“Help! My RRSPs are all over the place” + MORE Aug 10th

Ask MoneySense
My husband is retired and concerned that his money that is invested in his RRSP and TFSA is fluctuating too much. He is retired and is wondering if his funds should be in a GIC account as it’s paying 4% and not losing principal. He’s concerned in this volatile market.—Rodeen

Are GICs a good idea for retirement?

As you noted, Rodeen, guaranteed investment certificate (GIC) rates have risen to levels we have not seen in over 15 years. That said, they are starting to decrease and look poised to decline further over the balance of 2024 and into 2025. There are one- to five-year rates that are between 4% and 5%, and even slightly over 5% if you shop around. You may not get these rates at major banks, where rates may be 1% to 2% lower than that, but trust companies, credit unions and online banks generally offer a healthy premium to the big banks.

Are GIC rates going up in Canada?

At the start of 2022, GIC rates were just starting to rise but were still less than 3%…

As Canada’s financial services sector expands to include new online banks, credit unions, robo-advisors, brokerages and more, so does the likelihood that you have a ragtag number of registered savings plans with multiple institutions. For example, you may have set up an employer-sponsored plan at work, opened a guaranteed investment certificate (GIC) on your own to make a quick contribution before that tax year’s deadline, and invested in another RRSP through your financial advisor.

While in some sense this falls into the category of good problems to have—the more you sock away in retirement savings, the better—it might not be in your best interest to leave those funds fragmented across various providers. “When we talk about diversification, we mean diversifying by asset class. But diversifying by institution can actually be detrimental,” says Morgan Ulmer, a financial planner in the Calgary office of fee-for-service firm Caring for Clients.

To start, there could be a cost issue…