Seniors: Not Eligible for CERB? You May Have $500 in Tax-Free Income Headed Your Way

If you’ve received a payment from the government, you should consider investing it in Royal Bank of Canada (TSX:RY)(NYSE:RY) to help make the most of your money.

| More on:
Senior Couple Walking With Pet Bulldog In Countryside

Image source: Getty Images.

There’s been a lot of politics surrounding COVID-19 emergency payments. Currently, there are payments for people who have lost their jobs, students, as well as aid for employers to help pay a portion of wages. Seniors, unless they were working and were laid off due to the pandemic, however, wouldn’t have a COVID-19 payment dedicated to them. That is, until now.

The government recently announced that seniors could be eligible for a tax-free payment of up to $500. If you’re eligible for Old Age Security (OAS), then you’ll receive $300. And if you’re also eligible for the Guaranteed Income Supplement, then that’s another $200. There’s no application process involved. The government will determine eligibility in June and seniors who are eligible should expect to receive the payments in July.

Unlike the Canada Emergency Response Benefit (CERB), however, the government’s stated that this is a one-time payment to help with COVID-19. Seniors also don’t have to worry about holding back taxes, as the payments are not taxable.

Make the most of the tax-free income — invest it!

If you receive the $500 and don’t need it to pay your bills or use it for other pressing financial needs, a great option may be to invest the money.

Consider investing in a blue-chip dividend stock like Royal Bank of Canada (TSX:RY)(NYSE:RY). It’s a safe place to store your money, and it pays you a dividend every quarter. It’s a good choice for investors who don’t want to risk their money but still want to make some extra cash. Shareholders of RBC currently receive quarterly dividend payments of $1.08. If you buy the stock at around $95, then that means you’d be earning a dividend yield of about 4.5% per year.

If you could combine that $500 with other savings that you have, there’s the potential to earn a great recurring payout from the bank stock. Suppose you could pool $1,000 and buy RBC stock. That would generate $45 a year in dividend income for your portfolio. And if that investment’s inside of a Tax-Free Savings Account, then you won’t have to pay income tax on that dividend income. Investing $5,000 in RBC would produce annual dividends of $225. And if you had $10,000 to invest, then you could earn $450 every year.

Even if you don’t have much in savings, now could be a great opportunity to start putting some money aside. All that incremental saving can quickly add up and put you in a position where you can make a more sizable investment and earn meaningful dividend income.

OAS and Canada Pension Plan payments may not be enough to get by, and any extra income you can generate can be a good way to narrow that gap and make for a more enjoyable retirement. While the COVID-19 relief payment may be just a one-time payment right now, there’s no telling how long the pandemic will last, and the government may be inclined to issue more payments in the future.

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 David Jagielski has no position in any of the stocks mentioned. 

More on Dividend Stocks

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks I’d Buy — But I’m Waiting for a Dip

After the recent bounce, It may be smart for investors to wait for a dip before they buy these solid…

Read more »

woman data analyze
Dividend Stocks

Passive Income: How to Generate an Average of $385 Per Month in a TFSA

Top TSX dividends stocks now trade at discounted prices for TFSA investors seeking passive income.

Read more »

edit Colleagues chat over ketchup chips
Dividend Stocks

How to Earn $5,350/Year in Passive Income — TAX FREE!

Canadian investors could earn over $5,000/year in tax-free passive income by targeting stocks like First National Financial Corp. (TSX:FN) and…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

Passive-Income Investors: 2 TSX Dividend Stocks to Watch in February

There’s never a bad time to think about building a passive-income stream. Here are two top dividend stocks to get…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Better Buy: Enbridge Stock vs. Telus

Enbridge and Telus are top TSX dividend stocks. Is one a better bet right now?

Read more »

Dividend Stocks

TFSA: How to Invest $88,000 to Get $5,450/Year in Passive Income

Top TSX dividend stocks such as Enbridge can be held in your TFSA to benefit from steady payouts and capital…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Dividend Stocks (Down Over 30%) to Buy in January 2023

Given their discounted stock prices and high yields, these three cheap dividend stocks could be attractive for income-seeking investors.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

TFSA Investors: Earn Passive Income With 3 Blue-Chip Stocks

TFSA investors can worry less about a recession and earn passive income with three blue-chip stocks as core holdings.

Read more »