The Trudeau administration is living up to its promise that no Canadian will be left behind during the 2020 pandemic. The coverage of its COVID-19 Response Plan is far and wide. Employees and workers have the Canada Emergency Response Benefit (CERB), while employers can avail of the Canada Emergency Wage Subsidy (CEWS).
Students and recent graduates are receiving financial relief through the Canada Emergency Student Benefit (CESB). Those looking for summer jobs can do volunteer work to earn the Canada Student Service Grant (CSSG). Meanwhile, family benefits like the Canada Child Benefit (CCB) provides a one-time payment.
Special boost for pensioners
Canada did not leave its seniors and pensioners out in the cold. The federal government is aware that the Guaranteed Income Supplement (GIS) beneficiaries and Old Age Security (OAS) pensioners are most vulnerable to the novel coronavirus. Likewise, the same group is also facing economic hardship like the rest.
The federal government has a $2.5 billion budget allocation exclusive to 2.2 million GIS payees and approximately 6.7 million OAS benefit recipients. This COVID-related economic support should lessen seniors’ financial stress and help them cope with the expenses while lockdown measures are in place.
The one-time boost to seniors who qualify for OAS benefits automatically receives $300 extra. Low-income elders who are eligible for the GIS will get a one-time payment of $200. If you’re eligible for both GIS and OAS, you will receive $500. Each boost is on top of the regular GIS and OAS payments. The payments are available since the week of July 6, 2020.
Another bit of information is that recipients of the Allowance or the Allowance for the Survivor benefits will receive $500. I will remind seniors that the $500 payment is non-taxable. Also, OAS pensioners belonging to the higher income bracket are entitled to the OAS boost.
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Permanent boost to pension
Canadian seniors who have been saving or have savings can boost their pension some more. Unlike the one-time help in the GIS and OAS, investment income from a time-tested dividend stock is lasting, as if you have another pension for life. I’m referring to none other than the largest banking institution in Canada.
Royal Bank of Canada (TSX:RY)(NYSE:RY) has a market capitalization of $133.63 billion. The bank has been operating since 1864 (156 years) and has been paying dividends since 1870 (150 years). Given RBC’s outstanding record, you can build a substantial nest egg in 20 to 25 years.
As of this writing, the share price is $93.87, while the dividend yield is 4.62%. Let us compute your earning potentials, assuming you have $78,000 to invest. The annual income is $3,603.60, or $300.30 per month. In about 15.5 years, your investment will double. But in 25 years, you will have a wealth of $241,247.32.
Financial dislocation and outliving the nest egg are the greatest worries of retirees in the sunset years. Because of the COVID-19 pandemic, the young and old alike are seeing the importance of saving and investing. You don’t want to go through another episode where you are at the mercy of the government.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned.