10 year GICs | GIC discussions | Discussion forum

It's an interesting idea.

I think I'd hold off on both the annuity and the GIC for a bit longer.

I've done a bit of reading on annuities. The consensus seems to be that unless you have a specific need to move more quickly the best time to buy them is in your mid-70s, and to spread them out a bit to average the returns.

The best reason to choose annuities is to ensure your income will be enough for as long as you may live, not so much to compete with other investments. Does that apply to you? For some people, it's not relevant.

The longer you wait, the better the rate you will get on the annuity. But, unless you buy one with a guarantee, they expire when you do.
On the other hand, at 75 you may not want to tie your money up for ten years since the major advantage is that you get it back at the end.

I think GIC rates still have room to grow, although certainly the Motive rate is well out in front at this time. In general, not much attention seems to be being paid to 10 year GICs.

These are just a few thoughts. I don't think there is a one-size-fits-all answer.

Assuming your wife is significantly younger than you, she could still buy the annuity when she gets older, to sustain her without having to make future decisions. If it's really for her benefit, then perhaps the decision should be based on her age more than yours.

Twenty year guarantee with residual 1.8 sounds pretty good to me, but I am not up on annuity rates.

An added benefit of an annuity for someone who doesn't want to be involved in decisions or is not able to do so is that it protects them from other people messing with their money (powers of attorney, dubious financial advisors etc.). They can't touch that annuity but they might decide to move the GIC funds into a mutual fund etc. and put her at greater risk.
And you can't trust the banks either. Many people who are not used to dealing with money decisions think they can trust their bank. My mother was sold a house-brand mutual fund by her Big Bank at age 98 and did not have a clue what was going on. When I came along as POA, they told me I was not allowed to sell it. They finally relented when she was almost out of cash after I'd been bankrolling her for several months. A real nightmare.

Bear in mind too that there are such things as annuity brokers. It's a rather complex field with a lot of options and fine print. If you haven't spoken to one, you may find it useful.

I understand this is not a simple decision, but if you and your wife are of similar age, it's not a given that she would outlive you unless you are in poor health (which is none of my business).
It used to be that, on average, wives lived about 3 years longer than husbands. I'm not sure if this is still true, but it would give her about five extra years on average if applicable.
But the planning must also include you and your own maximum life expectancy.

But no doubt you have your reasons to expect her to live on.
My mom is one of those who always looked about 20 or so years younger,, so I know what you mean. She's now 101 and I doubt she will ever look her age. At 89 (sic), she was questioned as to whether she qualified for a seniors discount. It was her proudest moment.

Getting back to the problem, I would strongly suggest you calculate how much she might need from an annuity in order to SECURE her needed income, considering other sources of income. It may be she needs this,and it may be that she doesn't. If she doesn't, you need to decide on other grounds. Perhaps you have already done this.
If you want to look into it further, I strongly recommend Frank Vettese's book on retirement income planning, the second edition. I can look up the title if you want.

I think of annuities, for retired people, as basically the same as pensions. If you need additional reliable pension income in order to be sure of having "enough", then this is the ticket.

It sounds to me like you understand the issues very well.
You probably don't "need" annuities, but they would provide extra protection.

Yes, I think you have named the major reasons why people don't want to think about annuities. For me, the reasons are not relevant, but I have also not bought any annuities - yet.

I suppose you are aware that the best bang for your buck with annuities is with non-registered funds. They hardly draw any tax at all as income because so much of the money was yours in the first place. With RIFs, the whole thing is taxable at marginal rate and there is no special treatment for capital gains or dividends.

Just one consideration but please remember 6-10 year GIC's are not CDIC insured.

blake said
Just copied from CDIC site.

Term deposits, including Guaranteed Investment Certificates (GICs), are eligible for CDIC deposit protection. For example, a GIC with an original term of seven years, would be eligible.  

That's the way I see it too ...

According to CDIC, the five-year limit on term deposits being CDIC-insured was removed April 30, 2020:

What were the changes to the coverage of term deposits?

Effective April 30, 2020, term deposits of more than five years are eligible for CDIC protection. The five-year term limit has been removed. Keep in mind that the deposits with terms of over five years would not receive separate coverage but would be combined with other deposits within the same category.

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