The Rule of 30: A Better Way to Save for Retirement

by Frederick Vettese Narrated by Vijay Mehta

Overview

Consider the age-old question of how much you should save to enjoy a comfortable retirement: Are your knees knocking? Are you nervously biting your nails?

In The Rule of 30 personal finance expert Frederick Vettese provides a surprising - and hopeful - answer. Through conversations between a young couple and their neighbor, a retired actuary, the couple and the reader discover:

• How they would have fared had they been saving over various periods in the past, and how the future investment climate will differ
• The problem with saving a constant percentage of pay
• The Rule of 30 and why it is a more rational way to save
• Whether investing in real estate is a viable alternative to investing in stocks

The Rule of 30 changes the mindset from saving the same flat percentage of pay to saving when it is most convenient to your situation. In most cases, it means less saving early on while mortgage payments are high and children are costly, and more saving later.

Saving for retirement is a high priority, but it is not the only priority in life. It is time to dispense with old myths like “just save 10% of your take-home pay.” The truth is we should save differently throughout our pre-retirement years - and The Rule of 30 is a road map for doing so.

Editorial Reviews

Publishers Weekly

07/26/2021

When considering how much to save for retirement, the 10% rule of thumb is outdated, argues actuary Vettese (Retirement Income For Life) in this quirky if uneven survey. Now that defined pension plans are largely a thing of the past, he writes, people need to take on the responsibility (and risk) of planning their own retirement. To explore how to do so, Vettese presents a modern-day parable of a clueless early-30s couple and their retired-actuary neighbor, Jim, who leads them on a “financial odyssey.” Vettese’s lessons come as “Jim” leads the couple through financial planning topics such as identifying a realistic retirement income target, early mortgage payoffs, whether to rent or own, and tax planning: things come down to ditching a flat savings percentage in favor of saving when life is most amenable to it, averaging to about 30%. This is a good lesson in and of itself, but the wise mentor/young mentees model hamstrings the impact: not only does it feel forced, but it proves a significant distraction. And American readers will struggle to connect, as Vettese does calculations using account types and terms that will be unfamiliar and irrelevant. This feels like a missed opportunity. (Oct.)

From the Publisher

Vettese’s superpower is to look at personal finance from a new perspective. In The Rule of 30 he strikes again, offering up a new, empowering and action-oriented approach to retirement savings.” — Bruce Sellery, CEO, Credit Canada and Money Columnist, CBC Radio

“The Rule of 30 offers new ideas and timeless wisdom for retirement saving, conversationally delivered by the friendly retired actuary next door. This is a must-read for anyone wondering how they can possibly save enough for retirement.” — Ben Felix & Cameron Passmore, Hosts, The Rational Reminder Podcast

“Do you want to retire comfortably? Start planning and executing now. Fred’s book, The Rule of 30, is a good blueprint to follow and reads like a story. Your future self will thank you.” — Robin R. Speziale, National Bestselling Author, Market Masters

“The Rule of 30 answers the question we’ve all been asking about expensive housing: How will young couples with big mortgages and daycare bills carve out room for retirement saving?” — Rob Carrick, Personal Finance Columnist, The Globe and Mail

“An accessible read that offers a fresh perspective on saving and investing for retirement.” — Money We Have

Library Journal

10/01/2021

Personal finance expert Vettese follows up his Essential Retirement Guide with this savvy advice book on determining how much money to save to enjoy a comfortable retirement. Vettese writes that today's defined contribution plans, with virtually no workplace coverage, have transferred most of the saving responsibility to individuals, which means that workers will need to closely examine their spending needs and habits and individually determine how much money they need to save for their retirement. Vettese's view is that it is reasonable to save less in lean times and save more when flush with cash, in order to end up having saved 30% of one's salary per year by the time retirement rolls around. The keys to his advice are having the personal discipline to regularly "pay oneself" in savings before spending on discretionary expenses and starting early with saving. Vettese's parable of a young couple working with a retired actuary helps readers connect with these principles. Note that the book focuses only on Canadian governmental programs (Canada or Quebec Pension Plan), investment account tools, and terms that will be unfamiliar and possibly irrelevant in the U.S. market. VERDICT Recommended only on demand for the public libraries serving communities with Canadian customers.—Dale Farris, Groves, TX

Product Details

BN ID:	2940176359183
Publisher:	ECW Press
Publication date:	12/15/2021
Edition description:	Unabridged

Read an Excerpt

“What exactly is a bear market?” asked Megan.

“It’s defined as a drop of at least 20 percent in a benchmark index like the S&P/TSX.”

“Sounds nasty. Do these bear markets occur frequently?”

“There have been at least eight of them since 1950,” Jim confirmed. “That is why there are so many years when overall stock returns are negative.”

“Is that bear market the reason that 1946-1975 turned out to be the worst-ever period?” Brett asked.

“It’s one reason. Another is that inflation starting rising in the mid-1960s and was still climbing by 1975. It caused interest rates to rise, which created losses in the bond portion of one’s portfolio.”

“Just how bad was 1946-1975?”

Jim consulted his chart for a few seconds, “The average real return in that period was 2.6 percent a year, compounded.”

“So even in the worst-ever 30-year period, our investments would still be beating inflation by 2.6 percent a year,” said Megan thoughtfully. “That doesn’t sound so bad.”

“For sure,” Jim agreed. “This chart here shows the average return over all 30-year periods, both in nominal and in real terms.”

Jim gave them a page with a chart labelled Figure 1.

[Figure 1]

Brett frowned, “Doesn’t the return depend on how you invest?”

“Absolutely,” says Jim. “I should have mentioned earlier that I’m assuming a 60-40 asset mix.

Jim noticed Brett and Megan exchanging glances so he added, “A 60-40 asset mix means 60 percent of the assets are invested in stocks (or at least in some pooled or mutual fund that is composed of stocks) while the other 40 percent is invested in bonds, in this case longer-term government of Canada bonds.”

While his audience digested that information, Jim continued, “I’m not saying that 60-40 is the ideal asset mix for you but it is pretty standard for pension funds and retirement saving in general. Later, we’ll try to improve on it but for now, let’s assume that your savings are invested in a 60-40 mix. Now I need to ask you two, how much are you currently earning?”

Brett hesitated a moment, “I have no problem in giving you that information, Jim, since you’re like our financial priest. But why is it important to know our earnings? Don’t people need to save the same percentage of pay whether they’re earning $25,000 or $250,000?”

“Actually, no,” Jim replied. “It is important to include your pensions from OAS and CPP to really understand your retirement-readiness. When you do that, you find that the higher your earnings, the more you might have to save in percentage terms since OAS and CPP become less and less important to your overall financial wellbeing.”

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