The maximum Canada Pension Plan (CPP) payment for new beneficiaries in 2023 is $1,306.57. However, you must have contributed enough or at least 39 years to receive the max. A pension claimant at 65 today would receive, on average, $760.07 per month (as of April 2023) or $9,120.84 annually.
If you think the benefit amount is insufficient to cover your financial needs in retirement, avail of an incentive to boost your CPP payout. Also, invest in dividend stocks to generate cash flow streams in the run-up to retirement. The twin steps ensure financial security in the sunset years.
Image source: Getty Images
A 42% permanent increase
There’s no better time to take the CPP, but the pension incentivizes those desiring higher payouts. The trade-off for this option is deferring the payments past age 65. You enhance your benefit by 8.4% more for each year of delay until age 70. Assuming you take the entire route, the total permanent increase in five years is 42%.
If you do the math, the annual lifetime income rises to $12,951.59, or $1,079.30 per month, instead of $760.07. Since the CPP replaces only 25% of pre-retirement employment income (33.3% in the future), you can fill the gap with investment income.
Income stocks
A mature and well-capitalized company like Sun Life Financial (TSX: SLF) is best for building wealth. The $40.76 billion financial services company offers insurance, retirement, and pension products. It’s also active in mutual fund and investment management businesses.
The rising-rate environment favours life insurers, including Sun Life, because it positively impacts earnings, capital, liquidity, and reserves. Likewise, the stock performs when rates are rising. At $69.45 per share, investors enjoy a 12.97% year-to-date gain on top of the 4.39% dividend yield.
Imperial Oil (TSX: IMO) is ideal for long-term investors owing to its impressive dividend history. Through Esso and Mobil stations, the $39.24 billion integrated energy producer provides petrochemical products and services. Besides paying a dividend yearly for over 100 years, the company has raised its dividend for 28 consecutive years.
The 3.08% dividend yield isn’t the highest on the TSX, but the quarterly payments should be rock steady. Also, the energy sector remains in a slump year to date (-3.17%), but IMO is up 3.34%.
High-growth dividend stock
Ag Growth International (TSX: AFN) is a dividend payer like Sun Life Financial and Imperial Oil, although the yield is a modest 1.15%. However, the potential capital gains from this agricultural stock should be tremendous. Market analysts have a 12-month average price target of $71.80.
At $52.34 per share, the year-to-date and three-year gains are 21.42% and 89.57%. The $991.98 million company provides equipment and solutions to support the world’s food infrastructure. Seed, fertilizer, grain, feed, and food are its five platforms to address the huge addressable market.
Ag Growth International has exposure to multi-billion-dollar growing industries and can capitalize on growth opportunities in emerging economies. Management is confident its evolving business model will accelerate organic growth and increase market share.
No fear
The CPP deferment and maintaining a dividend stock portfolio with Sun Life Financial as a core holding is a professional move. It eliminates the fear of outliving your money in retirement.
