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Email this11:27 pm
August 5, 2014
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I was thinking about laddering GIC's for the reason of keeping money more liquid without being impacted too much from falling or rising interest rates.
Accelerate Financial seems to be the highest 1-5 year GIC ladder at this time. The average rate is 2.53%.
Outlook Financial, Maxa Financial, Steinbach Credit Union and Hubert Financial are as high as 2.48% and less for 1-5 year GIC ladders.
For CDIC deposit insurance, Oaken Financial is the highest with a 2.43% average 1-5 year GIC ladder available for all RRSP's, RRIF's, TFSA's, GIC's.
For TFSA's only State Bank of India Canada has 2.35% 1-5 GIC laddering and ICICI Bank of Canada for only TFSA's, RRSP's a 2.38% average rate 1-5 year GIC laddering.
The only other option getting close to these rates is 18 month GIC's at 2.25% but then what if interest rates drop more.
Unless you don't need liquidity or access to your money for 30 months, 2.50% and 2.60% 30 month GIC's at Meridian C.U. and Steinbach C.U. could work.
11:40 pm
August 5, 2014
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The highest monthly interest paying GIC ladder from 18 month to 5 years that I could find is Oaken Financial at an average rate of 2.38%.
I guess this makes sense for someone that needs monthly income. Every $10,085 will bring in $20.00 a month. This monthly option is only available for non-registered accounts.
1:51 am
October 21, 2013
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For registered accounts, Maxa has an exit fee of $75, which is higher than all the others on your list, I believe, although not sure about State Bank of India or Meridian. Maxa's rates do not justify this annoyance in my view.
Do you feel you need to keep it all in one institution? You can get better rates by using several institutions, but watch out for fees. You probably already thought of that!
It looks like you created your averages by adding up all the rates and dividing by number of years, but I would think it would be more accurate to weight the durations. A high 5 yr rate is worth more than a high 1 yr rate, is it not? While it is a laddered system, if you are starting today with all 5 steps on your ladder, I would think you'd be better off to put more emphasis on the longer term rates in deciding on one institution, if that's what you are going to do.
Another consideration is that not all of these institutions offer RRSPs or TFSAs. Accelerate probably does the best job overall, of offering different types of accounts and having generally better rates, except for their 5yr.
With a laddered approach, you are not supposed to ask the "what if?" question about where rates will be in a year or two. It's a couch potato approach in that you just keep rolling it over and let things average out on their own. That can be hard to stick to, but the assumption is that we never know which way rates are going to go.
Isn't it pathetic that 10,000 will get you $20/month! That really illustrates how difficult it is for people to live off interest.
8:30 am
December 23, 2011
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So far I have done a poor job of laddering and do endeavour to fix! But I do think the values to doing it are.
O one fifth of your GIC funds are available to you every year
O you catch the best rate (5 yr.) of the year
O you play/hope you are averaging out at a decent rate over the 5 or more different rates you may have
O good option for taking interest payments annually at the higher interest rate
There are other options of buying cashable, with penalty, GIC's to exceed withdrawal of more that a fifth of your laddered GIC's.
Any other good points?
9:22 am
February 17, 2013
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First of all....BIG fan of laddering. Worked well for me in my RSPs. All the top rates you are listing are pretty good for these times BUT, why would you want to lock in your TFSA funds for 5 years at 2.whatever percent? Peoples is still paying 3%, totally liquid and interest is paid monthly instead of annually. Not a fortune teller but I'm pretty optimistic rates will rise in the next 5 years (before a GIC you take out now matures), if not the next year or 2. It was great when rates for 5 year terms were 5-10 percent and you were rolling them over for 5 more years, but not so great when you're locked in for 2, 3 or 4 more years when rates are on the rise. Surprised the low rates have lasted this long, and anything can happen (Germany is flirting with 0% bonds), but I'm not locking in anything for 5 years @ under 3% right now. Peoples has a 1 year term at 2.4%, a miniscule difference in rate unless you're talking large sums, and it's not locked in for 5 years. Just my 2 cents.
9:42 am
October 27, 2013
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To the extent y'all have accounts all over the place seeking the best returns, I hope y'all are including your spouses (or executors) in this process along with a written investment statement on strategy and objectives AND a list of account numbers. Otherwise there could be a heck of a mess to clean up in the event you get hit by a bus later today.....or tomorrow...or....
There is much to be said for doing your survivors a favour with relative simplicity in investment processes and numbers of accounts.
P.S. I have followed a laddered 5 yr GIC* ladder in my RSP for years. It serves me well and allows me not to second guess the direction of interest rates. And it is all located in ONE discount brokerage.
* currently consists of about 7 GICs and 4 Corp Bonds, none of which go beyond 5 yrs (+/- 3 months) in maturity
10:10 am
December 23, 2011
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Rick said
First of all....BIG fan of laddering. Worked well for me in my RSPs. All the top rates you are listing are pretty good for these times BUT, why would you want to lock in your TFSA funds for 5 years at 2.whatever percent? Peoples is still paying 3%, totally liquid and interest is paid monthly instead of annually. Not a fortune teller but I'm pretty optimistic rates will rise in the next 5 years (before a GIC you take out now matures), if not the next year or 2. It was great when rates for 5 year terms were 5-10 percent and you were rolling them over for 5 more years, but not so great when you're locked in for 2, 3 or 4 more years when rates are on the rise. Surprised the low rates have lasted this long, and anything can happen (Germany is flirting with 0% bonds), but I'm not locking in anything for 5 years @ under 3% right now. Peoples has a 1 year term at 2.4%, a miniscule difference in rate unless you're talking large sums, and it's not locked in for 5 years. Just my 2 cents.
I agree with TFSA at Peoples...and plan to move mine to them if rates stay the way they are. But for non registered GIC's if you are not going to accept less than 3% what are you going to do? I have oaken, Hubert, Implicity, accelerate and outlook financial....and have no plans to do any more other than Peoples and am dropping Outlook Fianancial and one other...likely Hubert once I see how Implicity works out.
10:15 am
December 23, 2011
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AltaRed said
To the extent y'all have accounts all over the place seeking the best returns, I hope y'all are including your spouses (or executors) in this process along with a written investment statement on strategy and objectives AND a list of account numbers. Otherwise there could be a heck of a mess to clean up in the event you get hit by a bus later today.....or tomorrow...or....
There is much to be said for doing your survivors a favour with relative simplicity in investment processes and numbers of accounts.
P.S. I have followed a laddered 5 yr GIC* ladder in my RSP for years. It serves me well and allows me not to second guess the direction of interest rates. And it is all located in ONE discount brokerage.
* currently consists of about 7 GICs and 4 Corp Bonds, none of which go beyond 5 yrs (+/- 3 months) in maturity
Yup, seeking best returns......with today's crappy rates retirees have to get the best bang for their buck. And yes for every institution we deal at I have an envelope in safe keeping with all of the successor and beneficiary info. Along with a consolidated excel statement of every investment we have. PART OF MANAGING YOR MONEY
11:48 am
October 21, 2013
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It is a bit of a nuisance having accounts in several institutions, but they are simple investments. It's not as if we're buying vacation or rental properties or offshore investments or art. I would think that beneficiaries would be pleased that we'd left them a bit more money, particularly if larger amounts are involved. Probably not worth it in the early years, but most of us die in the latter years when we might have more money. .25% on 500,000 adds up after 10 years to well over $1,000. To me, it doesn't seem like too much work to track down 3 or 4 financial institutions, but it might be worth discussing with your beneficiaries/executors, if you have an easy relationship with them. If they don't want to be bothered with it and you don't really need the extra money, it would be best to stick with one institution.
Joint accounts can also be very helpful, depending on circumstances, so that they are automatically transferred on death to the co-owner of the account.
As AltaRed has said, it's really important to leave a written investment strategy. Your heirs may or may not be interested in how you managed to accomplish what you did, but if and when you become mentally incompetent, someone else will be making your decisions. It would be wise to leave the power of attorney some flexibility because they may not be able to spend the energy chasing down rates. Or it may be an institutional power of attorney, who will likely charge by the minute, wiping out any gains.
4:15 pm
December 23, 2011
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I can give a much more simpler and motivating example.
Excluding $150 self directed fees my advisers rates on GIC's has caused me/us to receive 2500 per year less for the last 10 years. On my own initiative I would have made 2500 x 10 plus 300 x 10 or 28000 more in my investment portfolio. And for anyone to not see that young or older...is just allowing easy money to blow away in the wind.
5:04 pm
February 17, 2013
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kanaka said
But for non registered GIC's if you are not going to accept less than 3% what are you going to do? I have oaken, Hubert, Implicity, accelerate and outlook financial....and have no plans to do any more other than Peoples and am dropping Outlook Fianancial and one other...likely Hubert once I see how Implicity works out.
Short term 1 or 2 years for spare cash. RSPs are coming due every year now and transferred my ones this year from ING and CC to CDF. Hoping CDF will offer the bonus rate for CDI customers again this winter/spring. Got a 5 yr for me and one for my wife @ 3.3% and 2 x 4 years for me @ 3.2 and 2.95% using the bonus rate.
5:34 pm
August 5, 2014
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Loonie, it is low, I admit $20.00 a month for a $10,085 GIC deposit. In 2007 and before when 1-5 year GIC rates were not much of a difference 4.5% to 5% someone could easily get $40 a month per $10,085.
Most of the higher savings accounts will probably earn $14 or $15 a month per $10,085 but what if they drop rates then what? $12, $10 etc. per month.
Maybe what I am doing is not GIC laddering but GIC staggering. This subject came up because we have about $50,000 which we want to have more liquid but not all coming due at one time in case we need some money.
This is our short term, liquid part of our money and is all non-registered money. We want to make our lives more easier not having many financial institutions for maybe 5 or 10 basis points more a year.
No matter what we do, it looks like 2.40% to 2.50% is what we can expect these days for emergency, liquid, shorter term money.
5:41 pm
August 5, 2014
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Rick, I hear you. It is difficult to find 3.00% or more these days like just 3 or 4 months ago. I have been doing well in sales the last 7 months so all my extra bonus money is going in TFSA's and RRSP's.
So far we have been able to get 3.10%, 3.05%, 3.00% with Oaken Financial for about $20,000 for the both of us.
We are trying to keep our longer term 5 year money at 3.00% or more. ICICI Bank of Canada looks to be 3.00% for RRSP's and TFSA's so far. We have some TFSA's already with them at 3.15%.
6:54 pm
October 21, 2013
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Jack, do you have additional accessible money in high-interest savings accounts etc that you could use if you ran into hard times? This matters because if you don't, then that needs to be attended to before you think about 1-5 year ladders where the money would be locked in. Most wags seem to think 3 to 12 months of emergency expenses should be accessible at all times, typically through a high interest savings account, money market fund or cashable GICs.
If you DO have this money set aside in addition to the 50,000, then it's reasonable to look at ladders.
However, there is something going on with interest rates right now which concerns me and makes me wonder if this might be one of those uncommon times historically where one might be better off not to do ladders. Over the last few months, rates have increased for short term GICs and savings account but have decreased for longer terms. Compare current situation even to last June and you can see that trend.
Laddering is based on the idea that 5 year rates are pretty well always better than 1 year rates. Therefore, once you get the ladder working, 20% of your money becomes available annually and you always reinvest it at the highest (longest) rate.
However, if the current trend continues, I am concerned that we might see a reversal of this rate trend. We are not very far now from seeing all the rates flatten out at around 2.5%. If long rates get to be less than short rates, then the laddering theory will no longer make sense.
7:29 pm
August 5, 2014
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Loonie, we already have $11,000 in a 2.05% cashable GIC at Oaken Financial and $5,000 in a Oaken savings account. This is why we are staggering this $50,000. This $50,000 represents about 30% of all of savings, investments.
We want liquidity on an annual basis at the very least above the emergency fund or reserve fund that many say everyone should have.
As for interest rates, I am too concerned about flat to lower interest rates. There was an article about Poloz and the Bank of Canada in the Financial Post today about this very subject.
It is now 8 years that we are saving and investing maxing out our RRSP's and TFSA's. We have 50% of this money in 5 to 7 year GIC's which are 4 and 5 year maturities now.
We have a small amount $12,000 in some dividend paying shares. The other 50% is in 4.25% to 4.75% zero coupon bonds with most in Canada, provincial which makes up 29% and 11% is in corporates. Most of these mature in 2023 to 2025 now as years have passed.
We our doing the opposite of most people we know which have 2 or more properties, rentals and much more debt than us.
9:00 pm
October 21, 2013
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thanks for the explanation, Jack.
Frustrating as it is, the choices we would like just don't exist.
The article with Poloz is indeed sobering. I just looked it up. Clearly he is in no hurry to hike rates. It's not really on his horizon at all as far as I can see. http://business.financialpost......das-poloz/
And so, on that basis, I would be inclined to carry on with the usual laddering principles but keep an eye out for the point at which long- and short- term rates start to converge. I don't know what we're supposed to do at that point though.
If you just want to use one institution for your $50,000, and it's not registered, Accelerate looks like a fairly good bet. Personally, I like Hubert because it offers best rates on the longest terms (4 and 5 years), which translates into the most income. I would mix Hubert for the longer terms with Peoples for the shorter ones. However, for $10,000 per rung of ladder, it may not be worth the bother of using 2 institutions, unless you already have an account with at least one of them, or plan to open a different kind of account in foreseeable future.
In another 5 or 10 years, when you have discharged your mortgage and saved additional money, it may be worth diversifying more in terms of institutions.
9:21 pm
August 5, 2014
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Loonie, we will be debt free within 18 months to 2 years as we only have about $40,000 left. We currently have a variable mortgage at 2.75% that matures in January-2016.
This is the only benefit we are really getting from low mortgage rates. We are fortune enough with 2 kids and good incomes. We are currently saving $2,700 a month plus bonus money when possible.
We max out RRSP's, TFSA's and RESP's, savings, non-registered investments. We used to only be able to save about $1,300 a month but with higher incomes and lower mortgage payments we are doing very well.
Yes, Loonie as we get more money, we will probably need to open other accounts. Where they are competitive, money will follow.
We may stagger some of the $50,000 in 30 month 2.50%, 2.60% GIC's, Meridian, Steinbach C.U. and Duca's 2.75% 40 month GIC as well.
9:32 pm
August 5, 2014
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Loonie, I can't remember when I read it but Macleans had an article about how low interest rates are having a negative psychological impact on savers of all ages.
They are more concerned about the money they will need in the future and low interest rates means they will need to save more for those are being prudent and proactive.
You can probably find it at MacLeans. I'm just guessing.
9:52 pm
August 5, 2014
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Loonie, First Calgary Financial has 5 year GIC's paying 2.35% but you have the option of redeeming 20% per year of principal without any penalties or interest lost.
The rate is not great but at least there is access to some money annually and nothing matures like GIC laddering or GIC staggering.
This is an Alberta credit union so I don't know who can open accounts with them but it is close to splitting 5 GIC's from 1 to 5 years, 2.35% versus 2.43% to 2.53% at most.
I was recently looking at other 5 year GIC rates and they are pathetic like Alterna 2.30%, Manulife Bank 2.35%, ATB Financial 2.20%, Coast Capital Savings 2.25%, Equitable Bank 2.35%, C.F.F. Bank 2.35%, Servus Credit Union 2.00%.
These pathetic rates are all locked in for 5 years. Terrible, dismal rates.
10:04 pm
October 21, 2013
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I think you'd best stop researching and lock in before the rates fall further!
The good news (apart from your low mortgage rate) is that you are on a very sound financial footing. I doubt you will ever have any serious financial worries, even with low interest rates. I can't say the same for your friends who are over-extended.
Please write your comments in the forum.