The Canada Pension Plan (CPP) is a key part of retirement planning for Canadians. In 2024, those who retire at age 65 can expect a maximum CPP payment of $1,364.60 per month. However, the average payment is much lower at $831.92 per month, or $9,983.04 per year.
CPP is designed to replace only about 25% of pre-retirement income. To bridge the gap, retirees often need other sources of income. One option is investing in dividend stocks, such as Sienna Senior Living.
This company specializes in retirement residences and long-term care. Sienna Senior Living trades at $16.69 per share and has a 5.57% dividend yield. Buying 1,300 shares for $21,697 would generate $100.71 in monthly income.
This passive income can supplement CPP benefits, especially when invested in a Tax-Free Savings Account (TFSA). Sienna Senior Living has performed well in 2024. Its net operating income rose 31.3% year over year to $109.5 million in the first half of the year.
With the growing need for senior living in Canada and limited new supply, the outlook for companies like Sienna is positive. Canadians eligible for CPP and Old Age Security (OAS) will see a payment increase starting in September 2024. Prime Minister Justin Trudeau confirmed this as part of the Canada Pension Boost 2024 initiative.
The goal is to help seniors facing higher living costs due to inflation. OAS payments will increase to $1,400 per month. This temporary measure aims to provide financial relief until inflation stabilizes.
The Canada Revenue Agency (CRA) has released the 2024 payment schedule for CPP and OAS. On September 26, 2024, there will also be a one-time extra CPP payment of $1,660. To get the pension boost, beneficiaries need to apply on the official Canada.ca website.
planning for cpp and tfsa benefits
They must log in, fill out a form, upload documents, and submit the application. Canadians can secure their financial future in retirement through higher CPP payments and maximizing TFSA growth.
However, this requires disciplined planning. Not everyone receives the maximum CPP benefit of $1,364.60 per month. To get this, you need to make the maximum contribution each year for at least 39 years.
If you don’t meet this, you might get the average monthly pension of $831.92 at age 65. Delaying CPP until age 70 can increase this to $1,214.60, a 42% permanent increase. For the TFSA, regular contributions and investing in dividend stocks are key.
Reinvesting dividends allows for faster compounding. While TFSA withdrawals are tax-free, it’s best to wait until you have enough passive income for retirement. CPP replaces only part of pre-retirement income.
You can fill the gap through your TFSA and dividend stocks. Reinvesting dividends instead of taking them as cash is powerful for compounding. Canada’s Big Five Banks are seen as reliable investments.
They have all paid dividends for over a century. The Canadian Imperial Bank of Commerce (CIBC) is a top performer this year. At $81.59 per share, it has a 32.8% return year-to-date.
The current dividend yield is 4.1%. CIBC has paid dividends for 156 years. The quarterly payouts are expected to be safe, with a 51.7% payout ratio.
As an example, 650 CIBC shares (costing $53,033.50) could potentially grow to $102,391.50 with reinvested dividends. By combining disciplined CPP planning and TFSA growth strategies, Canadians can build a financially secure retirement with substantial pension-like, tax-free income.
- Fool.com.”What Canadians Can Expect From CPP Benefits at Ages 60 and 65 in 2024″.
- AIUWeb.”Canada Pension Boost 2024: Increment in the CPP and OAS Pension Amount, Claim New Amount”.
- Fool.com.”Maximized CPP Benefits and TFSA Growth: How Canadians Can Get Both”.