How to Protect Your Retirement Funds

The Canada Deposit Insurance Corporation (CDIC), which guarantees eligible deposits held by certain Canadian banks, is well-known to many investors. But did you know that the CDIC can assist you in a number of ways to secure your retirement funds? In this blog, we’ll explain how to make the most of your CDIC coverage in order to effectively secure your retirement money.

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History of the CDIC

Since its inception as a Crown company in 1967, the Canada Deposit Insurance Corporation (CDIC) has insured Canadians’ deposits in banks, federally registered credit unions, loan and trust businesses, and organizations controlled by the Cooperative Credit Associations Act that accept deposits. In other words, if your bank fails, your CDIC-insured qualified deposit is immediately covered up to $100,000. Depending on how your assets are allocated, you may be eligible for more than $100,000 in coverage.

If you think that your Canadian bank won’t fail or is ‘too big to fail’, think again. 43 banks have collapsed since 1967, all of which were supported by the CDIC.

CDIC Coverage

Before we get into details about securing your retirement, let’s go through what is and isn’t covered by deposit insurance.

According to the CDIC website, the following are covered:

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  • Savings and chequing accounts
  • Guaranteed Investment Certificates (GICs) and other term deposits
  • Foreign currency (eg. $U.S.)
  • Eligible deposits held in the name of one depositor up to $100,000.
  • Joint deposits held in the names of two or more people. Coverage for joint accounts is for a total of up to $100,000 regardless of the number of joint depositors.
  • Deposits held in a registered retirement savings plan (RRSP) are protected up to $100,000.
  • Deposits held in a registered retirement income fund (RRIF) are protected up to $100,000.
  • Deposits held in a tax-free savings account (TFSA) are protected up to $100,000.
  • Deposits held in trust, up to $100,000 for each beneficiary named in a trust, provided certain disclosure rules are met.
  • Deposits held separately to pay property taxes on mortgaged properties held at a CDIC member.

Not covered includes:

  • Mutual funds, stocks and bonds
  • Exchange Traded Funds (ETFs)
  • Cryptocurrencies

Do you pay extra for CDIC coverage?

No, there is no fee for depositors to have their account(s) insured by the CDIC. CDIC is instead supported by premiums paid by its member institutions. You are automatically protected as long as your money is in a CDIC-eligible account.

Downsizing and securing your savings with CDIC

Once you retire, it is common for you to downsize and sell your house to move into a smaller home that is easier to maintain long-term. If you’re like many retirees, you’ve thought of downsizing to a smaller home, such as a condo or apartment. Indeed, a growing proportion of retirees consider their home equity while preparing their retirement. Of course, if you want to profit from the sale of your house, you must ensure that the money are secure.

While you may opt to invest some of your home equity nest egg in stocks or mutual funds, the CDIC protects assets stored in qualifying deposits like as savings accounts and GICs, whether registered or non-registered.

How does it work with Trustees?

When you retire, you may have deposits that are held by trustees. For example, you may want to think about forming a trust to pass on family property. If you do this, the CDIC will cover up to $100,000 in qualifying cash and term deposits to each beneficiary named in the trust. To learn more about this, read the CDIC’s Trust Disclosure Rules.

Maximizing Your Coverage

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