Smoke and Mirrors: Financial Myths That Will Ruin Your Retirement Dreams. 5th ed.

James D. Cameron is an associate professor of history at St. Francis
Xavier University in Nova Scotia.

This is a valuable, accessible, timely self-help book ideal for a public disillusioned by the recent financial meltdown. First published in 2004, it is now in its fifth edition. David Trahair is an experienced accountant who sets out to debunk the propaganda of the finance industry—advisors, banks, insurance and mutual fund companies, and brokers—who he claims will “suck the financial life out of us” and damage our long-term financial health.

The handy guide is divided into two parts of six chapters each. Part 1 is organized around five “myths” Trahair alleges are promoted by the financial advising community for its own benefit. Myth #1 asserts that a retiree will need at least $1 million and 70 percent of pre-retirement income. Trahair counters that lower expenses in retirement, the Canada Pension Plan, and Old Age Security suggest a much lower figure. Myth #2, that RRSPs are the “holy grail” of retirement, is also false; instead, debt reduction is most critical. Trahair considers Myth #3—the admonition against worrying about one’s investments—dangerous counsel; one’s investments and personal rate of return should be carefully monitored. Myth #4 depicts the tax collector as the enemy of the investor, but tax shelters and borrowing to invest are more lethal. The final myth wrongly claims that a person’s healthy financial future can be ensured through buying whole or universal life insurance.

In Part 2, entitled “Fighting Back,” Trahair recommends the following: (i) optimizing rather than maximizing RRSPs; an oversized one presents dangers of required, excessive withdrawals, estate taxes, clawbacks, etc; (ii) gaining financial knowledge to take control of one’s financial future; (iii) obtaining the cheapest mortgage and paying it off as soon as possible; and (iv) tracking one’s personal finances to identify unnecessary drains (handle “killer credit cards” with special care). The book includes a CD with six highly useful spreadsheets tailored to improve personal financial planning.

This book can help to equip the individual with important financial survival tools based on valid principles: develop a critical attitude toward the truisms perpetuated by the financial industry; eliminate debt; carefully track income and expenses; and acquire the financial knowledge necessary to ensure one’s own financial future. Perhaps a future edition will demonstrate how investors can benefit from the important Tax Free Savings Account introduced by Ottawa in 2009.