The Bogleheads' Guide to Retirement Planning (2 page)

Copyright © 2009 by Laura F. Dogu, Richard A. Ferri, Taylor Larimore, and Mel Lindauer.

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Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

 

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The Boglehead’s guide to retirement planning/Taylor Larimore . . . [et al.]; foreword by John C. Bogle.

p. cm

Includes index.

eISBN : 978-0-470-55286-5

1. Retirement income—Planning. 2. Finance, Personal. I. Larimore, Taylor, 1924-

HG179.B5688 2009

332.024’ 014-dc.024’014—dc22 2009021676

 

 

 

 

 

 

It’s hard to imagine a more fortuitous time to write a guide to retirement planning. The global financial crisis and the recession and bear market it has brought in its wake have exposed the tenuous condition of the retirement savings of millions of Americans, who would undoubtedly benefit from the sort of advice the Bogleheads dispense in this book.

On the other hand, it’s also hard to imagine a time when investors might be more reluctant to read
anything
that has to do with investing. Their nest eggs often depleted and sometimes shattered, and dreams of retirement delayed if not deferred—largely due to the recklessness of a select group of Wall Street experts who seemed unable to measure the risks on the balance sheets of the firms they ran—one could hardly blame an investor who says “the heck with it all,” writing off the financial markets as a rigged game, one in which their capital is used, first and foremost, to enrich the insiders.

But the fact that such a reaction is understandable doesn’t make it correct. For better or worse, most Americans today who want to enhance the modest retirement income distributed through our Social Security system have been given the responsibility of funding and managing their own retirement accounts, charged with investing their way to a secure financial future. The current economic crisis will not absolve us of that responsibility, even as it makes it more difficult. Invest we must.

But that by no means implies that investors should continue blithely along the path they’d been on. As the current bear market has made plain, too many Americans were ill-prepared to shoulder the responsibility that had been placed upon them. Even worse, our mutual fund industry was equally incapable of providing the assistance our nation of amateur investors needed. The conflicts of interest mutual fund managers face—seeking to maximize their own earnings, which reduce, dollar for dollar, the returns earned by their mutual fund investors—proved too great a temptation for them to resolve in favor of their fund investors.

So what is an investor to do? First and foremost, seek wisdom. “Wisdom excelleth folly as far as light excelleth darkness.” I used those words from Ecclesiastes some 15 years ago, in the epilogue of my first book,
Bogle on Mutual Funds,
as a way of introducing my Twelve Pillars of Wisdom, which I described as “lamps to guide you on your search for a sensible, productive investment program.”

Reviewing them recently, I was struck by how well they have stood the test of time. I’ll let you judge for yourself:

Of course, these 12 pillars are more than just an epilogue to a 15-year-old book. They represent the foundation on which I built The Vanguard Group. From its inception in 1974, I strove to make Vanguard a firm that emphasized the simple over the complex, the enduring over the ephemeral, and the low-cost over the costly, represented most clearly by the broad market index fund, which guarantees its investors nothing more (and nothing less) than their fair share of whatever returns our financial markets provide.

And as pleased as I am that, 35 years later, history has shown the merit in such an approach to investing, I’m even more pleased with how broadly it’s been embraced by millions of investors, none more so than the group that calls themselves the Bogleheads.

I met my first Boglehead on February 3, 1999. I had flown to Miami to deliver a speech, and Taylor Larimore, the group’s unofficial leader, invited me to join a group of his compatriots for dinner at his home that evening. Taylor and his friends proved to be as wonderful a group of people as I had ever met—intelligent, thoughtful, trustworthy, and eager to help others—in short, good human beings. We all had so much fun that our gathering quickly became an annual event. We’ve held our reunions in cities all over the country, and each one has been larger than its predecessor. Bogleheads 8 is scheduled for Dallas, Texas, in September 2009.

This group of like-minded investors represents the promise of our electronic age, which combines a seemingly endless amount of information with an unprecedented ease of communication. Harnessing both, the Bogleheads band together to help and encourage all comers to sort through the noise in the pursuit of their financial goals. Collectively, the group provides a vast gold mine of wisdom and experience waiting to be explored.

The Bogleheads’ Guide to Retirement Planning
is a true gem from that gold mine, a book whose advice is firmly built upon those Twelve Pillars of Wisdom. Truly a group effort (no fewer than 40 Bogleheads contributed to it in some capacity), this book provides the reader with a first-rate primer on saving and investing for retirement, covering everything from opening and funding a retirement account, to investing it wisely, to drawing down your account, to estate planning—not quite cradle-to-grave coverage, but pretty close.

Importantly, these investors/writers/believers do so in a way that even the most novice investor will be able to follow. I’m admittedly not the most impartial judge of their work—heck, I’m probably the
least
impartial person you could find for that task—but I’m certain that our nation of investors would be far better served if more of them acted on the advice the Bogleheads dispense in this book.

I’m often asked what it’s like to have a group of people name themselves after you. It is, I readily admit, more than a little surreal, at least in the abstract. But getting to know the Bogleheads over the past 10 years or so—both in person and by following their online community—has been one of the more rewarding experiences of my long career, not because of the undeniable boost they provide my ego (though that never hurts!) but because the Bogleheads represent the fulfillment of what I have dedicated my career to building.

When I founded Vanguard all those years ago, I did so in the face of enormous skepticism. It was a brand-new organization—one operating with a then-as-now unique structure—whose success depended not on a vast marketing budget or an army of sales representatives but on faith—a faith that individual investors, one by one, would come to recognize that this then-tiny firm, doing things differently, would serve their own economic interests, and a faith that that would be sufficient to ensure our enterprise’s success.

When I chat with the Bogleheads, they almost invariably thank me for starting Vanguard. But in reality, it is I who should be thanking them. It is investors like these fine human souls who validated my leap of faith and who allowed the Vanguard experiment to flourish. And that success, such as it were, has provided me with far more acclaim than any one person deserves. It is hardly an overstatement to say that whatever success I may have enjoyed in my long career is due entirely to the fact that my faith in investors like the Bogleheads has been so well placed.