Book Review: Why Swim with the Sharks?

Subtitled “An unconventional guide to early retirement”, the book promises to “let anyone thinking about early retirement follow their dreams ten years sooner”. The book largely succeeds in showing that early retirement might be possible for many Canadians even if they haven’t amassed a huge nest egg.

It is easy to agree with a lot of the themes covered in the book. The authors point out that conflicts of interest are rife in the financial planning industry, fees take a big bite out of returns and it is in the industry’s interest, not yours, to perpetuate what they call the seven “myths” of retirement. The book contains worksheets to help figure out how close you are to retirement (taking into account the value of public pensions) and advocates frugal living and taking time to slow down and enjoy life (shades of Your Money or Your Life).

While I mostly liked the book’s message, I found myself disagreeing with some of the suggestions. It is probably true that OAS and CPP will pay benefits for people who are a decade or so away from retirement. But the book includes an example of a 41-year old planning on early retirement and counting on public pensions. I don’t share the conviction that you can be sure of the government delivering on something that will happen in another 20 or 25 years.

The authors also seem to be seriously underestimating life expectancy, which is about 77 for men and 82 for women. In fact, they call “You’ll live to ninety” one of the seven “myths”. The authors quote this “myth” to convince readers that they may not be so fortunate and they should consider retiring early to slow down and enjoy life. Fair enough. But the cold hard fact is that many people will live to be ninety and the longer you live the bigger your nest egg should be to withstand the ravages of inflation.

The worst piece of advice in the book, in my opinion, is the suggestion that the nest egg should be entirely invested in bonds or GICs. A low-risk, no growth investment like bonds seriously handicaps investors. They need to save a large amount of capital to make up for the lack of growth and must pray that inflation does not eat away their capital. In this context, it is possible to construct a well-balanced, well-diversified portfolio allocated according to a person’s risk tolerance that provides the growth benefits of equity markets without paying for any of the wealth industry’s baggage.

In summary, Canadians in their mid-to-late fifties who have a paid off house and a modest nest egg might be able to retire early but I think younger Canadians are rolling the dice if they take the authors’ suggestions.