The best books on financial independence and retirement

Probably first for most other proponents of the FIRE (Financial Independence Retire Early) movement is this classic, subtitled Transforming Your Relationship with Money and Achieving Financial Independence.

Joe Dominguez was a successful financial analyst on Wall Street before retiring at the age of 31, and passed away in January 1997. The part that really resonated with me when I first read it was its representation of money as essentially life energy. While the average consumer may not fret about wasting a bit of money on some frivolous item, when you consider that you’re also wasting precious – and finite! – life energy, that may make you think twice about a purchase.

Drawing on 50 years of combined experience, Dominguez and Robin founded the New Road Map Foundation, an all-volunteer, non-profit organization that promotes a human, sustainable future for our world. The book tells the stories and life experiences and lessons of people who followed their nine-step program for finding financial independence.

They define Financial Independence simply as having an income sufficient for your basic needs and comforts from a source other than paid employment. It’s not about being classically “rich” but of realizing you have “enough.” 

The late Jack Bogle, founder of Vanguard Group, published this excellent book in 2009.

Consider the following apophyrical tale related in Chapter 10 of Enough: “Too Much Success, Not Enough Character.” It concerns an old greyhound who spent his days at a race track chasing a mechanical rabbit. Over the years, the dog had won over a million dollars for his owner but ultimately decided to quit: not because he was mistreated or had become disabled but because “I found out that the rabbit I was chasing wasn’t even real.”

Those who accumulate more money than they need in life and end up as the richest denizen in the cemetery would do well to reflect on the main premises of Enough. Remember, financial independence is about having income exceed expenses, no matter how modest those expenses might be. It’s about working only because you want to, not because you have to. There’s nothing so depressing as that old bumper sticker that declares “I owe. I owe. It’s off to work I go.”

As Henry David Thoreau found, if you value freedom over stuff, it helps to keep your wants — and therefore expenses—to a minimum. If your wish list of stuff includes multiple properties, flashy baubles and fast-depreciating luxury cars and technological gadgets, you may want to verify whether the rabbit you’re chasing is real.

Edmonton-based author Ernie Zelinski is probably best known for this self-published international bestseller.

Zelinski semi-retired at 30 after being fired from an engineering job. One of his first books was called The Joy of Not Working, and he later published The Joy of Being Retired: 365 Reasons Why Retirement Rocks—and Work Sucks!. But the one that really struck a nerve for FIRE proponents was How to Retire Happy, Wild and Free, subtitled “Retirement wisdom that you won’t get from your financial advisor”.

Zelinski sugar-coats the content with pull-out quotes and a few cartoons. As the back-cover blurb of my 2014 edition proclaims, “Retirement is the beginning of life, not the end.” It follows that Zelinski believes that the earlier you take Early Retirement, the better, and encourages readers to pluck up the courage to do just that.

To that end, his focus on frugality allows him to declare “you don’t need a million dollars to retire.” By following your own dreams, not those of others, the book shows how to make one’s retirement years the best time of your life. Zelinski’s books all recap what drives the FIRE movement: freedom from bosses, meetings, and commuting, with blessed time and freedom to do whatever you want.

But, as I have pondered elsewhere, is it really about retirement or financial independence? Zelinski covers them both with his latest book, The Lazy Person’s Guide to Success: Financial Independence and Personal Freedom Too! While Zelinski admits straight up in this volume that he is “lazy,” I have joked before that if so, he’s the hardest-working lazy person I’ve ever encountered!

His tips include working less and thinking more, tapping your creativity, and using money to buy time. When I was a columnist for Canada’s National Post, my review of Zelinski’s book was picked up as a back-cover blurb: “To be sure, retirement books are a glutted field, but most focus on money and financial planning. They view the finish line as the last day of employment. That’s where Zelinski’s begins.”

Pensionize Your Nest Egg, or PYNE as some readers call it, is a classic Canadian financial book by famed finance professor Moshe Milevsky and certified financial planner Alexandra Macqueen.

Its audience is primarily anxious would-be retirees who do not have the luxury of having an inflation-indexed, guaranteed-for-life Defined Benefit pension plan offered by an employer. In fact, the headline when I first reviewed the book, was “A Cure for Pension Envy.” Instead, its core reader may have lots of money in group RRSPs, Defined Contribution plans or 401(k)s that rise and fall with financial markets. Hence the subtitle of the second edition, published in 2015, is How to Use Product Allocation to Create a Guaranteed Income for Life.

In practice, this involves using a particular product – the life annuity – to make your nest egg more like a true DB pension. The authors go into some depth on Longevity and managing the risk of outliving your money, and also devotes a chapter that’s timely today: Inflation and “the great money illusion.”

The book surveys various kinds of Retirement products, chiefly life annuities but also traditional investments (stocks, bonds, ETFs, etc.) and tries to take the reader from mere Asset Allocation to what they call Product Allocation. 

Whether this succeeds in curing Pension Envy remains to be seen, but it’s a thought-provoking tome nonetheless and an essential part of a complete FIRE library. 

I’ve always like the phrase “Work Optional” to describe the state of being financially independent enough that you don’t have to work for money anymore, but nevertheless choose to for reasons like having a purpose, or structure.

Work Optional is also the title of another fine American book on Financial Independence, bearing the subtitle Retire Early the Non-Penny-Pinching Way. The author is an American woman, Tanja Hester, who “retired” early at age 38, along with her husband Mark, who was then 41. I put the word “retired” in quotes because, as is usually the case with advocates of the so-called FIRE movement (Financial Independence, Retire Early), Hester didn’t actually retire to do nothing.

Generally, I find that when FIRE proponents say they “retired” at 30 or 40, what they really mean is they quit working as salaried employees for a corporation, to launch what amounts to an encore career built upon self-employment. Often, their new work consists of blogging, writing books, and public speaking, with the content—as in Hester’s case—focussed on their own experience of how they were able to retire so early in life.

Work Optional is organized into three sections, with the biggest being the middle one about the financial mechanics of early retirement. The money part is no revelation. As Hester summarizes, it’s about spending less than you earn, investing the difference until it generates enough money to support your forever, then waving goodbye to mandatory work.

In one chart, Hester provides three Full Early Retirement scenarios with ballpark magic numbers ranging from US$1 million (to fund an annual spending goal of US$40,000), US$1.62 million (to fund US$50,000 a year), and US$2.7 million (to fund US75,000 a year). One thing I liked is Hester’s depiction of the gradations of Retirement. There’s traditional and full early retirement, career intermission, and Semi-retirement.

Obviously, in semi-retirement, you can still work a bit for money, which is where Work Optional comes into it. But, Hester writes, “We are still planning to act fully retired one of these days and like knowing that any work we do now is entirely optional and our financial plan doesn’t rely on earning another penny.” I view that sentence as the gist of the whole book and indeed the entire FIRE movement articulated by these and many similar books.