Positioned as a “decumulation” product for retirees and near-retirees, it’s probably no coincidence that the 4% target is nicely in line with the long-established 4% Rule discussed in this column earlier.
While a targeted return is NOT a guarantee—unlike the guaranteed but puny rates paid by GICs these days—Vanguard expects the product will attract a fair amount of money from income-oriented investors suffering sticker shock when their GICs mature. Currently, many 1-year GICs pay around 0.5%, ranging from as little as 0.3% to no more than 1.1%. Even going out to 5-year terms, they’re typically paying only 1.4%, ranging from under 1% to 2% in the best case.
Technically, those GIC returns are guaranteed, but a cynic might say they’re “guaranteed” to lose money on an after-tax, inflation-adjusted “real return” basis…
Still, Canadians have generally remained cautious. Although 77% of us say we invest, nearly half (47%) are saving cash, with millennials most likely to shun the markets (57% are holding savings in cash), according to a BMO RRSP Study conducted by Pollara Strategic Insights.
Why the reticence? If a lack of insight is holding you back from investing, check out The MoneyShow Canada Virtual Expo, Sept. 29 to Oct. 1, 2020. Streamed live to your laptop screen, the show offers:
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