The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that is designed to replace part of your income when you enter retirement. Canadians who qualify will receive CPP retirement pension for the remainder of their life.
Today, I want to discuss how Canadian retirees can work to bolster their CPP pension going forward. Moreover, I want to take a quick look at a top dividend stock that retirees can rely on for many decades to come. Let’s dive in.
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How to manage CPP contributions
Canadians can qualify for CPP pension in two ways: you must be at least 60 years of age and have made at least one viable contribution to the CPP. Valid contributions to CPP can be from domestic employment income or the result of credits received from a former spouse or former common-law partner at the end of the relationship.
You must apply for your CPP to start pension payments. The pension amount is a more complicated question that has many retirees scratching their heads when they finally do qualify for CPP pension. Indeed, the amount that a retiree receives monthly is based on three criteria. The first is your average earnings through your working life, your overall contributions to your CPP, and the age you elect to start your CPP pension.
According to the federal government, the maximum monthly amount you could receive if you start your CPP pension at age 65 is $1,306.57 in 2023. Moreover, the average monthly amount paid for a new retirement pension was $811.21 this January. How can retirees hope to increase these payments?
Pursue a CPP pension boost
In 2019, the federal government announced that the CPP would gradually be enhanced. That means that the workers of today will receive higher benefits when they eventually retire. This stands to reason considering the pace of inflation and the cost of living in Canada.
Canadians could also theoretically increase their CPP if they choose to work while receiving their retirement pension. They must be under the age of 70. According to the CPP government website: “Each year you contribute to the CPP will result in an additional post-retirement benefit and increase your retirement income.” That benefit will be immediately paid out the following year.
One way for retirees to pursue an alternative with a Dividend King
The CPP is all well and good. However, some retirees might have that drive to seize their destiny and pursue post-retirement income through TSX-listed dividend stocks. Canadian Utilities (TSX: CU) is a fantastic target for Canadian retirees. This Calgary-based company is engaged in the electricity, natural gas, and retail energy businesses in the United States, Australia, and worldwide. Its shares have dropped 9.2% month over month as of close on Thursday, June 15.
A Dividend King is a stock that has delivered at least 50 consecutive years of dividend growth. These highly dependable equities are great additions to a post-retirement portfolio. Canadian Utilities is the only Dividend King on the TSX right now. Shares of this utility stock currently possess a favourable price-to-earnings ratio of 15. Canadian Utilities offers a quarterly dividend of $0.449 per share. That represents a strong 5.1% yield.
