The Motley Fool

Don’t Even Think About Retiring on ONLY Your OAS and CPP Pension

Happy Retirement” on a road
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No one expected 2020 to be the year of living dangerously. Because of the COVID-19 pandemic, we have a health and economic crisis in our midst. Global economies are falling into a deep recession. Retirees, in particular, are in a bind.

In Canada, there is a retirement income system in place. Seniors feel secure because of the Old Age Security (OAS) and Canada Pension Plan (CPP) to look forward to when they retire. However, with all the financial hardships going on, taking the retirement exit has become frightening.

If you’re thinking of relying on only the OAS and CPP pensions, get real. Crunch the numbers to see if you will have a quality of life during the sunset years.

Real numbers

Let us run the actual figures to determine if it is viable to subsist on the OAS and CPP. The maximum OAS monthly payment is $613.53, while the average CPP monthly is $672.87. If you’ve been contributing to the CPP for 39 years, the maximum is $1,154.58 per month. Only a few receive the maximum.

The combined total is $1,286.40 monthly, or $15,436.80. Some retirees will elect to defer the OAS and CPP until 70 to receive higher payments. If you do the same, the OAS will increase by 36%, while the increase in CPP is 42%. Roughly, the total is $21,478.50. Can you make do with the pensions at age 65 or 70?

Common dilemma

Housing costs eat a lot from the retirement budget. Owning a home gives stability, although you will spend on repairs and maintenance. Renting offers flexibility because maintenance costs are negligible. However, there’s rent escalation to consider.

Both have financial risks, but you’ll have to decide which option works best. Remember that retirement is all about the quality of life. The only way to avoid a low quality of life is to augment your OAS and CPP. You can even retain your home and not rent if you have another wellspring.

Build a cash reservoir

When you pick assets for retirement income, choose the friendliest and most dependable provider. Bank of Montreal (TSX:BMO)(NYSE:BMO) fits the bill. You won’t have doubts investing in this bank stock. First, BMO is the oldest bank in Canada and the fourth-largest financial institution in the country today.

Second, this $48.88 billion bank is the pioneer in dividend payments. Its history of providing passive income to shareholders dates back to 1829 — 191 years ago. Third, you can buy the bank stock at a discount ($76.44 per share) if you take a position today.

Currently, BMO pays a dividend of 5.56%. A $50,000 investment should generate $2,780 in passive income. You can add it to your $15,436.80 annual OAS and CPP if you retire at 65. Over the last 20 years, BMO’s total return was 459.65%.

BMO is not the highest dividend payer, but it’s a blue-chip company. You’re investing in stability, reliability, and peace of mind.


OAS and CPP are not plentiful enough to live comfortably in the sunset years. Aim for a higher quality of life and invest in top-quality assets you can hold for a lifetime.

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 Christopher Liew has no position in any of the stocks mentioned.

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