Index
Please note that index links point to page beginnings from the print edition. Locations are approximate in e-readers, and you may need to page down one or more times after clicking a link to get to the indexed material.
4 Percent Rule (Bengen), 76, 79–82
5 money secrets. See five money secrets of happy retirement
5% withdrawal, as basis of $1000/mo rule, 75
10-year Treasury rate, 164–165, 167–171
12b-1 fees, 208–209
50-50 allocation rule (Graham), for stocks and bonds, 209–210
401(k) plans
in determining wants and needs (purpose), 52
Gen X and Gen Y developing alternatives to social security, 137
making maximum contribution to, 10, 90–91
not having, 8
rebalancing investments regularly, 210
risk and, 180–181
tax-advantaged savings, 88
403(b) plans
Gen X and Gen Y developing alternatives to social security, 137
tax-advantaged savings, 89
457 plan, 137
1000-Bucks-a-Month Rule, 74–76, 83, 85
1040 Tax calculator, from Bankrate. com, 35, 87
ACA (Affordable Care Act), 40–42
accelerating payments, in mortgage payoff, 104–106
accumulation phase, of life, 118–120, 153–154, 180–181
advisors, getting objective advice from fee-only advisors, 212–213
age/aging
adjusting allocation of bucket system, 173
adjusting Bogle’s rule to apply to income, 166–167
balancing buckets by, 186–187
Bogle’s rule of thumb for bonds, 164–166
making most of golden years, 227–228
risk-aversion and, 34
alternative income bucket
balancing buckets by age, 186–187
ERTs (energy royalty trusts), 148
expected yield (5–7%), 151, 153
MLPs (master limited partnerships), 147–148
portfolio balance and yield, 182–184
in recap of bucket system, 159
REITs (real estate investment trusts), 148
risk modification, 187–188
in Wes Moss Bucket System, 144, 147–148
annuities, limitations of, 210–212
appreciation (growth)
in accumulation phase, 116
applying Graham’s 50–50 rule to growth and income, 173–175
vs. income investing, 129–131
noncyclical stocks and, 188–189
ways of making money, 33–34
18 traits of happy retirees, 239–240
car culture as core pursuit, 65–66
ditching luxury cars, 16–17
tips for avoiding unhappy retirement, 28
Baby boomers, inheritance and, 82
Bankrate.com, 35, 87, 104–105
benchmarking, psychological pitfalls in investing, 202
big-ticket items, 22–23, 111–113
bi-weekly payment schedule, in mortgage payoff, 113
bond bucket. See income bucket
bonds
10-year Treasury rate as benchmark, 167–169
accelerating mortgage payments and, 102
Bogle’s rule of thumb, 164–166
combined yield from bucket system and, 149
compared with stock market in terms of return and volatility, 171
diversification and, 193–194
Federal Reserve’s impact on government bonds, 168
Graham’s 50-50 rule for stocks and bonds, 172
in income bucket, 144
increasing percentage in as you age, 173
inflation and bond values, 169–171
interest income from, 131
markups as fee, 208
reasons for investing in 0% government bonds, 150–151
rebalancing investments regularly, 209–210
stocks contrasted with, 145
types in income bucket, 190–193
Wes Moss Risk Continuum and, 179
bouncing principal (Miller), 163
Bucket System. See Wes Moss Bucket System
budgeting
benefits of paying off mortgage, 100
for retirement, 23–25
tips for avoiding unhappy retirement, 28
Wes Moss Economic Shutdown and, 213–214
capital appreciation. See appreciation (growth)
careers, that can maximize income, 93–94
cash bucket
expected yield (0–1%), 151, 153
in recap of bucket system, 158
in Wes Moss Bucket System, 143
cash savings, 143
CDs
accelerating mortgage payments and, 102
emergency cash savings, 143
interest rates of, 151
Wes Moss Risk Continuum and, 178–179
CEFs (closed-end funds), distributions from, 132
closed-end funds (CEFs), distributions from, 132
COBRA, 40
commissions, truth about annuities, 211–212
compounding, applying to risk evaluation, 163–164
consulting, as part-time work, 120
core pursuits
18 traits of happy retirees, 237
choosing the kind of life you want to lead, 57
comparing happy and unhappy retirees, 62
diversifying, 64–66
don’t be like Mac (Arthur McMullen example), 60–64
enriching life with, 92
example of happy retirees (Marilyn and Jerry), 54–55
finding, 69–71
of happy retirees, 5
making most of, 226–227
part-time work and, 116
purpose of retirement and, 45–46
value of, 59–60
corporate bonds, 144–145, 149, 190–191
crowdfunding, having a purpose for your money, 20
debt, 22–23, 127–128. See also mortgages
DID (Dividends, Interest, and Distribution), 131–133, 140–141
discretionary (life) expenses, TSL guideline (50%), 89
distribution phase, of life, 118–120, 155, 181
distributions, 131–133, 140–141
diversification, 132, 136–138, 193–194
dividends
balancing buckets by age, 186–187
in DID approach, 131–133
dividend stocks in growth bucket, 144
growth vs. income investing, 129–131
most common income streams for retirees, 136
noncyclical stocks and, 189
as percent of return of S&P 500, 158–159
sources of cash flow, 140–141
Dividends, Interest, and Distribution (DID), 131–133, 140–141
divorce, economics of, 209
domestic partnerships. See marriage
donor-advised fund, having a purpose for your money, 20
early retirement
ditching the VIP mentality, 38–39
don’t use health insurance coverage as excuse, 40–42
example (Marc and Carol Hobbs), 44–45
finding your unique game plan, 36–37
five money secrets for, 45–47
FTG (fill the gap) strategy, 33–36
getting out of the urban commuting cycle, 29–30
how not to be a scary statistic, 30–31
plateau effect related to wealth and happiness, 42–44
EBRI (Employee Benefit Research Institute), 30–31
economic shutdown, for spending control, 213–214
education, 18 traits of happy retirees, 240–241
effective tax rate, determining, 86
elderly, scary statistics regarding retirement, 215
emergency cash savings, 90, 143
emerging market stocks, 188
Employee Benefit Research Institute (EBRI), 30–31
energy royalty trusts. See ERTs (energy royalty trusts)
equity line, flexibility of having no mortgage, 109
ERTs (energy royalty trusts), 132, 148
ETFs (exchange-traded funds), 193
fast food, 239
FDIC insurance, securing savings accounts, 150
Federal Insurance Contributions Act (FICA), 86–88
fees (Seven Layer Dip of Fees), 206–209, 211–212
FICA (Federal Insurance Contributions Act), 86–88
Fidelity Charitable, donor-advised funds and, 20
fill the gap strategy. See FTG (fill the gap) strategy
financial crisis, 107, 126, 143. See also recession
financial planning, getting advice from fee-only advisors, 212–213
five money secrets of happy retirement, 45–47, 227. See also by individual type
floating rate bonds, 193
food, economic shutdown and, 214
FTG (fill the gap) strategy, 33–36, 53
GARP (Growth At a Reasonable Price), 150–151
goal setting, 214
gold investments, limitations of, 156
government bonds, 144, 150–151, 168. See also Treasury bills/notes
greed, 201–202
growth. See appreciation (growth)
Growth At a Reasonable Price (GARP), 150–151
growth bucket
balancing buckets by age, 186–187
Bogle’s rule of thumb and, 164
calculating overall investment return, 181–182
decreasing percentage in as you age, 173
expected yield (2-4%), 151, 153
modifying risk and, 187–188
portfolio balance and yield, 182–184
recap of bucket system, 158–159
stock categories in, 188–189
time horizon and, 185
in Wes Moss Bucket System, 144, 146–147
growth investing, 144, 150–151, 181–182
health insurance costs, not an excuse for not retiring early, 40–42
healthcare, scary statistics regarding retirement, 215
high-yield bonds, 144–145, 149, 190–191
hobbies. See core pursuits
home ownership
18 traits of happy retirees, 237
determining wants and needs (purpose), 53
don’t move and don’t renovate, 20–22
handling big-ticket repairs/upgrades before retirement, 111
mortgage rate window and, 168–169
not overspending on (Nick and Katie example), 10
tips for avoiding unhappy retirement, 28
underwater properties, 107
housing market, greed example, 201
hybrid investments, in alternative income bucket, 144
I Bonds, 192–193
income
applying Graham’s 50–50 rule to growth and income, 173–175
careers that can maximize, 93–94
determining in FTG strategy, 35
determining income needs, 134
generating in accumulation phase, 116
growth vs. income investing, 129–131
keeping mortgage below 15% of gross income, 113
levels of happy retirees, 43, 134–135
ways of making money, 33–34
income, from multiple sources (secret #4)
5 steps to early retirement, 12–13
18 traits of happy retirees, 235–236, 238
determining income needs, 134
developing income streams, 46–47
DID (Dividends, Interest, and Distribution), 131–133
diversification of income streams, 136–138
happy retirees and, 6–7
how many sources are enough, 135
investment income, 47, 128–131
moving from accumulation to distribution phase, 118–120
overview of, 115–117
part-time work, 120–121
pensions, 123–124
rental income, 124–128
rivers and reservoir analogy, 117–118
social security, 121–123
tips for generating multiple income streams, 138
income bucket
advice for balancing buckets by age, 186–187
bond types in, 190–193
expected yield (3–5%), 151, 153
increasing percentage in as you age, 173
portfolio balance and yield, 182–184
in recap of bucket system, 158
risk modification and, 187–188
in Wes Moss Bucket System, 144–146
income investing. See also investments
1000-Bucks-a-Month Rule and, 75
4 Percent Rule (Bengen) and, 79–80
accumulation phase and, 153–154
adjusting Bogle’s rule to apply to income, 166–167
advice for balancing buckets by age, 187
distribution phase and, 154
getting most out of your money and, 139–140
how to become an income investor, 141–142
as philosophy, 157
power of reinvesting, 154
what it is, 140–141
income investor, becoming (secret #5)
accumulation phase and, 153–154
alternative income bucket, 144, 147–148
balancing funds in bucket system, 152–153
benefits of, 156–157
bucket system, 142
cash bucket, 143
combined yield from bucket system, 149–152, 155–156
developing investment income, 47
distribution phase and, 155
gold investments, 156
how to become as income investor, 141–142
income bucket, 144–146
overview of, 139–140
reasons for investing in 0% government bonds, 150–151
recap of bucket system, 158–159
what is income investing, 140–141
inflation
4 Percent Rule and, 79
adjustments to social security for, 122
bucket system as hedge against, 157
getting a deflationary break (mortgage payoff), 103
investing to outpace, 143
taking into account in FTG strategy, 35
inheritance, using to add to savings, 82–84
interest
benefits of paying off mortgage, 100
bond yields and interest rates, 150-151, 165–166
from bonds, 144–145
conventional wisdom regarding mortgage payoff and, 98–99
in DID approach, 131–133
inflation and bond values and, 169–171
managing on real estate, 10–11
sources of cash flow, 140–141
International stocks, 188
investing pitfalls, avoiding
annuities, 210–212
divorce, 209
fear and greed, 200–201
fees (Seven Layer Dip of Fees), 206–209
getting objective advice from fee-only advisors, 212–213
liquidity and, 209–210
living happy, active, and free (Ryan and Allie Pepper example), 197–198
making mistakes and starting over, 196–197
overview of, 195–196
psychological pitfalls, 202–205
rebalancing buckets regularly, 209–210
scary statistics regarding retirement vs. real possibilities, 214–215
turning their life around (Ryan and Allie Pepper example), 198–199
using bucket system to avoid, 205–206
Wes Moss Economic Shutdown for spending control, 213–214
investment advisors, getting objective advice, 212–213
investment-grade corporate bonds, 190
investments. See also income investing
50-50 allocation rule for stocks and bonds (Graham), 172
accelerating mortgage payments and, 102–103
arithmetic of loss and, 77–78
calculating return on, 181–184
caution regarding lack of liquidity, 210
comparing market returns with average investor returns over time, 177–178
conventional wisdom regarding mortgage payoff and, 98–99
getting objective advice, 213
importance of understanding, 203
income from, 47
income from multiple sources, 128–131
leaving in hands of experts, 18–19
power of reinvesting, 154
rebalancing buckets regularly, 209–210
vs. savings, 144
tips for avoiding unhappy retirement, 28
tips for generating multiple income streams, 138
ways of making money, 33–34
junk bonds. See high-yield bonds
leverage, real estate investments and, 127–128
life expectancy, 124, 137, 230–231
liquidity, 210–212
lump sum payouts, vs. pensions, 84
master limited partnerships (MLPs), 132, 147–148
MEDFIT (materials, energy, discretionary, financials, industrial companies, and technology), 147, 189
Medicare, in determining your effective tax rate, 86
MLPs (master limited partnerships), 132, 147–148
money. See also income
five money secrets, 45–47
having a purpose for, 19–20
health + money + social life = happiness, 232
making sure Rich Ratio is over 1, 25–26
mastering, 61
tips for avoiding unhappy retirement, 28
ways for making, 33
money market accounts, 90, 143, 151, 178–179
mortgage payoff calculator, 104–105, 113
mortgages
5 steps to early retirement, 12
10-year Treasury rate as benchmark for mortgage rates, 167–168
18 traits of happy retirees, 237–238
benefit of paying off, 53–54
Federal Reserve’s impact on mortgage rates, 168–169
not buying a new house on entering retirement, 21–22
planning to pay off early, 11
suffering under big mortgage as investing pitfall, 196
mortgages, paying off (secret #3)
accelerating payments, 104–106
balancing IRA money and non-IRA money in payoff, 107–109
benefits of paying off, 100–101
conventional wisdom vs. paying off, 98–100
example of happy people, 106–107
flexibility from having no mortgage, 109–110
four steps in paying off, 113
handling the big-ticket items and, 111–113
One-Third Rule, 101–103
overview of, 97–98
pay off as a deflationary moment, 103–104
planning payoff before early retirement, 46
VRBO (vacation rentals by owner) and, 110–111
The Motley Fool, 30
mutual fund fees, 207
NAPFA (The National Association of Personal Financial Advisors), 212–213
noncyclical stocks, vulnerability and, 188–189
non-profit organizations, 59
One-Third Rule
steps in mortgage payoff, 113
using savings to payoff mortgage, 101–103
part-time work
case example (Nick and Katie), 11
common income streams for retirees, 136
core pursuits and, 116
developing income streams, 47
example of happy retirees (Marilyn), 56
as income source, 120–121
income sources of happy retirees, 6
managing own rental property, 125
overcoming pitfalls, 197
PAW (Prodigious Accumulator of Wealth), 38
PBGC (Pension Benefit Guarantee Corporation), 123
pensions
career choices and, 138
common income streams for retirees, 136
in determining wants and needs (purpose), 52
developing income streams, 47
funding issues, 124
as income source, 123–124
income sources of happy retirees, 6
lay off prior to eligibility, 8–9
life expectancy and, 137
vs. lump sum payouts, 84
scary statistics regarding retirement, 30–31
physical well being, correlation with wealth, 225–226. See also health
planning retirement, 5, 23–25, 28, 239
plateau effect, related to wealth and happiness, 39, 42–44
portfolio
50–50 rule for stocks and bonds (Graham), 172
applying Graham’s 50-50 rule to growth and income, 173–175
balance and yield, 182–184
expected yield (4%), 153
nurturing, 73
rebalancing regularly, 209–210
risk modification, 187–188
separating cash-producing value from growth potential, 133
yield from dividends, interest, and distributions, 141
Prodigious Accumulator of Wealth (PAW), 38
psychological burden, of having a mortgage, 101
psychological pitfalls, in investing, 202–205
purchases. See spending
purpose (secret #1)
18 traits of happy retirees, 236–237
choosing the kind of life you want to lead, 57–59
diversifying core pursuits, 64–66
don’t be like Mac (Arthur McMullen example), 60–64
finding core pursuits, 69–71
five money secrets at core of happy retirement, 45–46
overview of, 51–56
value of core pursuits, 59–60
value of exercise and health, 68–69
value of social life, 66–68
real estate, 107, 126. See also home ownership; rental income
real estate investment trusts (REITs), 148
recession, 77, 107. See also financial crisis
recreation (golf, tennis, etc.), 44, 58, 225
REITs (real estate investment trusts), 148
rental income
5 steps to early retirement, 13
accumulating properties over time, 126
buying property at or close to retirement, 124–126
case example (Nick and Katie), 10
cash purchase vs. leveraged investing, 127–128
developing income streams, 47
income sources of happy retirees, 6
tips for generating multiple income streams, 138
retirement accounts, impact of withdrawing money from, 108
risk
10-year Treasury rate as benchmark for interest rates, 167–169
401(k) plan and, 180–181
adjusting Bogle’s rule to apply to income, 166–167
aging and risk-aversion, 34
applying Graham’s 50–50 rule to growth and income, 173–175
applying principal of compounding to, 163–164
balancing buckets by age, 186–187
Bogle’s rule for bonds, 164–166
bond types and, 149
bonds in income bucket and, 190–193
calculating investment return, 181–184
conventional wisdom regarding mortgage payoff and, 101–102
determining your position on Risk Continuum, 184–185
Graham’s 50-50 rule for stocks and bonds, 172
how to best diversify, 193–194
how to modify portfolio risk,187–188
inflation and bond values and, 169–171
leverage and, 127–128
stock categories in growth bucket, 188–189
stocks and, 176–178
Wes Moss Risk Continuum, 178–180
Roth IRA, 90–91
savings
5 steps to early retirement, 12
balancing spending and saving, 92–93
determining retirement needs, 46
emergency cash savings, 143
example (Ryan and Allie Peppers), 195
failure to save as biggest pitfall of retirement planning, 196
FDIC securing savings accounts, 150
vs. investments, 144
One-Third Rule in mortgage payoff, 102–103
scary statistics regarding retirement, 32, 215
TSL guideline (20%), 88–89
value of discipline, 213
savings (secret #2)
1000-Bucks-a-Month Rule, 74–76
4 Percent Rule, 79–80
balancing spending and saving, 92–93
career choices and, 93–94
determining retirement needs, 46
inheritance and, 82–84
nurturing your portfolio, 73
pensions vs. lump sum payouts, 84
power of early savings, 89–91
power of joint approach with romantic partner, 91
stretching 4 percent into 5 percent, 80–82
TSL (Taxes, Savings, Life) approach, 85–89
TSL (Taxes, Savings, Life) worksheet, 94–95
Wall Street souffle model and, 76–78
SEP IRA, 89
seven layer dip of fees, 206–209
SHUT (Staples, Healthcare, Utilities, and Telecommunications) index,146–147, 188
social life
benefits of being active and social, 63–64
getting out, 229–230
of happy retirees, 5
health + money + social life = happiness, 232
life expectancy and, 230–231
making most of golden years by volunteer work, 229
moving out of solitary endeavors, 229
value of, 66–68
social security
challenges facing Social Security System, 122–123
common income streams for retirees, 136
in determining wants and needs (purpose), 52
developing multiple income streams, 47
effective tax rate and, 86–88
as income source, 121–122
income sources of happy retirees, 6
likelihood of benefit reduction in future, 137
limitations as basis for retirement, 31
tips for generating multiple income streams, 138
spending
18 traits of happy retirees, 239–240
choices of happy retirees, 5
determining in FTG strategy, 35
don’t make big-ticket purchases at retirement, 22–23
handling big-ticket items before retirement, 111–113
having sound spending and savings habits, 93
levels of happy retirees, 135
plateau effect and, 42–44
tips for avoiding unhappy retirement, 28
Wes Moss Economic Shutdown for controlling, 213–214
Staples, Healthcare, Utilities, and Telecommunications (SHUT) index, 146–147, 188
state income taxes, 87
stock market, 200–201, 205–206
stocks
bonds contrasted with, 145
categories of, 188–189
decreasing percentage invested in as you age, 173
emotional decision making and, 200–201
in growth bucket, 144
investing in stocks vs. paying off mortgage, 99
leaving investment in hands of experts, 18–19
MEDFIT (materials, energy, discretionary, financials, industrial companies, and technology), 147
rebalancing investments regularly, 209–210
return over time, 174–175
SHUT (Staples, Healthcare, Utilities, and Telecommunications) index, 146–147
tips for avoiding unhappy
retirement, 28 Wes Moss Risk Continuum and, 178–179
in worst five-year period, 176–178
TIPS (treasury protected securities), 131, 144, 192
travel. See also vacations
choosing the kind of life you want to lead, 57
diversifying core pursuit, 64
examples of travel during retirement, 219–220
making most of golden years, 228
on retirement to do list, 224
taking a trip(s) in retirement, 221–222
Treasury bills/notes, 144, 150–151, 167–169
TSL (Taxes, Savings, Life)
for balanced approach to spending and saving, 92–93
discretionary living expenses (50%), 89
overview of, 85–86
power of early savings, 89–91
power of joint approach with romantic partner, 91
savings (20%), 88–89
taxes (30%), 86–88
worksheet for, 94–95
underwater properties, real estate, 107
U.S. stocks, 188
vacations. See also travel
18 traits of happy retirees, 240
choosing the kind of life you want to lead, 57
early retirement and, 44
of happy retirees, 5
home rental options, 110–111
making most of golden years, 228
on retirement to do list, 224
value investing, 150–151
variable annuities, 210–212
VIP mentality, things to ditch in order to retire early, 38–39
volunteer work, 59, 64, 228–229
VRBO (vacation rentals by owner), 110–111
Wall Street soufflé model, of investing, 76–78
wants and needs, determining, 52. See also purpose (secret #1)
wealth, plateau effect, 39, 42–44
Wes Moss Bucket System
alternative income bucket, 144, 147–148
avoiding investing pitfalls, 205–206
balancing buckets by age, 186–187
balancing funds by bucket, 152–153
cash bucket, 143
combined yield from, 149–152, 155–156
finding yourself on Risk Continuum and, 184–185
as hedge against inflation, 157
income bucket, 144–146
opening cash flow from (distribution phase), 155
overview of, 142
portfolio balance and yield, 182–184
reasons for investing in 0% government bonds, yield
rebalancing buckets regularly, 209–210
recap of, 158–159
risk modification, 187–188
understanding investments you own, 203
Wes Moss Economic Shutdown, for spending control, 213–214
Wes Moss Risk Continuum, 178–180, 184–185
wrap management fees, 208
yield
combined yield from bucket system, 149–152, 155–156
in current market climate, 155–156
from dividends, interest, and distributions, 141
example of 5% yield, 133
expected yield by cash, income, growth, and alternative income buckets, 151
expected yield of portfolio (4%), 153
portfolio balance and, 182–184