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In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 3rd decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

Interview with Bob Clyatt

Author of Work Less, Live More

Billy and Akaisha Kaderli

In 2005, Bob Clyatt wrote a book on semi-retirement titled, Work Less, Live More. Back then Bob asked us for an interview and we were one of the retiree couples featured in his very successful book.

It's over a decade later now, and we asked Bob if we could check in with him as to how his semi-retirement life was going, and also how his two recommended portfolios were performing.

Read our interview with Bob Clyatt below.

Retire Early Lifestyle: Can you tell us a little about yourself?

Bob Clyatt: Hi, thanks. I stumbled on Paul Terhorst's You can Retire at 35 in the 1980’s and it changed everything for me. I set to work saving and modeling how I could get out of the daily grind. It took me until age 42 but I did it and have been living happily as an early semi-retiree now since 2001. To convince myself I wasn’t putting my family’s financial futures in jeopardy I spent a lot of time researching this whole area and the result was my book Work Less, Live More, published by Nolo Press in late 2005. It’s sold over 40,000 copies now since it was published, so I feel like I’ve been able to carry the torch a bit for this alternate lifestyle.

And thanks, Billy and Akaisha for being profiled way back then – your story continues to inspire readers as you surely know!

Bob and Wonda Clyatt in London

REL: Your book, Work Less, Live More was first published in late 2005. You proposed two portfolios: The Rational Investing Portfolio (RIP) and Sandwich Portfolio. Could you explain them and how have they stood up to the test of time?

BC: Sure – I wanted an all-terrain vehicle sort of portfolio that would generate sufficient returns through all sorts of investment climates, and have a low volatility. If a long-term retiree is withdrawing every year, huge swings, even if they average out well over time, can be harmful since the withdrawals in down years can beat up returns. For this reason as well as for the mental health of the retiree needing to live off savings, a low volatility portfolio was key.

I was looking for what is affectionately called a Slicer-Dicer sort of investing approach—lots of hopefully less-correlated asset classes, conservative allocations, and disciplined rebalancing. I got help from the random walk and efficient frontier research of my old professors at MIT and from Modera Asset Management’s modeling and real-world work with clients. I published two portfolios – the Rational Investment Portfolio (RIP) which had 16 asset classes and a simpler DIY version called the Sandwich Portfolio with 8 mutual funds (7 of them from Vanguard).

 

The 10-year results are now in and we’re all happy with the results: The fancier RIP Portfolio had 5.4% compounded annual returns over the 2006-2015 period and the simpler Sandwich Portfolio actually beat it with a 6.2% compounded annual return. Both portfolios have significant international exposure so most of the difference seems to be from the commodities exposure in the RIP portfolio. Sometimes simpler is better! My final recommendation in the book was simpler still – just buy Vanguard’s Wellington Fund, but most people seem to want more diversification than that. As it turns out, Vanguard’s US-only blended Wellington Fund was the winner for these 10 years, with a 7.3% compounded return over the period. They’ve been at it since 1929 and are reliable long-term outperformers.

REL: Would you comment on today’s financial market? How do you see the next few years?

BC: I think the defining question for long term retirees going forward is about Fixed Income: what do you do when yields seem stuck in this long secular low-interest period? Unlike stocks, bonds don’t necessarily go in cycles, so it isn’t enough to just assume this will all correct itself in the near term. Long term retirees need not only dividend and capital gains income but also fixed income returns, so we are kind of sitting on a tippy stool these days. Stocks, however, feel like they are functioning within historical norms and don’t scare me, though naturally they can always be smacked down 10 or 20% “just because”.

Bob sculpting large female head while in China

REL: Would you continue to recommend your RIP and Sandwich portfolios as a solid investment approach?

BC: Yes, I have looked at various alternatives, such as the Permanent Portfolio and for those who don’t have the fortitude to go all-in with the Wellington Fund, I still think our Sandwich and RIP Portfolios are well-structured for preserving long run capital while affording regular annual withdrawals in the 4% range. When foreign currencies and commodities turn around and corporate bond prices weaken, the greater diversification of the Sandwich and RIP portfolios should allow them to outperform a single domestic balanced fund, even a superbly managed one like Wellington, and provide lower volatility.

REL: Have you found that those who have high stake careers are inclined to want to retire early? Do you think that semi-retirement might fit that personality better?

BC: Absolutely – I live in one of the NY suburbs where lots of talented, hard-working people settle and the fact is very few of them are able to sustain the drive or withstand the stress for the full 40+ year ride of a traditional career. Yet because they are drawn to challenge and intellectual stimulation, full-on putter-and-have-fun kinds of retirements wouldn’t keep them mentally engaged. The semi-retirement path gives a nice blend –more control over a less-stressful schedule, intellectual challenge, engagement and a bit of income to supplement those puny fixed income returns. Lots of the over-achievers I know about successfully downshift into consulting, managing a small hedge fund, being on a board of directors – that sort of thing, all of which I consider forms of semi-retirement.

Bob, Jasper and Miles Clyatt in Brazil

REL: What do you recommend to help soften the transition for someone who might want to retire or semi-retire and who is used to a high pressure producing job?

BC: Start today planning so you know the financials will work, cultivate the consulting/directorship/investment sorts of roles in your field that can transition you out of high-pressure operating roles, and then start digging into other things you may want to do with your time outside of work: make lists of activities and resources, and start trying things out in whatever free time you have now. Once you do pull the plug, promise yourself and your family not to make any major new financial commitments for the first year – it’s way too easy to get in trouble as you grapple with the sort of vertigo feeling of suddenly having no big stressful project – it’s as if we tried to make some new problem for ourselves so we can feel we’re back on familiar ground.

Or another fun way of shooting at our feet: large chrome-laced recreational toys. After a year you’ll have settled down and if you still want the boat or the RV or the Tesla (or the can’t-miss investment in the restaurant or biotech startup), then go for it—you’re probably ready to make a rational decision by then.

 

REL: What do you do with your time these days, now that you have retired from your past career? Do you consider yourself retired or immersed in a second career?

BC: As you know I’m deeply involved in art – I could be called a ‘full-time sculptor’ though that doesn’t mean I’m always in the studio. Sometimes it’s 15 hour days but more likely it's about a 30-hour week with a blend of research time, viewing other art and marketing my own work in addition to actual studio time creating new pieces. Beyond that I’m involved in a number of local men’s groups – reading, study, discussion and we try to spend plenty of time traveling. I have been going to China several times a year to cast bronze pieces in a foundry there, which has been a lot of fun. And I exercise a lot and have a nice long morning coffee while I read the paper every day. Bliss.

REL: If someone is not happy in their current career, would you recommend retirement, semi-retirement or perhaps simply a long break?

BC: Well, plain old unemployment doesn’t work – that gives you your time back but is way too stressful. If the savings are sufficient and it can be worked out with employers in a not-too-damaging way, I think there is a lot of value to taking a sabbatical. Honestly I don’t know how anyone has time to get to the deep personal development and self-awareness, the sustained inquiry and engagement in fields of possible interest if you’re trying to squeeze it all in nights and weekends. I have been very grateful these past years to have so much unstructured time to really dig into things I’ve been curious about, to change and learn. It’s a huge gift.

At the end of a sabbatical I think you’d probably have a great idea of whether you wanted to go back to your old career, switch employers or careers or semi-retire to pursue something entirely new. Then it’s a question of doing the math on earnings, savings, spending etc. to make it all possible in a sustainable way.

Hanging with Elvis in Nashville

REL: What have you learned from your semi-retirement. Any advice to our readers?

BC: My one thing that could probably be emphasized more in the book is to stay at work a little longer and save a little more money than you think you’ll need—the markets are crazy and you never know what can happen. Related to that would be to not throw away lightly a career you fundamentally like when all you need is a nice long break and perhaps a change of job or employer. It’s hard to get back into something really challenging or remunerative once you’ve left—the world marches on and everyone wants to hire professionals as committed as they are.

If you’re used to being a Big Dog at something, and let’s face it, we all like to feel needed, then it can take a long time to get that feeling back once you’ve retired and are starting something completely different. But if the whole first-career thing has become toxic or meaningless, then don’t drag it out – get on with the second half of life—every day is precious and there is nothing so wonderful as feeling you’re free and able to discover and live the life you really want, on your own terms.

REL: How can people find you and your revised book?

BC: The 2nd edition, which came out in 2008, is always available from Amazon or direct from the publisher’s website, Nolo Press. There’s also a companion workbook and CD-ROM with spreadsheets for budgeting and long-term investment modeling. If it were me, in frugal early-retiree mode, I would try to get it from your local library system (its in a lot of libraries) or even better, an e-book version from the library just to see if I liked it. Warning: it’s the sort of book you may find you keep coming back to so you might need to scan some pages or borrow it more than once.

But if you do purchase it I’ll make 90 cents toward my own semi-retirement earnings so I’d never say No to that!

We at RetireEarlyLifestyle would like to thank Bob for his time and effort in answering all of our questions. We appreciate his expertise and perspective on both finance and semi-retirement.

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About the Authors

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible.

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