Two Books That Will Help Us Go Cruising—Part 1

We write a lot here at AAC about the gear and skills we need to go cruising. And there are many books available that do the same. But all of that is dreaming (nothing wrong with that) if we can’t figure out a way to manage our lives so as to actually accumulate enough money to buy a boat and fund cruising.

For many of my generation (boomer) that was relatively easy:

  • Get a reasonable education.
  • Go to work for a reputable company.
  • Pay into their defined benefit pension plan (usually required).
  • Pay into our government’s old age security plans (always required in most countries).
  • Save enough to buy a boat.
  • Retire on a good pension, indexed to inflation and managed by professionals.
  • Go cruising.

(By the way, this was not Phyllis’ and my financial route to cruising.)

Even better, the whole life course was so easy and secure for most of us boomers (at least in comparison to pretty much any other generation) that many of us could even afford to take some time off in our working years to go voyaging, without worrying that our old age would suck big time.

But for those under around 55 years of age today, things are far more complicated:

  • We have developed a star system in employment where a small percentage of any given cohort get huge wealth, often for doing little that’s useful to society—yeah, I’m looking at you, Zuck & Co—and the rest are left with an ever shrinking piece of the pie.
  • Employment is no longer secure—almost everyone, at least in the private sector, is vulnerable to sudden layoff.
  • Except for public service workers in wealthy countries, the defined benefit pension plan indexed to inflation is a thing of the past, replaced by defined contribution with no inflation protection.
  • And defined contribution plans require beneficiaries to make their own investment decisions, both while saving and in retirement, usually without any training at all on how to do that.
  • While there are many good financial advisors available, it’s extremely difficult to separate them from the untrained and/or charlatans.
  • The financial advisory business is rife with conflicts of interest.
  • Most people need to save seemingly unattainable amounts to have a secure retirement, let alone buy a boat and go cruising.

It’s not a pretty picture, particularly for those who want to do something other than work all the hours in a year trying to stay secure, and it’s not getting any prettier.

And even for us boomers who don’t have one of those great indexed pensions, like Phyllis and me, managing our finances has got a lot more difficult for many reasons, the most notable being that our expected life span has increased far more than we thought it would, so suddenly we need to worry about what life will look like if, as is perfectly possible for those who have lived to 60+, we live well into our nineties, with the attendant risk of needing very expensive longterm care—now there’s a first world problem.

Sadly, I don’t have a silver bullet to solve these problems.

But what I can do is suggest two very different books that may help, at least a little.

The first book is for all of us without indexed defined benefit pensions who are trying to figure out how to manage our money through our older age, hopefully with some cruising thrown in, as well as for those with good jobs still trying to save for cruising and/or retirement.

And the second book lays out a framework that might just hold the key to making the world a better place.

The one is full of practical advice, the other is more philosophical, but no less important.

Let’s start with the hard actionable information book:

The Essential Retirement Guide: A Contrarian’s Perspective by Frederick Vettese

This is quite simply the best book I have ever read on how to:

  • save for retirement (and maybe cruising too),
  • and then manage our finances in our older age (retired or not).

That’s a pretty sweeping statement, so it will probably be more meaningful if I share that I have been self-managing and investing our assets for nearly twenty years. This is a task that I take extremely seriously, particularly because the woman I love is ten years younger than I am and therefore we have a much higher longevity risk (Phyllis outliving our savings) than many couples do.

As part of that task, I spend an average of 10 hours a week (~500 hours a year) reading about finance, economics and investment management—now you know why I don’t watch TV! The point being that I have read a lot to compare this book to and it’s simply the best, at least of those I have read.

Before I go any further, a quick aside. While it has worked reasonably well for us, I’m not advocating for investment self-management. It’s a lot of work to do right and fraught with opportunities to let our emotions drive us into costly mistakes—I have made a couple of doozies.

Back to the book. What is so good about it? Three things:

#1 Based on Hard Math

I’m not a mathematician, but my Dad was, and one thing I learned from him, and have had reinforced throughout my life, is that good decisions are based on doing the math.

Sure, that seems obvious when I write it, but the sad fact is that much (maybe most) investment and money management advice is based on rules of thumb, poorly executed extrapolation of history, and plain old bullshit, often mixed with a heaping helping of conflict of interest.

This book is different. Vettese is one of the smartest actuaries ever to open a spreadsheet, and he also has access to the resources of one of Canada’s foremost pension management consulting companies—bit of a controversy around that company right now, but that dosen’t alter the fact that they know what they are doing and have huge data sets to analyze.

The book also brings that mathematical rigour to bear on little talked about subjects like what is the real likelihood that we will need round-the-clock care, and for how long, and at what cost, as we age.

#2 He Can Write

Of course none of that math would help most of us (least of all me) if it was served up raw. But the author also has an almost miraculous ability to explain the complex in simple terms, without talking down to his readers or leaving them without essential understanding.

And believe me, as someone who makes his living explaining technical issues in writing, I can tell you that doing it as well as Vettese does is extremely rare, hard to do, and priceless.

#3 Good News

It seems, particularly since the great recession, that most writing about retirement, investing and pensions is of the “we are all screwed and are going to end up eating dog food during our old age” genre.

Vettese does not fall into that trap. Although he does warn that investment returns going forward from here are likely to be lower than the averages of the past, he then uses hard math to show that many of us are way better off than we think we are. That’s the contrarian part.

In fact, the whole tone of the book is generally upbeat, focusing on the positive things we can do to improve our lives, rather than on doom and gloom scenarios.

Why It Matters To Cruisers

And that brings me to why the book is applicable to going cruising. If we are, in fact, better off than we think we are, and with Vettese’s help can put a viable financial life plan in place, it will be at least a bit more likely that we will be able, and feel secure enough, to go voyaging at some point in our lives.

Who’s It For?

If you have a secure defined benefit pension plan indexed to inflation that will, together with your government’s social security, cover your retirement needs, leaving you with just the need to save to buy a boat, you probably don’t need this book.

But for most others, reading this book is simply the only sane thing to do. Not making the time to do so is…let me just say…ill advised.

The book is aimed at residents of the USA and Canada, but I still think that a good three quarters of it will be of use to pretty much anyone who lives in a developed country. (I just don’t know enough about living in a developing country to say whether or not the book would be useful.)

That said, sadly, there is a second group who probably don’t need to read this book: Those of you (far too many) just struggling to keep your heads above water, often working in the so-called “gig economy”.

Telling you to read this book about how to save for retirement would be downright cruel (particularly coming from a well-situated boomer). How the hell are you going to save for your old age, let alone go cruising, when you have no job security and are not even sure you can make next month’s rent?

Part 2

Sadly, I can’t do a damned thing to fix that, except perhaps recommend a book and an idea that just might be the longterm solution. And that’s what Part 2 is about.

Comments

If you have any suggestions for other books on personal finance that will help the rest of us manage our money better so we can get out there cruising, please leave a comment.

Further Reading

Disclosure

The link to this book is not to any affiliates program, and neither I nor AAC will receive any benefit if you buy the book.

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Meet the Author

John

John was born and brought up in Bermuda and started sailing as a child, racing locally and offshore before turning to cruising. He has sailed over 100,000 miles, most of it on his McCurdy & Rhodes 56, Morgan's Cloud, including eight ocean races to Bermuda, culminating in winning his class twice in the Newport Bermuda Race. He has skippered a series of voyages in the North Atlantic, the majority of which have been to the high latitudes. John has been helping others go voyaging by sharing his experience for twenty years, first in yachting magazines and, for the last 12 years, as co-editor/publisher of AAC.

13 comments… add one
  • rene Feb 19, 2018, 5:01 am

    Thank you John, for a very interesting subject and timely one at that. It is said that the Boomer generation will see the greatest money transfer in history. No society will last longterm if it is not build on three pillars: Freedom, Free enterprise and Truth. We live in a very materialistic world and all kind of stuff is put in front of us and most we dont need. Like a car, some get 40mpg others only 15, and the same goes for people. A bargain is not a bargain if you dont need it. An old friend was a truck driver for a city, yet retired at age 55 and did very well, but didnt waste money and traded up from time to time with his own paid for house.
    Risk management is vital for any type of investment. We invested in the stock market and real estate. Many are fearfull of the stock market, rightly so. But remember in the early nineteen eighties the DOW was below 1000 points, now it is around 26000. Many of the present younger generations, will have a more difficult time finance wise, mainly because employment will be more scares, as robots become cheaper, government and personal debts are way too high, and many will not be paid off. Credit has also made banks billions in profits and for many it has become a noose around the neck that gets tighter as each day goes by. I have never bought a new car for the simple reason I didnt like loosing 25% of its value, the minute I drove it off the dealers lot. Also, the government has not taxed yet the work you can do yourself fixing things in your house, car or boat. Living on an acreage, we have to bring our own garbage to the dump and always am shocked to see how wasteful North Americans are, by throwing out perfectly good items. 30 years ago a neighbor threw out a good quality garden hose and I still use it today. That same neighbor later asked me for a loan, instead I gave him money, but less than he asked for as I knew he never would pay it back anyway. Money does not bring happiness, but it is sure handy to have some!
    Rene

  • Alain Feb 19, 2018, 5:48 am

    Hi John,
    Thank you for the recommendation, I have read “The Essential Retirement Guide” and found it very useful and recommended it to other colleagues in my situation (approaching retirement, late 50’s, no defined benefits). It’s a tough going in a low interest rate environment with extreme market valuation and an extended business cycle. Frank lays out some good options and certainly eased some of my concerns about setting up a financial plan for my cruising life. I agree with your comments and glad that you presented the subject to your audience.
    Alain

    • John Feb 19, 2018, 3:53 pm

      Hi Alain,

      Thanks for the endorsement. I agree, one of the best things about the book is that Frank’s options certainly reduced our anxiety about the future—nothing like having a plan based on good numbers for reassurance.

  • Doug Feb 19, 2018, 6:08 pm

    Great topic, I’ll add this book to my reading list. I question if people are really living longer.
    http://vancouversun.com/news/staff-blogs/the-baby-boom-is-already-dying-off-lets-adjust-accordingly-interactive-chart

    • Marc Dacey Feb 20, 2018, 1:13 pm

      I work for a firm that provides analysis to the Canadian investment funds industry. Fear of “outliving your retirement savings” is real and is founded on actuarial tables, which are creeping up. Sure, you can still get bumped off by bad luck or disease on the cusp of retirement, but 80 is statistically more likely than not for today’s 60-year-old. On top of that, people who are old are not as old as they used to be. While we aren’t all remarkably well-preserved, a general sense of keeping active and fit and well-tended has meant that a lot of people are mobile (and, for instance) sailing, skiing and biking at ages that would have seemed ludicrous when they were themselves younger. So it’s not worries about outliving one’s money that are in play so much as outliving one’s active retirement. That said, a lot of people wonder if they can afford a decent nursing home (v. expensive if in any aspect decent) should they ever get to the age of really needing one.

      Entire investment product lines are devised to address these concerns. I think it’s a good problem to have, but I also think Canada should have been increasing the age of pensions and mandatory retirement for the last 15 years. It should be at least 70 at this point to reflect that you need 50 years of contributions to fund 20 years of pensions.

      These things noted, few consider that, conservatively sailed, living on a boat is probably cheaper than a house (certainly so in the bigger cities) if you have the health and can maintain the strength to safely manage it. So even “adventure cruising” is a sort of wealth preservation plan. It just doesn’t seem like it when something falls off the motor.

      • John Feb 21, 2018, 7:44 am

        Hi Mark,

        I agree, we in Canada should be moving the age at which receive pensions up to reflect longer lives—just basic common sense based on hard data.

        The book I write about in part 2 has a plan that would make that more palatable, particularly for the less fortunate.

      • Doug May 6, 2018, 8:26 pm
  • Phil Feb 23, 2018, 10:13 pm

    Have you ever heard of the Trinity Study ? This is all what you need. Google it.

    Adjust your life style to live with only retrieving 4% of your portfolio per year, no matter what, you will not be able to exhaust the portfolio.

    • John Feb 24, 2018, 7:39 am

      Hi Phil,

      Yes, I know of the Trinity study and the 4% rule, but most of my reading indicates that the 4% rule is way too simplistic because it does not take into account the sequence of investment returns. For example, a retired person that experiences a significant drawdown (like 2008) early in their retirement will likely run out of money with the 4% rule.

  • David Feb 26, 2018, 8:38 pm

    Hi John,

    I will give your book recommendation a read. I have been self-employed and have self-directed my SEP and my wife’s IRAs since the early 80s. Although real estate investing was our accidental successful retirement plan, our retirement portfolios have done pretty well too. I would like to also recommend “Spend ’til The End”, Raising Your Living Standard in Today’s Economy and When You Retire, by Laurence J Kotlikoff and Scott Burns. I think it’s must read for anyone concerned with working towards a sustainable retirement.

    • John Feb 27, 2018, 8:06 am

      Hi David,

      Thanks, I will take a look.

  • Mark Tilley Mar 1, 2018, 2:31 pm

    I didn’t see this point mentioned in either the editorial or user reviews on Amazon, but I think it is a foundational point and the implications are rarely explored, both for retirement planning and general financial decision making.

    Here it is: Risk And Reward Go Together.

    Of course the relationship is quite variable, but as a general rule, and especially over the long term (>10 years) it does hold.

    The other point that should be obvious and underpins the following implications, is that nobody has a crystal ball. i.e. the future is always risky to some degree, and the farther out you go, the greater the risk.

    What are these implications? Here are two simple, yet important examples.

    Borrowing for a house (or boat) and wondering what mortgage terms you want? When you fix your rate, what you’re really doing is paying someone else a premium to take on the risk of interest rates rising in the future. i.e. over the long term, floating rates will be cheaper than fixing. Of course, you should make sure you can afford the payments if rates go up, but sticking with a floating rate will save you money in the long run.

    The implications for investing are: riskier portfolios will generate a higher return, again, over the long term.

    The key here is to define what term is relevant to you, and your risk tolerance at any given time.

    As a retiree under 60, I see my term as ~30 years, so I have no problem being in 100% equity funds because I believe the term should be relative to lifespan, not “years to retirement”. This latest market downturn concerns me not in the least because I’m confident that such volatility will be irrelevant in the long run for me.

    Of course you can, and should, still mitigate risk by diversifying (e.g. by country, currency, market, industry, fund and company). Obviously you also need to know how much risk you are getting with various investment types.

    I wish I’d realized the mortgage implications when I was younger, but it’s never too late to apply the principle everywhere.

    • John Mar 2, 2018, 7:57 am

      Hi Mark,

      The book does deal with investment risk management to some extent, but it’s not primarily an investment text. For really deep and up to date discussions of risk management I have relied a lot on the writing of the people at GMO: https://www.gmo.com/north-america/welcome

      It takes a bit of a search through their archives to find the relevant stuff, but it’s worth the effort to leverage the work of some of the smartest portfolio managers on the planet. One of the key points they bring ups is the importance of thinking about sequence of cash flows once we stop earning. For example, a substantial drawdown in the first years of retirement, or even in the last years of earning, can devastate retirement planning.

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