My Retirement Disagreements with Chris Hogan

I recently posted ten great things about the book Retire Inspired: It’s Not an Age, It’s a Financial Number.

I could have listed many, many more and I have recommended the book as a supplement to my 12 books to make you a financial expert in a year.

That said, I’m not 100% on the same page with the author, Chris Hogan. I generally like Chris — both his teachings and his style — but there are some things we don’t agree on.

BTW, I don’t agree 100% with anyone, so don’t hold it against me, Chris. 😉

I thought I’d list Chris’s thoughts, detail what I disagree with, and let you share your opinions.

In addition I have a couple open-question issues the book shares that I’d like your input on.

Before I begin, let me say that I think Chris’s work is influenced by the Dave Ramsey school of financial advice since Chris works for Ramsey. This is likely the foundation for much of what Chris says, which I’m sure he believes, but which also causes some disagreement with me.

With that said, here are the areas I disagree with Chris from the book Retire Inspired…

You Always Need a Budget

Let’s begin with what Hogan says about budgeting. Here are some excerpts from the book:

It is important to understand that, no matter what phase of life you are in, you will never outgrow the need for a budget. Budgeting is and always will be your road map to financial success, no matter how much or how little money you have.

Remember this rule: from now on and for the rest of your life, you have to prepare a written budget every month — before the month begins.

Every retirement success story I could ever share with you involves one common practice: budgeting.

I disagree with this one in a couple ways:

1. You do NOT always need a budget throughout your life.

My advice is that a budget is critical for the first few years of your financial journey. It will help to establish control over your money and allow you to manage it.

But once you get a handle on your money (and especially as your income grows and you keep expenses low), the need for a budget becomes less vital. Of course someone could argue that without a budget you lose at least a bit of money from lack of control and I’d concede that. However it’s probably not so much as to slow you down on the road to financial independence.

I would also say that as you approach retirement, it’s good to re-establish the budgeting habit, maybe a couple years before you retire. There are two reasons for this:

  • You need to know exactly what your expenses are so you know you have enough to retire. The only way to know exactly is to develop a budget and manage it.
  • Retirement is critical because you’re going to be leaving behind a large source of income and living on your savings. There’s no margin for error so you need to control your money more closely, which a budget supports.

This is what we did. We had a budget the first ten years or so of our marriage, then stopped doing one as we were making a ton of money and spending very little.

Then I picked up the habit again prior to retirement and still update it monthly. I might switch to quarterly updates as things are going pretty well and I don’t need to have such tight control.

BTW, it’s not just me who believes budgets don’t have to be a lifetime commitment. Millionaires think so as well.

2. Budgeting is not the most vital part of retirement success.

I know this is not exactly what he said, but it is implied.

I would say having a plan is the most vital part of retirement success.

Sure, having a budget might be part of that plan, but without the plan you are dead in the water even if you do have a budget.

And if you don’t have a budget and yet work your plan, you can still have a great retirement.

Maybe nit-picky, but I’m kinda feeling that way today. 😉

You Can Retire by Buying Used Cars Alone

Yes, I have a problem with this. I think it’s over-stated, but we’ll get into that in a minute.

Here’s what Hogan says:

If you choose to drive nice, reliable, used cars that you pay for with cash, your retirement dream could be a reality — with just that one decision.

He then runs the numbers, showing that if you take the money you would have spent on new car payments and invested that at 10% for 30 years you’d have $2.9 million. More than enough to retire, of course.

But there are a couple problems with this:

1. He doesn’t factor in the costs of buying a used car.

Ok, so you skip the new car purchase. But you still need a car. Where do the payments for the used car come from? And what about the higher maintenance costs? Are we just assuming that a genie appears and pays for everything?

Of course not. He’d answer that you save up and buy the used cars with cash. That means, you need to SAVE UP, taking at least part of what you would have spent on the new car and putting it aside for the used car. In other words, you wouldn’t have the entire new car payment to save and invest for 30 years, far from it. And taking a big bite out of this, you’d lose a good portion of the returns he touts.

He also doesn’t account for the fact that used cars, on average, have higher maintenance costs than new cars. This would further reduce what you’d be able to set aside and invest.

2. It’s never about one decision.

Ok, let’s say you take Hogan’s advice and only opt for used cars. Now that your retirement is set, you can blow the rest of your money on a big house, fancy vacations, and the like, right?

See what I’m getting at? You have to make and enforce multiple decisions to create a great retirement. It’s not “just that one decision” with anything. There are always other factors.

For example, if I was naming something that would be close to one thing to make your retirement it would be to “spend less than you earn” or something similar. And while that’s a decent start, it still needs some help. Like how much should you save? What should you do with the savings? (You need to invest it correctly, right?) What about the other ga-zillion factors needed to make a great retirement?

I get what he’s saying and I generally agree that buying used cars is a good idea (though I didn’t do that myself — I always bought new at a great price and drove them into the ground — but that fit into my plan.) I just think he over-stepped in saying that if you take this one step you’re good to go. That’s way too much over-emphasis on one item IMO.

BTW, it’s interesting he uses 10% as his return rate. It’s lower than Dave Ramsey’s 12% but higher than my 8%.

There is Not One Debt That’s a Positive

You’re going to LOVE this one. LOL!

Here’s what he says:

Debt is never a good idea. There are simply no circumstances where you can possibly rationalize debt.

It’s obvious that the biggest roadblock between you and your dream retirement is debt. But some people will claim that there is “smart debt” such as school loans. Let me tell you, though, debt is debt, and it always shows up at your door and demands to be paid each month (with interest), whether you can afford it or not!

The people I know who are diligently creating real wealth over the course of many years will tell you that debt is the number-one enemy of progress.

Really? There are “no circumstances where you can possibly rationalize debt”?

How about when you borrow $5k to create a career that earns you several million (which would have been a few million more if I hadn’t retired)? That certainly sounds like a great rationalization for debt.

I’m sure many of you will pile on with thoughts of your own, so I won’t say a lot more. I do think Hogan is hampered by the Ramsey connection here. There’s NO WAY he can say that some debt, if managed properly, is good. That’s a clear no-go from no-debt Dave.

Let me begin by saying that I’m a big believer in low or no debt. I haven’t been in debt myself for almost 25 years (including my mortgage), so I’ve lived the debt free life and it is great.

That said, I think a small amount of debt in the right circumstances and managed correctly can give you a financial head start. In particular, I’ve used debt to get a valuable college degree (as noted above) as well as to initially buy my house. Both times, the debt was small in proportion to the expected benefit and/or what I could afford (FYI, here’s how we paid off the house — which started with buying less of a house than we could afford.)

I know some of you have used debt to invest in real estate and others actually hold off paying down debt to invest instead. While I didn’t use either of these methods, they too, if managed and done conservatively, can greatly enhance wealth.

In the end, I think we can come up with many ways to “rationalize debt”. I look forward to your examples in the comments below.

You Must Hire an Investing Expert

Batten down the hatches for this one!

Here’s what Hogan says on the subject of getting professional money advice:

You don’t want to do this stuff on your own. The truth is that you need an expert to help you — a true investing professional.

You need to consult a professional about your retirement plan and options.

We have addressed a few of the most common behaviors I see getting in the way of people’s retirement dreams, but now I want to address one of the biggest: the mistaken belief that you can navigate the retirement waters alone. I believe the most important investment behavior you can engage in is to go out and find a professional investment advisor.

An investment professional is essential to your financial well-being.

Hogan is an advocate for both financial planners and “investment advisors.” I’m assuming these could be the same person, but am not 100% sure.

I think this is another way that Hogan is hampered by the Ramsey association. They make a lot of money recommending advisors (especially focusing on investments) so not being a strong advocate for advisors just isn’t an option.

That said, let’s look at what Hogan says. Is it true that having a professional help manage your money is that vital?

I’ll start by siding with Hogan. I do believe there are people who need a financial advisor for even basic money guidance. These include:

  • Those who have no interest in managing their own money.
  • People who can’t stick to a plan and need someone to hand-hold them.
  • Those not willing to invest the time and effort in learning about money.

If you fit into any of these categories, you need help. You are not willing to do the work yourself so someone needs to assist you. It’s not the ideal option IMO, but it’s better than the alternative (eating dog food in retirement).

That said, for anyone with average intelligence and even a bit of initiative, you can manage your own basic finances. If nothing else, you could take a year, read the 12 books I recommend (or listen to them if reading is too difficult), and after that year be in pretty good shape for managing your finances — including your investments.

Yes, there’s a bit of a time commitment, but it’s nothing too strenuous and certainly not anything too intellectual. Then if you can apply what you’ve learned, you probably have 80%+ of personal finances covered.

To me, this is the best option since it’s your money, your retirement, and your life. I think it’s best if you’re both knowledgeable and in charge.

And I believe that most people could manage their own finances if they wanted to, so I’m not talking about the top 10% of people. I’d go so far as to say that the majority (at least 51% of American) are able to understand basic money principles. I’m less optimistic about their ability to stick to a plan though (it takes sacrifice, which many Americans don’t seem to embrace).

Notice that I said “basic” finances above. I do believe there are times when you need a bit of help with complicated financial issues (like taxes and estate plans.) In these cases, paying an advisor is probably going to save you a boatload of money (time too) and/or do something you couldn’t do on your own, thus making hiring them worth it.

But for basic finances, you can invest in 12 books, manage your money yourself, save a ton, avoid the chance of being taken advantage of, and be financially successful. A financial advisor is certainly not “essential” nor is hiring one “the most important investment behavior you can engage in”.

You Should Wait Until 70 to Claim Social Security

From here on out we’re moving into issues I only slightly disagree with Hogan on.

He says the following:

Unless you will absolutely depend on those Social Security benefits to fund your retirement. I recommend holding off until age seventy.

This is the general consensus advice out there today and at least decent counsel for most, so I’m not too upset with this.

That said, there are so many complications and possibilities with SS, that I think 1) the advice should be “generally wait until 70” and 2) this may be one time that hiring an “expert” would be worth it — to help you get the most out of SS based on your life situation and goals.

Other than that, I’m ok with the advice, though taking it early can be a good idea too.

You Need LTC and Identity Theft Insurance

In listing the types of insurance coverage everyone should have, Hogan includes long-term care (LTC) insurance and identity theft protection. Quotes:

Spending your last several years in a nursing home can completely destroy your retirement account. That’s why LTC coverage is so important.

You need coverage that provides restoration services and a counselor who can work with you to help clean up the mess left behind when your identity is stolen.

Let’s begin with the Dave Ramsey connection. I’m working on a post about LTC insurance and found this article which is pretty much a sales pitch from Ramsey for LTC insurance. So again, Hogan HAS to recommend it.

Aside from that, I thought the very poor (because the government will pay for them) and the wealthy (over $2 million in net worth or so, since they can pay for long-term care themselves) were generally dismissed from needing LTC insurance as a rule of thumb. That means only those in the middle need it.

I’m interested in what you think and what, if any, LTC insurance you have purchased. Admittedly, I don’t know much on the topic but I’m starting to research it and would be interested in your perspective.

As for ID Theft insurance, does anyone have it? Is that even a thing? Is it different than credit monitoring, etc. that a company like LifeLock offers or is that what Hogan means? Or do you buy it from an agent with the rest of your insurance?

Seems like this might fall more in the same category as pet insurance — something that exists but that you don’t really need.

You Should Save/Invest 15% of Your Income

Here’s what Hogan says about how much to invest:

You’re ready to start [investing] only when you’re out of debt (except for the house) and have a fully funded emergency fund of three to six months’ worth of expenses. If you’re there, you’re ready to start investing 15 percent of your income.

Note that he says you shouldn’t count the company 401k match in your 15%, so you’d actually be saving more than 15% total with the match.

I’m wondering on this one:

  • Should you really wait until you’re completely out of debt to invest? Even if your interest rates are high, should this keep you from at least putting in enough to get your full company match (which is generally a 50% match)? Waiting until you’re out of debt wastes a lot of time — and time is your most valuable investing asset.
  • Is 15% the right number? Should it have a qualifier? Like “save 15% if you want to retire at 65, 20% if at 60, etc.” How does early retirement fit in? You certainly need more than 15% for that. I guess what I’m wondering is 1) is there a good rule-of-thumb on what percent everyone should save and 2) if so, what is it? Any ideas?

Interesting Retirement Concepts Worth Considering

In addition to the issues above which I took exception to, there were a couple of others raised that I think deserve discussion.

I have thoughts on them but wanted to run these two by you for your opinion…

1. Is there a responsibility with success?

Hogan talks about one couple who retired “right” and says:

They had means to travel the world if they wanted. In fact, they had the money to go sit on every beach on the planet, but they were driven by what they called the “responsibility that had come with success.” They wanted to put that money to work to bless other people.

He’s not saying that everyone has an obligation that comes along with wealth, the couple said that.

But do you think that’s true? Do you believe those who are wealthy owe it to those less fortunate to help them?

I’m sure there will be a lot of discussion on this one!

2. Should you be debt free at retirement?

Here’s another of Hogan’s rules worth discussing — in his words:

A true retirement dream killer [is] carrying debt into retirement.

Let me be crystal clear here. When you retire, you want to owe nothing to anyone. You do not want to have any debt — including a mortgage. Every dollar of your retirement income should go toward funding your dream, not paying off debts.

Is this true in your mind?

One school of thought says you should be completely debt free at retirement because it lowers your financial obligations and thus makes retiring easier.

Another school of thought says that as long as you have the funds to cover all your expenses (including a mortgage and even other debt), then you’re fine.

What do you say?

And what do you think of the objections I have?


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