If you have savings in your bank accounts and/or cash in your RRSP, RRIF, TFSA, mutual fund, or brokerage account portfolios, be aware that guaranteed investments like GICs are very generous these days.
Thanks to the significant increase in the Bank of Canada’s interest rates, which have risen from 0.25% (March 2022) to 5.0% today, the various investments guaranteed by the deposit insurance offer high interest yields. tempting.
With our central bank’s interest rate likely approaching its ceiling, it would be surprising if yields on ultraconservative assets like GICs could rise significantly from current levels.
Some of the most generous banking institutions to savers today include:
– 1 year GIC: Equitable Bank (5.51%); Laurentian Bank and B2B Trust (5.48%); People’s Trust (5.50%); Tangerines (%); Home Trust Company (5.50%).
– 3-year GIC: Equitable Bank (5.32%); Home Trust Company (5.32%); CDN Western Bank (5.28%); ICICI Bank (5.27%); Laurentian Bank and B2B Trust (5.30%); Versabank (5.28%).
– 5-year GIC: Canadian Tire Bank (5.03%); Equitable Bank (5.05%); CDN Western Bank (5.02%); Home Equity Bank (5.08%); Laurentian Bank and B2B Trust (4.95%); Manulife Bank (5.00%).
For their part, the major Canadian banks offer returns in the range of:
– 1 year GIC: 5.40%
– 3-year GIC: 4.80%
– 5-year GIC: %
The Caisses Desjardins and Épargne Placements Québec offer lower yields.
ONE TIRE IS BETTER…
As the saying goes, “One in the hand is better than two in the woods.” If you’re a risk-averse saver, now seems like a good time to stock up on guaranteed investments, given the returns on offer.
We agree that investing in the stock market and stock mutual funds or balanced portfolios can make significantly more money than freezing your savings in GICs. But you still need to have risk tolerance and not panic or have nightmares when stock markets are in sharp declines.
From a tax point of view, interest income is disadvantaged compared to income from dividends or capital gains. While interest income from guaranteed investments is fully taxable, dividend income from shares is subject to a lower tax rate and capital gains are only half taxable.
However, if you invest in RRSPs or RRIFs, the income from all your investments (regardless of type) will be accumulated tax-free up to the time you make withdrawals and will be fully taxable according to your income level.
The only investment vehicle that allows us to avoid taxes on all income from our investments is the TFSA (Tax Free Savings Account).
