EQ GIC rates up | EQ Bank | Discussion forum

Alexandra said Not bad, I'll probably go some for the 27month & the 3yr.....just in case things go badly.   

How do you define 'things going badly'? What are your decision factors?

HermanH said

How do you define 'things going badly'? What are your decision factors?  

I suspect she is trying to "time the market" and buy her GICs at peak interest rates - she is worried if the rates suddenly drop she will be very unhappy that she "missed the peak" and has to buy at lower interest rates in 2023. I think chances are that rates will not be higher in 2023 - recession could start anytime - in fact maybe it has already started but economists only confirm that after a few quarters of negative growth.

I wish my tax rate is only 10% lol

Vatox said
Nobody should ever worry about tax time, with regards to investments.   

Either this is poorly written or I just don't understand the intent but it is completely and utterly wrong.

After tax returns matter. Full stop.

It's the money you end up with in your pocket at the end of the day that matters. To think otherwise is foolish.

You must think about tax implications when investing every bit as much as any other consideration.

Post #7 is poorly written since to my knowledge, there is no such thing as a 10% income marginal tax rate., i.e. the lowest federal tax rate is 15% alone, never mind lowest provincial rate. The poster must be taking about blended 'average' tax rate of his/hers tax return and that is not what matters for the next dollar of income. It is always the marginal tax rate that one must consider with incremental investment income.

As Koogie says, one can only spend and live off after tax income, so it is the after tax income that ultimately matters. Regardless, I would rather pay taxes on $50k of taxable income than on $20k of taxable income and for that reason alone, seeking higher HISA and GIC rates has a net after tax benefit.

AltaRed said
I would rather pay taxes on $50k of taxable income than on $20k of taxable income

Funny you said that. I slowed down my RRSP withdrawals to keep me under $20K-$30K annual taxable income. With the Canadian government that can't stop giving money and more money to low-income population, makes sense to stay that way. I'll get my extra GST credit in November.

Back to the topic EQ. I am concerned interest rates might go down next year, so on January 1st I will be buying one and a half year GIC for all my TFSA at top rate available at that day. Currently, it is Tangerine with 5%, but if EQ beats it - I'll go with EQ.

As for cashing or not TFSA that sits at 2.5%, that depends of your anticipated income tax rate. If, for example, your marginal tax rate expected to be 20%, you must find at least 3.125% HISA for cashing out to make financial sense.
This is considering that new HISA interest income won't move you to higher tax bracket, otherwise HISA interest must be even higher.

Alexandra said

Why is it that you don't want to buy 1yr or longer TFSA GIC? Because you are going to be needing funds within a year or you think the rates will go up a fair amount on long term GICs in 2023? Just wondering.  

With the current rate of inflation @ 6.9%, the locked-in inaccessibility of GICs and income tax considerations, I am not attracted to a one year GIC @ say even the high 4.85%. I realize by keeping my funds in HISAs I am earning less (and paying a cost i.e. lower interest) but I am achieving a flexible position if some other investment comes up. So basically I have answered my own question - I will keep my funds in HISA or under one year GICs to maintain maximum flexibility. Perhaps the new Canada-backed Ukraine bonds which Trudeau just announced will have a competitive interest rate. (although I personally have my doubts.)

One shouldn't worry too much about taxes on investments. Worrying too much can lead to some really bad investment decisions.

One accountant wrote about a client who had a huge gain in his Nortel shares. Client asked how much the capital gain taxes would be if he sold. Apparently, his broker had asked him to consider selling and diversifying.

Accountant calculated the capital gains taxes would be over $100,000! Client refused to sell and thought his broker was out of his mind to trigger such a large tax liability.

Client no longer has that capital gains tax issue. But, client also no longer has a $400,000+ capital gain on his Nortel shares.

Those labour-sponsored venture capital corporation funds are another example.

canadian.100 said

With the current rate of inflation @ 6.9%, the locked-in inaccessibility of GICs and income tax considerations, I am not attracted to a one year GIC @ say even the high 4.85%. I realize by keeping my funds in HISAs I am earning less (and paying a cost i.e. lower interest) but I am achieving a flexible position if some other investment comes up. So basically I have answered my own question - I will keep my funds in HISA or under one year GICs to maintain maximum flexibility. Perhaps the new Canada-backed Ukraine bonds which Trudeau just announced will have a competitive interest rate. (although I personally have my doubts.)  

2.5% HISA vs 4.85% 1y, the cost of flexibility of 230bps loss is huge and not worth it if the main reason is to wait for raupte to go higher. U need a 7.2% 6 month rate in 6 months time to equate to a 1y 4.85%, ignoring compounding or day count just to keep it simple.