Retired Couples: How to Get $679 in Monthly Tax-Free Passive Income

Retirees can generate significant tax-free income insider their TFSAs and not worry about putting their OAS at risk of a clawback.

| More on:
Close up shot of senior couple holding hand. Loving couple sitting together and holding hands. Focus on hands.

Image source: Getty Images.

Canadian pensioners can take advantage of their Tax Free Savings Account (TFSA) contribution space to build portfolios of top TSX dividend stocks that provide steady and growing streams of tax-free passive income.

The current maximum TFSA contribution limit is $81,500 per person. That means a retired couple has up to $163,000 in TFSA contribution room. TFSA earnings remain beyond the reach of the CRA, so the income generated on the investments won’t put Old Age Security (OAS) payments at risk of the pension recovery tax.

The best TSX stocks to buy for passive income typically have long tracks records of dividend growth.


Enbridge (TSX:ENB)(NYSE:ENB) has raised its dividend in each of the past 27 years. Investors who buy the stock at the current share price below $54 can lock in a solid 6.4% dividend yield and simply wait for dividend increase to boost the return in the coming years.

Enbridge is a North American energy infrastructure giant with a current market capitalization of $110 billion. The company moves 30% of the oil produced in Canada and the U.S. and 20% of the natural gas used in the United States.

Global energy markets are going through an interesting phase with demand for Canadian and U.S. supplies rising. Liquified natural gas (LNG) shipments from both countries are expected to surge in the coming years, as Europe seeks out reliable supplies from LNG facilities on the U.S. Gulf Coast and Asian buyers book shipments from LNG locations on the Pacific. Enbridge recently announced plans to take a 30% ownership stake in the $5.1 billion Woodfibre LNG project in British Columbia. The company is also expanding its natural gas pipeline infrastructure in both Canada and the United States to serve LNG sites.

Enbridge stock looks cheap right now and is good to buy for a TFSA portfolio focused on passive income. Investors should see the dividend increase by 3-5% per year over the medium term, supported by the current $13 billion capital program. Acquisitions could boost cash flow and increase the size of the distribution hikes.


Fortis (TSX:FTS)(NYSE:FTS) owns and operates $60 billion in utility assets in Canada, the United States, and the Caribbean. Nearly all of the revenue comes from regulated assets. This means cash flow tends to be predictable and reliable. The businesses include power generation, electricity transmission, and natural gas distribution operations. These are essential services that homes and businesses need regardless of the state of the economy. As a result, Fortis is a good stock to buy if you are concerned about the potential arrival of a recession in 2023 or 2024.

Fortis has raised its dividend in each of the past 48 years. The company is currently working on a $20 billion capital program that will increase the rate base by about a third to more than $41 billion by the end of 2026. Management expects the new assets to drive enough cash flow growth to support an average annual dividend increase of 6% through at least 2025.

At the time of writing, Fortis stock provides a 3.7% dividend yield.

The bottom line on top stocks to buy for tax-free passive income

Enbridge and Fortis are good examples of top TSX stocks to buy for attractive dividends that should continue to grow for years. An equal investment in the two stocks would provide an average yield of about 5% today.

Retired couples could quite easily build a diversified TFSA portfolio of quality Canadian dividend stocks that would generate this level of return. That means their $163,000 in combined TFSA investments would generate $8,150 per year in tax-free income. That’s better than $679 per month in earnings that won’t put the OAS pensions at risk of a clawback!

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.

The Motley Fool recommends Enbridge and FORTIS INC. Fool contributor Andrew Walker owns shares of Enbridge and Fortis.

More on Dividend Stocks

Hands holding trophy cup on sky background
Dividend Stocks

3 of the Top Dividend Stocks in Canada

Top TSX dividend stocks are still on sale.

Read more »

man touches brain to show a good idea
Dividend Stocks

Pembina Vs. Brookfield Renewable: Which High-Yield Dividend Stock Is Better?

Both Pembina Pipeline (TSX:PPL) and Brookfield Renewable Partners (TSX:BEP.UN) look like strong dividend stocks, but is one better?

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $20,000 in 2 TSX Stocks for $863/Year in Passive Income

Shares of these two fundamentally strong Canadian companies can help you start a worry-free passive-income stream.

Read more »

Dividend Stocks

The Best Canadian Stocks to Buy With $1,000 Right Now

If there are just three Canadian stocks you can pick up with $1,000, make them these three. All have dividends…

Read more »

Growing plant shoots on coins
Dividend Stocks

2 Incredible Dividend Growers to Buy Hand Over Fist in July 2024

These two top Canadian dividend stocks, with solid track records of raising dividends, look really attractive to buy right now…

Read more »

sale discount best price
Dividend Stocks

3 Discounted Stocks to Track in July 2024

Not all discounted stocks are worth buying right away. You have to watch many of them to recognize the trend…

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

How to Use a TFSA to Earn $250 per Month in Tax-Free Passive Income

Looking for long-term growth in your TFSA? Here is exactly how to create the perfect passive income portfolio, and where…

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 Reasons to Buy CAPREIT Stock Like There’s No Tomorrow

CAPREIT (TSX:CAR.UN) has proven its worth time and again. And after strengthening its portfolio, it could be time to pick…

Read more »