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3-year or 5-year TFSA GIC
March 27, 2024
10:55 am
Rick Condon
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One of my TFSA GICs just matured at EQ Bank. I'm considering getting a 3-yr (4.8%) or 5-yr (4.45%) GIC. Any opinions? This GIC will be for about $90k and I'm still working at 56. My current plan is to have all my GICs mature at the same time, when I'm 60, then re-evaluate my financial situation. Usually, my GICs are laddered but I figure when I'm 60 I'll have more savings and more options to maybe go in a different direction than GICs. I know none of us has a crystal ball, but your opinions are welcome especially if you're a seasoned financial wizard. 🙂

March 27, 2024
12:18 pm
Dean
Valhalla Mountains, British Columbia
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.
Sorry ... I don't got no Crystal Ball and I ain't no Financial Wizard, so your guess is as good as mine. sf-wink

Good Luck ... and may 'The Force' be with you ❗

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

March 27, 2024
12:27 pm
savemoresaveoften
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Based on the math, it sb a 4y GIC perfect fit 🙂

Your guess is as good as anyone else. But given 3y 35bps higher than 5y, I will opt for 3y if its me.

March 27, 2024
1:22 pm
Loonie
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Since nobody knows the future, and i would argue it's very uncertain right now, moreso than usual, why go long at all? I'd go for one or two years, where the rates are currently best. At least you know you'll be ahead of longer rates in one to two yrs.

I believe it was the Deputy-Gov of Bank of Canada who said the other day that there is a real risk that inflation may not come under control as anticipated by so many. And I would agree.

Do you plan to retire at 60?
Don't leave retirement income planning until you get to that stage would be my advice on that. There is no magical need to start new investments at 60, especially riskier ones - and almost anything is riskier than GICs. 60 is a round figure, nothing more.

March 27, 2024
2:04 pm
Rick Condon
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Loonie said
Since nobody knows the future, and i would argue it's very uncertain right now, moreso than usual, why go long at all? I'd go for one or two years, where the rates are currently best. At least you know you'll be ahead of longer rates in one to two yrs.

I believe it was the Deputy-Gov of Bank of Canada who said the other day that there is a real risk that inflation may not ocme under control as anticipated by so many. And I would agree.

Do you plan to retire at 60?
Don't leave retirement income planning until you get to that stage would be my advice on that. There is no magical need to start new investments at 60, especially riskier ones - and almost anything is riskier than GICs. 60 is a round figure, nothing more.  

Interest rates sucked from 2008-2022, so my guess is that we're headed back there fairly soon. I'd prefer getting a slightly lower interest rate for longer than getting a higher one for less time. I think 5% is my sweet spot and 4.8% (3-year) is close enough. Because it's tax-free income, I want to keep the money train rolling for as long as possible. One year definitely won't cut it.

No, I won't retire at 60 unless someone drops dead and leaves me some Bitcoin in their will. The house is paid off, so that's a plus. My hope is that I could retire at 62 or 63.

March 27, 2024
3:44 pm
AltaRed
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I would tend to avoid having maturities all happening around the same time. No one has a crystal ball, and while I don't believe interest rates will go as low in the future as they were in the past decade, there is risk of considerably lower rates at the time all GICs might mature in about 4 years.

I would hedge my bets and preserve some of today's rate offerings by going long, i.e. 5 years, on at least some of the holdings.

March 27, 2024
7:00 pm
Loonie
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While we all agree we have no crystal ball, you are convinced rates will fall and will remain low for next five years.
To my mind, this is illogical.

I just finished shredding a lot of old financial docs and was reminded that that for a long time the rates were significantly higher than in this century. Don't base your opinion just on what has happened since the 2008 debacle but do remember that virtually every financial "wizard" on the planet said they didn't see that crash coming. There is nothing inevitable about where rates will go.

However, since you clearly want to take the long route, you should probably just get on with it. Maybe put half in 3 yr for some minimal diversification.
If you have 90K at EQ, there is a risk you could exceed CDIC limits in a couple of years with interest. I can't remember if EQ has a workaround for that but I know Oaken does. You might consider moving your TFSA elsewhere.

I would agree that having everything come due at about the same time adds risk to your portfolio without much justification.

March 27, 2024
7:27 pm
AltaRed
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To clarify, if you were replying to me, what I said was 'lower' rates but not low rates. I also think the neutral bank rate going forward will be closer to the 2.5% range as they have been historically pre-2008, not 0.25% and not 5%. Pure speculation on my part for sure but I would hedge my bets and capture some of the ~4.5% five year rates at this time.

March 28, 2024
9:50 am
Rick Condon
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This is the value of forums. Thank you, everyone, for your thoughts. I've decided to ladder the $90k into 1-year, 3-year, and 5-year GICs. One last thing. My EQ Bank TFSA account now exceeds $100k. I was going to create a TFSA account at Motive Financial, where I have a HISA, but you have to phone in your GIC purchases. Not my cup of tea. I need to be able to purchase my own GICs. Anyone know a bank, other than EQ Bank, that allows self-serve purchase of GICs?

March 28, 2024
10:11 am
Loonie
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Oaken might, but I'm not sure as I haven't dealt with them for a while.
Bear in mind that most FIs charge a transfer-out fee, which could kick in when your GICs mature and you want to move the money again. EQ, Oaken, Peoples, Achieva and Hubert don't charge the fee, as far as I know, at least not yet. These fees go up regularly so you can expect them to be higher later. As far as I know, every other FI charges a fee. They add up over time.
Hubert won't allow the online deposit you want. I don't know about the others.
If no one else has a better idea, I suggest you ask at Oaken. You would be able to place all 3 GICs there by dividing between Home Trust and Home Bank issuers, which minimizes your financial clutter. Their rates tend to be about the same as EQ.

March 28, 2024
10:40 am
Warwick111
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Rick Condon said
This is the value of forums. Thank you, everyone, for your thoughts. I've decided to ladder the $90k into 1-year, 3-year, and 5-year GICs. One last thing. My EQ Bank TFSA account now exceeds $100k. I was going to create a TFSA account at Motive Financial, where I have a HISA, but you have to phone in your GIC purchases. Not my cup of tea. I need to be able to purchase my own GICs. Anyone know a bank, other than EQ Bank, that allows self-serve purchase of GICs?  

I have been buying Motive GICs via self-serve for years. There is no need to call in.
Other banks allow self-serve purchase of GICs include Tangerine, Outlook Financial, Achieva, Oaken..

March 28, 2024
11:40 am
gicjunkie
Ontario
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Just an FYI, in case you weren't aware, re insured deposit limits: Ontario credit unions have no limits for deposits to registered accounts. It's all insured no matter how much is invested. Non-registered funds are subject to the $250,000.00 insurance limit. Chartered banks still have the $100,000.00 limits for non-registered and registered accounts. We've been hoping for this to change for a long time now.

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