Long term GICs | Motive Financial | Discussion forum

Seems like Motive is taking benefit of the changes to CDIC, where the 5 years limit on GIC is lifted.

Such a long term GIC is a good alternative to anyone that invest in bond, as the rate is still significant higher than federal gov's bond of the same term.

I was just looking yesterday at the Motive 10/9/8/ yr GIC rates as well.

I do see what you are saying loonie about never being able to spend the money.
You say EQ has a 2.7% rate. So, if you invested $100K (I know that is a lot), you would get $2700 per year if you opted to be paid out annually. Or, if you wanted, you can get paid monthly (at Motive anyway) if you are over 65. Kind of like a pension. The last few years up until March of this year, I was taking annual payments on my GIC's.

Dean said
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Hmmm ... I guess I'm cut from a different cloth. I could Never talk myself into Locking money away in a GIC (or anything else) ... for 10 whole years ❗

I even struggle with the concept of a 5 year GIC ... LOL

'Carpe Diem'

Dean

  

It depends on your priorities.

When I started saving in the early 1970's I bought 5 year RRSP GIC's. CDIC insured them up to 5 year term. In the 1980's when interest rates were high I purchased 17 1/2 and 18 1/2 year Ontario Hydro strip bonds yielding 11 3/4%. I cashed them after about 13 years when interest rates dropped to the 6-7% range.

I have views today about buying GIC's.

I am creating a 5 year ladder with my non-registered GIC's. The advantage is about 20% of that part of my portfolio matures each year. I take out interest on maturity.

If you have GIC's in a RRIF I see no problem having any maturity for GIC's. The FI cashes the GIC with the lowest interest rate each year with no interest penalty.

It is the liquidity factor that makes me purchase these long term GIC's.

In a TFSA OK to have a 10 year ladder approach if you are less than 62. They mature annually at age 72. Like withdrawal from RIFF.

I passed that age so I will not consider. Never put much into TFSA since the option did not exist when I worked.

Many options to consider when making each investment.

Enjoy the day.

Rick said

Loonie said
Rick, I don't know what you should do, but don't lose sight of the fact that (presumably) rung 1 will be maturing next year and you will get another kick at the can each year. That's the point of a ladder in the longer term. But in the shorter term, when you are setting up, it can be more uneven.

Thanx Loonie. Rung 1 was started in 2018 so it's not due until 2023. Rung 2 was started 2019 and 3 will be 2020. With the new long term offerings, I can complete the whole 5 year ladder this year by purchasing a 5, 6, and 7 year, and renewing the 6 and 7 year for 5 years when they come due. OR....get a 5 and 6 year and see where rates go in the next year or 2 for the final rung in 2023.
Kamelia was no help at all  

I started the 5 year ladder in 2018 on part of my portfolio. At the time I had no specific plan. I purchased about 20% 1 year, 20% 2 year, 20% 3 year, 20% 4 year and 20% 5 year. I remove interest on maturity date. It will take several years to have exactly 5 GIC's.

To complete the 5 year ladder purchase a 1 and 2 year term. When each matures buy a 5 year. You have many options.

I thought about converting a 5 year ladder to a 10 year ladder. How do you do this? When GIC matures split principle in 1/2. Purchase a 5 year and a 10 year. It still takes 5 years to convert. Not sure I want this. The difference in premium from a 1 year to a 5 year is not a big difference.

I think maybe you guys set up your ladder initially in a different way than I did.

I tried, where cash available, to set it up so that one would mature each year right from the beginning. It's pretty much all in place now for non-registered. I'm still working on RIF and TFSA, but I have laid out a plan for them which I am following. This gives me enough flexibility annually if I should decide to start on another strategy or kind of investment.

The tricky part, for me, is how many rungs to put on my ladder (how many years' terms). Regardless of rates, a long term investment like 7 or 10 years is harder to justify the older you get once you're in your 70s. I have read that some people cut down to 3 rungs in their 80s and one person said he only bought one-years from his mid-80s on. I guess it boils down to whether you are ever going to use this capital or do you see it strictly as annual income supplement. That could be a hard decision to make.

While I can see the value of putting some of one's money into the longer terms (over five years), I wouldn't want my ladder to be weighted in that direction. I would want to fill in the ones maturing over the next five years first, to allow for possibility of more desirable rates then - of course these may not materialize!

Strictly Canadian Western Bank (Motive is a division/branch) as far as I'm aware.

In the beginning, I used four different banks for GIC's. One bank I would buy 5 GIC's one maturing each year say in January. The other bank same thing only maturing say in April, then the other in July etc. So every quarter one would mature. Eventually, I would have a GIC maturing each month. Pretty well at each maturity I would reinvest at the five year rate. Sometimes though, if a 2 or three one was at a better rate, I would go for that instead. There are certainly different ways of doing this. If you have the money and you know you aren't going to need it, and the rates happen to be super good, then buy all five yr terms, after five years you will have the five year ladder. If you just need a little money, have the GICs interest paid out annually instead of at maturity.