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Meridian 2.20% 18 month GIC
January 28, 2017
8:58 am
JenE
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Seen just now:

ENJOY ALL THE BENEFITS OF OUR 2.20% 18-MONTH GIC OFFER¹
Principal and rate are guaranteed
No fees
Available as a TFSA or RRSP
Deposits are completely insured
Plus your GIC investment will be automatically linked to a Good To Grow High Interest Savings Account so that you can continue to maximize your savings even after the completion of your term.

1. This is a limited time offer. Available on new to Meridian money to registered TFSA and RRSP plans only. A minimum deposit of $100.00 required. 2.20% is an annual rate. Interest is calculated annually and paid on maturity. All rates subject to change without notice. Other conditions may apply.

January 29, 2017
9:59 am
Loonie
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I would read this as meaning the interest is not compounded after the first year, and that it is not available on non-registered or RIF money.

The offer actually does meet my need at the moment, so I phoned to ask if they would reimburse my transfer-out fee, but they insisted I would have to go to a branch and speak to an advisor to get that question answered. I don't appreciate these kind of shenanigans. Either you do or you don't. If you have criteria, then say so. How difficult is that? Certainly doesn't require an appointment with an "advisor".

If you are turning 71 this year, do not buy this GIC as you will get dinged by CRA for not having converted it to RIF this year. It seems Meridian doesn't offer this deal for RIF. This also annoys me as I am finding that rates for RIFs are not always as good as for RSPs. I suppose they view it as a declining asset and therefore not as attractive to them. This may be shortsighted as people who have RSP/RIFs often have lots of other assets as well. It may also be another reason to liquidate your RSPs as soon as it becomes practical, tax-wise.

January 29, 2017
11:53 am
Norman1
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Loonie said
… This also annoys me as I am finding that rates for RIFs are not always as good as for RSPs. I suppose they view it as a declining asset and therefore not as attractive to them. This may be shortsighted as people who have RSP/RIFs often have lots of other assets as well. It may also be another reason to liquidate your RSPs as soon as it becomes practical, tax-wise.

I think it is because the minimum annual withdrawal requirement makes a single-GIC RIF more of a partially-cashable GIC.

January 29, 2017
6:11 pm
Loonie
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I don't really think that (should) make any difference, Norman. Some FIs do have the same rates for all categories, so the others could too if they chose to.

At any rate, if I do get this one from Meridian (RSP), I intend to simply cash it in when it matures as part of my process of getting rid of them as quickly as prudently possible.

I notice that CARP has the elimination of mandatory minimum withdrawals on its agenda for action. I support the idea of letting people make up their own minds about withdrawals. However, it is not without pitfalls, so I hope they are equally committed to educating people about decisions on withdrawals. The government will get its share regardless.

January 30, 2017
4:59 am
JenE
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I'm not in the market for RIFs or RSPs but am considering TFSA. Any thoughts or advice?

January 30, 2017
5:36 am
2of3aintbad
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One problem with GICs in a TFSA is what to do at maturity. Renew at the going rate at the institution, transfer to another, withdraw the cash? If you bought this one, it would mature in the middle of next year - end of July actually. So if you had a big expense around that time and planned to withdraw, fine. Otherwise, I wouldn't open a new account just for the 2.20%. That is separate from the argument of what to hold in TFSAs - equity index funds or ETFs in my opinion.

January 30, 2017
5:25 pm
Loonie
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I agree with 2of3, that the issue is what you plan to do with the money in 18 months. If you plan to cash it in, then no problem. But if you plan to transfer it somewhere else, there will almost certainly be a transfer fee of $50 or more. you may hope to negotiate with the receiving institution for reimbursement. Meridian will not offer you a superior rate on renewal. They will try to convince you to invest in something else, like a market-linked GIC. (That's what they tried to get me to do today when I phoned about the 18 month GIC). They are using this offer as a way to get some of your money, hoping they can entice you into other investments later.

However, if 18 months is your desired term, then go for it. Even if you have to pay the transfer fee, you may still be ahead of other current offers,depending on how much you are investing. If you are only investing the current year's allowable amount ($5500), then you would probably be better off in the long run to go elsewhere. Peoples Trust offers 2 years for 2.05 or 1 year for 1.95, and does not have any transfer fees yet (and I think they probably won't for some time, if ever). Similarly, Hubert offers 2.05 on 1 year and 2.0 on 2 years, with no transfer fees.
You need to calculate the impact of the fee on the amount you have, if you are planning on remaining invested somewhere.

January 30, 2017
6:13 pm
Norman1
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Loonie said
I don't really think that (should) make any difference, Norman. Some FIs do have the same rates for all categories, so the others could too if they chose to.
… 

It does make a difference to the FI. Entire principal of a regular five-year GIC is committed for the entire term and can be used to fund a five-year loan. That's not the case with a five-year RRIF GIC.

For an 80 year old holder of a five-year RRIF GIC, only 82% of the principal is committed for five years:

Year Principal GIC Rate Minimum
RRIF Withdrawal
Interest Paid Withdrawal
1 100.00% 2.400% 6.82% 2.400% -6.820%
2 95.58% 2.400% 7.08% 2.294% -6.767%
3 91.11% 2.400% 7.38% 2.187% -6.724%
4 86.57% 2.400% 7.71% 2.078% -6.675%
5 81.97% 2.400% 8.08% 1.967% -6.623%

An FI can choose to offer the same rate on both RRIF and RRSP GIC's. But, the two sources of funding are not exactly the same.

January 31, 2017
1:54 am
Loonie
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Your withdrawal rates may be off by one year. The rate for an 80 year old may only be 6.58 because, unlike the determination of when you need to convert to RIF, it is based on age reached the previous year., not the age you become in the current year. Most of the reference charts are somewhat misleading in this regard since most people seem to prefer December for their payout date. This saves many of us a year's increase over what we may have expected. And you have chosen an older person, which magnifies the withdrawal rate. It would be less for a younger person.
Be that as it may...

Another way to look at it is to say that they only pay the stated rate on the balance that is actually in the account. They would pay exactly the same rate on the existing capital, whether it is RSP or RIF, for the entire five years. Thus in year 5 in your chart for the person who is turning 85 this year, the balance in the account is $81,790, then the interest payout at 2.4% will be $1,967, not $2400 as it would have been in the first year when he turned 81. All of this information is known when the person takes out the GIC in the first place. It is not costing the FI any more just because there are mandatory withdrawals.

It may be argued that the FI has to match up a small amount of that money with shorter loans at lower rates. However, having watched rates for the last few years, I don't find that credible. There is too much evidence to the contrary, not to mention that it would be impossible to calibrate everything that precisely. Last summer, as many will recall, Oaken even offered the same rate on all or most years of GICs for a while. They have lots of other things they can do with our money.
They never pay interest on funds that have been withdrawn according to legal requirements.

FIs can choose to spread their costs and rewards however they wish. They do it all the time, else there would never be any promos, contests, free toasters or ipods (currently out of fashion), etc.; they would all have the same advertising budget; all would charge the same or nothing for transfers; and they would all base their dividends on the identical formula.

I can only say that (a) they have real options in how they choose to reward GICs, and (b) I prefer to deal with the FIs which treat me best. In most cases, in terms of RIF GICs, this turns out to be some of the MB credit unions and Oaken. They are also more likely to get some of my non-RIF/RSP money - which the stingier institutions don't seem to have figured out yet! Some FIs don' t even deign to offer RIFs (e.g. Peioles Trust). For most people, I think RSPs should be avoided They're more trouble than they're worth in the long run. Take your lumps (taxes) when you earn the money in the first place, and you are more likely to be able to keep it and use it on your own terms later.
I can only see two uses for RSPs: except for relatively small "rainy day" amounts which may get you through a period of low or no income when your tax rate will be at its lowest, and perhaps during your highest earning years when you know FOR SURE that your retirement income will be at leat one tax bracket lower than your current one and also lower than the OAS clawback threshhold. Rules can change, too, by the time you retire, usually not to the advantage of any funds which are locked into government plans. I also wouldn't use an RSP for a down payment on real estate; it's just too much debt and too much risk for a young family, as you are required to pay it back on schedule.

I know I'm a bit off topic, but I am just so fed up with the burden of trying to figure out how best to dispose of these RSPs, which I wish I'd never gotten, and the difficulties of getting a fair return for them. sf-frown If we still have any by the time our post-retirement "second lap" income ends (which is likely), I think I'll just buy annuities over about a 3 to 5 year period, as they mature, and then I can stop thinking about them (and stop complaining about them!). It will be a sunny day when that happens.sf-smile

I am glad CARP is taking up the case of the mandatory withdrawals. I hope they will also start raising the question of discrimination in RIF GIC returns. Seniors, who must keep an ever-increasing portion of their assets in fixed income, are being scr*wed with these horrible rates which cannot keep up with inflation and taxes even. Likely nothing will be done about it until the government starts noticing how it impacts things like GIS costs, age credit clawbacks etc.

January 31, 2017
5:10 am
Bill
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I agree, the benefits of RRSPs for the general population have been overstated by the investment industry, but I get it, they want your money long-term for the annual management fees, etc. But I know some young guys, professionals, who work on projects all over the world and then, being millennials, they take lots of time off to travel, etc. So they might make $200K one year or for a few years, then travel or chill and make nothing or next to nothing the following year or so. Some of them also say they intend to work non-stop for a few years, make their dough, and then just work as they like after that. (I tell them a key part of that strategy is to avoid long-term relationships, they seem to be well aware of that already! Smart!) Point: RRSPs are awesome for them - they contribute the max in high income years and claim the deduction, then take it out in a year when their tax rate is much lower. And millennials keep telling us they're not like boomers, they're going to follow their "passions" instead of being acquisitive, so RRSPs might be more generally useful to generations that intend to opt in and out of wage slavery (I don't blame them, many of them have ambitious, two-income boomer parents living in million-dollar homes so they know likely a pile of dough will be coming their way in a decade or two, just when it'll come in handy).

January 31, 2017
11:57 pm
Loonie
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It's great when we can agree, Bill!sf-smile

I also see the point that some millenials are making with on-and-off employment. It only applies to a small percentage of people, but it's consistent with my observation that the only people who should buy into RSPs are those who have a very specific exit plan in mind. Simply saying that it's for your "retirement" is not good enough, because you could be in for a lot of surprises. If it's insurance you want, then buy an insurance policy.
Eventually, most of those millenials will settle down one way or another, with or without mom and dad's money. At some later date it may be useful for them to get into RSPs again, if they are making lots of money and can clearly see how they will have significantly less income in retirement. Also, mom and dad may not cooperate. Sometimes mom remarries and creates havoc with the inheritance. Sometimes mom and dad live much longer than expected. I know people in their 70s who are still waiting (and running around after mom an dad), rather like Prince Charles waiting to become king! He'll be over 70 if that ever happens. And sometimes they spend the wad on health care.

I suppose it was the government that first cooked up the idea of RSPs. It was a win--win for them because they knew they would eventually get the tax anyway, and probably foresaw how they would make up any losses through final tax bills and people who forgot to convert to RIF in time (it still happens). It was also a win for the investment industry, who must surely have had a hand in the idea. The latter could equally make money off your non-registered assets, but those wouldn't be as large. It gave them more money to play with and thus more to collect for their own pockets. And this is why they always ask about your "invest-able assets" which includes money that isn't ever going to be yours but is good for them to play with and looks nice on the balance sheet.

February 1, 2017
6:30 am
Bill
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Loonie, I agree that it's good to agree, sometimes.

Another thing the youngsters have to consider is the recent enrichment of the CPP. More will be contributed to that pension plan, and the payouts will be better, so that becomes part of the overall decision re. how much additional to allocate for retirement purposes.

February 2, 2017
8:07 pm
Loonie
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Meridian has told me that interest will be compounded after the first year on the 18-month GIC.

February 3, 2017
4:21 pm
Save2Retire@55
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Tried to open this but got below. Anyone had the same issue?

Thank you for applying for a Meridian account.

Unfortunately, we are unable to complete your application at this time due to a problem with your personal information.

To open an account, please visit a Meridian branch with valid personal identification or call our Contact Centre at 1-866-592-2226.

February 3, 2017
8:01 pm
Norman1
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Yas said
Tried to open this but got below. Anyone had the same issue?

Thank you for applying for a Meridian account.

Unfortunately, we are unable to complete your application at this time due to a problem with your personal information.

To open an account, please visit a Meridian branch with valid personal identification or call our Contact Centre at 1-866-592-2226. 

 

That sounds like your credit bureau record may have a fraud alert flag on it.sf-surprised

Was your information compromised in a privacy breach, like the one with People's Trust in 2013 or Home Depot in 2014?

February 3, 2017
8:29 pm
Norman1
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Loonie said
Your withdrawal rates may be off by one year. The rate for an 80 year old may only be 6.58 because, unlike the determination of when you need to convert to RIF, it is based on age reached the previous year., not the age you become in the current year. … And you have chosen an older person, which magnifies the withdrawal rate. It would be less for a younger person.
Be that as it may...

Definitely possible that I was off by one year.

I agree: The withdrawal rate would be lower for a younger annuitant. But, the rate would also be much higher for someone older. Around 89 years old, the minimum withdrawal is over 10%.

Another way to look at it is to say that they only pay the stated rate on the balance that is actually in the account. They would pay exactly the same rate on the existing capital, whether it is RSP or RIF, for the entire five years. …. All of this information is known when the person takes out the GIC in the first place. It is not costing the FI any more just because there are mandatory withdrawals.

There are two aspects to the funding: interest paid and duration of the funding.

The example RIF GIC I gave is like the following hammer-shaped GIC ladder:

Year 1 2 3 4 5
Weight 4.4% 4.5% 4.5% 4.6% 82%

Unless the one-, two-, three-, four-, and five-year GIC rates are normally the same, a FI is paying more if it pays the same five-year rate for a RIF GIC. Doing so has the effect of paying the same five-year rate for the one-, two-, three-, and four-year portions the ladder.

I think it is a good deal for the customer when a financial institution offers the same rate for a RIF GIC as a regular GIC. sf-laugh But, it is understandable when they offer a lower rate on RIF GIC's or don't want to offer RIF GIC's at all.

February 3, 2017
8:45 pm
Norman1
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Loonie said

I suppose it was the government that first cooked up the idea of RSPs. It was a win--win for them because they knew they would eventually get the tax anyway, and probably foresaw how they would make up any losses through final tax bills and people who forgot to convert to RIF in time (it still happens). It was also a win for the investment industry, who must surely have had a hand in the idea. …

Did some digging. Historical findings in new thread A bit of 1957 RRSP history.

February 4, 2017
12:08 am
Loonie
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Norman1 said
Unless the one-, two-, three-, four-, and five-year GIC rates are normally the same, a FI is paying more if it pays the same five-year rate for a RIF GIC. Doing so has the effect of paying the same five-year rate for the one-, two-, three-, and four-year portions the ladder.

Yes,I know that. But, as I said, all is known at the beginning of the deal. They have places they can put that one-year marginal amount and do well with it, and so on. They know their options. And they know how often they will recoup the money in other ways. They can also choose to incorporate this truth in the rate they offer for both RSP and RIF rates. Last year, Oaken gave the same rate for almost all years for a while. I prefer the FIs that treat me equally well for both RIFs and RSPs. If they don't get my money at all, they won't make a cent, which is a bigger loss for them than paying equally for both unless, of course, they simply don't want my money. There continues to be competition.

There is more than one way of looking at it.

February 4, 2017
9:49 am
Save2Retire@55
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Norman1 said

Was your information compromised in a privacy breach, like the one with People's Trust in 2013 or Home Depot in 2014?  

Yes. People's Trust. I thought that was resolved.

February 4, 2017
1:29 pm
Norman1
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Yas said

Yes. People's Trust. I thought that was resolved.

People's Trust did plug the security vulnerability in their web site. So, information of new account applications after that are safe. However, the hackers were able to access and likely copied the information while the vulnerability was there.

According to their October 2013 letter, the hackers were able to get the name, mailing address, telephone number, e-mail address, date of birth, and social insurance number from the exposed account applications. So, the affected people will be vulnerable until that information become out of date.

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