CPP Pension: How Much CPP Will You Receive in 2020?

Qualifying for maximum CPP payout is no mean feat. But having a dividend-oriented strategy like BCE stock investment can help you in fulfilling the relevant requirements.

| More on:
question marks written reminders tickets

Image source: Getty Images

Canadian Pension Plan (CPP) has been around since 1995. Despite being relatively new to other federal pension schemes, CPP has become a popular post-retirement plan for many working Canadians.

What makes CPP more interesting is that it works on the mantra, “You get what you give.” Any Canadian from age 18 to 65 is eligible to make monthly CPP contributions.

Average CPP payout 

As of now, the average monthly CPP payout is around $640. The majority of retirees are only able to get average and below-average CPP payouts.

There are many reasons behind not getting qualified for the maximum CPP payment. The primary reason people can’t qualify for maximum CPP payout is that they fail to bring off the consistency that its monthly contributions demand.

Maximum CPP payout 

This year, the maximum CPP monthly payout is $1,175.83 — nearly double the average payout. However, only 6% of CPP members qualify for maximum CPP. There are two main reasons why it is so hard to qualify for maximum CPP payouts.

You have to contribute for 83% of the time in which you are eligible to make CPP contributions. In other words, every Canadian is eligible to contribute to CPP for 47 years. This means they have to roughly add for 39 years to the CPP to fulfill the 83% condition.

While being consistent with your contributions, you also need to have the annual earnings that match up with the Yearly Maximum Pensionable Earnings (YMPE) set by the CRA and CPP. The YMPE for 2020 has been revised with an increment of $1,000. This year it is $58,700.

In short, you need to make maximum CPP contributions for 39 years while making equal or more than the YMPE.

Investing in dividend stock can help in qualifying for maximum CPP

Investing in dividend stock is a great way to offset the cash outflow caused by CPP contribution. Reasonable dividend payments can also help you in registering your income over YMPE.

BCE Inc. (TSX:BCE)(NYSE:BCE), formerly known as Bell Canada Enterprises Incorporation, can be a great choice for supplementing your CPP contributions.

The telecommunication company with various mass media assets has been paying dividends since 1983. It is currently registering the dividend yield of 5.12%. If we factor in the stock growth, then this dividend yield seems more lucrative.

BCE stock has experienced 47.74% growth in the last five years. The 19 times trailing price to earnings ratio of the company also suggests that the company hasn’t disappointed its investors. The $10,000 invested in BCE five years ago would have turned $14,814.56 today and that too without dividend reinvestment.

With 5G growth plans in the pipeline, we could expect that BCE will continue to pay its investors dividends without making any cuts.

Conclusion 

Qualifying for maximum CPP payouts is nothing short of an achievement. It can bring more ease to your post-retirement life in terms of finances. But you can only get to that finish line if you are making smart investment decisions today.

Investing in a dividend stock like BCE that offers great cash inflow can help you meet the YMPE requirements and neutralize the dent made by CPP monthly contributions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Jason Hoang has no position in any of the stocks mentioned.

More on Dividend Stocks

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »