[brad]

The bulk of my retirement money is in index funds, but I do have a small portion in bonds and another small portion in a GIC. The GIC is short-term (three months), and I'd like to transfer it to a new RRSP account at another institution. I've never had a GIC before so am not sure how this works: do I cash in the GIC and then have a certain amount of time to reinvest it in an RRSP at the other instutition, or do I have to arrange a transfer directly between the two institutions? Do I have to report anything at tax time?

 

[stardancer]

I am assuming the GIC is held within an RSP. Go to the new institution to complete the RSP transfer forms (can't remember the number or the name of the form). On or close to the maturity date, the new institution will send the forms to the current one for the transfer. The actual transfer can take a week or two. You cannot touch the $$ yourself, or this will constitute a withdrawal and you will be taxed. The transfer must be between the institutions. If it's done this way, nothing is reported on the tax return.

In the meantime, let the current institution know that you don't want the GIC to be reinvested, but to be deposited into the cash account of your RSP.

 

[Robillard]

Brad,
As I understand it, unless your GIC has some early cashing provision, you will probably have to wait until it matures or becomes available to cash before you can transfer it in cash to another institution. Stardancer was referring to form T2033, which is used to transfer cash or securities from one RRSP to another (at a different institution). You can find the government of Canada version here. Each institution has their own version of the form. You should probably complete the one at the receiving institution. Incidentally, it can take a lot more than a week to complete the transfer. My experience working in a brokerage back office demonstrated that account transfers are a terribly bureaucratic process in which it is not uncommon for errors to happen.

 

[brad]

Thanks to both of you for your advice. I guess I'll just leave this GIC at the current institution, as it sounds like it would be a pain in the neck to do the transfer, and I'm okay with leaving it where it is. However I might want to change the term the next time it comes due. It's a 3-month GIC which came at a great introductory rate of 4 percent but now it's down to 0.5 percent. Interest rates are likely to start rising again so I'm sure my rate will improve next time around, but I'm on the fence about whether it's better to stick with a 3-month GIC (which has volatile rates that might average out better over time, kind of like dollar-cost averaging) or to go with longer-term periods that tend to have higher rates on average. Any thoughts on that would be appreciated!

 

[stardancer]

Thanks to both of you for your advice. I guess I'll just leave this GIC at the current institution, as it sounds like it would be a pain in the neck to do the transfer, and I'm okay with leaving it where it is. However I might want to change the term the next time it comes due. It's a 3-month GIC which came at a great introductory rate of 4 percent but now it's down to 0.5 percent. Interest rates are likely to start rising again so I'm sure my rate will improve next time around, but I'm on the fence about whether it's better to stick with a 3-month GIC (which has volatile rates that might average out better over time, kind of like dollar-cost averaging) or to go with longer-term periods that tend to have higher rates on average. Any thoughts on that would be appreciated!

That would depend on the purpose you have assigned to the money. If you are holding it while you decide what to do with it, then go for the short term. If you are planning on leaving it in a GIC instrument, then look at longer term, but not too long, perhaps a year or two. I don't see interest rates going up quickly over the next few years, but they will climb slowly. Usually I work by the motto- when in doubt, don't.