Book Review: Income for Life - The Retiree’s Guide to Creating Income From Savings
Joseph DiSalvo and Marie Madarasz
Income For Life is surprisingly useful in providing the reader with a detailed overview of retirement planning. Going into the book, I was expecting a guide on how to find investments or opportunities that would generate income, as the title implies. However, this is not what the book does. Despite the misdirection, the book does provide you with a better sense of how to plan your retirement income to ensure you do not run out of money before you run out of lifetime. In this sense, it delivers on its promise to set you up with income for life.
The book starts with some boring stuff. I was initially turned off from finishing the book thanks to the first part. Depending on your level of financial education, you may or may not be able to skip the first part. Like Dr. Doofenschmirtz, the authors are compelled to give the reader some backstory about why they are writing the book. It’s better if you muscle through this as it relates to what comes later.
Start With Desired Outcomes
Once you get past the first part, Income for Life delves into helping you think through what your retirement will look like. This is to give you a detailed picture of how much money you will need to achieve the desired outcome. One way that the book differs from other financial planning books I have read is that the authors work on the premise that you may have 30 years or more in retirement. In other words, you may very well live into your 90s. The simple fact is that 30 years is another lifetime that you don’t want to spend in poverty. Other books on the matter assume you'll live into your 70s and maybe into your 80s.
Once you have planned for your expected lifestyle, it allows you to work the numbers such that you can build a portfolio that will get you the results needed by 30 years or more of distributions. You will need to consider social security, pensions, pre and post tax retirement accounts, and other investments. Of course, taxes will also play a large part in your retirement planning.
A Balanced Portfolio
You will often hear about building a balanced portfolio for your investments. In the past, it has rarely made much of an impression on me. The authors make a good case on why you would want a portfolio consisting of income and growth assets. Without going into too much detail, it has to do with managing risk of drawdowns. You are better able to weather bad years if your portfolio is balanced.
Beyond The Balanced Portfolio
What I found most useful was the description of breaking up your retirement savings into three components.
The first component is liquid savings. They recommend three years of income. So, if you plan on retiring on $40,000 per year, you would need $120,000. This is your working capital.
Your Retirement Portfolio
This is the portfolio we mentioned earlier that will generate your retirement income with income and growth assets. If done right, you can draw 4.15% for eternity and rely on the portfolio to continue growing over the years.
The Life Happens Portfolio
This portion of your retirement assets is set aside to grow undisturbed except in case of emergency. This portfolio is there simply to grow. It is not meant to provide you with retirement income. It’s there just in case life happens and you are forced to spend money that would blow up your whole setup.
This last part in my mind is like having a hybrid car. The car runs on electricity, this is the first component. However, it drains the battery, for which you need a gas engine to provide power and top up the battery. This is the second component. The last component is like a second car that’s there just in case your hybrid breaks down.
In the end, readers will appreciate this book because it does not go into excruciating detail about setting up retirement. In fact, they recommend seeking professional help to help you make decisions. This book is more to help you understand what your retirement plan should have and why so that you can have a more productive relationship with your professional advisers.
Unfortunately, Income For Life does not mention investing in cryptocurrencies. In this regard, it is primarily focused on traditional financial products. Even so, there are some substitutions you can make. Cryptos can in some ways be seen as stocks. Stablecoins best resemble bonds. Given the new ground, it is especially important that you seek the advice of professionals when using crypto for retirement planning. Reading this book should enable you to better communicate with your advisor in terms of strategy for your investments, which can include crypto.
I gave this book Four Stars mainly because of that painful first part. I procrastinated reading it for about a month after starting it, thinking it was just as bad all the way through. However, I’m glad I finally picked it up again and finished reading. It was difficult to get through because it would spark new thoughts that would set my mind racing. Then, I would have to re-read the section. I’m embarrased to say that I may eventually circle around to read the book again as I work on my retirement plan based on some of what is in the book.