Retired Canadians are fortunate to have government-sponsored programs like the Old Age Security (OAS) and Canada Pension Plan (CPP) to boost retirement income. However, the term “boost” raises this question: Can you survive on only your OAS and CPP pension?
The OAS and CPP payments are not sufficient. You need extra savings or income if you want to maintain your current standard of living in retirement.
The reality
The maximum monthly OAS benefit in 2020 is $613.53. The amount could reach $916.38 for the lowest-income seniors with the addition of the OAS Guaranteed Income Supplement (GIS).
This year, the maximum CPP monthly benefit is $1,175.83, although the majority are unable to receive the full amount. The average monthly is $672.87. Thus, you can assume the combined OAS and CPP monthly pension to be $1,286.40 on the average.
Create more income
Since you’re looking at an annual pension of $15,436.80, a larger retirement gap exists. The suggestion to reduce the deficit is to use your savings to invest. You can create income from high-yield dividend stocks like Fiera Capital (TSX: FSZ) and MCAN Mortgage (TSX: MKP).
Fiera has a market capitalization of $1.3 billion and is the third-largest independent asset management firm in Canada. This global investment manager has $169.7 billion worth of assets under management. The company plays a leading role in investment management science globally.
Through its customized multi-asset solutions across traditional and alternative asset classes, Fiera creates sustainable wealth for institutional, retail, and private wealth clients in North America, Europe, and selected markets in Asia.
Fiera follows a strategic growth pattern. Since 2003, the company has been acquiring investment management firms to build a robust growth platform. Nearly every year, there is a purchase or joint venture. The U.S. expansion started in 2011 after Fiera’s IPO listing the previous year.
With the global economy improving, analysts are forecasting an annual growth estimate of 15.3% for Fiera in the next five years. Prospective investors would delight in the 6.53% dividend this financial stock is offering.
MCAN is a profitable mortgage investment corporation and a known dividend monster. The shares of this $406.58 million company are trading at less than $20 but paying a terrific 7.66% dividend. Any amount of investment should double in less than nine-a-half years, assuming the yield holds for the entire period.
This prime stock in the mortgage finance industry is a pure dividend play, so there’s nothing much to expect in terms of capital gains. About 75% (payout ratio) of income goes to payment of dividends.
MCAN generates reliable streams of income from investments in a diversified portfolio. Canadian mortgages, including single-family residential, residential construction, non-residential construction, and commercial loans, comprise the portfolio. The only threat I see is if the Canadian housing market turns sour.
Barring any housing market bubble burst, MCAN should continue to average about $40 million in net income over the next couple of years.
Retire for good
The OAS and CPP are income boosters only, but not enough as standalone retirement income. Fiera and MCAN should be able to provide you the active income once you decide to retire for good.
