COVID-19 is more than a lethal contagion. Besides the health hazards it brings, the economic impact is very harsh. The outbreak gave rise to business slowdowns and lockdowns. Canada is pouring in billions of dollars in emergency aid.
There is growing concern among retirees relying on the Old Age Security (OAS) and Canada Pension Plan (CPP). Likewise, would-be retirees are holding off on retirement decisions. It will be tough to survive on the pensions alone if you calculate the OAS and CPP payments.
With or without the pandemic, the OAS and CPP appear to be inadequate already. The pensions will replace a portion of your pre-retirement income, and not the entire thing. OAS pensioners are currently receiving a maximum of $613.53 per month. In the 2020 pandemic, there is a one-time boost of $300 in OAS benefit.
For the CPP, the maximum payout in 2020 is $1,175.83 per month. However, you can only receive the amount if you have contributed the maximum each year for many years. But the average is only $672.87 per month ($735.21 for new beneficiaries as of January 2020).
The OAS plus CPP payment will total $1,286.40 per month, or $15,436.80 per year. Can you manage to work around this budget? You have to subsist on the two for the rest of your sunset years if you do not have other retirement income sources.
How much is enough?
The current pandemic raises a lot of uncertainties for Canadians in their 50s, 60s, or 70s. There is no magic number as to how much a retirement fund should be. It will depend on the lifestyle you want. But if you desire a comfortable retirement, accept that the OAS and CPP are not retirement plans.
You will receive the OAS because it’s a universal benefit for seniors. Workers pay into the program to receive the CPP in the future. Thus, the key to an enjoyable retirement is to save and invest to guarantee financial stability.
Create your wellspring
The bulk of your retirement fund must come from a different wellspring. Your OAS and CPP are post-retirement pensions that can supplement your nest egg. But it requires financial discipline to build retirement wealth.
Consider investing in a crisis-resistant stock like Capital Power (TSX:CPX) if you’re starting the process or are still growing your nest egg. This $2.99 billion company owns and operates power-generation facilities in Canada and the United States. You have both investment protection and capital appreciation.
Capital Power is showing resiliency in the face of the coronavirus outbreak. Its first-quarter 2020 earnings results were a sight to behold. Revenues and other income grew by 34% to $533 million versus the same quarter in 2019. Adjusted EBITDA rose 16% year over year to $234 million.
The utility company is doing a lot of hedging on its baseload to ensure its commercial portfolio will generate significant cash flows until 2023. Capital Power expects to end 2020 with over $300 million in discretionary cash flow.
Seal the deal
Capital Power is trading at less than $30 per share and paying a lucrative 6.94% dividend. Seal the deal now to start the ball rolling.