Once you stop working, investments have two jobs: paying income now and keeping up with inflation over a retirement that can last 25 years or more. This page covers the main choices, how they are taxed and where to hold them. It is part of the retirement income hub; asset allocation by age covers the stock and bond mix.
The main choices
| Investment | Main risk | Protection |
|---|---|---|
| GICs and high-interest savings | Inflation; locked in until maturity (GICs) | CDIC up to $100,000 per category per member institution |
| Bond ETFs | Prices fall when interest rates rise | None (market investment) |
| Dividend ETFs | Stock market falls; concentration in a few sectors | None |
| Covered call ETFs | Stock market falls; gains are capped in strong markets | None |
| Balanced ETFs | Stock market falls, cushioned by the bond share | None |
| Life annuities | Inflation, unless indexed; the money can’t be taken back | Assuris, for insurer failure |
GICs and savings accounts
The Canada Deposit Insurance Corporation (CDIC) insures eligible deposits at its member institutions if one fails, up to $100,000 per coverage category, principal and interest included, so deposits in more than one category can be covered for more in total. Each member institution has its own separate coverage. GICs and savings accounts are eligible deposits, and since April 30, 2020 CDIC covers GICs of any term and foreign-currency deposits (CDIC, what’s covered).
A GIC ladder splits savings across GICs maturing in different years (for example a fifth each in one- to five-year terms); each year one matures and can be spent or reinvested at the five-year term. GIC laddering explains it and best GIC rates lists current rates.
Bond, dividend and covered call ETFs
| ETF | Type | Distribution yield | MER |
|---|---|---|---|
| BMO Aggregate Bond Index (ZAG) | Canadian bonds | 3.46% | 0.09% |
| Vanguard Canadian Aggregate Bond (VAB) | Canadian bonds | 3.60% | 0.08% |
| Vanguard FTSE Canadian High Dividend Yield (VDY) | Canadian dividend stocks | 2.97% | 0.22% |
| iShares S&P/TSX Composite High Dividend (XEI) | Canadian dividend stocks | 3.44% | 0.22% |
| BMO Canadian Dividend (ZDV) | Canadian dividend stocks | 2.71% | 0.39% |
| BMO Covered Call Canadian Banks (ZWB) | Bank stocks with call options | 6.79% | 0.72% |
| BMO Covered Call Utilities (ZWU) | Utility stocks with call options | 7.39% | 0.71% |
Distribution yields from the issuers’ fund pages, as of September 30, 2026 for VAB and VDY and August 31, 2026 for the others; they change as prices and payouts change. A covered call ETF pays more because it sells away part of the upside, so it tends to lag the plain stocks in a strong market. Best dividend ETFs, best bond ETFs and covered call ETFs compare more funds.
Balanced ETFs
One fund holds a fixed stock and bond mix and rebalances automatically:
| ETF | Stocks | MER |
|---|---|---|
| Vanguard Balanced (VBAL) | 60% | 0.22% |
| iShares Core Balanced (XBAL) | 60% | 0.18% |
| Vanguard Growth (VGRO) | 80% | 0.22% |
Withdrawals then come from selling units as needed, rather than from distributions alone.
How the income is taxed
Outside a registered account, the type of income matters:
| Income | Tax |
|---|---|
| Interest (GICs, savings, bond ETF distributions) | Fully taxable each year |
| Canadian eligible dividends | Grossed up, then reduced by the dividend tax credit |
| Capital gains | Half taxable, when you sell |
Dividends also count for the OAS recovery tax and the GIS at their grossed-up or adjusted amounts; dividend investing in retirement works through the effects.
Which account to hold it in
- TFSA: Income earned in a TFSA and TFSA withdrawals don't reduce federal benefits such as OAS, GIS and EI, or credits such as the Canada child benefit, the Canada workers benefit and the Canada Groceries and Essentials Benefit (formerly the GST/HST credit). Interest-paying investments gain the most from the shelter.
- RRSP or RRIF: Under Article XXI of the Canada-US tax treaty, US dividends paid to an RRSP, RRIF or LIRA are exempt from US withholding; in a TFSA, FHSA, RESP or taxable account the standard 15% treaty rate applies, and only in a taxable account can it be recovered as a foreign tax credit.
- Non-registered: Canadian dividends get the dividend tax credit and only half of capital gains is taxed.
Annuities
A life annuity turns part of your savings into guaranteed income for life. The annuity calculator and annuity vs RRIF cover how they work and when they fit.
Related guides
Sources
The figures and rules on this page come from these sources, last checked against them between September 25, 2026 and September 29, 2026. How we check facts.
- BlackRock iShares: iShares S&P/TSX Composite High
- BlackRock iShares: iShares Core Balanced ETF Portfolio
- BMO Global Asset Management: ZAG - Factsheet
- BMO Global Asset Management: ZDV - Factsheet
- BMO Global Asset Management: ZWB - Factsheet
- BMO Global Asset Management: ZWU - Factsheet
- Canada Revenue Agency: What is a TFSA
- cdic.ca: Whats covered
- IRS: UNITED STATES - CANADA INCOME TAX CONVENTION
- S&P Dow Jones Indices: S&P/TSX Canadian Indices methodology
- Vanguard: Canadian Aggregate Bond Index ETF | Vanguard Canada
- Vanguard: Factsheet | August 31, 2026
- Vanguard: FTSE Canadian High Dividend Yield Index ETF | Vanguard Canada
- Vanguard: Factsheet | August 31, 2026
- Vanguard: Balanced ETF Portfolio | Vanguard Canada
- Vanguard: Factsheet | August 31, 2026
- Vanguard: Growth ETF Portfolio | Vanguard Canada