A guaranteed investment fund is similar in nature to mutual funds, in that it is a group of assets put together by a portfolio manager with the goal of meeting specific investment objectives.

The difference is that this fund is offered by insurance companies and the assets can be invested in an equity, bond and/or index fund while guaranteeing a minimum value at maturity or when the investor dies. The insurance company running the fund charges quite a bit for this guarantee: up to 1% of your investment annually.

The advantage to placing funds in a guaranteed investment fund is that you are certain to recoup your investment. Furthermore, if your fund has a particularly good year you can opt to reset the guarantee at the higher value. The problem is that it can be very difficult to figure out how such a fund performed in comparison to normal mutual funds since the structures are so different.

Deciding between the two funds is matter of personal need and the advice of a good financial expert. If your goal is to provide additional security for your family or heirs then a GIF may be a good option, especially if it is run by a well known, reputable insurance company. The fund should also sport a good record of success.

The Guaranteed Investment Fund should not be mistaken with the Guaranteed Investment Contract. The latter is an insurance contract that guarantees the owner both the repayment of principal and a specific interest rate for a preset period. This is a fund that is usually offered to institutions rather than individuals.

The Grantor Retained Annuity Trust is an estate planning tool that decreases the tax liability that occurs when a there is an inter-generational transfer of assets. By using such plans it is possible to create a temporary irrevocable trust; when the trust expires, the beneficiary gets a tax free disbursement.

The goal of a GRAT is to reduce the tax burden associated with an estate or gift. The grantor who sets up the trust transfers assets into the trust. The trust is designed to provide a steady stream of income to the grantor over a specified period. After that time has elapsed the remaining funds are passed to a beneficiary.

Every time a GRAT is set up a grantor, trustee and beneficiary must be named. The grantor funds the trust, the trustee manages the assets and, if the conditions of the trust are met, the beneficiary collects the assets at the end of the predetermined period. One of those conditions is that the beneficiary must be a family member of the grantor. Additionally, since this is a form of irrevocable trust, the grantor is removing assets from their estate so that no taxes will be due on them.

The reason that GRATs are popular as estate planning tools is that they allow the grantor to reduce the size of their estate. It also provides the grantor with a regular source of income while the annuity is being paid out. If the grantor dies before all the annuity payments are made then the balance of the trust automatically transfers to the beneficiary.

Benefits, which increase as an employee accrues more time at a company, fall under the category of graduated vesting. Federal law mandates a vesting schedule, but a graduated approach may be chosen by employers for the portion they contribute to private retirement plans.

When a graduated vesting schedule is used, the employer’s contribution vests over several years. For example, any contribution made by the company may be 20% vested after one year, 40% after 2 or 3 years and so forth until the whole amount is fully vested. If the employee leaves before the vesting schedule is complete they will retain their full contributions but only the vested portion of the employer’s deposits.

Such a plan encourages employees to remain with a company for the entire period until their employer’s contributions become fully vested. The advantage of a graduated vesting schedule goes both ways. The employer doesn’t lose the total amount contributed if the employee leaves before complete vesting while the employee doesn’t lose all the funds contributed by their employer either. Gradual vesting can also encourage good work performance, if used properly.

Once an employee reaches the point where their retirement account is fully vested they can leave their present employment and take all the funds in their account with them. Some companies won’t vest at all until a number of years have been served. This can cause discontent among employees who feel that they, and their pension funds, are being held hostage in some sense. The graduated option eliminates the “all or nothing” scenario.

Vesting is a process through which employer contributions to an employee retirement plan become owned by the employee. With graded vesting, an employee must become vested by at least 20% of their benefits after a specified period. An additional 20% becomes vested each subsequent year. How long that initial period is depends upon how the employer determines their contributions.

The difference between graded and graduated vesting is that a graduated plan doesn’t involve an automatic annual increase; the plan can be randomly designed by the employer. While the initial period before the first vesting may be more than a year in a graded system, the following changes in vesting must occur on an annual schedule. In a graded system it can be several years between steps, although it is rare for it to be more than 2 years each time.

Employer contributions are routinely tied to a vesting schedule. While the employer cannot make any stipulations relating to employee contributions, they have full control of how they commit their contributions. Graded and graduated plans allow employers to provide incentive for employees to stay with their companies, at least as long as it takes to become completely vested.

Another form of vesting a company may use is called cliff vesting. Very unpopular with employees, this system offers the employees nothing until many years have passed. No employer contributions are yours until that cliff is reached. The longest period an employer can wait with a cliff vesting situation is 5 years, after which all the contributions belong to the employee, even though they were made all along.

The GSRA or Government-Sponsored Retirement Arrangement is a Canadian retirement plan designed for people who are paid by public funds but are not part of the local, provincial or federal government. Not registered with the Canadian Revenue Agency, the regulations placed upon GSRAs decrease how much of a person’s retirement fund qualifies for tax deferred status.

Many countries have established funds for citizens and others who work within the country. These funds are designed to provide income for retirement. These plans require the individuals to contribute throughout their lives in order to qualify for benefits later. The GSRA is similar in nature to the US Social Security plan, which is the largest government-sponsored plan around.

Contributions made to the GSRA are not tax deductible. When an employee makes contributions to a GSRA they are limited in how much they can put into Canada’s other retirement plan, the RRSP.

Canadians have several options when it comes to government supported retirement savings plans, although some areas such as Quebec opt out of the state sponsored arrangements. The Old Age Security and Guaranteed Income supplements offer seniors a minimum income, but it is not really enough. The Canada or Quebec Pension Plan require mandatory contributions and provide additional benefits, such as disability and survivor benefits.

Registered pension and savings plans as well as income funds are also available to Canadian workers. Together, all these plans are designed to make sure that retirees have more than enough to enjoy their retirement, assuming that they start saving in non-governmental plans early on.

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