North American investors woke Friday morning to the shocking news that Brexit is a reality: the United Kingdom has voted to leave the European Union.
Stocks around the world are plunging while the price of gold is soaring.
As I write this just before 5 am, European stocks were down 8%, while gold was soaring almost 15%: the most in 42 years for British buyers.
One British friend, a banker, told me on Facebook that “it’s a very sad day for our country and Europe as a whole.”
Investors caught flatfooted
Were investors caught flatfooted?
“Absolutely,” she told me.
So what now? With 52% voting to leave and 48% to stay, the BBC says the report was decisive.
Here is the Economist’s report around 5 am: in an unprecedented move, the British weekly newspaper delayed publication of the print edition in order to get the historic vote in. They called it a “seismic shock.” It said this:
As soon as the results started to come in, the pound started to plunge. From around $1.50 before the polls closed, the pound dropped to $1.45, then $1.40, and then to $1.34, its lowest level since 1985. It was the worst day for sterling since the currency floated in the early 1970s. The shock was also reflected in equity markets, both within and outside Britain. The Nikkei 225 average in Tokyo has dropped 8%.
Pound suffers biggest hit since 1985
Making the rounds of social media this afternoon is a profile of Yours Truly created by Toronto-based robo adviser Wealthsimple.
It can be found at its Grow blog, titled One of Canada’s Favourite Money Gurus Tells Us How He Retired at 60 Without Ever Being Rich. We hope to run the piece in its entirety here at the Hub but in the meantime, social media waits for no one.
It was based on an interview conducted a few weeks ago and readers may find the prose as eclectic as the artists’ rendition of myself. But as one reader noted on Facebook, there’s plenty of personal finance “wisdom” in there (if I do say so myself): no surprise since it refers in part to last summer’s 7 Eternal Truths of Personal Finance that ran in the Financial Post, and which are revisited in the book I’m releasing this summer. Written with Mike Drak, it’s called Victory Lap Retirement. Link is to Mike’s new site, where you can preorder the book. We’ll resume running Mike’s Victory Lap blogs here at the Hub in a week or two.
The Wealthsimple profile also refers obliquely to the new book.
NewRetirement.com Q&A with me on benefits of Findependence
Also today, NewRetirement.com published a Q&A with me that also talks about Findependence and Victory Lap Retirement. Click on Jonathan Chevreau on the Benefits of Financial Independence. It does a pretty good job of summarizing what Mike and I describe in the book: the years of “slaving and saving” needed to get to the Findependence Finish Line (aka Findependence Day), and then the post-corporate Victory Lap phase that ensues.
MoneySense blog on Bonds
By Pat McKeough, TSINetwork.ca
Special to the Financial Independence Hub
There are a few retirement income planning steps you and your spouse can take to lower your taxes.
These steps work especially well if your spouse makes a lower income than you do.
There are lots of ways to shift investment capital and income to the lower-income spouse. This lets you lower your overall tax bill right now. It also ensures that each spouse gets roughly the same amount of income in retirement. That will cut taxes later, as well.
We’ve discussed other retirement income planning techniques like paying your spouse’s bills, setting up a spousal RRSP and swapping assets for cash or shares. Here are more ideas:
Reinvesting attributed income
My take on this week’s expansion of the Canada Pension Plan just went up at the Motley Fool Canada site: click on the highlighted headline, CPP Expansion too late for Boomers but a Win for their Children.
The blog (which is free to access) goes into more detail but in a nutshell, what it means is that once fully implemented, those who choose to collect CPP benefits at the traditional retirement age of 65 will receive as much as $17,478 a year, compared to $13,110 right now. That assumes someone who has is maxed out on the earnings ceiling (known as the Year’s Maximum Pensionable Earnings or YMPE) on which CPP benefits are calculated: currently $54,900 a year. The many Canadians who earn less than that will receive correspondingly less.
A key feature is that by 2025 this earnings ceiling will rise to $82,700, which means that those earning that kind of money will pay higher premiums but ultimately receive more benefits in retirement. Obviously, those who make less than that will pay lower premiums and receive lower benefits.