You think that the Guaranteed Investment Certificates (GICs) Are they a safe choice for your retirement? Think again.

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The hidden dangers of GICs

  1. Returns so low that you lose money. GIC rates are often lower than inflationThis means that, every year, your purchasing power decreases, even if you feel you are securing your capital.
  2. A disastrous tax system that eats away at your profits. Interest on GICs is taxed at full rate, unlike capital gains and dividends which benefit from preferential tax treatment. The result? You pay more taxes for a lower return.
  3. A lack of flexibility that locks you in. GICs often restrict you to a fixed term. preventing you from accessing your money when needed.

How a lack of liquidity forced a retiree to sell his house

The case of Jacques, 72 years old

Jacques, a former entrepreneur, retired with complete confidence. $350,000 in savings, which he placed in 5-year GIC at 4%He thought it was a risk-free strategy that would allow him to enjoy life by withdrawing his interest each year while preserving his capital. But three years after the start of his retirement, an unforeseen event disrupted his plans..

An unforeseen accident

One evening, Jacques had a bad fall and fractured his hip. After his hospitalization, he was no longer able to live alone and was required to arrange for home care, at a rate of 2 500 $ per month.

His money was locked in GICs

Convinced he had made a wise decision by investing his money in GICs, Jacques hadn't planned for liquidity in case of an emergency. When he tried to withdraw his money to cover his medical expenses, he realized he couldn't access his capital before the GICs matured unless he agreed to pay hefty redemption penalties.

A desperate solution: sell your house

With no other source of liquidityJacques was forced to selling his house earlier than expected to gain access to funds. He was not not emotionally ready for this changeand due to market conditions, he has had to sell at a loss thus reducing his assets for the rest of his life.

What should be done instead?

  • Choose for bond funds offering better performance
  • Choose the dividend stocks for a stable income
  • Diversify with solid company bonds

Don't fall into the GIC trapThere are better strategies to ensure the security and growth of your retirement. Let's talk about it.