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You're Fifty--Now What? Investing for the Second Half of Your Life Paperback – January 2, 2002
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As boomers reach midlife faster than a new Beatles CD can climb the charts, many are wondering if they'll have sufficient resources to comfortably make it through their golden years. Investment guru Charles Schwab's You're Fifty--Now What? addresses these concerns with a step-by-step road map to help the middle-aged assess where they're at, determine where they want to go, and pick the proper mix of investments to get there. "While getting older isn't a bad thing," Schwab writes, "being unprepared for it is. And by not understanding the financial part of your future, you sabotage yourself and limit your choices." Not surprisingly--given the author's background as founder of the discount brokerage that bears his name--the book contends that you have to remain an active investor for the rest of your life in order to make it financially over the long haul. To do so, it advocates using as aggressive an approach as you can comfortably handle, centered on a combination of broad-based index funds and actively managed mutual funds or individual stocks.
With plenty of easy-to-use worksheets, Schwab helps you take stock of everything you've accumulated, determine how much it costs you to live now, and estimate what it will take to maintain that lifestyle into the future. The latter is determined by calculating everything from projected housing and tax obligations to food and entertainment expenses, while life-expectancy tables, inflation adjustment factors, and investment return rates allow you to see where you stand versus where you need to be. Schwab then addresses reaching these goals through a proper investment mix. (Sidebars explaining the basics guide even novices through these critical steps.) Additional chapters detail ways to develop a regular long-term cash flow, and suggest how to monitor its progress while making adjustments when necessary. There is also information on financial advisors, insurance, estate plans, and charitable giving, adding up to a wealth of specifics presented in a manner that virtually everyone should be able to understand and follow. --Howard Rothman --This text refers to an out of print or unavailable edition of this title.
From Publishers Weekly
Founder and chairman of a famous international brokerage, Schwab offers sound advice on basic personal finance topics faced by boomers and retirees, including estate planning, retirement cash flow and pension plans. The investing sections target inexperienced investors, with definitions of stocks and zero coupons, and worksheets for retirement budgets and portfolio benchmarks. A useful appendix includes advice on reading mutual fund prospectuses and selecting insurance. Schwab's breezy, non-threatening style and advertising backed by his company should ensure high visibility and bestseller list appearances. (Jan.)
Copyright 2000 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.
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The book is intended for someone that is in the later stages of their working life who expects to retire in the not too distant future. Although the title of the book implies that it was written for someone in their 50s, the book is really intended for anyone that is in the latter half of their working career. I am in my forties and felt that this book had a lot to offer. Schwab offers advice on how to invest in preparation for your retirement, and what to do with your investments after you retire. Although the book does not assume that everyone has built up a nice nest egg by the time that they're fifty, it acknowledges that those that haven't are going to have a some of catching-up to do.
Schwab does have an aggressive bias when it comes to investing. He recommends a portfolio that is heavily weighted in stocks even after you retire. This is contrary to the traditional weighting recommended by most other sources. His rationale for this approach is that retirement is much longer now than in the past. People are living longer. The returns that you get with a traditional conservative portfolio may not last your lifetime. He also feels that the income that you'll need after you retire is often understated by many financial planners. Although we live longer, the older we get the more unexpected expenses we may incur (medical, long-term care, etc). Although he acknowledges the risks with this approach, he points out that there are risks with the conservative approach also - that your savings will run out when you need it most.
In addition to investing, Schwab covers other topics such as types of insurance that will make your retirement years less risky for you and your family (life, health, disability, long-term care, etc).
Schwab includes a chapter on charitable giving and stresses how important it is for all of us to give back to their community. Like other texts, he summarizes some of the tax advantages of giving, but he truly seems to believe that those fortunate enough to have accumulated some wealth need to consider returning some of it to a cause that they believe in. I thought that this chapter was nice touch and a departure from the "show me the money" attitude that is the cornerstone of most personal finance books.
This book is not perfect and may not be for everyone, but if you are in the latter half of your working career, I think that you will enjoy and benefit from this book.
I found this book to be vastly superior to "52 Weeks to Financial Fitness" by Marshall Loeb, which was also recently published, for people in this age category.
Mr. Schwab's profits as author from this book are all being donated to the Charles Schwab Corporation Foundation to provide for the needs of seniors.
The book is divided into two parts: First, planning for the rest of your life; and second, getting organized to implement that plan.
The planning section is very well done because it covers materials at a level of perspective that goes from the needs of most beginners to handling the needs of all but the most sophisticated people. Fundamentals are covered in sidebars so as not to clutter-up the main text for those who do not need the information. The subjects covered include how much money you will need in total, determining the value of what you have available, estimating the gap between your needs and resources, understanding how to think about asset allocation in your investment funds, establishing the proper cash flow to match your needs, and readjusting your investment mix over time.
Each section is clearly written and provides formats to make it easier for you to assemble and think about your information. I was particularly pleased to see Mr. Schwab challenge some conventional wisdom about financial planning. Many people use a rule of thumb that you will need 70% of your preretirement income. In practice, many people find that they spend more than that because some costs go up more rapidly than inflation, like medical care, or they take on new interests. Mr. Schwab suggests 90%. I think even that may not be conservative enough. I think a better assumption is to have the percentage grow over time, slowly. Eventually, it will probably exceed 100%.
In addition, many people will tell you to plan on spending 6% of your assets each year after you have to start drawing on them. Mr. Schwab wisely suggests that 3-4% will be more appropriate for most people. I liked that advice very much.
The advice on investing is much more conservative than you would expect from someone who heads an on-line brokerage house. But appropriately so. He suggests you stay in common stocks as long as possible, because you may well live much longer than you think. But he has all but 10% of your portfolio in either no-load index funds or conservative bond and cash positions. If you skip the idea of owning any individual stocks, the advice is quite appropriate for the average person. It also has you reducing your exposure to stocks over time, as the years appraoch when you will need the income. So even if stocks stop performing well (as some warn) in the next few years, you will be relatively safe.
Part II of the book gets you into deciding whether you need a financial advisor or not, and how to select and work with one. It also looks at the most important questions about insurance, estate planning (get thee to a lawyer), and how to handle your donations so they bring you the most satisfaction and least after-tax cost.
The book has several other nice qualities. It emphasizes the rest of your life as being the "second half" rather than the downhill slide or some other negative concept. In sports, we all know that the winners are usually those who play the second half the best. Also, at half-time, the coach often makes adjustments that lead to winning performance. It is a very nice metaphor for financial planning at this stage in life. "What do I want for the second half of my life?" is the key question posed in the beginning of the book for you to consider.
I also liked the optimism of the book. Rather than focusing on the fear that people have about outliving their money, the book emphasizes the potential for good things to happen. You may live longer, and think of all the good things that could follow. "Anything is possible" was my favorite line from the book, which followed examples of wonderful accomplishments by seniors of advanced years.
Unless you already have been through this exercise recently with a financial advisor, I suggest that you get the book and use the exercises.
Further, I suggest you take even more time to think through the possibilities that the post child-rearing and tuition years may offer you. It's almost like getting to start over again, but with much more in the way of resources and wisdom.
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