GIC Laddering: Steady Returns Without Locking Up Your Money
Want the safety and higher rates of long-term GICs without locking up all your money for years? A GIC ladder gives you the best of both worlds—higher average returns with regular liquidity.
What Is a GIC Ladder?
A GIC ladder spreads your investment across multiple GICs with staggered maturity dates. Instead of putting $50,000 into a single 5-year GIC, you'd split it into five $10,000 GICs maturing in 1, 2, 3, 4, and 5 years.
Each year, one GIC matures. You can either use the money or reinvest it in a new 5-year GIC at current rates.
Why Ladder?
- Regular liquidity: Access to some funds every year without penalty
- Higher average rates: Long-term GICs typically pay more than short-term
- Interest rate protection: If rates rise, you reinvest maturing GICs at higher rates
- Simplicity: Set it up once, maintain with minimal effort
Example: $50,000 Ladder
| Year | Amount | Term | Rate* | Matures |
|---|---|---|---|---|
| 2026 | $10,000 | 1-year | 4.25% | 2027 |
| 2026 | $10,000 | 2-year | 4.50% | 2028 |
| 2026 | $10,000 | 3-year | 4.40% | 2029 |
| 2026 | $10,000 | 4-year | 4.35% | 2030 |
| 2026 | $10,000 | 5-year | 4.50% | 2031 |
*Rates are illustrative. Actual rates vary by institution.
Building Your Ladder
Step 1: Choose Your Ladder Length
Common options are 3-year, 5-year, or 10-year ladders. A 5-year ladder is the most popular—long enough to capture higher rates, short enough for reasonable liquidity.
Step 2: Divide Your Investment
Split your total equally across each rung. For a 5-year ladder with $50,000, that's $10,000 per rung.
Step 3: Shop for Rates
Rates vary significantly between institutions. Credit unions and online banks often beat the big banks by 0.5% or more.
Step 4: Consider Registration
GICs can be held in TFSA, RRSP, or non-registered accounts. Interest is fully taxable, so registered accounts are often preferred.
CDIC Protection: GICs at CDIC member institutions are insured up to $100,000 per category. A $500,000 ladder across categories (registered, non-registered, joint) can be fully protected.
Ladder Variations
The Barbell Strategy
Instead of spreading across all terms, concentrate in short-term (1-year) and long-term (5-year) GICs. This maximizes yield while maintaining some liquidity.
The Bullet Strategy
All GICs mature at the same time—useful when you have a known future expense (house purchase, tuition).
Cashable GICs
Cashable GICs offer lower rates but can be redeemed early. Consider including one or two for emergency liquidity.
GIC Ladder vs. Bond Ladder
| Feature | GIC Ladder | Bond Ladder |
|---|---|---|
| Principal guarantee | Yes (CDIC) | If held to maturity |
| Liquidity | At maturity only* | Sell anytime (price risk) |
| Complexity | Low | Higher |
| Minimum investment | Low ($500-1,000) | Higher ($5,000+) |
*Cashable GICs offer early redemption options.
Tax Considerations
GIC interest is taxed as ordinary income—your highest rate. In a non-registered account, you'll pay tax on interest annually, even if you don't receive it until maturity (the "annual accrual" rule).
This makes registered accounts (TFSA, RRSP) particularly attractive for GIC ladders. In a TFSA, the interest is completely tax-free.
How Talk Through Wealth Helps
Model your GIC ladder strategy as part of your complete retirement plan:
- Compare ladder returns vs. single-term GICs
- Model different ladder lengths and structures
- Project after-tax returns in different account types
- Balance GIC allocation against other investments
- Plan maturity dates around anticipated cash needs
Build Your GIC Strategy
Join the waitlist to model GIC ladders in your retirement plan.
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