Monday, February 20, 2012

mormonhermitmom's review of RetirementQuest; Make Better Decisions by John Hauserman, CFP

FYI: I received this book in return for reviewing it. There was no other compensation.

Retirement Quest is aptly named. It seems like it takes a quest of epic heroic proportions to plan for retirement these days. While this book is NOT a primer for those who have never thought of or approached retirement planning, it does add a different perspective into investing.

The author is a certified financial planner with some years of experience. He outlines in this book what he feels are major mistakes that individual investors make and why they make them. I don't think of myself as an "investor" because to me, that is someone who has money that they don't need for monthly expenses or debts and are looking to make their money work for them. My hubby has a 401k and an IRA with rolled over funds from 401k plans of his past employers. Aside from his automatic 401k contributions, we don't really sock away any other money. We're still working through some financial challenges before we can get to the point where there is "disposable income" in our budget.

The author himself states the following:
This book is intended for mature readers who have already achieved a reasonable level of financial security and responsibility, and for younger people who are actively in a wealth building mode.

I take that to mean that if your family is burdened with too much debt and struggles to make ends meet, this book may not be that helpful. It certainly never hurts to learn about saving and investing money even when you are in the hole - the thought of what lies ahead might motivate some to get their financial house in order.

What I appreciated most about what Hauserman had to say, focused mainly on why it seems so hard to get ready for retirement these days. Hauserman gives a brief history lesson on the economic forces during the 20th century that allowed the World War II generation to create such a high level of prosperity and how the baby boomers are finding themselves caught between a rock and a hard place financially. Hauserman explains how Social Security began with a certain set of assumptions about life expectancy and now faces a drastic crisis if not utter extinction in the next thirty years due to rising medical costs, longer retirements, and exploding education costs. Essentially, your grandparents' social security isn't going to cut it in the future. It may not even be there at all.

With such a grim outlook, it's easy to feel anxiety over one's financial future. I had a very pronounced negative reaction after just the first few chapters. I had to stop and absorb what I had read, get my emotions under control before I could continue. Thankfully, the author explains some of these emotions later and it's really worth a look to just swallow the fear and keep reading.

Hauserman explains how our reactions to news about the economy in the media are a big reason for mistakes in investing. If you focus on the wildly swinging reports of stocks going up and down, you may be tempted to make a move you shouldn't. Hauserman emphasizes the need for a sensible, well thought-out plan that looks at the long term instead of the short term, preferably guided by people that know their stuff. He warns against brokers who encourage people to jump on the current bandwagon of this hot stock or that incredible fund. He talks about how different kinds of financial service professionals are paid and how that affects their relationships with their clients. My hubby and I have met with financial planners before with differing results. From our experience we have learned some things but it would have been handy to have had this book beforehand - we would have known better what questions to ask.

One thing Hauserman mentioned in RetirementQuest which I had never heard of before, was the Monte Carlo graph. It's basically a financial computer tool. You plug in certain data, like your retirement date and what you expect to spend during retirement among other things, and it doesn't just give you one possible outcome, it gives you a best and worst outcome. For years I've seen graphs on "what your retirement fund will do based on such and such percent average annual rate of return". I think we've all seen tables or graphs that plot out such a scenario. Hauserman's book is the first one I've seen that explains that the results can be very different depending on how the market goes in the beginning years of investing and the end years. Two couples might both get an "8%" annual average return, but they could both end up in very different places. One couple could be destitute a few years into retirement and the other might be taken care of without too much worry. The Monte Carlo tool shows how both of those results can happen. Hauserman says you shouldn't just run the numbers once but MULTIPLE times. He says if you only get positive scenarios 70% of the time or less, you better rework your retirement plan.

Throughout the book there are numerous "disclaimers" that say, "results may not occur as expected", etc. It almost gives one the thought, "No matter what I do, I may still lose it all." Well, it's possible. However, don't assume it's all gloom and doom. Hauserman asserts that a soundly constructed retirement plan and a diversified portfolio will, for most people, get them to a better place than if they did nothing at all. He emphasizes personal responsibility. No one is going to take better care of you than you. You have to assume the task of educating yourself so you aren't taken advantage of, or left with nothing, in your "Golden Years". Hauserman is optimistic that if everyone were more proactive and prudent in that area, not only could we avoid some of the worst of what seems to be an inevitable collapse of our country financially, but everyone could stand to profit as our economy increasingly evolves away from the traditional manufacturing that used to be our nation's backbone.

I think overall, this book is that "voice of warning". Sometimes we need a wakeup call to get us moving. It might be disturbing at first but hopefully we later see that it is both necessary and a blessing in disguise. Now if we can just get our Congress to wake up, we'll all be in better shape.

Hauserman has an internet site that mirrors what he lays out in the book. It's kind of a "where do I start" tool. It's free to use and there is no obligation to buy anything that I could see while I surfed around the site.

If you want to get the actual book, you can find it on Amazon.

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