Guaranteed investment certificates (GICs) are a conservative way to set aside money for a specific goal. They return a guaranteed principal plus interest, come in a range of terms and payout options, and are available in both registered and non-registered forms depending on where you hold the investment.
GIC rates typically rise with longer terms. You can also choose between redeemable and non-redeemable GICs: redeemable GICs let you access funds before maturity with more flexibility but usually pay lower rates, while non-redeemable GICs often deliver higher returns in exchange for locking your funds for the term.
Registered vs non-registered GICs: Which should you choose?
When buying a GIC you must choose whether it will be held in a registered account or a non-registered account. This choice affects how the interest is taxed and how the investment fits into your broader financial plan.
Registered accounts shelter returns from immediate taxation. For example, funds held in a tax-free savings account (TFSA) grow tax-free and withdrawals are not taxed. Other registered options include a registered retirement savings plan (RRSP), a registered education savings plan (RESP), and the first home savings account (FHSA). You may hold new contributions or existing registered savings in these accounts.
Tax rules differ by account type. RRSP withdrawals are generally taxed at your marginal rate; converting an RRSP to a registered retirement income fund (RRIF) and taking regular income will be taxed accordingly, while early RRSP withdrawals can trigger withholding taxes. In an RESP, investment income accumulates tax-deferred and is taxed when paid out to the beneficiary.
GICs held in non-registered accounts produce interest that must be reported as income in the year it is earned and taxed at your marginal rate. For multi-year GICs, interest is typically accrued annually for tax purposes even if it is reinvested.
Why invest in GICs?
GICs are among the safest investments available in Canada. Your principal is guaranteed and many GICs are eligible for coverage by the Canada Deposit Insurance Corporation (CDIC) up to certain limits, providing additional protection if a financial institution fails.
GICs may be suitable if you:
- Are saving for a short- to medium-term goal and want capital protection.
- Prefer predictable, guaranteed returns over market volatility.
- Need a predictable stream of interest income or want to reinvest interest to compound returns.
- Want a fixed-income allocation that helps stabilize an investment portfolio during equity market downturns.
Terms generally range from 30 days to 10 years, with many investors choosing one- to five-year terms based on their objectives. Payout options include monthly, semi-annual, or annual interest, or interest compounded and paid at maturity to maximize return.
MCAN Wealth 1-year non-registered GIC
- Interest rate: 3.65%
- Minimum amount: $1,000
- Eligible for CDIC coverage: Yes
GICs and asset allocation
GICs can play an important role in a diversified asset allocation by providing stability and predictable income. Fixed-income investments like GICs are less volatile than equities and can act as a buffer when markets fall. Unlike bonds, which can lose market value when interest rates rise, GICs maintain their principal value through the term.
How much of your portfolio should be in fixed income depends on your age, risk tolerance, time horizon, and financial goals. Younger investors often hold a smaller proportion of fixed income, while those approaching or in retirement typically increase their allocation to protect capital and generate steady income. If you’re unsure, consider consulting a qualified financial advisor to tailor allocation to your circumstances.
How to start investing in GICs
Getting started with GICs is straightforward. You can buy them in person at a bank, credit union, or through online financial institutions. Compare terms, rates, minimum deposits and whether the GIC is redeemable. Decide whether to hold the GIC in a TFSA, RRSP, RESP, FHSA or a non-registered account based on your tax and savings goals.
Tools
Find a qualified financial advisor near you
Search a directory of credentialed advisors who offer financial planning and investment services across Canada to help match GIC choices with your goals.
Further reading on GICs
- How GIC interest rates work
- 6 times when a GIC is a smart investment choice
- What types of GICs are available in Canada?
- Why GICs are a good addition to an RRSP or a TFSA
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