# Cash in low interest savings acct?



## Blush (Jan 9, 2014)

I have $70,000 from house sale siting in a 1.5% savings acct and my bank is not suggesting any other type of investment? I am focussed on retiring in 10 yrs and would like to invest but nothing aggressive or high risk. Suggestions?


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## thompsg4416 (Aug 18, 2010)

Well I guess it depends on your comfort level and if you need to have access to the cash or not. With 10 years, I'd be looking at some mixture of blue chip div payers, GIC's and maybe cash. I'm not a financial adviser but maybe 20k or more in equities(Util,Big Bank,Pipeline) and about 50k or less in GIC's. I know nothing about GIC's but a quick look at TD rates shows they have a 5 year stepper GIC with an Effective Annual Yield of 1.834%. 

A quick google search found this: http://www.highinterestsavings.ca/chart/

You'd have to do your research on those institutions but a quick glance says you could squeeze out almost another half point just by moving it to another institutions HISA. 

Lots of options. I wouldn't settle for 1.5 over 10 years though that's for sure.


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## Ag Driver (Dec 13, 2012)

I wouldn't settle for 1.5% either. At the very least I would be looking into a GIC ladder.


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## leeder (Jan 28, 2012)

+1 on GIC ladder, but only for the very conservative if you are going to put the entire 70k there. My personal thoughts would be to start up an investment brokerage account like TD Waterhouse and build a nice easy to manage balanced portfolio with their TD e-Series funds. My breakdown for a balance portfolio with $70k would be $35k in laddered GIC, and the other $35k divided evenly between Canadian, US, and international indices. You can adjust up the fixed income portion and down the equity portion if you are more conservative.


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## james4beach (Nov 15, 2012)

If you want access to this money in 10 year timeframe (like you'll want to draw down that amount), I don't think you should put too much into stocks -- not even a balanced fund, since that's still 50% stocks. Stocks have to be left alone for long periods (like 20+ years) to get reliably good returns.

I also suggest a discount brokerage account because they're very flexible, and you can also purchase GICs through them. The GIC ladder is a very good idea.

Here's one suggestion for the 70k. Assuming you want a bit of stock exposure and don't have to fully draw the amounts in 10 years,

 10k into a low fee stock index like e-series Canadian index, or XIU (an ETF)... probably e-series best
 60k into a GIC ladder

Royal actually has this nice web page explaining the ladder process. So for example, once your discount brokerage account is open you would go and buy (modified slightly due to current market rates)

12k leave in your cash at 1.5%
12k into a 2 year GIC at 1.7%
12k into a 3 year GIC at 2.0%
12k into a 4 year GIC at 2.35%
12k into a 5 year GIC at 2.7%

What's nice about having the brokerage for the GIC ladder is that you can shop around for rates from different issuers, and also diversify by purchasing GICs from different banks (instead of having them all at one bank)


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## Blush (Jan 9, 2014)

Update on my initial post. Went to rbc and they tried to convince me to put the cash in a select balance mutual funds or a dividend fund. I already have $70,000 in that fund with a 2% met but they Justified the 2% MER fee indicating that rbc has the lowest fees of all banks. Said if I go rbc direct invest they would not offer any advice! it is risky, a lot of fees involved and I would be on my own. The mgr of investing was quite rude and abrupt actually, I wasn't impressed. I also met with td and they promoted a similar mutual fund portfolio but did offer the advice of a financial planner with td Waterhouse who could get the mewer fund and some other funds. I am leaning towArds rbc direct investing? Thoughts and input is greatly appreciated. Thanks.


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## m3s (Apr 3, 2010)

Blush said:


> They Justified the 2% MER fee indicating that rbc has the lowest fees of all banks. Said if I go rbc direct invest they would not offer any advice! it is risky, a lot of fees involved and I would be on my own. The mgr of investing was quite rude and abrupt actually, I wasn't impressed.


Of course. You're only dealing with mutual funds salespeople here. The only "advice" they will give you is to buy their own products to make the most $$$ for themselves. Any advice you get in this thread will be far more useful. I would pool this $70k with the other $70k already in mutual funds into a discount broker with some GIC and ETF/big blue chip divvy payers. It's not like it all has to be liquidated on year 1 of retirement either.


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## Nemo2 (Mar 1, 2012)

@Blush....I imagine you'll get the same basic advice here as you did when you posted on FWF as Tango1.


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## humble_pie (Jun 7, 2009)

it's worth noting that OP has at least $140k investible funds, not 70k.

if it were myself & i wished to avoid risk, i'd divide it something like 100-110k GIC ladder, 30-40k into a canadian equity e-fund or etf with eligible dividend tax credit distributions.

(aside to james4) i'm no expert on GIC ladders, that's for sure. 
but wouldn't the right way to build one would go like this:

year 1 (if building a 60k ladder) (adjust figs for 100k):
- 12k into a 5-year GIC at 2.70% 
- 48k in HISA or 1-year GIC at 1.5% or best obtainable

year 2:
- 12k into another 5-year GIC at best obtainable
- 36k in HISA or 1-year at best obtainable

year 3:
- another 12k into 5-year at best etc
- 24k in HISA or best 1-year etc

year 4:
- another 12k; by this time 48k is now safely invested at highest possible rates
- 12k in best HISA etc

year 5:
- final 12k into 5-year GIC at highest possible rates etc
- machine is now fully built & operational

this does take a while to build but in the end such a machine will remain permanently invested at maximum 5-year rates.


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## james4beach (Nov 15, 2012)

humble_pie, that overall allocation sounds pretty good to me (1/4 in equity, 3/4 in GICs)

I was feeling like some colour so I made this spreadsheet comparing the methods of building up a GIC ladder
https://docs.google.com/spreadsheet/ccc?key=0Ak1GkIfBO77ydHppcU9yMklPUFc2TWdrd3J6NERsMWc&usp=sharing

This is assuming current interest rates, assuming they remain as is (and they're hard coded in the spreadsheet) but I wanted to understand the effect of these strategies, like the one you mentioned.

My method seems to provide 1% higher returns -- buying all GICs at the start. What happens with your method is there is lots of money left in HISA (grey in my table) which earns less than it could earn in GICs.

Of course if you're expecting rates to change in one direction that's a different story, but then you're in the realm of forecasting interest rates which is notoriously difficult to do.


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## humble_pie (Jun 7, 2009)

nice table james4! nice spring green colour, too.

yes i do see how your approach is better. Mine had too many $$ sitting in HISA for too many years, your plan bumps these $$ up to higher interest levels. 

i take it, though, that as each shorter-term GIC matures, investor rolls the principal into a 5-year, though? so it still takes 5 years to get the full monty up & running smoothly?


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## james4beach (Nov 15, 2012)

Yup the key seems to be that the sooner you can get the cash into an elevated rate, the better.

Yes as the short term GICs mature, then you only buy 5 years from then on. In one year you don't have any cash lying around any more, but yes it's still 5 years until the full thing is up and running consisting entirely of 5 year GICs.


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## Blush (Jan 9, 2014)

james4beach said:


> I also suggest a discount brokerage account because they're very flexible, and you can also purchase GICs through them. The GIC ladder is a very good idea.


Mr. Beach, thanks for info on the GIC ladder and the spreadsheet. I am a Direct Investor with RBC Direct now and can purchase this GIC Ladder myself. My plan is for retirement in 10 yrs but I may need access to some cash in the interim. What are your thoughts on this 5 in 1 GIC? http://www.rbcroyalbank.com/products/gic/5in1.html

Also, thoughts on investing cash into a non-registered account? What are the implications? I am maxed out this yr in my TFSA but have lots of room in my RRSP. 

Any advice you can offer is greatly appreciated. TKs.


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## rikk (May 28, 2012)

Re: GICs ... don't know about RBC Direct, but with Qtrade the choice of GIC providers is limited, e.g., I've currently a 120 day GIC in my RSP account at 1.6%, the closest I can come to holding "cash" there. And about GIC laddering ... I'm currently setting up a ladder here ... http://www.peoplestrust.com/en/ ... and it'll be 1 year GICs currently at 2.3% purchased monthly, bi-monthly, tbd ... until the rate changes, then it's look for the best deal elsewhere, e.g., Alterna had a good deal a while back ... or ... why a 5 year ladder if a 1 year ladder suits my purposes.


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## Blush (Jan 9, 2014)

Thoughts on this new product for GIC's: 
RBC is offering this new GIC product...Introducing the RBC Canadian Banking MarketSmart GIC, the RBC U.S. MarketSmart GIC and the RBC Canadian Utilities MarketSmart GIC - These three new GICs provide you with the higher potential returns of the stock market combined with the guaranteed security of a GIC. With nothing to lose and more to gain, you will: Receive a minimum return even if the market performs poorly. Earn a maximum potential return of up to 9.00% per 3-year term* if the market performs well. Enjoy 100% protection of your initial investment.

http://www.rbcroyalbank.com/product...l?ProspectID=1AF0B77750B64820A18FAB0B95DD6141


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## Spudd (Oct 11, 2011)

So the maximum you can get is 3% per year and the minimum is zero. vs 2.5% per year guaranteed at Accelerate or Outlook. That does not seem like a good deal.


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## Canadian (Sep 19, 2013)

Blush - the RBC products you're referring to are market linked GICs. There is a recent thread with much discussion surrounding the pros and cons of this type of product. Here is the link:

http://canadianmoneyforum.com/showthread.php/18505-Market-Linked-GICs


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## the-royal-mail (Dec 11, 2009)

*RUN AWAY* from those market-linked GICs!!!

The 5 in 1 seems much better.

Glad you saw through the BS of the bank advisors who tried to sell you their MFs. You made the right move by going with DI. Far lower fees and you are in control.

Generally, I agree that you should not be taking too much equity risk at this point, so the GIC or HISA option is a good one. RRSP is worth considering for you since you can access it fairly soon (10 yrs).


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## Blush (Jan 9, 2014)

the-royal-mail said:


> *RUN AWAY* from those market-linked GICs!!!
> 
> The 5 in 1 seems much better. Glad you saw through the BS of the bank advisors who tried to sell you their MFs. You made the right move by going with DI. Far lower fees and you are in control.


I am still unsure what to do with lump sum of cash. I will do more reading.

Yes I finally saw the light thanks to the info from this forum. The banks continue to push their balanced MF's at high MER's with low rates of return. The only time I heard from my bank advisor was when I poked, prodded and/or threatened to switch banks. Even then things weren't explained properly, I guess they "bank" on clients inexperience and lack of investing knowledge. The knowledge is out there and one has to take control and get involved in their own investments. It is an intimidating process all the same as I do worry about the risk factors involved and whether or not I've chosen the right funds. With the help of this forum and the Canadian Couch Potato I believe my investments are in better hands. Again thanks to all on this forum who choose to offer their expertise as many decide not to share their knowledge. Very much appreciated.


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## Blush (Jan 9, 2014)

the-royal-mail said:


> *RUN AWAY* from those market-linked GICs!!! RRSP is worth considering for you since you can access it fairly soon (10 yrs).


Thanks "the-royal-mail"!! I have lots of room in my RRSP ($40,000) so perhaps for next yr I will contribute more to my RRSP and direct the tax refund into my TFSA? Thoughts?


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## the-royal-mail (Dec 11, 2009)

Great idea!


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## wendi1 (Oct 2, 2013)

Blush: that is what I do (so I think highly of the strategy). The question is, when you take the money out of the RRIF or RRSP, will you pay more tax than you saved?

If you are not making much now, for instance, but will get a hefty pension when you retire, you might want to stay out of RRSPs. Most people do not have this problem, but run your own numbers to make sure you will not regret using the RRSP contribution room.

Note that you can make a big contribution this year, but carry forward some (or all) of your deduction to future years.


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## gibor365 (Apr 1, 2011)

wendi1 said:


> Blush: that is what I do (so I think highly of the strategy). The question is, when you take the money out of the RRIF or RRSP, will you pay more tax than you saved?
> 
> If you are not making much now, for instance, but will get a hefty pension when you retire, you might want to stay out of RRSPs. Most people do not have this problem, but run your own numbers to make sure you will not regret using the RRSP contribution room.
> 
> Note that you can make a big contribution this year, but carry forward some (or all) of your deduction to future years.


I doubt many people can get " a hefty pension when you retire" that will exceed current gross earnings 
If difference between spouses salaries is significant, just contribute into Spousal RRSP


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## Blush (Jan 9, 2014)

wendi1 said:


> Blush: If you are not making much now, for instance, but will get a hefty pension when you retire, you might want to stay out of RRSPs.


Hi Wendi, tks for the info but I won't have a hefty pension....just an average public servant so I need to have a decent rrsp to compensate.


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## Eclectic12 (Oct 20, 2010)

wendi1 said:


> ... The question is, when you take the money out of the RRIF or RRSP, will you pay more tax than you saved?
> 
> If you are not making much now, for instance, but will get a hefty pension when you retire, you might want to stay out of RRSPs...


I can see planning what to put where but it seems to me few people should complete avoid an RRSP. I am not aware of a lot of people who will have a higher income in retirement. Sure, RRSP contributions made at a lower income level in one's 20's will be taxed more heavily but the trade off is that one has had 30+ years for the full dollar to grow tax deferred so I expect this is more of a benefit than any additional taxes paid.

Then too, the people I've seen writing they regret their RRSP contributions regret it for the OAS clawback. 
Of course what seems to be overlooked, is that it's only about 2% of seniors who have all of OAS clawed back.




Blush said:


> Hi Wendi, tks for the info but I won't have a hefty pension....just an average public servant so I need to have a decent rrsp to compensate.


Make sure to include all sources of income as some of the people who regretted their forgot to include CPP and their investments in the estimate of their retirement income.


Cheers


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## lonewolf (Jun 12, 2012)

Any money invested in a bank is @ high risk. The bank has it down to a science to take as much money from you as possible to add to their billions of profits. I would deal with a credit union & buy GICs


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## gibor365 (Apr 1, 2011)

_Then too, the people I've seen writing they regret their RRSP contributions regret it for the OAS clawback. 
Of course what seems to be overlooked, is that it's only about 2% of seniors who have all of OAS clawed back.

_
imho the first priority is max up TFSA as income from it is not taxable and (from my undestanding) there is no OAS clawback... The couple that maxing up TFSA for 20 years , considering it will stay 5500 and 5% annual gain, will have only in TFSA about 400,000 that (with same 5%) gives annual income 20K


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## fatcat (Nov 11, 2009)

Blush said:


> I am still unsure what to do with lump sum of cash. I will do more reading.
> 
> Yes I finally saw the light thanks to the info from this forum. The banks continue to push their balanced MF's at high MER's with low rates of return. The only time I heard from my bank advisor was when I poked, prodded and/or threatened to switch banks. Even then things weren't explained properly, I guess they "bank" on clients inexperience and lack of investing knowledge. The knowledge is out there and one has to take control and get involved in their own investments. It is an intimidating process all the same as I do worry about the risk factors involved and whether or not I've chosen the right funds. With the help of this forum and the Canadian Couch Potato I believe my investments are in better hands. Again thanks to all on this forum who choose to offer their expertise as many decide not to share their knowledge. Very much appreciated.


oaken has 2 products which i would consider: an 18 month gic at 2.3% and a 1-year cashable after 90 days at 2.05 ... thats where i would go if i needed to place 100K

especially the 1-year cashable which costs you only $250 to have liquidity and guaranteed return for a full-year


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## gibor365 (Apr 1, 2011)

fatcat said:


> oaken has 2 products which i would consider: an 18 month gic at 2.3% and a 1-year cashable after 90 days at 2.05 ... thats where i would go if i needed to place 100K
> 
> especially the 1-year cashable which costs you only $250 to have liquidity and guaranteed return for a full-year


I'd just open account in ING (Tangerine) , all new money until July 31 get 2.5% on Saving acc,
and People Trust offers 1 y GIC for 2.3%


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## fatcat (Nov 11, 2009)

gibor said:


> I'd just open account in ING (Tangerine) , all new money until July 31 get 2.5% on Saving acc,
> and People Trust offers 1 y GIC for 2.3%


to me, i would rather pay the $250 as an opportunity cost and have the money liquid after 90-days ... on 50K the costs is only $125 

but yes, 2.3 is good for a 1-year place


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## BC Eddie (Feb 2, 2014)

What about putting it in Tangerine until July 31. Then, if as expected, Tangerine drops their rates, Hubert may still be offering their one year term GIC that is cashable after each three month period that is paying an annual average of 2.35%.


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## fatcat (Nov 11, 2009)

BC Eddie said:


> What about putting it in Tangerine until July 31. Then, if as expected, Tangerine drops their rates, Hubert may still be offering their one year term GIC that is cashable after each three month period that is paying an annual average of 2.35%.


hubert is provincially guaranteed ... oaken is cdic guaranteed


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## gibor365 (Apr 1, 2011)

BC Eddie said:


> What about putting it in Tangerine until July 31. Then, if as expected, Tangerine drops their rates, Hubert may still be offering their one year term GIC that is cashable after each three month period that is paying an annual average of 2.35%.


I'm just moving my triple digit cash amount between PT and ING and CIBC, when ING will drop rate to 1.35, I will move all cash to PT who gives 1.8% on HISA (and will buy some 1 year GIC for 2.3%) or maybe CIBC eAdvantage if they have promotion.... and when ING/Tangerine will have new promotion will move money back there....


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## birdman (Feb 12, 2013)

*Hubert deposit Guarantee*

Hubert deposits are not provincially guaranteed but are guaranteed by the Deposit Guarantee Corp. of Manitoba. In BC, and perhaps some other provinces, the deposits in a credit union are guaranteed by the provincial government without limit.


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## james4beach (Nov 15, 2012)

frase said:


> Hubert deposits are not provincially guaranteed but are guaranteed by the Deposit Guarantee Corp. of Manitoba. In BC, and perhaps some other provinces, the deposits in a credit union are guaranteed by the provincial government without limit.


Yes, this is worth remembering. Manitoba does not stand behind deposits.
http://www.greatponzi.com/guide/is_money_safe_in_bank.html



> For instance Manitoba's guarantee corp states that “There is no legislated requirement for the Manitoba government to provide financial support to the Deposit Guarantee Corporation of Manitoba.”


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## dawne (Jan 18, 2014)

Blush said:


> I have $70,000 from house sale siting in a 1.5% savings acct and my bank is not suggesting any other type of investment? I am focussed on retiring in 10 yrs and would like to invest but nothing aggressive or high risk. Suggestions?


If you haven't already, you could max out TFSA (3% at People's Choice. They also offer term rates for 1 yr to 10 yrs, so you could hold some and deposit the rest.) Their e-savings offers 1.8%, so I'm also watching for better HISA somewhere. That's what I did with mine, but feel a little nervous having it all in one institution. I wanted to keep some liquid too so decided not to invest in anything long term at this time.


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## the-royal-mail (Dec 11, 2009)

Thanks james for that reminder about Manitoba.


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