A guaranteed investment contract, or GIC (pronounced gick), promises to preserve your principal and to provide a fixed rate of return when you begin to withdraw from the contract, typically after you retire.
You can invest in a GIC through a salary reduction plan, such as a 401(k) or 403(b) sponsored by your employer, provided that investment option is offered.
Because of their fixed rates, GICs are vulnerable to inflation. And you may have to pay a penalty if you decide to change from a GIC to a different investment.
Insurance companies that offer GICs assume the risk that the rate they earn on their investments will outperform the rates they've guaranteed on the GICs.
- Browse Related Terms: 403(b) Plan, Central Registration Depository (CRD), Conduit IRA, Funds Receivable, Guaranteed investment contract (GIC), IRA rollover, Plan administrator, Plan provider, Plan sponsor, Rollover, Rollover IRA, transfer
A "promise to pay" issued by an insurance company, usually in a large amount. The insurance company guarantees the interest rate paid on the amount promised but does not guarantee the principal. GICs are not guaranteed by a government agency. Many defined contribution plans, such as 401(k) plans, offer GICs as investment options.
- Browse Related Terms: Annuity, Cost-of-Living Adjustment, Earnable Compensation, FICA, Fixed Income, Guaranteed investment contract (GIC), Interest, Pre-Tax, Prospectus, South Carolina Retirement Systems, volatility