In case retirement is knocking, will you be claiming your Canada Pension Plan (CPP) at age 60 or wait until you’re 70? If you’re not sure when to take the CPP, your circumstances would be the deciding factor.
Retire at 60
The decision to retire early or at 60 years old stems from two major concerns. Poor health is often the primary reason why the curtain call comes prematurely. Second to health issues is financial need. If there isn’t enough on the nest egg and monetary sustenance is a top fear, claiming the CPP is the only recourse.
Retire at 70
Based on the United Nations data, life expectancy for Canada in 2020 is 82.52 years. If you’re in the pink of health or great shape, claiming your CPP at 70 is the best move.
Also, if you don’t have an immediate need for money or you can afford to wait another 10 years, delaying your retirement comes with perks. Your CPP payout would increase by 42%, or a gain of 0.7% for every month you defer payments after 65.
Self-made pension
Whatever your reasons are for retiring early or late, you need a financial cushion on top of the CPP. Mindful savers invest in income-producing assets like Toronto Dominion Bank (TSX:TD)(NYSE:TD) and Torc (TSX:TOG). With an average yield of 5.59%, an equal investment of $100,000 should produce $11,180 annually.
TD is the pricier between the two ($74.20 per share). However, you’re investing in the most popular bank in Canada and the U.S. This $134.5 billion institution is also the second-largest bank in Canada.
Analysts are mixed on the prospects of picking bank stocks. One side thinks debt catch up on the Big Banks, including TD. However, another group sees financial stocks or the banks, in particular, to pick up steam and perform better in 2019.
TD is still one of the most reliable stocks in the sector. As shown in the 2008 financial crisis, only TD was able to report both revenue and profit. You can also count on its 163-year dividend track record. The merits of TD as a safe and dependable investment are unassailable.
Torc is a cheaper option ($4.06 per share) than TD, but this oil and gas company pays a fantastic dividend of 7.18%. There is comfort investing in Torc. It’s the second-biggest equity holding of the Canada Pension Plan Investment Board (CPPIB), the entity that manages and invests the CPP fund.
The CPPIB chose the stock because of its potential to deliver a maximum rate of return. Based on analysts’ forecasts this year, Torc has a potential upside of 84.7%. The threat to the business, however, is the unpredictability of crude oil, where Torc derives 97% of revenue.
Nevertheless, momentum is building now that the price of Canadian crude is rising. With its high dividend and relatively low price, you’ll get your money’s worth from this energy stock.
Safety measure
Investing is an integral part of retirement planning because you can create an income stream separate from the CPP. Your dividends from TD and Torc should give you the peace of mind regardless of the time you claim the CPP.
