Plus: why the wealth gap just grew November 4, 2024 Sign Up | View online IN THIS ISSUE 8 min read 💸 A widening wealth gap 🚂 A derailed railway 🇨🇦 A (possible) Canadian stock surge If the line “I’m getting too old for this” doesn’t hit hard right now, it will one day. Below, check out some late-career money wisdom to get ready. | Warner Bros. THE WEEK IN MARKETS Why traders aren’t sweating the election America will finally choose its next president on Tuesday, which means that all the uncertainty around who will lead the world’s largest economy will, barring some unforeseen circumstance, at last come to an end. The markets don’t seem anxious — the major stock indexes are hovering around 2% of their all-time highs — perhaps because whoever wins will be inheriting an economy that’s the envy of the world, thanks to strong corporate earnings, falling inflation, and relatively low unemployment. Both candidates have made big economic promises — Trump wants more tariffs, Kamala wants more tax credits for low-wage earners — but getting elected won’t give either candidate superpowers. The key question for the markets isn’t so much who captures the White House but whether either party sweeps Congress as well. If no one emerges with total control, U.S. policy might not swing much, which might explain why markets seem pretty unfazed. We’ll see if Tuesday’s results change that. THE WEEK IN ONE NUMBER 4 billion People who use Meta products (Facebook, Instagram, etc.) each month, which is about half of the world’s population. This is one wild fact among many that we learned from Acquired podcast’s new six-and-a-half-hour deep dive into the social-media giant. WHAT HAPPENED LAST WEEK IMPORTANT The wealth gap between homeowners and renters is canyonlike. Startling data from StatCan’s latest financial-security survey: the median net worth of a family that owns a home, has no pension, and whose primary earner is age 55–64 is $914,000 — but if that same family rents a home, their median net worth drops by 98%, to just $12,000. There’s some causality here — people with higher incomes or inheritances are more likely to own — but the wealth gap has grown dramatically over the past few years, as homeowners’ wealth has swelled thanks to surging property values. We’ve covered the wealth disparity between renters and homeowners in the past, but these fresh numbers illustrate like never before the degree to which housing has become the primary wealth driver in Canada, even more than pension savings — and explain why affordability measures that might cause a drop in home prices never seem to gain much traction. Will Canada’s stock rally run longer than the S&P’s? At least one investment firm thinks so. Rosenberg Research told clients last week that U.S. investors “should strongly consider moving from New York to Toronto,” suspecting that U.S. markets could peak in December, while Canada’s rally might run into next year. Whether or not Rosenberg’s prediction is right (predictions are often wrong), it’s true that Canadian stocks look like a bargain right now: the TSX’s price-to-earnings ratio (a measure of value) is hovering around 19, compared to the S&P 500’s 29. But they’re cheaper for a reason: the TSX has returned 17% this year, versus the S&P 500’s 23% gain. U.S. stocks have risen so drastically that some traders believe they’re poised for a period of weak returns. We’ll see! INTERESTING The Alberta to Alaska railway gets derailed. In case you need a refresher: in 2020, President Donald Trump and former Alberta Premier Jason Kenney OK’d a proposal to connect the entire North American rail system to Alaska ports via Alberta by 2026, which would have made it wayyy easier to ship oil and other goods to Asia. Which sounded great! The trouble is that there might have been some fraud. Last week, the married couple behind the project was found to have misdirected funds — allegedly, they sent millions to the railway’s founder (to, you know, build the railway) who then, in turn, sent the money back into the couple’s personal bank account. The rail-ruining lovebirds tried to thwart an investigation into their actions, leaving profanity-laden voicemails for witnesses, but that worked about as well as their foiled scheme. —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🍞 Visits to food banks in Canada have almost doubled since 2019. Visits to actual banks virtually unnecessary. Source 🚨 Haribo “Tangfastics” candy recalled for containing wood pieces. Company must also explain what “Tangfastic” is supposed to be a play on. Source 🚰 British-Canadian computer scientist Geoffrey Hinton, aka the “Godfather of AI,” donates half his Nobel prize money to clean water charity. Source 🏆 TLDR’s Sarah Rieger wins Avenue Magazine’s 40 Under 40 award. Congratulations, Sarah! Maybe next time you’ll make 30 Under 30. Source CRASH & BURN TO THE MOON 💰 TikTok co-founder is now richest man in China. Wants to thank everyone’s worst instincts for making it all possible. Source 🐀 Toronto named Canada’s most rat-infested city for third year in a row. Vancouver rats re-thinking whole strategy. Source 🧑‍⚖️ JPMorgan suing people who took advantage of “infinite money glitch.” Defendants hoping for “infinite broken justice system” glitch. Source 🎢 Swedish creative agency builds a 200-foot indoor roller coaster for its employees, which is almost as fun as a raise. Source WHO CARES THE BIG IMPORTANT STORY FINANCE 101 How To Be Super Smart With Money If You’re Over 60 Earlier this year, we published the first two parts of a three-part series about how to navigate the different stages of one’s financial life. We intended to run the third installment over the summer, but, well, we got distracted by such irresistibly hot topics as picking the right type of mortgage or whether mutual funds are unfairly maligned. Now, with the end of the year approaching — a time when many folks try to max out their RRSP/TFSA contributions — we thought the moment was ripe to finish our life-phase project with some late-career/retirement money strategies. And even if you’re not there yet, you’d be wise to read on, because saving for a cushy retirement takes a lot of forethought. Let’s get to it: [1] Figure out if you’ve saved enough Earlier in this series, we said that in your 30s you should have a clear savings goal (a retirement calculator can help). One rough target is to sock away twice your annual salary by age 35 and thrice your annual salary by 40. Well, by the time you hit 65 (when most Canadians retire), you’ll probably want to have at least 13x your salary, according to many personal-finance pros. Which is a lot! But it’s doable if you begin early. How can you be sure you have enough to retire comfortably? There’s something called the 4% rule, which holds that you should be able to spend 4% of your savings each year and have enough to sustain yourself for 30 years. (For planning purposes, you should probably expect to live until age 95.) So, let’s say you’re 65 and have $1.7 million socked away. Four percent of that is $68,000. Can you live on the inflation-adjusted equivalent of that for the next 30ish years? If so, great! You will probably be able to retire (assuming you’re not in a lot of debt, etc.). It’s good to talk to a financial planner about this sort of stuff. [2] But remember that you can’t retire from home repairs When weighing whether to retire, keep in mind that retirement spending doesn’t just involve lengthy cruises and rewarding new hobbies (though it should certainly involve some of that). You’ll also have predictable expenses, like property taxes, along with unexpected expenses, e.g., major car or home repairs, pet emergencies, bail for your wayward-but-goodhearted grandson Chad. To prepare for such headaches, the standard advice is to have an emergency fund with the equivalent of a year’s worth of living expenses and to assume you’ll need to spend 1% to 4% of your home’s value each year on maintenance. [3] Learn to love bonds, but don’t totally ditch stocks Financial advisors suggest young folks invest in risky, high-growth assets, like stocks. Why? Because, history shows it’s much harder to hit your retirement goals if you keep all your cash in the bank. As you age, however, you’ll probably want to gradually de-risk by investing in less-volatile assets, like bonds. That way, a stock-market downturn won’t wallop your portfolio. By the time you hit your 60s, it’s generally considered prudent to keep somewhere between 40% to 60% of your holdings in bonds. But — and this is important — you don’t want to go too bond crazy, because remember: you might live until age 95, so you’ll likely need your portfolio to keep growing to stay ahead of inflation, which typically requires hanging onto some higher-growth assets. [4] Save on taxes with savvy withdrawals Let’s go back to the 4% rule: when it comes time to sell some of your investments, you’d be smart to do so in a way that minimizes your tax burden. If you’re like most Canadians, you’ll be eligible for Old Age Security and Canada Pension Plan benefits at age 65 and 60, respectively. OAS and CPP benefits are subject to taxes, as are withdrawals from RRSPs and employer-sponsored pensions. But TFSA withdrawals aren’t taxed. We’re telling you this because if you plan ahead, you can strategically withdraw money from various accounts to avoid paying more taxes than you need to. One common tactic is to withdraw just enough from your RRSP or other taxable retirement accounts so that, when the money is added to OAS and CPP/QPC, your annual income falls just inside the lowest-possible tax bracket. OK! That’s it! Six months after we started this three-part series, we’ve now covered your entire financial life. Good luck! —Ben Mathis-Lilley OTHER VERY GOOD READS 📺 25 Years of Indecision with Jon Stewart* Times have changed since he began on The Daily Show. Has he? | The Nation 🕸️ A Rock-Star Researcher Spun a Web of Lies And nearly got away with it. | The Walrus 💫 Two Black Holes Are Giving the Cosmos a Fright* A dead star is ripping apart an alive one. | The New York Times *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. POSTS OF WISDOM We’re not yet fully convinced this election will ever end… THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Ben Mathis-Lilley (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Clare Douglas (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (lifecycle marketing manager), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE As of October 29, 2024. Rates as compared with Canada’s five largest banks with client assets of $1, and a loan less than $100,000. Actual rate may vary. Wealthsimple charges P-0.5% for Generation clients, P-0% for Premium clients, and P+0.5% for Core clients. Wealthsimple's margin account prime rate is 5.95% for CAD and 8% for USD as of October 29, 2024. Subject to change. Interest is calculated daily, posted monthly. All investments involve risks. See here for details. TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. Any views expressed are those of the individual author and/or of Wealthsimple Media Inc., not of Wealthsimple Financial Corp or any of its other subsidiaries or affiliates. The content in TLDR is not investment advice, a recommendation to buy or sell assets or securities, nor any other kind of professional advice. TLDR is not a research report and should not serve as the basis for making investment decisions. Wealthsimple Media Inc. does not endorse any third-party views referenced in this content. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only. Always research before investing. © 2024 Wealthsimple Media Inc.