Last month, the big CERB news was that the benefit would be extended from 16 weeks to 24 weeks. Justin Trudeau made the announcement just as many Canadians were about to see their benefits expire.
An extra eight weeks means $4,000 for recipients who qualify. That’s a nice financial lifeline. However, there have been indications that the CRA will tighten up the application process this time around.
As of July 5, new applicants have to sign an attestation that the government wants them to work. In and of itself, that doesn’t mean much. However, viewed in context with the CRA’s crackdown on fraudulent CERB claims, it could signal a stricter application process.
As of right now, the CERB is still available for several more weeks. However, the CRA’s recent actions indicate that the program is coming under closer scrutiny. With fraud investigations and now signed attestations, it’s clear which way the wind is blowing. Therefore, you’d be wise to start planning for a life after the CERB. The following are two ways to support yourself when the CERB is gone.
Option #1: Invest
If you have considerable savings, you can always live off of those. That entails spending your capital and lowering your net worth, but it is one option for surviving. However, it’s not the best option. The better option is to put your savings to work for you with income-producing investments. That way, you both preserve your capital and get a bit of spending money.
One example of a good income-producing investment is the iShares S&P/TSX 60 Index Fund (TSX:XIU). According to BlackRock’s website, the fund has a 3.5% yield. That means you get $3,500 in annual payouts on every $100,000 you invest. That’s a pretty substantial income supplement. And you can even shelter part of it from taxes.
XIU is a permitted investment for a Tax-Free Savings Account (TFSA), a special tax-sheltered account that spares you dividend and capital gains taxes. You could hold about 69.5% of a $100,000 XIU position in a TFSA and shelter that percentage of the income from taxes. So, the amount of the return you’d keep would be higher than that same $3,500 return earned in a taxable account.
Option #2: Get re-hired
A second and more obvious way to stay afloat financially in the COVID-19 era is to get re-hired. As the economy re-opens, more and more jobs will come back. If you haven’t spoken to your employer yet about the possibility of getting your job back, do so. You may be surprised to find that they’re getting ready to re-hire their staff.
Remember that the CEWS is still in effect as of the summer of 2020. Employers can get up to 75% of employees’ wages subsidized by the government. It’s been a vital lifeline for businesses in the COVID-19 era and a key program to help Canadians get back to work.
Despite all the extensions we’ve seen, the CERB will end sooner or later. In fact, the original end date of October 3 is still in effect. The extension announced last month extended the number of weeks you can get the CERB for, not the cutoff date for the program. Unless that changes soon, your CERB money will likely end this year. Fortunately, with the right investments and a good job, you can wean yourself off it without too much pain.