Retirees: Boost Your Monthly Income by $100 and Avoid OAS Clawbacks

Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR) is a good stock retirees can count on for recurring dividend income.

| More on:
Canadian Dollars

Image source: Getty Images

If you’re a retiree with savings and looking to boost your monthly income, there’s a way you can do that without worrying about it resulting in a clawback of your Old Age Security (OAS) benefits. OAS and Canada Pension Plan (CPP) payments are often not enough for seniors to help make ends meet, especially if they’re living in cities like Toronto or Vancouver, where the cost of living is very high.

Below, I’ll show you how, with about $24,000 in savings, you can boost your monthly income by $100 without taking on much risk or having to worry about the taxman.

Use a TFSA to keep your dividend income away from the CRA

A Tax-Free Savings Account (TFSA) is something all retirees should take advantage of. With the possibility of putting as much as $69,500 in a TFSA, the account can shield a lot of taxes for investors. You won’t receive a tax slip, nor do you have to worry about reporting any income you earn inside your TFSA.

As long as the Canada Revenue Agency doesn’t think you’re operating a business (e.g., day trading within the account) then you won’t have to worry about your earnings within the account being taxable.

That also means that the earnings won’t impact OAS and you won’t have to worry about any clawbacks, either.

Once you’ve got the money in your TFSA, all that’s left is to choose a solid income stock to put in your portfolio to help generate those dividend payments. One stock that stands out not just for its dividend payments, but also for its stability and growth potential is Shaw Communications Inc. (TSX:SJR.B)(NYSE:SJR).

The telecom giant is a household name and a stable business that investors shouldn’t have to worry about. And with the company developing Freedom Mobile, there’s still potential for a lot more growth in the future.

Currently, the stock pays a monthly dividend of $0.09875. Although the company hasn’t raised its payouts in recent years, investors can still earn more than 5% per year from owning the stock. And with an investment of $24,000, that would generate more than $1,200 per year in dividends. On a monthly basis, investors would be getting $100. All that income would be tax-free within a TFSA.

If you have more savings, then you could certainly add more to boost that monthly income even higher. There are other monthly dividend stocks that investors can choose. Real estate investment trusts (REITs) on the TSX typically pay dividends on a monthly basis and offer a great way to diversify.

TFSAs can offer investors lots of flexibility

One of the big advantages of a TFSA over a registered retirement savings plan (RRSP) is that you can take the money out as you need it. As the money contributed to a TFSA has already been taxed, there’s no withholding tax when you go to withdraw it.

For retirees, that can add a lot of flexibility in deciding whether to keep funds invested or not. But the one mistake TFSA investors should avoid is overcontributing to the account, which can happen easily if you’ve withdrawn funds and add them back before there’s room in the TFSA (withdrawals don’t free up space in a TFSA until the following calendar year).

The TFSA is a valuable tool that can help grow your savings without incurring a big tax bill along the way.

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 Investing

Solar panels and windmills
Energy Stocks

Algonquin Stock Has Broken Investors’ Hearts, but I Think It Will Turn a Corner

AQN stock faces more uncertainty in 2023, but could be a compelling value pickup for income investors.

Read more »

Investing

Better Buy: Manulife Stock vs. Suncor Stock

Manulife Financial Corp. (TSX:MFC) and Suncor Energy Inc. (TSX:SU) are powerhouses that offer nice value and income right now.

Read more »

energy industry
Energy Stocks

2 Top Energy Stocks to Buy Right Now

These energy companies remain immune to the economic and commodity down cycles.

Read more »

Man holding magnifying glass over a document
Investing

4 Canadian Small Caps to Keep Your Eye on

These small-cap stocks have a long runway for growth with potential to deliver stellar returns in the long term.

Read more »

edit Businessman using calculator next to laptop
Investing

Where to Invest $1,000 in 2023

Despite the economic headwinds, the following three Canadian stocks look attractive due to their solid underlying business and stable cash…

Read more »

man is enthralled with a movie in a theater
Investing

Could Cineplex Stock Be a Big Winner in 2023?

Cineplex trades roughly 75% off its pre-pandemic high and is well on its way to recovery this year, making it…

Read more »

grow money, wealth build
Dividend Stocks

2 Ultra-High-Yielding TSX Stocks to Buy With $1,000

You don’t need thousands to start investing. Here are two super high-yielding TSX stocks to buy now that can provide…

Read more »

Man with no money. Businessman holding empty wallet
Stocks for Beginners

Canadians Investors: How to Know When We’ve Hit a Recession

A recession is coming in 2023, but what does that even mean? And how can investors protect themselves before it…

Read more »