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.
with Bob Clyatt
Author of Work Less, Live
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
Read our interview with Bob
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.
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
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).
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.
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%
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
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.
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
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!
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.
About the Authors
Early Lifestyle appeals to a different
kind of person – the person who prizes their
independence, values their time, and who doesn’t
want to mindlessly follow the crowd.