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Email this10:17 am
August 9, 2011
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As a person on a very fixed income, no increases through employment, I have always bought GICs as they are the only thing I could count on. I lost money, a LOT of money, in fixed income funds years ago and not only, don't trust them, I think they are a rip off and the only ones getting richer are the managers and others of each fund, not the little guy. Mutual funds, for those on fixed incomes and who are 60+, receive CPP and OAS and what little income they can garner from investments, are the ones who are being gouged by the government, corporations, and the like.
Our power rates are going up, water rates 13% (the first hike which will end up being 20%), food costs are going up, it is a never ending battle.
If all the increases in the bare necessities are added up, they add up to a lot more than a pay raise (for the little guys) or an increase in CPP/OAS. Rates for savings are an insult and rates for GICs, whether from a bank or credit union, are also an insult.
If one had hoped to retire with a savings of $500,000 at 4%, they are now receiving at 3.5% a whopping $17,500 a year. As rates for GICs continue to decline, that net amount will drop even more. Even with CPP and OAS it is barely $40,000 for a two couple family with a modest income from those CPP/OAS's, there is little left to enjoy the "fruits of their labour" and cause stress, worry and anxiety for the years they have left.
I want to question the readers of this forum re the above, especially those 60+ who live on a modest income and who do not receive raises or increases of any kind except the pittance government gives each January 1.
Are GICs the investment of choice for you? Are you wary of investing in mutual funds, especially when you aren't "in it for the long term"?
I hope this discussion will prove interesting as we all cope with the realities we are faced with right now, the debt situations, the mid-East question, the riots in Europe...the list goes on, and they all affect our economies and people's lives.
regsmith1
11:41 am
November 8, 2009
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I am not 60 but getting there fast.... I also have seen mutual funds as a frustrating waste of time and money. I wonder why the managers get paid hansomly no matter what happens to the clients money? A few bad weeks in the market can wipe out critical capital that took years to build. A GIC is safe and you can count on the returns with no ripoff fund fees but the rates are so low, 3 maybe 4 percent. Have you looked into a REIT? They could be better than GIC,s and should be more secure?
12:04 pm
August 9, 2011
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Wow! I am so happy to see someone else with my concerns!
I haven't looked into REITs, have heard of them so will have to do some research.
Right now Achieve and Outlook have the best rates, 3.5. I worry about putting all my money into credit unions although they specifically say that all money, regardless of amount, is insured.
How true do you feel, members of this site?
Do you think if you speak to someone higher up, they will give you a competitive rate at bank institutions?
Thanks.
regsmith1
1:47 pm
March 25, 2009
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I'm 100% fine with the credit unions 100% insured policy myself, as soon as I can, I'll leave HSBC and dump my money there. It's a better rate than a 1 year GIC and you can move your money around easily.
About REITs, I was offered them but said "no thank you" because they are based on the housing market, which IMO, is a bubble, so I won't be investing in that.
Have a great day
6:13 pm
November 8, 2009
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the REIT i was considering was based on apartment buildings only and the income was rental plus the value of the units. Looks like the feds are going to at least keep interest rates low for now and possibly lower them??? How the heck can you get any lower? 3 percent GIC locked in may be considered a good return in the next few years....sighhh. shuda bought gold back when it was sub one thousand.....
9:28 pm
Hello regsmith1,
Many income funds out there do little to help the end investor - especially in this low interest rate environment. It really depends on your ultimate investment objective - to me, it seems like it is income generation with possibly a little growth. REITs can be volatile, so that is another factor you want want to look at - are you able to handle the dips?
A few more questions to ask - I apologize if they are too personal:
What frequency are you looking to receive your income?
How much income are you looking to generate?
Would you like the income to increase over time (for example with inflation)?
Are you both looking to leave any capital to your estate?
There are many factors that come into play, but those are some things you may want to think about. Good luck to you.
H
10:29 am
I am discouraged by low rates too, they will be around for a while now with the state of the economy. My husband and I have laddered GIC's, we have taken advantage of the Manitoba CU good rates and service.
We have tried mutual funds, stocks etc, but have decided to protect our capital with GIC"s instead. You might be interested to read about David Tralhair, I will check spelling, he is the chartered accountant that wrote books on GIC's and only GIC's , we like what he has to say..
10:35 am
Yes, I have requested the book from the library. I will be very interesting in seeing what he has to say.
I think in the long run, we are pretty well screwed when it comes to receiving the income we thought we would (we being seniors in general) and we really have to downsize and bite our tongues and hope we can manage.
When it comes to maturing GICs, it's pretty scary to see what is going on especially with the banks. Obviously they don't want our money. And the government wants you to save? The only good thing the government did was initiate the TSFAs. If I were a young person just starting out, that's where I'd be parking my $5,000 each year, even if I had to rob Peter to pay Paul!
Thanks for your input.
regsmith1
11:33 am
March 25, 2009
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kilarney - I wouldn't worry about not buying gold, it isn't as safe as they make it out to be to invest in.
Last time it was this high was 1981 at $1500ish per oz, then in less than 1 year time it crashed down to $350 oz. You needed 31 YEARS to get back your money! You couldn't sell it when it was dropping like a rock!
I don't know about you, but 31 years is too long for me to "break even".
Have a great day
5:59 pm
We are seniors, 67 and 62 respectively. In the last 10 years, just when we were doing the final push for our retirement, we were hit by Y2K, 9/11, and 2008 market meltdowns as well as Income Trust reversals by the Conservative government, which really hit us hard. Our mutual funds values dropped, yet the managers regularly paid themselves their MERs and administration fees. We have had it with CFPs (Certified Financial Planners). Almost 2 years ago after the markets recovered somewhat from the devastation, we had enough and finally took everything and put it into 5 year GIC/RRIFs...not much of a rate, 3.47, but at least it won't change, covered by FDIC, and we can sleep at night. At this point the rates can only go up. We just don't trust the markets out there!
We are taking the minimal amount out and creating our retirement pension by drawing it down..., yes, slowly drawing it down. It is not a lot and we are not wealthy, but after all, that's what the sheltered stuff was intended for. Our kids agree. We feel it should last the rest of our lives. We have some non-registered savings and TFSAs.
We'll just have to manage with this, along with our CPP/OAS and maybe a little GIS if possible. We own our home, have no debts and have down-sized to a smaller home and therefore cut expenses down as low as possible. It has to be a combination of things to enter into retirement. For us, we feel most comfortable with GICs. Wish the return was higher now, but at least the income is reliable...we know what we're getting with GICs and can plan accordingly. As seniors we agree with David Trahair.
We are fortunate to have OHIP here in Ontario, so unusual health expenses should not be an issue. If health costs and travelling are not issues, evidence shows that senior's expenses generally drop as they age.
6:24 am
Reg, what I discovered now, at 35 years old, takes most people their whole lives to figure out: the financial game is rigged. Always has been, always will be. You sound like you've had a vision of clarity.
Isn't it curious that North America is going into an "austere" period -- less spending money for you, fewer jobs for us -- and at the same time fees, taxes, tolls, rates, tariffs, duties, and levies keep going up up UP. And the fat cats get fatter and more smug while the working stiffs get stiffed. It's disgusting and morally repugnant. But since when do fat cats have morals, eh?
I'm sure this current state of things was planned some time ago. To bring up the developing nations, first take down the developed. Savings accounts? Somebody tell me how you're supposed to save a decent chunk when interest rates are sh** and the cost of living keeps rising. You're gonna trust a broker or a money manager with your dough? After the 2008 fiasco? Come on. In the money game there's no seat at the table for an honest man.
The best you can do is pay off debts, downsize, and live modestly -- not such a bad thing but hard to adjust to if you've lived a life of relative comfort.
1:46 am
March 25, 2009
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Brad Naylor said:
You're gonna trust a broker or a money manager with your dough? After the 2008 fiasco? Come on. In the money game there's no seat at the table for an honest man.
I feel the same way as well. I believe a financial advisor can come up with explanations of what is happening and way, but in the end, you are still playing the same game in the market. HFT (high frequency trading) should be outlawed and so should derivatives. But really what we need is education not regulation and teaching of right and wrong (morals) again.
It still appears to me, none of those who caused the financial crisis have learned ANYTHING from it. What did we do to "fix it"? We gave our future tax money to those who were responsible... smart.
Thus, a GIC isn't a bad idea.
Have a great day
1:53 pm
mike said:
Brad Naylor said:
You're gonna trust a broker or a money manager with your dough? After the 2008 fiasco? Come on. In the money game there's no seat at the table for an honest man.
I feel the same way as well. I believe a financial advisor can come up with explanations of what is happening and way, but in the end, you are still playing the same game in the market. HFT (high frequency trading) should be outlawed and so should derivatives. But really what we need is education not regulation and teaching of right and wrong (morals) again.
It still appears to me, none of those who caused the financial crisis have learned ANYTHING from it. What did we do to "fix it"? We gave our future tax money to those who were responsible... smart.
Thus, a GIC isn't a bad idea.
3:00 pm
Savings accounts have never provided growth, just security. GICs beat inflation only if you are paying almost no taxes – but for older investors in a time of widespread losses, who have extra deductions, they'll do as long as you're not dealing with RRSP withdrawals.
I bled out my RRSPs over the last few years when I realized they'd be a dead loss for me due to loss of income-tested government benefits, just enough to pay little or no taxes as I went. Into the TFSAs they went these last few years. I'm laddered and hedge with 5-year GICs and some 2-year or no-penalty cashables.
Money going into RRSPs at low tax deduction and coming out at high when I was needy cost me more than any other mistake in my financial life, and the arrival of TFSAs was a timely help. Next year I get my CPP - about $300 a month. Pfffft.
Take a close look at 2-, 3- and 5-year escalator deposits, but don't let them fuzz you with "average interest rate." Those are NOT straight-line rate curves! They dip, leaving you with less cumulative "area under the curve" earnings. You have to compare the TOTAL earnings with the TOTAL earnings of straight-line rates! I have done VERY well with escalators in falling-rate markets in the past, but that's not where we are now.
You also want compounded terms – so you have the maximum amount of money in that last year at the best rate. It makes a big difference. ALWAYS calculate total earnings.
I'm teetering on grabbing a 5-year 3.5% if I still can, but I've also been studying bond funds for almost a year now. Their rates usually beat GICs and a "massive" drop in bond funds is at most 3%, quickly recovered. unlike GICs, there are different types – aiming at stable income, growth or tax strategy, and even ETF ones that may qualify as 100% capital gains. You have to watch their risk mix and the terms of their holdings, as well as fees.
But I'm still cautious. Anyone have experience playing in that pool? I never touched equities or mutuals in the past.
RetirEd
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