Friday, April 20, 2012

Why Swim With the Sharks: An Unconventional Guide to Early Retirement by Diana Salomaa and Henry Dembicki


Every once in a while you read a book that makes you think differently about about life. This is one of those books. In this easy to read work, some of the most common myths about retirement are debunked. Among the so-called "truths" that are shown to be false are the following: a) You need at least 70 per cent of your pre-retirement income to retire; b) You need a million dollars (or more) nest egg to retire; and c) Don't count on public pensions to meet the bulk of your retirement.

As made clear in this book, these "truths" are in reality myths that are perpetuated by financial institutions who have a vested interest in selling their products to the public. Consequently, instead of getting unbiased advice on how to save for retirement, Canadian's are constantly being bombarded by incorrect information.

For example, the 70 per cent rule quoted above is a common rule of thumb. Yet the problem with this rule is that it assumes that a retired person will have the same level of expenses when they stop working as during their wage-earning years. In reality, the daily cost of living for a retired person is much lower. To demonstrate this point ask yourself the following question: How much money do I currently live on once I subtract the mortgage, car payments and contributions to RRSPs, RESPs, CPP and EI? Now, what would my life be like if I didn't have any debt nor had to save? If you can pay off your house and car before you retire, then it's completely realistic to think that you can retire on less than 70 per cent of your pre-retirement income. This is even more true when we recall that a retired person can avoid spending money of CPP, EI, RRSPs and other savings.

Based on well-thought out arguments and practical advice, this book is a must-read for anyone who does not want to buy into the rat race. It also makes the indispensable point that money is only one component of retirement. Other factors, such as having strong relations with your family and friends, as well as having interests outside of the office, are critical to a happy retirement.

That said, I don't agree with everything in this book. For example, the suggestion to write down everything that you spend (even right down to the penny) seems excessive. I tried this technique and I found that it produces a lot of work for little return. Personally speaking, I find that a budget achieves the same ends without causing me to be overly anal. Overall, however, I found this book to be an excellent resource and recommend it.

4 out of 5 stars