Thursday, February 2, 2023
No Result
View All Result
  • Home
  • Recent
  • Business
  • Economy
  • Investing
  • Markets
  • Personal Finance
  • Retirement
  • Tech
  • Startups
  • Insurance
  • Market Research
  • Crypto
  • Home
  • Recent
  • Business
  • Economy
  • Investing
  • Markets
  • Personal Finance
  • Retirement
  • Tech
  • Startups
  • Insurance
  • Market Research
  • Crypto
No Result
View All Result
Home Retirement

Is now the time for retirees to sell stocks and buy GICs?

Updates Finance by Updates Finance
July 11, 2022
in Retirement
0
74
SHARES
1.2k
VIEWS
Share on FacebookShare on Twitter


You might also like

Crypto Donations Now Need An Appraisal

Resort Report: Point Grace Resort, Turks & Caicos

Am I Too Old To Get Another Dog

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 10 years. There are one- to five-year rates that are between 4% and 5%. You may not get these rates at major banks, though, where rates are about 2% lower than that, but credit unions and trust companies generally offer a healthy premium.

Are GIC rates going up in Canada?

A year ago, GIC rates were less than 2%. The reason they are so much higher now is worth considering. The May year-over-year inflation rate was nearly 8% so the Bank of Canada (BoC) has raised interest rates to slow down spending and price increases. So, while a 4% GIC rate may seem enticing, it represents nearly a 4% negative real rate of return when adjusted for 8% inflation. 

GICs vs stocks as inflation hedges

Stocks tend to be a good inflation hedge but that is not always the case. The S&P/TSX Capped Composite Index was down 10% for the first six months of the year, and the S&P 500 was down 20%. Along with high inflation, there are recession worries and geopolitical risks weighing on the markets. 

Stocks are volatile in the short term and sometimes in the medium term but provide great long run returns for patient investors. The longer your time horizon, the less the volatility matters. But obviously, a retiree like your husband, Rodeen, has a shorter time horizon than someone saving for and many years away from retirement. And for some investors, the stress of short-term volatility may not be worth the opportunity to earn higher returns. 

As a result, asset allocation—how much to have in stocks versus bonds, or other asset classes—is highly personalized. 

If your husband moves out of stocks completely and into GICs, it could result in temporary stock market losses becoming permanent with no potential to recover that principal. So, although there is a risk of further stock market losses by staying invested, since stocks rise more than half the time, and especially so after falling a lot in value, there is also a risk of selling everything all at once. 

Although stocks have fallen a lot in value, in terms of their absolute level, both the TSX and S&P 500 are only back down to where they were in early 2021, less than a year and a half ago. Last year was a fantastic year for stocks, with the TSX returning 25% and the S&P 500 returning 27%. 

If your husband moves everything into GICs, Rodeen, that will reduce his future return expectations for his portfolio. This may reduce your retirement income or a potential future inheritance for your beneficiaries. As an example, over a 25-year time horizon, a 1% higher return on your investments may increase your pre-tax retirement income by about 11%. It could also increase the future value of an inheritance by 27%, ignoring taxes. 



Source link

Tags: BuyGICsretireessellstockstime
Share30Tweet19
Updates Finance

Updates Finance

Recommended For You

Crypto Donations Now Need An Appraisal

by Updates Finance
February 2, 2023
0

Cryptocurrency donations will now need a qualified appraisal to support your tax deduction.getty Cryptocurrency Donations More Complicated Donating cryptocurrency and getting a charitable contribution deduction has just gotten...

Read more

Resort Report: Point Grace Resort, Turks & Caicos

by Updates Finance
February 1, 2023
0

Advertiser Disclosure: This site is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as CardRatings.com. This compensation may impact how...

Read more

Am I Too Old To Get Another Dog

by Updates Finance
February 1, 2023
0

Will Skye be the author's last dog?Photo by Bart Astor Five Key Considerations With two exceptions, my wife and I have owned at least one dog throughout our...

Read more

The Fed Is Poised To Hike Interest Rates Again. Is It Enough To Keep Away A Recession?

by Updates Finance
February 1, 2023
0

(Photo by Samuel Corum/Getty Images)Getty Images Key takeaways The Fed is expected to introduce a 0.25% interest rate hike today, bringing the target up to 4.75% Inflation is...

Read more

How Does SECURE 2.0 Affect RMDs?

by Updates Finance
January 31, 2023
0

If you turned 72 in 2022, are you eligible for the SECURE 2.0 age change to age 73 for your first ... RMD?getty Readers are already asking questions...

Read more
Next Post

How to Trade Options on Webull 

Related News

Hinge plans to add video verification feature as ‘romance scams’ soar

October 26, 2022

Fintech and Bitcoin Payments Firm Zebedee Raises $35 Million From Kingsway Capital, Square Enix – Bitcoin News

July 19, 2022

Canada settles residential school reparations class action for C$2.8 billion By Reuters

January 21, 2023

Browse by Category

  • Business
  • Cryptocurrency
  • Economy
  • Insurance
  • Investing
  • Latest updates
  • Market Research
  • Markets
  • Personal Finance
  • Retirement
  • Startups
  • Technology

Get the latest Financial news on updatesfinance.com. Business news, Economy news, Investing news, Personal Finance and more.

CATEGORIES

  • Business
  • Cryptocurrency
  • Economy
  • Insurance
  • Investing
  • Latest updates
  • Market Research
  • Markets
  • Personal Finance
  • Retirement
  • Startups
  • Technology

Recent News

  • This Is Where Subway’s Co-Founder Left Half of His Fortune
  • Ascendant Resources Announces High Grade Copper Assay Results Supporting High-Grade Copper Corridor at the Venda Nova South Zone

Copyright © 2022 - Updates Finance..

No Result
View All Result
  • Home
  • DMCA
  • Disclaimer
  • Cookie Privacy Policy
  • Privacy Policy
  • Terms and Conditions
  • Contact us

Copyright © 2022 - Updates Finance..

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?