Work Less, Live More — The Retire Early Movement Grows Up

The book Work Less, Live More, authored by Bob Clyatt (Nolo, 2005), offers its reader a number of breakthrough insights on how to win financial freedom early in life. I briefly explore eight of them in the words below.

The first breakthrough insight put forward in Work Less, Live More is the idea that we need a new understanding of what constitutes “retirement.”

Work Less. Live More

I published my Secrets of Retiring Early report in June 2000. I remember feeling a bit nervous at the time about one of the themes explored in the report. At that time, the Financial Freedom Community was comprised of a single discussion board, the Motley Fool board. The board was going gangbusters at the time, but I thought that in some important ways the scope of discussions held there was too narrow.

I was using a newfangled understanding of the concept of “retirement” in my own Retire Early plan. I didn’t find much appeal at age 43 of retiring in the way that most other people did at age 65 — leaving the challenges and joys of the workplace altogether behind me at an age at which I still had lots of energy and dreams and ambitions seeking a means of expression. I didn’t want to prepare to die, I wanted to open up the possibility of living more fully.

I wrote about the concept that Bob Clyatt refers to in Work Less, Live More as “semi-retirement” in my report and anxiously awaited my hits from that segment of our community that views new ideas with suspicion and argues that everything worthwhile that there is to know about early retirement was figured out years ago.

I have indeed taken a good bit of abuse for that one from the “If You Don’t Retire Early My Way, It’s Not Really Early Retirement!” Crowd. But I have also obtained a good bit of gratifying feedback from fellow community members who have been quietly nursing “heretical” views along the same lines for some time.

It turns out that there are a lot of people who find a good bit of appeal in the money management ideas discussed at our boards, but who, like me, find not so much appeal in the idea of becoming old before their time. They like the idea of winning their financial freedom early in life, but want to make use of their financial freedom in ways that permit them to continue enjoying the positive aspects of the work experience (of which there obviously are many) for many years to come.

Those sorts of community members need to read Work Less, Live More. Bob Clyatt doesn’t just give his okay to a new understanding of what constitutes early retirement — he heartily endorses the concept. The title of the book is not Work Not at All, Live More. It is Work Less, Live More. I of course have no objection to the pursuit of the conventional approach to early retirement by those who view that approach as best for themselves. I am much pleased, though, to see the nonsense idea that there is one and only one “right” way to pursue early retirement finally and completely put to rest (I pray!) by publication of Bob Clyatt’s book. It is hard for me to imagine that there is any serious person who could argue that there is no place for “semi-retirement” (Clyatt’s phrase) or “Retiring in Stages” (my phrase) after seeing the persuasive case put forward for it in the pages of Work Less, Live More.

Retire Early Movement
Clyatt is arguing for a balanced, sane, reasonable approach to early retirement. I believe that publication of this book will give our movement a gentle push in a direction in which it very much needs to move. A movement needs new ideas to retain life, and Clyatt’s advancement of the semi-retirement concept supplies them. I see the publication of this book by a fellow Financial Freedom Community member (Bob Clyatt posts to the Early Retirement Forum under the screen-name “ESRBob”) as a sign that our small (but quickly growing!) movement is beginning to grow up. Good for us!

The second breakthrough insight put forward in Work Less, Live More is the idea that it is the non-financial aspects of the Retire Early experience that are the most important.

Semi-retirement is a powerful concept because it allows many middle-class workers to overcome dependence on corporate and government employers years or even decades sooner than they could if they planned never again to earn an income of any kind. The more important benefit, however, is the sense of purpose that it adds to one’s life to be putting together a plan to quest after new dreams instead of putting one together solely to escape the bad aspects of the corporate workplace.

Bob Clyatt says that the impetus for his early retirement was his desire to spend more time with his two boys. That’s a healthy Retire Early ambition, in my view. I get uneasy when I hear people say that their sole reason for pursuing early retirement is to escape boring staff meetings. I have sat through boring staff meetings, and I relate to the feelings of frustration noted by those who feel a drive to escape the experience. My concern is that escaping boring staff meetings is a negative goal rather than a positive one. My sense (based on reading many of the stories of the thousands of early retirees who have posted to our boards over the course of the past six years) is that the most successful Retire Early plans are those driven by a healthy balance of positive goals (things to aspire to) and negative goals (things to escape).

Wanting to spend more time with your family is a positive goal, as is a desire to do a new kind of work, or to get in better shape, or to do volunteer work. I feel myself drawn much more strongly to positive Retire Early visions than to negative ones, especially when the visions are visions being put forward by people in their 30s or 40s. People should still be questing in their 30s and 40s, not entering a stage of life in which their most pressing concern for the future is that Social Security not run dry.

The future of Social Security matters, to be sure. But we all should have things in our life that we have some control over that matter too. We should have things that we are doing that matter to us. In other words, we should have important work before us (whether done for pay or not). Non-retirees have that, and even most conventional-age retirees have that. I think that early retirees should seek to have that too.

Early semi-retirement, in Bob Clyatt’s view, “captures the best of both worlds: plenty of free time and the opportunity for good healthy living that early retirement offers, combined with the psychological benefits and long-term financial security of a modest amount of part-time work–a hybrid that works for large numbers of people.”

Early Retirement
I think that is exactly right. Remain dependent on a paycheck until you turn sixty-five, and you put yourself in circumstances in which you are likely to feel great levels of frustration in your 40s and 50s, when you know enough about how to do the work you do that you should be calling more of the shots than most non-owners are permitted to call in the modern-day workplace. Aiming for semi-retirement permits you to break free years sooner than you could aiming for full retirement while also allowing you to enjoy the positive side of the work experience for many additional years. Beat that combination, proponents of the old and moldy approach to early retirement!

Here’s the title that Bob Clyatt chose for Chapter Six of Work Less, Live More — “Do Anything You Want, But Do Something!” It needed to be said, and that phrase says it well. Do Anything You Want, But Do Something! — I’m going to be using that one in days to come. (Clyatt credits Warren Buffett with the coining of the phrase.)

The third breakthrough insight put forward in Work Less, Live More is the idea that investment returns must be predictable if you are going to plan to give up reliance on a regular paycheck.

I am known in our movement as the anti-Greaney (or the anti-”Intercst,” his posting screen-name) because of my criticism of John Greaney’s safe withdrawal rate study (published at the site) as well as my criticism of the highly abusive posting tactics Greaney and his supporters have employed to block questioning of the flaws of the study. Often lost in the hullabaloo over my criticism of the Greaney study and his “defense” of it is my praise for the aspects of the safe withdrawal rate question that I believe Greaney very much got right.

After our community discussions showed beyond any reasonable doubt that the conventional methodology studies are analytically invalid for purposes of determining safe withdrawal rates (what Greaney actually calculated was the historical surviving withdrawal rate, not the safe withdrawal rate), it became fashionable in segments of our community to argue that it doesn’t matter because safe withdrawal rates are of no real consequence. “It’s all so much fortune telling,” we were told. Some argued that the safe withdrawal rate is only a “rule of thumb” and thus it is not important to get the math right.

I cannot recall an instance in which Greaney directly endorsed these “defenses” of his study put forward by others on his behalf. I always found this “defense” of Greaney to be insulting to him. What sort of defense of him is it to argue that the work he did preparing his study was a pointless exercise in “crystal ball reading?”

I say that Greaney got the safe withdrawal rate number wrong, but that at least he was engaged in a serious endeavor in trying to determine it. I view that as a step up from the position advanced by his presumed defenders, who are implicitly arguing that all the time that Greaney and thousands of other Financial Freedom Community members have spent exploring safe withdrawal rates was a waste.

How to Retire Early
Again, Bob Clyatt comes down on the right side of this important question in his new book Work Less, Live More. Clyatt devotes a good bit of page real estate to the safe withdrawal rate question. Not only that. He is not satisfied with passing along old and worn-out safe withdrawal rate claims. He presents new strategies for making use of safe withdrawal rate findings. He advances the ball.

The section of Work Less, Live More that deals with safe withdrawal rates is gravely flawed, to be sure. Like John Greaney before him and like Bill Sholar (owner of the Early Retirement Forum and publisher of FIRECalc) before him, Clyatt fails to include an adjustment for valuation changes in his safe withdrawal rate analyses.

I find this oversight astounding. Clyatt participated in discussions at the Early Retirement Forum in which the need to include an adjustment for changes in valuation levels was discussed. I even exchanged e-mails with him on this question!

I am really at a loss for words (how often does that happen?) as to what Clyatt was thinking in electing to walk down the same dark path that Greaney and Sholar elected to walk before him. I have said it in regard to the false safe withdrawal rate claims of Greaney and Sholar, so I think that I am obligated in fairness to say it in regard to Bob Clyatt too — these demonstrably false safe withdrawal rate claims are likely to result in hundreds of thousands of busted retirements in days to come (presuming that stocks perform in the future somewhat in the way in which they always have in the past). Causing busted retirements is not what our movement is all about. Don’t go to the dark side, Bob Clyatt!

In all seriousness, if either Bob Clyatt or Bill Sholar or John Greaney would like to write an article explaining why he believes it is okay to continue to push safe withdrawal rate claims that have been publicly shown beyond any reasonable doubt to be incorrect as a matter of “mathematical certainty” (William Bernstein’s phrase), I would be happy to publish the article at the site and include a link to it in this article. If all three elect not to take me up on that offer, I think it is fair to say that something extremely fishy is going on re this matter (something that this long-time observer of community interactions cannot help but attribute to behind-the-scenes efforts at “persuasion” on the part of Greaney).

Bob Clyatt

All that said, there is a bright side to the safe withdrawal rate material appearing in Work Less, Live More. The bright side is that Bob Clyatt is for the most part taking safe withdrawal rates seriously. A number of board communities have elected in their embarrassment over the Greaney matter to downplay the safe withdrawal rate topic. Clyatt is putting it back on the table with the publication of Work Less, Live More, and rightly so.

We have been talking about safe withdrawal rates since the earliest days of our movement, and my guess is that we will continue to be talking about them for a long time to come. Safe withdrawal rates matter.

(There was a spirited discussion of Work Less, Live More and the critical need to include valuation adjustments in safe withdrawal rate analyses held at the Vanguard Diehards board not too long ago.)

The fourth breakthrough insight put forward in Work Less, Live More is the idea that safe withdrawal rate analyses intended for use by early retirees should not call for diminishment of principal to zero over the course of the retirement.

This is big stuff.

The standard practice with safe withdrawal rate analysis has long been to determine the withdrawal rate that works presuming that the retiree is willing to see his portfolio diminish to nothing at the end of 30 years. The safe withdrawal rate for an 80 percent S&P portfolio used to finance a retirement beginning in January 2000 is 1.6 percent. This does not mean that a retiree could withdrawal an inflation-adjusted 1.6 percent of portfolio value each year and still be reasonably sure of having his initial portfolio value remain in place at the end of 30 years. It means that he can be assured that, even if a worst-case returns sequence (the worst that we have seen in the historical record, but nothing worse than that) pops up in his retirement, he will be able to take out 1.6 percent of portfolio value each year if he is willing to accept possibly having nothing left at the end of 30 years.

This reality is stated in the conventional studies. So there is no deception going on regarding this aspect of the conventional methodology studies (as there is with the studies published by those who are aware of the critical effect of valuation changes but who have failed to incorporate this factor into their analyses). Still, it is a highly problematic way to set things up.

The problem is that the safe withdrawal rate analyses require the retiree to stick with a buy-and-hold strategy at times when stock prices fall. If the retiree sells his shares when prices drop, all the assurances that safe withdrawal rate analysis is intended to provide go out the window. So it is extremely important that the retiree build into his plan enough of a margin of error to avoid feelings of panic during price downturns.

Early Retirement

The conventional approach — permitting portfolio value to drop to zero in a worst-case scenario — does not do the job. This way of setting things up is likely in many circumstances to cause panic at just the worst time. Clyatt argues persuasively for setting things up so that the initial value of the portfolio is preserved even in cases in which a worst-case returns sequence pops up.

Bob Clyatt argues that the conventional set-up is particularly ill-suited for early retirees, who may spend a good bit more than 30 years in retirement. That is a powerful argument, in my view. William Bernstein, author of the book The Four Pillars of Investing, stressed this point in comments he made recently at the Vanguard Diehards board in which he rejected out of hand the idea that it is safe for an early retiree to use one of the conventional methodology studies to prepare his or her plan (he was expanding on ideas earlier put forward in his book).

I know from posts I have seen put to the various boards that a number of community members are not aware that in a worst-case scenario their portfolios will be reduced to zero when they make use of a “safe” withdrawal rate. The studies do point this out. But not all community members read the texts of the studies carefully enough to pick up on the fine points. The practical reality is that a lot of people are being misled into thinking that their retirement plans are “100 percent safe” (a phrase used in the study and often repeated by Greaney in his posts to the various boards) when in fact they are something a good bit less than that. Not good.

The case is closed on this one, so far as I am concerned. Analyses making prominent mention of the fact that the withdrawal rate identified as safe may cause the entire portfolio to be wiped out in 30 years are acceptable. But analyses that reveal the withdrawal rate that permits the retiree to preserve his original portfolio value in circumstances in which a worst-case returns sequence pops up are more properly termed “safe withdrawal rate” studies, especially when the primary users of the studies are early retirees. The whole idea is to be safe in one’s planning, is it not?

The fifth breakthrough insight put forward in Work Less, Live More is the idea that early retirees need to follow more diversified investing strategies than those termed “optimal” in the old and now discredited safe withdrawal rate studies.


Clyatt is highly critical of the conventional studies, which, while entirely discredited in recent years in Financial Freedom Community discussions, are still often cited in media accounts written by reporters who lack expertise in the early retirement field. Not only does he find fault with the idea of setting things up so that portfolio value can drop to zero in 30 years. He also argues that the conventional studies, which generally look at portfolios comprised of a high percentage of S&P stocks, are inadequately diversified. I would like to see more discussion of this question before reaching a firm conclusion, but I am inclined to agree with him, at least in part.

Bob Clyatt’s call for greater diversification reminds me of arguments that have been put forward by the Financial Freedom Community members going by the screen-names “Raddr” and “Ben.” Both of these posters have portfolios more diversified than the portfolios identified as “optimal” in the often-cited study. My sense is that both the Raddr and Ben portfolios are a good bit more “optimal” than the one that claims that status for itself.

Bob Clyatt agrees that the 74 percent S&P portfolio that many community members once thought was the only way to go for those aspiring early retirees who did not want to reveal themselves “mentally ill” (this is the term that Greaney frequently uses to describe community members who employ allocations other than the one he recommends) is a far cry from optimal. I hope that the support he offers to community members who have dared to be different gives more of us the courage to stand up to the assaults of Greaney defenders in days to come. We need a greater diversity of viewpoints on our boards, and my hope is that the arguments put forward by Clyatt may help us move us to a place where the expression of a good number of Greaney-opposed viewpoints is both tolerated and encouraged.

We need new blood, and, to get it, we need to encourage those who put new ideas on the table. I think that Work Less, Live More will be welcomed by movement newcomers who have been reluctant to offer their sincere investing views because of the heavy-handed tactics that have often been employed by a number of the old-timers trying to bring back the summer of 1999. A hearty thanks from one community member to another for your efforts at doing that, Bob Clyatt!

The sixth breakthrough insight put forward in Work Less, Live More is the idea that the technology revolution is providing investors with insights that will make it easier in future days to customize portfolios in ways that best serve the long-term goals of the investor.

I believe that Clyatt is on the right track in a section of his book in which he refers to development of an approach to investing that he terms “Rational Investing.” I am not entirely persuaded by the arguments put forward in this section. My sense is that the ideas being put forward are not yet fully baked. But my sense is that Clyatt is grasping at something not too far off from the also-not-yet-fully-baked concept of “The New Buy-and-Hold” Investing Paradigm that is described in articles at another section of the web site.

I hope to be exploring Clyatt’s “Rational Investing” concept in a bit more depth in days to come. I believe that it is possible that some of his ideas could be incorporated into The New Buy-and-Hold Investing Paradigm as that paradigm is more fully developed.

We are in a transition stage in our understanding of how best to invest for the long term. A good number of informed investors are beginning to see that the Stocks-for-the-Long-Run Investing Paradigm is not going to live up to its billing. But the core idea of holding stocks for the long term has strong appeal (and rightly so). So we have been reluctant to make too quick and too clean a break with the old paradigm. Clyatt does not seem to me to have all of the pieces of the Retire Early investing puzzle in place. But it does seem to me that he is at least looking forward about as much as he is looking backward. I think he may be a significant help in our community’s effort to — oh, what’s that phrase again? — GROW UP!

The seventh breakthrough insight put forward in Work Less, Live More is the idea that the annual percentage withdrawal taken from a Retire Early portfolio should be a variable number rather than a fixed number.

Clyatt here is endorsing a version of the approach to safe withdrawal rate analysis that Peter Ponzo (“Gummy”) has argued for using the phrase “sensible withdrawal rates.” The community member who goes by the screen-name “SalaryGuru” or “SG” has also put forward some valuable input on strategies to adjust withdrawal rates and thereby render safe take-out percentages that otherwise would not be safe.

The variable-withdrawal approach makes sense. The flaw in the incarnations of it that we have seen thus far is that those who have argued for the concept have not adequately addressed the valuations question. Thus, we cannot have confidence in the numbers used in their analyses. The analytical approach makes sense, but the executions of it that we have seen thus far leave much to be desired.

The same flaws apply to the approach recommended by Clyatt. He revealed in a thread at the Early Retirement Forum that an early retiree using his approach might suffer a loss of annual buying power of 35 percent or more. Stop! Do Not Pass Go! That’s too big a potential loss in buying power for a retiree seeking safety in his early retirement plan.

I would very much like to see Clyatt put forward a reformulation of his variable withdrawal percentage approach that provided an acceptable measure of real-world safety. I must give the articulation of the concept put forward in Work Less, Live More a failing grade, however. It adds too much complexity for too little return pay-off.

The New Retirement

The eighth breakthrough insight put forward in Work Less, Live More is the idea that discussion-board communities are capable of doing serious work to advance knowledge of how to win financial freedom early in life.

There are a good number of community members who have told me that they think I am crazy to fight as hard as I do to protect our community from abusive posters. I am frequently informed that: “It doesn’t matter if the debates held are on the level or not because it’s only a discussion board!” Boo! Hiss! I’ve seen posters at our boards generate insights that cannot be found in any book in any library on the face of Planet Earth. I’ve seen posters at our boards put forward accounts of their personal experiences that changed the lives of their fellow community members in profound and positive ways. A Financial Freedom Community board is never only a discussion board, in my estimation. A Financial Freedom Community board is a wonderful and significant thing to be.

Bob Clyatt shares my excitement about the potential of this new communications medium. The first words on the Acknowledgments page of Work Less, Live More are a valentine to his fellow Financial Freedom Community members (as are the first words to the Acknowledgments page of my book Passion Saving). I haven’t seen this done before. But my guess is that it is something that we will all see being done not infrequently in days to come.

Discussion boards offer ways to generate and develop and test ideas that simply did not exist prior to the development of this exciting new communications medium. There are flaws to the discussion-board communications medium, to be sure. No one knows that better than I do. But the potential is there for discussion boards in general (and for Financial Freedom Community boards in particular) to change the world. Bob Clyatt (ot should I say “ESRBob”?) very much “gets it” re this one.

Eight breakthrough insights in one book — Good job, ESRBob! Now get down to the important business of fixing those “highly misleading” (William Bernstein’s phrase) safe withdrawal rate numbers set forth in your book, will you please?