Yes, You Can Still Retire Comfortably! The Baby Boom Retirement Crisis and How to Beat It

Book by Ben Stein and Phil DeMuth

Save more money.

Lots more money.

That's the overriding message of this book, and it's a shame so few people will follow their advice. If you get nothing else from this book or this article, but you pay off all your consumer debts and max out your tax-deferred retirement accounts, you'd owe Stein and DeMuth a tremendous debt.

However, they do provide a lot more useful information and advice. Unfortunately, in my opinion, they don't fulfill the promise of their title and subtitle.

In Chapter 1 they outline the problems that the retirement of baby boomers will bring to the world's (it's not just an American problem -- in fact, it's even worse in Japan and many European countries) economy. There's simply not enough money to pay boomers the Social Security, Medicare benefits and pensions they expect and are entitled to by law.

Baby boomers who have their own savings are going to be much better off than those depending on Social Security and pensions.

Most of the book is devoted to advice on how to invest those savings for maximum return before you retire, and, after you retire, how to convert them into cash to live on and yet keep from running out before you die. Much of the advice is good, even terrific.

They have the guts to point out something that few financial advisors do. Although stocks have historically returned 10% per year on average, nobody can count on that, because that's simply a long-term average of returns that fluctuate across a wide range of negative and positive results, in no predictable pattern.

They publish a chart on page 76 that's a real eye-opener. It's the range of possible returns from the S & P 500 over a 30 year period. Because the stock market fluctuates so much, its range of returns from year to year varies enormously. People's overall results, depending on the sequences of good and bad years, even over a 30 year period, can differ tremendously even though the average return remains 10%.

For instance, someone investing $1000 at the beginning of the best possible 30 year scenario would wind up with over $1 million. Yet the person investing that same $1000 at the beginning of the worst possible 30 year scenario would have only $268 at the end. The median was just over $10,000.

I'm also glad that they point out the value of maintaining good health, and that you must plan your finances as though you're going to live to be 100 -- maybe more, as our life expectancies are gradually on the rise. A lot of improvements are going to be made in health care over the next 50 years.

And they point out that it's likely the government will expand the means-testing of Social Security and Medicare benefits. (I consider taxation, and the recent increase in Part B Medicare premiums for people making over $80,000 a year, to be a form of means-testing, so it's already started.)

The wealthy will have enough money to get by without Social Security and Medicare. The poor will be provided for. The middle-class will have every possible dollar confiscated from them. Prepare.

One area I think could have been improved on was their advice to postpone retirement as long as possible. The more you work and save money instead of spending down savings, the better off financially you'll be. I think they could have gone into more detail about how people can work part time from home, or find other ways to make money without spending another 5-10 years at a hated conventional job (which many baby boomers are not going to do).

Where I really fault this book is that after outlining the particular problems of baby boomer and Gen X retirement, they then explain standard retirement strategies. They advocate saving through the "couch potato" portfolio -- putting half your money in a bond index and half in a stock market index.

And they devote many pages to strategies for funding your retirement through selling off your saved stocks and bonds over the course of the rest of your life. They are conservative in standard retirement financial advice, but do not consider what will happen to the prices of stocks and bonds when millions of baby boomers start selling off their stocks and bonds. They basically assume the markets will continue to go through normal cycles.

They make no adjustment in their advice for the possibility that the sale of stocks and bonds (especially stocks) will bring in relatively small amounts of money, at least after the initial wave of retiring baby boomers start to sell. The very first ones will get normal market prices.

The rest of us? Rots of ruck, for many years to come.

Their advice on funding and staying funded through retirement is certainly superior for normal conditions. But conditions won't remain normal for more than a few years.

That's why I believe they don't fulfill on the promise of the book title's. If they were advising previous generations, their advice would be terrific.

This is doubly disappointing because these same authors wrote a good book addressing the only real solution to the baby boomer's retirement dilemma: Yes, You Can Succeed as an Income Investor. I believe baby boomers should be buying up high quality stocks and bonds that pay dividends and interest, and hang on to them.

Live on the income from your investments and you don't have to worry about their current market prices.