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Glenda is 63 years old and has all of her $600,000 in savings invested in GICs at her local credit union? Is her money safe?
Q. I live in Manitoba and have about $600,000 invested in GICs at a local credit union. I am 63 years old, retired with a pension, no debt and no mortgage. However, I still worry about this money and it has been hard for me to find an unbiased view on its safety. Can you help?
—Glenda W.
A. I think you can relax, Glenda. Your money is safe. Credit unions in your province have the Deposit Guarantee Corporation of Manitoba which provides an unlimited guarantee of all deposits. GIC’s are covered, but not stocks or mutual funds. If you were with a Canadian bank, your deposits would be covered by CDIC insurance, which protects accounts up to $100,000.
Your investment personality is risk-averse, which is totally fine. But there is one risk that you may not be factoring into your assessment: Inflation risk. Prices for food, gas and almost everything else are on the rise, but your GIC probably isn’t earning much to account for that.
RELATED: The safe, unloved, amazing GIC
You are in the enviable position of no debt, no mortgage and a pension, mitigating your risk significantly. If I were in your shoes, I would invest part of the nest egg in something that provides a bit more a return, either in the form of a dividend or some potential capital appreciation. It could be just 10%, but the added diversification would at least provide you with the potential for upside.
I don’t really expect you to take my advice on this, by the way. But do check to ensure that your conservative outlook isn’t limiting your ability to enjoy what you love—travel, hobbies, family or whatever it might be. Sometimes people fall into a scarcity mentality and forget that the purpose of life is to live it.
Bruce Sellery is a frequent guest on financial television shows and author of Moolala
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Well said remember you only live once and you can’t take it with you! I would invest into S@P and have some great dividend stocks and used the money and enjoy life.
My aunt and uncle is in a similar position. They have most of it, 85% of their money in all 3.30% 10 year GIC’s in a Manitoba credit union with RRSP’s and regular non-registered GIC’s and are able to take the $20,000 interest a year to do things they love and helps keep savings, investments up for future cost of living expenses.
They do have the other 15% in GIC’s, TFSA’s with some banks, trust companies that are fully CDIC deposits insured which brings in another $3,500 a year in annual interest.
Their CPP, OAS pays and small LIRA pays all their bills, taxes etc. and are still able to max out their TFSA’s yearly, $12,000 a year and use a GIC annual ladder of $10,000 a year.