How to Make the Most of the Increased Retirement Income

Millions of Canadians rely on Canada Pension Plan (CPP) and Old Age Security (OAS) pensions to financially sustain their golden years. But these benefits don’t just appear as you enter your retirement years. Think of CPP as the tree that you have been watering with your contributions for decades so that it will bear fruit in retirement. In most cases, it is not enough to help a retiree survive financially and must be supplemented through savings.

There are registered, tax-sheltered accounts such as Registered Retirement Savings Plans (RRSP) and Tax Free Savings Accounts (TFSA) came into play. They allow you to save for retirement and grow your savings through investments.

This is necessary for several reasons, including the difference that exists between a static CPP and the ever-increasing cost of living. However, the government has taken steps to bridge that disparity by increasing the CPP.

CPP enhancements

The government has continuously increased the contribution rates for the CPP over the past five years, and it is now at 5.95% for employees and employers. This may hurt contributors now but will benefit them when they retire. People who have contributed at this enhanced rate for 40 years can experience a 50% bump in their CPP pension.

That is a substantial increase and may help raise the CPP level to more effectively address the rising cost of living. It can also give you more wiggle room when planning for the retirement income you need to supplement your CPP and OAS pensions. But it’s still not enough as a standalone source of retirement income (even if you add OAS), and you need to supplement it with savings/investments.

In fact, some good dividend stocks can fill that gap. If you transfer enough capital to a reliable dividend stock that offers a good yield, it will help you generate a steady income to supplement CPP and OAS pensions.

A reliable dividend stock

Emera (TSX:EMA) is a utility company with several regulated utility operations. It has seven regulated utility companies under its banner and provides services (mostly electrical) to several international markets.

Most of its revenue comes from Florida; therefore it is also the main source of capital investment and growth for the company. The company is rapidly expanding its renewable capabilities, and the capacity is now at 1.6 gigawatts.

As an investment, Emera offers a healthy mix of dividend and capital appreciation potential, both of which are valuable from a retirement-planning view Dividends have a direct impact on an investor’s income production potential. With a current yield of 5.1%, the company can help you generate a monthly income of about $127 with $30,000 invested.

It may not be much, but enough capital invested in reliable dividend payers like Emera can result in a large dividend income, enough to supplement the enhanced CPP for retirement expenses.

Silly takeaway

It is recommended that Canadians try to maximize their CPP and OAS pensions whenever they can. The only practical way to do this is to delay taking pensions until age 70, which can be practical if you have a healthy dividend income and enough savings to see you through, or if you choose to continue working beyond normal retirement. age