Comprehensive retirement planning guide

By Elliot Raphaelson
Posted on May 16, 2023

In December 2021, I wrote a favorable review of Wade Pfau’s Retirement Planning Guidebook, published by Retirement Resources.

Pfau has recently produced a second edition of his book, which addresses all the major regulations passed since then. Many experts agree this book is the most comprehensive and best-written personal finance book ever written. I agree.

If you are approaching retirement and need guidance regarding any of the most important aspects of retirement, you should obtain this book. It is required reading not only for prospective retirees but for all financial planners as well.

The guide discusses four general retirement income styles. You can determine your style, before obtaining the book, by filling out a questionnaire. You’ll get input to develop a strategy that will allow you to meet your retirement objectives.

You can visit risaprofile.com/guidebook to take the questionnaire and make your profile without cost or any future obligation.

The book covers investments, withdrawal options, annuities, Social Security, Medicare, health insurance, long-term care options, housing decisions, tax planning and estate planning.

In every one of these subjects, Pfau goes into considerable detail, with reliable sources, to help you make critical decisions with a full understanding of all options, knowing the pros and cons of each.

Reverse mortgages

One of my favorite parts of the book is the section on housing decisions. Pfau has developed expertise regarding reverse mortgages and has covered the advantages in this book at a depth that no other author has, to my knowledge.

Not everyone in retirement wants to remain in their home long-term. But for those who do, this section is a must-read. (Pfau has also written a separate comprehensive book, Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement, which I have reviewed favorably.)

Pfau explains clearly the differences between a home equity line of credit, or HELOC, and a home equity conversion mortgage, or HECM.

With a HELOC, a homeowner borrows the money using the home as collateral, generally with low start-up fees, and is required to repay the loan in a relatively short time frame. Retirees may not be eligible for a HELOC loan if they don’t have a regular income.

With a HECM, which is used for most reverse mortgages, the homeowner would have higher up-front fees and has the option to repay the loan voluntarily, but is under no obligation to make any repayment as long as he/she is eligible for the loan.

HECMs added new safeguards in 2015 to make sure that they are not used solely as a last resort by those who have otherwise depleted their resources.

However, the qualifications for HECMS are less stringent than those for a HELOC. A HECM is generally available as long as set-asides are included to cover taxes, insurance and maintenance.

Pfau points out that the major advantage of the HECM is that a line of credit cannot be canceled, frozen or reduced. No such protection is available for HELOCS. This was a significant problem for HELOCs during the financial crisis in 2008.

Pfau also emphasizes that the principal limit and line of credit for HECMS will grow throughout retirement, independent of home value, unlike the fixed amount available with HELOCs.

Furthermore, the HECM has flexible payback options and is noncancellable. For homeowners who want to establish a liquid contingency fund, the HECM has advantages that HELOCs don’t have.

At the end of the book, Pfau discusses the non-financial aspects of retirement success. For example, the relationship between work and retirement is discussed, and the importance of strengthening relationships and social connection. Also covered is the importance of a healthy and active lifestyle.

Each chapter recommends valuable sources for further reading if you want to investigate any subject in more detail.

Bottom line: The guide is very comprehensive. There is no major category associated with retirement that is not covered in depth. You will find the guide an essential tool to a prosperous retirement.

The second edition of Retirement Planning Guidebook was released March 15, 2023 and is available on Amazon and other online booksellers.