Boomers need to consider savings protection

Protecting savings is always important but it’s even more critical in retirement, since most Canadians will need to start drawing out the money they’ve put away. One way to ensure your money is safe is to deposit it in a financial institution that is a member of the Canada Deposit Insurance Corporation (CDIC).

RRIF protection

Everyone who saves money in an RRSP will have to start withdrawing cash from a RRIF the year they turn 72. Imagine what would happen if your bank failed that year and you couldn’t use your savings?

CDIC, a Crown corporation established in 1967, ensures that depositors’ eligible deposits are protected if one of its member financial institutions fails.

Up to $100,000 of cash and term deposits, such as Guaranteed Investment Certificates with an original term to maturity of five years or less, held in a registered retirement income fund will be protected.

The same is true for eligible deposits in Tax Free Savings Accounts, as well as several other CDIC insurance categories.

Since 1967, no retiree — and no Canadian of any age — has lost a dollar of their insured deposits under CDIC protection due to the failure of a CDIC member institution.

If Canadians are worried about losing their savings, they can keep their money in CDIC insured products.

Trust coverage

The closer they get to retirement age, the more people will be thinking about the legacy they want to leave to their future generations.

Some boomers may want to set up a trust to keep some control over how their estates are distributed to their children and grandchildren after they pass away.

Fortunately, money in a trust is protected by the CDIC. As with a RRIF, CDIC will cover up to $100,000 of eligible cash and term deposits.

What’s different with a trust, is that each beneficiary is protected to the full amount. If you have $500,000 in one trust account, with $100,000 allocated to five different people, all of that money will be covered in the event of a bank failure provided the trust rules are followed.

Trust accounts are often very large and have a lot of beneficiaries. Each person will be protected if they comply with CDIC coverage rules.