Retirement investors seeking predictable returns without a high level of risk may want to consider guaranteed investment contracts (GICs). Typically offered as an investment option in workplace retirement plans, such as 401(k)s, GICs look to preserve capital and generate a fixed rate of return. 

Read on to learn what a GIC is, how a GIC investment works, and when it can make sense in your retirement portfolio. We’ll also show investors seeking low-risk investments on the road to retirement how Gainbridge’s fixed annuities are a solid alternative to GICs without the limitation of being tied to your employer-sponsored plan.

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What is a guaranteed investment contract?

A GIC is a conservative investment product that is typically issued by insurance companies. It’s an agreement where the insurer promises to return your original investment and a fixed or variable interest rate over a set period.

GICs often appear in employer-sponsored retirement plans like 401(k)s and pension funds. They’re designed for stability, not high returns — making them an option for retirement savers who want to grow their money without taking on market volatility. 

However, GICs typically aren't available to individual investors outside these retirement plans. Gainbridge’s fixed annuities offer similar benefits — guaranteed interest, principal protection, and low risk — accessible directly to individuals planning their financial future.

How does a GIC work?

Like bonds, most annuities, and other conservative investments, GICs are meant to be safe and straightforward. Choose the investment as part of your 401(k) or other workplace retirement plan, and at the end of your term — usually anywhere from one to 20 years — you’ll receive your principal plus interest. 

GICs can be fixed-rate or variable-rate, depending on contract terms. A fixed-rate GIC offers predictable returns, while a variable-rate GIC can generate higher or lower returns depending on various factors such as market performance, economic indicators like the Federal Reserve funds rate, and your contract. 

Benefits and risks of GIC investments

Before choosing a guaranteed investment contract, consider the following benefits and risks.

Capital preservation

If you invest $5,000 in a GIC, you will have $5,000 (plus interest) at the end of your term. If you don’t want to risk losing money, a GIC can be a safe type of investment for your retirement savings plan. 

Stable returns

When you opt for a fixed-rate GIC, you can calculate precisely how much interest you’ll earn. GICs provide clear visibility on returns, making them favorable for investors anticipating income requirements in retirement. 

Predictability

With fixed-rate GICs, you generally don’t need to worry about market swings like you do with stocks, ETFs, and mutual funds. The peace of mind you get from capital preservation and stable returns in a GIC often works for risk-averse investors. 

Inflation risk

With a GIC, the rate of interest you receive might not be as high as the inflation rate. With less purchasing power due to inflation’s erosion of your dollar, you could technically lose money over time.

Interest rate risk

If interest rates increase when you’re locked into a GIC, you won’t benefit from higher returns elsewhere. For example, if you’re stuck in a GIC paying an interest rate of 2%, you won’t be able to put that money to work in other account types such as a type of annuity that pays, say, closer to 6%. 

Insurer default risk

The Federal Deposit Insurance Corporation (FDIC) does not guarantee GICs like bank deposit accounts. Although rare, if the insurance company that backs your GIC fails, you could lose your investment. 

That’s why financial strength matters. With Gainbridge’s SteadyPace™ annuity, investors receive guaranteed growth with fixed rates and no hidden fees. And we back it with an A- (Excellent) financial strength rating from AM Best, underscoring our commitment to providing long-term stability and investor protection.

Types of GICs explained

There are two main types of GICs that differ in how they’re issued and managed. 

Traditional GICs

The most common type of GIC — a traditional GIC — is most often used in workplace retirement plans. Issued directly and backed by insurance companies, they offer a guaranteed return of principal plus a predictable rate of interest earned. 

Synthetic GICs

Synthetic GICs, also known as wrapped GICs, are more complex. With a synthetic GIC, the investor (typically your retirement plan servicer) doesn’t own deposit funds directly with an insurance company. Instead, they manage the assets themself — usually within a fixed-income portfolio — and “wrap” them in an insurance policy that guarantees the investment. 

GICs vs. CDs

While guaranteed investment contracts and certificates of deposit (CDs) can appeal to low-risk investors, there are key differences to consider. 

Not FDIC insured

The FDIC insures bank deposit products, such as CDs, up to $250,000 per depositor, per bank. GICs lack the same government protection and instead rely primarily on the financial strength of the insurer that issues them. 

Usually offered through retirement plans

While you can open a CD online using a process similar to a checking or savings account, you typically can’t start a GIC account directly. To invest in a GIC, you must select the option as part of your workplace retirement plan. 

Gainbridge annuities: A more flexible retirement option

While GICs offer capital preservation and predictable returns, you can typically only access them through retirement accounts like annuities, IRAs, and 401(k)s. 

Gainbridge lets you grow your retirement savings confidently and directly. With the potential for tax-deferred growth and no fees or commissions, you can increase your money faster without the middleman.

Explore Gainbridge today and take control of your retirement strategy. 

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This article is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. For advice concerning your own situation please contact the appropriate professional. The Gainbridge® digital platform provides informational and educational resources intended only for self-directed purposes. Financial Strength ratings are current as of 9/5/2025. Ratings are subject to change.