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moneysense.ca, 16/10/06
Book Review: Why Swim with the Sharks?
![[Cover Image of Why Swim with the Sharks]](http://www.canadiancapitalist.com/images/books/why_swim_with_the_sharks.jpg)
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.
moneysense.ca, 16/10/06
I read this book also, its pretty good. I’ve read a lot of financial advice books like this and I find that they all have pitfalls. But, I’m almost always able to glean some morsel of valuable advice from every book and this was no different. My personal recomendation is go to your library, there is usually a shelf or two of books just like this. Keep taking them out until you’ve read them all. Make note of the ones you like, and reread them.
There are quite a few books with this sort of theme in print. The ones I have read contain a mixture a very good and (in my opinion) very awful advice.
Typically the “good” parts of the advice are ideas for cutting fees living expenses, ways to increase your income after ceasing to work full time and, above all, a reminder that there is a lot more to life than the standard 80 hour working week.
The bad advice is, in my opinion, advice which I view as being highly risky. Retiring too early with too little capital leaves retirees extremely vulnerable to things going wrong with reduced prospects of recovery. Not making adequate allowance for your personal rate of inflation is a common weakness to a lot of these early retirement plans. Another deficiency is assuming that you can continue working part time – age and health issues may prevent this.
The central message I take from reading these sort of books is that if everying goes well, it is possible to retire sooner and on less than a lot of financial planners recommend – but you take some serious financial risks in doing so. I prefer the peace of mind that comes with working a few years longer and saving a bit more capital.
Did everyone just finish reading this book? I just finished two days ago.
Overall I found the book very similar to Free Parking, Stop Working, etc.
I like these books because they point out that depending on what you really want to do in retirement you may not need a lot of cash and can get started years earlier than most people. I think people assume they need to golf daily in retirement for some reason.
I agree that having a all GIC/ bond fund is not very smart, but you should have a higher amount in lower risk investments as you get older.
As to the risk of starting very early. Yes there is a risk, but I think that you have to be honest with yourself and ask. Can I live on only CPP/OAS if I have to during my later years? If the answer is yes, leave early. If not, put in more time and build up that fund. Really the choice is yours.
CPP and OAS are a pretty good basis for any retirement. CPP will give you an inflation indexed salary that should cover your monthly food bill and then some. OAS I am more concerned with, as it is paid out of government revenue. As the retirees go up so does the cost to the government. Thats the plus side to CPP it comes from a completely seperate pool of funds, that the government cannot pilfer from.
I am more hopeful that CPP will be there for me but who knows what will happen to the OAS 30+ years in the future. If it pays great, I’m just not counting on it.