Retirees: 1 Awesome Trick to Max Out Your CPP Pension

You can supplement your CPP payout by investing in quality dividend stocks.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Retirement is expensive. It’s even more so if you are living in large Canadian cities such as Toronto or Vancouver. While the Government of Canada has a couple of pension plans for Canadians, are they enough to lead a comfortable life when there is no other source of income?

The Canada Pension Plan (CPP) is a monthly taxable benefit. It aims to replace a part of your income on retirement. The average monthly payment for Canadians starting CPP payouts at the age of 65 is $679.16. The maximum CPP payment for 2019 is $1,154.68. Comparatively, the Old Age Security (OAS) is the country’s largest pension program. The maximum OAS payout for 2019 stood at $613.53.

This means the maximum monthly payout on retirement is $1,768.21. You can delay CPP payments and increase pension benefits. For example, in case you want to receive CPP payments at 70, the payout might rise by 42% or by 8.4% for every year you delay these benefits.

However, the reality is, pension amounts are insufficient to cover your financial requirements during retirement. This is why you need to maximize your TFSA (Tax-Free Savings Account) and RRSP (Registered Retirement Savings Plan) contributions and increase wealth over the long term.

The total TFSA contribution limit stands at $69,500. You can also contribute 18% of your annual income to the RRSP. These contributions should be allocated to buy top-quality dividend stocks that can help secure your retirement.

Dividend stocks such as Enbridge (TSX:ENB)(NYSE:ENB) not only pay dividends but also help to build a retirement nest egg via capital appreciation.

Enbridge is ideal to supplement your CPP payout

Enbridge stock is trading at $44.2. Its annual dividends of $3.24 per share indicate a forward yield of 7.33%. This means a $100,000 investment in Enbridge stock will generate $7,330 in annual dividend payments. In the last 10 years, the stock has also gained close to 90%. Enbridge shares are currently trading 23% below record highs.

Enbridge is part of the energy sector that is volatile due to low oil prices. Further, lower-than-expected demand due to the ongoing COVID-19 pandemic has driven shares to multi-year lows. But Enbridge is an integrated energy company and not an oil producer.

It transports close to 25% of all oil produced in Canada and the United States. In the U.S., it also transports 20% of the country’s natural gas. Enbridge is largely immune to commodity prices. However, it remains vulnerable to lower oil volumes. The COVID-19 slowdown is likely to be a near-term headwind. As lockdowns ease, the demand for oil will push prices higher in the second half of 2020.

In the last two years, Enbridge sold close to $8 billion in non-core assets. This has helped strengthen its balance sheet. Its increasing focus on the regulated sectors will result in stable and predictable cash flows. Further, the energy giant has also invested heavily in natural gas utility assets as well as high-growth renewable energy facilities.

Currently, over 90% of Enbridge’s EBITDA is secured via long-term contracts. In 2020, the company has forecast cash flows between $4.5 and $4.8 per share. This indicates a dividend-payout ratio of less than 70% at the midpoint estimate.

Your retirement will be secure if you start investing in quality stocks such as Enbridge. Dividends from such companies can help delay CPP withdrawals and increase supplement these benefits to a certain extent.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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.

The Motley Fool owns shares of and recommends Enbridge. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

stock research, analyze data
Dividend Stocks

Where to Look for Value Opportunities in Canadian Stocks This Month

These stocks have great track records of dividend growth during difficult economic times.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

3 High-Yield Canadian Stocks I’d Consider for a $5,000 Investment

These three dividend stocks are excellent additions to your portfolio, given their healthy cash flows and high yields.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Use My TFSA to Invest in Canadian Value Stocks for Long-Term Wealth

TFSA investors can mitigate bearish trends by shifting to value stocks that can deliver long-term wealth.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA ‘Forever Holdings’: 4 Canadian Stocks for Sustained Tax-Free Growth

Add these four TSX dividend stocks to your self-directed TFSA portfolio to generate tax-free passive income for decades.

Read more »

Beware of bad investing advice.
Dividend Stocks

Where I’D Invest $1,000 in 3 No-Brainer Canadian Stocks Under $150

Want to invest $1,000 in some great stocks? Here's a trio that investors can buy at a discount right now…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

The 1 Canadian Stock I’d Buy and Hold Forever in a TFSA

This Canadian stock is a strong option for any TFSA, and here's why.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,267 in Annual Passive Income

Dividend stocks are strong options, but these two could be some of the best long-term options.

Read more »

investor looks at volatility chart
Dividend Stocks

I’m Adding This 12% Dividend Stock for a Recession-Resistant Portfolio

Despite boasting such a high dividend yield, this 12% dividend yield stock might be an excellent pick to build your…

Read more »