This article was first posted March 1, 2006.
Passion Saving author Rob Bennett is a self-proclaimed "financial consultant" and "career counselor" with no training or credentials in either field. The book Passion Saving is a verbose and poorly proofread adventure in vanity publishing. While Mr. Bennett evidences an unusual skill in crafting self-congratulatory prose, a skilled editor could cut the volume down to the size of a short pamphlet. Its weak content doesn't do justice to the professional looking, $2,000 cover designed by Bookwrights of Lovingston, Virginia.
While the book Passion Saving isn't worth your time and money, Rob Bennett's own "early retirement" story is extraordinary. It serves as a cautionary tale for those who might attempt early retirement with insufficient savings, a limited understanding of arithmetic, and a half-a$$ed financial plan.
Rob Bennett has posted under the screen name "hocus" on about a half dozen Internet discussion groups devoted to the subject of early retirement over the past 5 or 6 years. He's been banned from most of them for posting in a demonstrably false and misleading manner. Indeed, one of the most popular forums hosts a Best of Hocomania board where a dedicated team of scholars and researchers collects and analyzes Bennett's lies and misstatements and sets the record straight.
Rob Bennett's early retirement story
While you wouldn't guess it from his disorganized and illogical writings, Rob Bennett holds a law degree and a Master of Laws in Taxation. He worked as an editorial writer for a Washington DC-based newsletter Tax Notes which tracks legislation as it moves through the House Way & Means Committee and Senate Finance Committee. From there he moved on to a job with a six-figure salary at Ernst & Young, the big accounting firm. Bennett quit (or was fired from) this high paying job in August 2000 and "retired" with the following plan.
My Plan -- TMF REHP post #67025 May 20, 2002
The features of 'My Plan' include an annual budget of $30,000/year for a family of three (with plans for additional children), a home with no mortgage, savings of $400,000 invested solely in TIPS, I-bonds, and CDs -- no stocks or equity mutual funds, and the need to work to make ends meet.
At a 4% withdrawal rate, a $400,000 nest egg will only produce $16,000/year in income. Hocus planned on having his pregnant wife earn $4,000/year and felt that he could earn at least $10,000 year trading on his expertise in saving, budgeting, and 'The Secrets of Retiring Early'
Feb 8, 2005 update to 'MyPlan'
In the fifth year of his "retirement", some of the holes in "My Plan" appear to be widening.
The hocus family budget for 2005 is $38,000, a 27% increase from May 2002 during a period when the CPI increased by only 6.2%. Clearly the hocus mix of fixed income investments can't keep up with these kinds of spending increases.
Hocus claimed to have expertise in saving, budgeting and 'The Secrets of Retiring Early'. He earned about $15,000 in royalties from the Motley Fool Soapbox.com venture before it folded in early 2001.
Unfortunately, hocus has produced little marketable editorial content over the past three years as he diverted his energies to long, delusional posts on the various Internet discussion forums devoted to early retirement. He's been banned from at least two forums and heckled off several others. The odds of him meeting his goal of $10,000/year in writing income from his supposed 'early retirement' expertise appear slim.
The New Arithmetic
To rationalize his failures, hocus has devised some new arithmetic to spin his failing retirement plan.
hocus2004: The spending level in the budget set forth in my book is $38,000. Take out the $10,000 minimum assumption of writing income, and you have $28,000 to be generated from savings. In the book, I don't explain in any detail how this works in my case. I just use a 4 percent real return assumption and the $700,000 total net worth figure to get the $28,000 number.
I do not expect the money in the house [i.e. $300,000] to generate a 4 percent real return. I note that in the book. But I expect other portions of my capital to do better than that. The average long-term return for stocks is about 7 percent real. If you invest in a valuation-informed way, the historical data shows that you can expect to do better than that. So I assume a real return from the portion of my portfolio that will be invested in stocks of greater than 4 percent real.
**** end of quoted passage ****
So there you have the hocus arithmetic. Include your home value in the portfolio for generating income, but don't tell us how you plan to strip nails and sheetrock out of the building to sell for cash on the scrap market. Base your withdrawals on the long term returns for the stock market, even though you haven't owned any stock since 1996. Include $10,000/year in writing income that's be absent for the past three years.
If you ignore these questionable and fraudulent assumptions, today hocus is taking a $38,000 withdrawal from a $400,000 portfolio -- a 9.5% withdrawal rate. Extremely risky no matter how you're invested.
Lessons learned from hocus's 'My Plan'
1) Don't quit your high paying job before you're financially independent.
Most successful early retirees define financial independence as having at least 25 times your annual spending in retirement. That would mean at least $750,000 for hocus's original $30,000 annual budget, about double his $400,000 in savings. In reality, he probably should have saved even more since his plan included having additional children -- something very few early retirees contemplate.
2) If you're not "financially independent", you're not "retired".
The hocus plan trades a high salary career for intermittent income that averages out to a sub-minimum wage job. Under this plan hocus will have to work forever and never become financially independent.
Most people would call this a "change in careers" or "downshifting" to a more enjoyable lifestyle (if you ignore the stress of declining finances and a limited income), but few would call it "retirement."
Review of Rob Bennett's "Passion Saving" web site
Mr. Bennett maintains a web site and blog, but is well known within the early retirement community for deleting negative comments from his site. Few people bother reading or posting anything on his site. The comment below is typical of the constructive criticism that Bennett routinely expunges from his blog.