates, but on scores of related questions (just about all investing questions have some connection with safe withdrawal rate analysis when the safe withdrawal rate analysis is done in an analytically valid way). So John’s research has put a lot of important findings on the table, scores and scores more than any of the conventional methodology safe withdrawal rate studies. It is far too early in our Learning Together project to be making definitive pronouncements as to whether many partitcular findings of his will stand the test of time or not, in my view. We need a lot more input from a lot of smart and serious people before we will be in a position to confirm the findings presented at the Early Retirement Planning Insights site.

John can’t be blamed for that, of course. It’s not his job to confirm his own research findings. He has done eveything that one human being could possibly do to advance our project of learning what it takes to win financial freedom early in life, He is a Hero of the First Order of our small (but quickly growing!) movement. He is honest. He is smart. He stands up for fellow community members when they are under attack. He is hard-working. He is unfailingly generous with his time and polite and kind with his comments. Beat that combination!

Planning Ahead
I read the other day that there are about 60 million web sites. Not too many of them are going to change the world. The Early Retirement Planning Insights site is going to change the world. That’s my take. If you possess a sincere interest in learning what it takes to win financial freedom early in life, you need to get on over there and check it out. No, that’s not enough. You need to study the earth-shaking material that John has put forward there.

There’s not that much that you are going to read this week that is going to make a big difference in how your future turns out. The stuff you see at Early-Retirement-Planning-Insights.com is likely to do just that. So please take the time to work through as much of that material as you possibly can and to go over the hard bits enough times until you possess at least a moderate understanding of the true message of the historical stock-return data.

I ain’t no Numbers Guy. John is a serious Numbers Guy. That means that a lot of his stuff sails about ten miles above my head. Them’s the breaks. If you are like me, and generally prefer words to numbers, my advice is to do what I do and just struggle with this stuff to the extent you can without giving yourself a headache and be satisfied that doing that is a whole lot better than nothing.

There are a lot of web sites that I have visited where I look back and say “Why the heck did I waste so much time reading that junk?” There is too much stuff out there that amuses for a time but in the long run offers not much substance. You don’t read John’s site to be amused. There are indeed some hard bits included in the mix (although a good bit of John’s material is not all that difficult to take in). The bottom line is that it even the hard stuff is hard stuff that makes a difference, hard stuff worth taking the time to work through.

I discover something new each time I pay a visit, whether I am looking at recently posted material or going over again stuff that I made an initial stab at on an earlier visit with the thought that I needed to come back again later and dig a little deeper. If you care about winning financial freedom early in life, the Early Retirement Planning Insights site is the most important site on Planet Internet.