The Canadian government has opened plenty of doors for us to enjoy comfortable retirement years. Retirement income plans like Old Age Security (OAS) and Canada Pension Plan (CPP) are excellent avenues to make a decent income in our best years.
CPP is one of the best retirement systems in the world. Canada’s pension system was ranked among the top 10 published by the Melbourne Mercer Global Pensions Index. The index takes risk management and financial adequacy into account.
The fact that the CPP is a risk-averse plan makes it sustainable, but it also makes the plan somewhat inadequate if you do not utilize it properly. I am going to discuss a way you can boost your CPP pension payment with one quick step: delaying your CPP payments.
Delaying your CPP payments
If you are approaching your 60s and you have started to wonder about collecting your CPP payments as soon as you retire, I would ask you to reconsider. Waiting a little longer before starting your CPP can help you get more from the pension plan. The longer you wait after you are 60 to begin collecting your payment, the more money the government will pay you through your CPP.
You become eligible to start collecting the CPP at 60, and so many retirees jump on the opportunity. If you begin receiving the payments before you are 65, you get 0.6% fewer dollars for every month up till your 65th birthday. After doing the math, starting your CPP five years earlier than your 65th birthday means you stand to earn 36% less from the government through CPP payments.
Delaying your CPP payments after you turn 65 can help you earn 0.6% more every month. If you can put off collecting your CPP until you are 70, you can make 36% more than you would if you begin at 65.
Making yourself capable of delaying the CPP
Understanding how delaying your CPP is one thing. Becoming able to suspend the CPP is a different matter. If you are wondering how you will earn an income during your retirement without living below your means, there is a solution: Investing in high-quality dividend stocks.
Investing in reliable dividend-paying stocks like Canadian Utilities (TSX:CU) can present you with a viable solution. The CPP is, after all, a part of your retirement nest egg. The pension plan is not meant to be the only source of income to rely on during your retirement. Buying stocks like Canadian Utilities and storing them in your Tax-Free Savings Account (TFSA) can give you the boost you need to be able to delay your CPP payments.
CU is an incredible investment source for the long term. The company recently boosted its dividend for the 47th year in a row. The company’s shares make for an investment that can stand the test of time and delivers high income for you.
The company earns more than 80% of its income through regulated utilities. CU is also preparing for a cleaner and greener future, having sold its entire fossil fuel portfolio. Instead of relying on fossil fuels and increasing uncertainty, CU is maximizing its long-term sustainability. CU is guaranteeing the possibility of generating substantial revenue in the decades to come.
In the past year alone, CU’s share prices have grown by more than 25%. Trading for $39.13 per share, Canadian Utilities stock investors also receive dividend payments at an impressive 4.32% yield. Buying and holding CU stock in your TFSA can allow you to earn substantial tax-free income and enable you to delay collecting your CPP payments.
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Fool contributor Adam Othman has no position in any of the stocks mentioned.