3 year vs. 5 year ladder? | GIC discussions | Discussion forum

christinad said
Just curious if people are still doing 5 year ladders. I am looking at doing a ladder in my td brokerage account. Here are the best rates. Ha Ha

1 year 2.09
2 year 2.18
3 year 2.24
4 year 2.26
5 year 2.29

The difference seems so slight i'm not sure a 5 year is worth it. On the other hand i thought it may be confusing to switch from a 3 year to 5 year ladder if i would want to do that eventually. It wouldn't be for that large an amount but it would grow bigger as my fixed income portion grows.  

Do what you feel that YOU believe in!! And stick to it!!! Don't ask for advice as it will just be confusing. The difference from year to year is not that great although 1yr to 5 yr difference is significant. But will be a hassle changing from 3 yr to 5 yr ladder. And your funds are split in thirds.

I do a 5 year ladder, then eventually the majority will all renew at the 5 year rate. The best rate usually. But I would not invest in similar rates as you show as I have iTrade that have similar low rates and they take a commission of at least .25%. The ladder works good for me as I can always take the best 1 2 3 4 or 5 year rate at Oaken, Accelerate, Hubert etc. I run an Excel program for a summary of every GIC and shows my 5 year ladder results.

christinad said
I found out the transfer out fee is $135 so i don't think i'll be transferring out based on the amount i have.  

Depending on how much another FI wants your business, they may refund you the transfer out fee if you ask. I don't do it often but I'll move money when it's warranted, and I haven't eaten any transfer out fees for decades

I agree that it depends on how much you have in this account, how many GICs, and when they mature. None of this is clear.

However, if you have no intention of investing it in anything that requires a brokerage, then you should plan to bite the bullet and move the money out of TDDI. The longer you leave it, the more money you will lose on poorly paying GICs. Eventually that will definitely cost you more than $135; and, in the meanwhile, TDDI will likely increase the fee. You can't win by staying there.

Any FI that, itself, charges a transfer fee, will likely reimburse up to $50. If they charge $100, they may reimburse $100.

However, you really should do the math in your particular situation, especially if you have more than one GIC. With TFSAs being relatively new, it's unlikely you have a huge amount in each step of your ladder, which is why I suggest waiting until all mature.

You may lose a bit in the short term, but you will always lose in the long term with TDDI if you are only using it for GICs.

They will likely take the fee out of your TFSA, so you probably won't have to find new cash to pay them. You should ask them about this to clarify.

There is probably a fee for cashing out as well, and I wouldn't be surprised if it too is high. It might be the same as for transfer. You should check.

You might consider the rate specials currently offered at BCU , an Ontario credit union, if that works for you. I think they have branches in Toronto and Ottawa. See Nehpets' post.
You could set up the transfer this month, but it would mature towards the end of its final year rather than at the beginning of the next.
It's almost impossible to get all your registered GICs to line up to mature always in December unless you never move them. Any transfer moves the pointer ahead a couple of weeks or more.

Consider this:
$10,000 x 2.29% x 5 yrs = $11,198.
$10,000 x 2.85% x 5 yrs = $11,508.
Difference is $310, which is significantly more than TDDI's current transfer fee of $135.
You may not want to deal with BCU, but htere will be other offers. Oaken has 2.9% now, I believe. And I imagine you have at least 25K in this account, so there will be additional savings.

christinad said
Thanks, yes i agree its simpler to stick with a 5 year ladder. I'm also irritated as you can't buy gics online with td direct investing. I'm trying to dig up the transfer out fee but i would really prefer my gics mature in december so i'm not sure i want to transfer out.  

I tested several institutions with short term GICS (i.e. terms less than 12 months) to find how they work these days. Most are competitive. Stick with one that you are happy with. The difference between 1 year and 5 year is not significant. I may get 6/7 year GICS if my institution offers them later this year. I buy one GIC once a year. If I have 5 year GICS I have about 20% in each GIC. If X is term the 100%/X is amount in each GIC.

Isn't the whole point of laddering to average out total investment? I have one at 3.62% and the one I'm about to take out at 2.4% and my average combined rate is 3.01%....extrapolate over a 5 year ladder.

Loonie said

Nothing new, but I am hopeful and will wait.  

Can abandon this years rung for a better savings or short term rate ...it's not impossible. Reintegrate when maturity rolls around but you're gambling rates will go up (who knows...got in on CC's 4% special but missed Tangs' 3.2 special earlier), there's a missing rung in the ladder that can take years to reset, and it kind of defeats the purpose of setting it up and just letting it keep rolling over....if that's your goal.
Yeah...sux locking in for 2.4% for 5 years. Then again....maybe 3 years in, 2.4 will be looking pretty good. It's already better than the current 2.25 or 2.2 of the HISA leaders.