Jim Otar’s Pearls of Wisdom

Guest blog by Steve Thorpe.

Yesterday, I posted a review of Unveiling the Retirement Myth: Advanced Retirement Planning based on Market History by Jim C. Otar, a financial advisor, Certified Financial Planner, and engineer.

In this second post, I share a few quotes that epitomize the reality-based themes and critical insights woven throughout Otar’s text:


    • Proper retirement planning requires planning for the worst.
    • This book is based on my research of retirement planning involving one hundred and nine years of market history. What you read will be depressing.
    • When it comes to retirement finances, the three main risk factors are longevity risk, market risk, and inflation risk.  A retirement plan must minimize each of these three risk factors to be considered a well-designed plan.
    • Disregard any financial research, any words of wisdom, any gibberish from financial gurus in the media that “markets eventually recover in the long term.” They are not telling you the full story: Yes, markets did always recover in the past, but your distribution portfolio retained a permanent loss for the rest of your life.

    • Many strategies that sound logical end up failing the test of time because markets are seldom logical.
    • Keep in mind that these findings are based on market extremes of the last century. The current century may create market extremes beyond those extremes.
    • If the marketing material of an investment says something like “our sophisticated propriety computer model…”, then avoid that fund. Either they are lying … or if their model is indeed “sophisticated”, it may eventually backfire with your money in it.
    • Portfolio management expenses can significantly reduce portfolio longevity. Like inflation, its effect is not readily apparent in a short period of time.
    • Your lifelong savings are “shared” between you and the financial industry.
    • [Regarding borrowing money to invest]: Do you really think you have any chance, especially if the underlying premise of leveraging is: “Win, we share. Lose, we don’t care!”


    • In a distribution portfolio, the withdrawal rate is the most important contributor of portfolio longevity.
    • If you thought you were safe withdrawing 4% starting at the beginning of 2008, you are likely in for a rude awakening.
    • The concept of “long–term” exists only in accumulation portfolios. There is no such thing as “long term” in a distribution portfolio. As soon as your periodic withdrawals start, “long–term” ceases to exist, and the “luck factor” takes control of the outcome.
    • The most important element during the seed money formation years [generally, the range is between the ages of 20 and 40] is to invest with discipline, month after month, year after year.
    • A high PE ratio is an indicator of overvalued equity prices. Eventually, such trends go through a correction. If you are just retiring, this correction will create a bad sequence of returns in your portfolio.
    • The answer to the question, “How much can I take out of my portfolio?” is not a pleasant one: “A lot less than you think”.
    • If it turns out that the client’s assets appear insufficient for lifelong income, then my first suggestion is delaying his retirement. In some cases, working two extra years can turn an unsuccessful plan into a successful one. My next best suggestion is to reduce withdrawals to below the sustainable withdrawal rate.
    • Stay out of debt.
    • Work: do what you love and love what you do.
    • Trust others only as much as you need to and only after they fully earn it.
    • Keep your life simple. Stick to stocks, bonds, inflation–indexed bonds, cash. That is all you need. Complicated investments can blow up in your face.
    • Investment education: make this an ongoing process.
    • If you don’t have the time or inclination to do it yourself, then find a good advisor.


  • Luck is by far one of the most important factors in retirement planning. It is second only to the withdrawal rate for influencing the portfolio life.
  • Plan on being unlucky and if it turns out that you are lucky, only then increase withdrawals. Believe me; it works much more safely that way.

Pearls of Wisdom from an author who’s done the research to back his opinions.

About the Author of this post

Steve Thorpe is the founder of Pragmatic Portfolios, LLC, a fee-only Registered Investment Adviser based in Durham, North Carolina specializing in developing sensible investment plans integrated across all of a client’s investment accounts. He also chairs the Research Triangle Park, NC area chapter of the “Bogleheads” investment interest group. Observing conflict-of-interest laden behavior of various charlatans from Wall Street has always inspired Steve to help others navigate the sometimes-treacherous investment landscape.

1 thought on “Jim Otar’s Pearls of Wisdom

  1. Pingback: Investing Book Review: Jim Otar’s Unveiling the Retirement Myth « Portfolio Investing Blog: Portfolioist

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