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No Savings? No Problem! How to Retire Comfortably on Just CPP and OAS

With stock markets continuing to melt years of hard-earned investment gains away in the blink of an eye, investors are beginning to imagine a different kind of retirement. They’re preparing for a world where they have no savings and are forced to just retire on CPP and OAS.

Such a reality could be a lot closer than you think. You might have ample savings, but your situation could deteriorate if the market keeps dropping. Maybe you’ll be forced to liquidate at exactly the wrong time. Or perhaps you’ll realize volatility is something you don’t want to ever experience again, so you switch to an ultra-conservative portfolio.

Even if your savings are healthy and you’re confident in the future, it’s still not a bad idea to imagine a worst-case retirement without any savings. Could you survive?

Let’s take a closer look.

Embrace government programs

There are dozens of government programs in place to help low-income seniors.

One of the biggest is Guaranteed Income Supplement, a federal government program that tops up low-income seniors. Essentially, it’s designed for someone who didn’t work much and is now facing a reality of retirement without much CPP. If you’re in that situation, you could easily qualify for a few hundred dollars more a month.

There’s also a myriad of programs on the local and provincial level designed to help out struggling seniors. Don’t feel bad seizing these opportunities, either. They’re in place for a reason. Besides, most seniors have paid a lot of taxes over the years. They’ve contributed their fair share into these programs.

Delay CPP as long as possible

There’s a very simple way to increase your CPP payments by 42%. All you need to do is delay taking your pension until age 70.

For some folks, this simply isn’t an option. The reason why they’re retiring with no savings is because of a job loss or some other unforeseen circumstance. They were forced into this situation, in other words.

But if you can, delaying CPP can make a huge difference. Not only does it give you additional time to save, but the maximum payment increases from $14,109 to $20,036 per year. Add that to your spouse’s projected CPP, and it’s a good start towards a retirement with no savings.

No savings? Maybe sell the house

I know nobody wants to sell their family home, but sometimes drastic measures must be taken. Many folks are sitting on very valuable real estate and could easily extract $250,000 from their principal residence. If that cash is invested at just a 5% return, it’ll generate an additional $1,000 per month in retirement income.

Today’s market sell-off means there are dozens of stocks out there that yield more than 5%. One of the safest yields out there today is National Bank of Canada (TSX:NA), a high-quality bank stock that recently saw the yield creep ever so slightly above 6%.

National Bank has been quietly posting excellent results of late, driven by a robust Quebec economy and solid growth initiatives. It has recently made acquisitions abroad — including in the United States, something investors have wanted for years — which have also helped to boost the bottom line.

The company is also expected to boost the bottom line nicely in 2020, although expectations could be impacted a little bit by virus-related slowdowns. Analysts expect the company to earn $6.65 per share in 2020 and more than $7 per share in 2021. National Bank shares, meanwhile, are trading at around the $50 range as I type this. That translates into a dirt-cheap price-to-earnings ratio.

Although National Bank’s dividend is pretty high, the payout is secure. The current dividend is $2.84 per share. Even if earnings contract a bit and come in around $6 per share in 2020, the payout ratio would still be comfortably under 50%. National Bank has the balance sheet strength to continue paying the dividend, even if earnings collapse this year.

The bottom line

If you have no savings, don’t sweat it. You can have a comfortable retirement by maxing out CPP and OAS, signing up for other government programs, and freeing up some equity in your house. Millions of Canadians manage to successfully retire with no savings. It’s not as big of a deal as you’d think.

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