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Return to Work Before the CRA Ends Your CERB

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In the last two months, many Canadians received $2,000 per month, and some even received a higher amount from the Canada Revenue Agency (CRA). The government wanted people to stay at home to contain the spread of COVID-19. Hence, it supported those who lost their job because of the lockdown by offering the Canada Emergency Response Benefit (CERB).

The CRA disbursed up to $2,000 in monthly payments to individuals who applied for the benefit. However, the government is now facing a backlash from this benefit. As the economy reopens, employers are calling back their employees to work. But employees are refusing to return to work, as in some cases, they can earn more from the CERB while sitting at home.

Moreover, the government has extended the CERB till September, making people reluctant to return to work or search for a job. The CERB is not an alternative to a job, but direct government support to help people who had no job opportunities. The government is now tightening its belt and disbursing CERB payments only to those who deserve it.

The CRA can end your CERB 

The flaw in the CERB payment was its amount — and the qualification requirements to secure that amount. If you earn $1,000 or above, you are not eligible to receive the CERB payment of $2,000. Hence, it comes as no surprise that people are turning down job offers that pay less than $2,000 a month.

Conservative MP Dan Albas has proposed a scaled approach wherein Canadians will continue to receive a certain percentage of their CERB payment as they return to work. This amount would be gradually phased out as they increase their working hours.

For the July payments, CERB recipients will have to attest that they are actively searching for jobs and consult the government’s job bank.

Sector Funds vs. Index Fund 10-Year Returns
ETF Name Ticker Before Market Crash After Market Crash
iShares Core S&P/TSX Capped Composite Index ETF XIC 98.90% 75.20%
iShares S&P/TSX Capped Information Technology Index ETF XIT 381% 470%
iShares S&P/TSX Capped REIT Index ETF XRE 184.60% 105%
iShares S&P/TSX Capped Financials Index ETF XFN 153% 103%

Don’t rely on CERB payments to pay your bills

The CRA could end your CERB payments at any time. People will return to an economy where the salaries may not be as competitive as they were in the pre-pandemic times. Hence, it is necessary to set a passive income source. Finding a good stock is where most early, as well as seasoned investors, falter.

Diversification can help you mitigate the risk of choosing the right stock. The easiest and cheapest way to diversify is through ETFs.

The iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) gives you exposure to the top 250 stocks trading on the Toronto Stock Exchange. However, certain sector ETFs have outperformed the XIC because of their higher exposure to good stocks in their sector.

For instance, XIC has 6%, and the iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT) has 29% of its holdings in Shopify, the best-performing stock of 2020.

If you had invested $8,000 in XIC 10 years back, you would have earned $6,000 by now. However, if you had spread this money by investing $2,000 each in XIC, XIT, financial, and REIT ETFs, you would have earned $15,000 by now. This $15,000 would have helped you earn your $2,000 CERB payment for seven months.

And if you had made this investment through your Tax-Free Saving Accounts (TFSA), the $15,000 income would be tax-free.

It’s not too late to prepare for another recession

It is not too late to start investing. Canadians who are eligible for the CERB can get a maximum payment of $12,000 in 24 weeks. If you can monthly invest $500 in the above four ETFs, you can earn more than $3,500 in the next 10 years.

Don’t forget to continue investing even after you return to work. Regular investing habits will not only prepare you for another recession but also give you financial stability during contingencies.

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 Puja Tayal has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

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