Book Review: Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire

This article was first posted July 1, 2009.

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Spend 'til The End is kind of a book-length sales brochure for Professor Kotlikoff's ESPlanner software. (Retire Early did a review of ESPlanner back in July 2006.) However, the book does make a few valuable observations and is worth reading.

The authors make the case that many Americans are actually oversaving and underconsuming -- largely due to bad advice from Wall Street and the financial planning community who profit from the status quo. Consumption smoothing is an economic concept with the goal of balancing out one's saving and spending to attain the highest possible standard of living over one's lifetime.

Consumption smoothing analysis is a complex calculation and requires making assumptions on your spending requirements and investment returns decades in advance. As such, some analysts question the value of the technique because of the difficulty in making reliable assumptions for the input parameters required.

Spend 'Til the End:

by Laurence J. Kotlikoff and Scott Burns
Simon & Shuster, New York, NY, June 10, 2008, 336 pp.

Retire Early rating:

The authors make a few surprising (and counterintuitive) observations in the book. For example, they calculate that a 40-year-old plumber in Ohio has about the same standard of living as a 40-year-old physician. College is often a bad investment -- especially if you take out a lot of student loans to attend an expensive private college. And even though most people don't get to deduct property taxes and mortgage interest because they take the standard deduction, the real tax advantage of owning a home is the tax-free implicit income you derive from not paying rent.

Kotlikoff and Burns are big fans of using single-premium immediate life annuities to fund retirement, even as they disclose the sky-high fees and costs associated with these insurance products. Even a "no-fee, no commission" life annuity has 8%-10% of costs imbedded in its price.

The authors' advice on Social Security is a little schizophenic. In Chapter 17 they extoll the virtues of delaying Social Security in favor of a higher monthly benefit at age 70. In Chapter 18, they note that taking Social Security early and reapplying at age 70 using a Withdrawal of Application "seems to be the best option of all".

Spend 'til The End is a fairly quick read and doesn't contain a lot of math. It's probably something you'll want to borrow from the library rather than purchase and retain as a textbook.

Resources for further information

Hewitt Associates - 401(k) index some interesting information on how people allocate their retirement acounts.

Lifetime Financial Advice: Human Capital, Asset Allocation and Insurance, by R.G. Ibbotson, M.A. Milevsky, P. Chen and K.X.Zhu

Social Security Handbook -- information on your Social Security benefits.

Who Benefits from the Mortgage Interest Deduction? -- as it turns out, not many.