Many folks grew up with Canada Savings Bonds. Perhaps you received them for Christmas – I know they were a favourite of many Grandparents. At one point in time – they were even a good investment…
Canada Savings Bonds were last issued in 2017 – so why are they a topic for this Blog post? In addition to receiving questions from our clients, the last bonds issued in 2017 will be maturing in 2021. The Government of Canada has issued directives – simply read on.
Once mature (November 1 or December 1, 2021) your bonds will no longer earn any interest. THIS APPLIES TO ALL MATURE CANADA SAVINGS BONDS.
That means the Open/Cash, RRSPs and RRIFs will earn ZERO INTEREST FOR THE CANADA SAVINGS BONDS PORTION after these dates.
The truth is, for many years now, Canada Savings Bonds have cost their owners buying power. WHAT??! You read it correctly.
WHEN IS SAVINGS NOT REALLY SAVINGS?
ANSWER: When the rate of return – MINUS the cost-of-living (inflation) results in a rate of return than the interest earned! For example – a Canada Savings Bond (which make up Canada RSP and RIF plans) may pay 0.5% - assuming a cost-of-living is 2.5% your purchasing power is MINUS 1%! PLUS – the interest earned is fully taxable at some point! Take a look at the ACTUAL returns for Canada Savings Bonds (below)
INVESTMENTS MANAGED BY PRIME TIME FINANCIAL
ARE NOT IN CANADA SAVINGS BONDS!
We’ve sent this info out to our clients who may have these investments on their own (most often inside automatic deduction from paycheques), or who have invested in their kids or grandkids with this kind of investment. For those of you who are "visitors" to our blog - but not clients (yet!) - we present this as information.
BY THE WAY: You're in the "blog" portion of our website - so why not check out the other blogs? Take a look at these topics for something of interest...
- What YOU need to know about SEG FUNDS (and Wills)!
- The dangers of EMOTIONAL INVESTING
- A CASH FLOW STATEMENT - find out what your actual expenses are!
- Why getting your MORTGAGE INSURANCE FROM A BANK - isn't the best idea!