Are you thinking about retirement? What is the maximum you can get from the Canada Pension Plan (CPP) to which you and your employer contribute every month? The Canada Revenue Agency (CRA) determines the CPP payout every year. For 2023, the maximum payout you can get is $1,306.57/month if you made the maximum CPP contribution in 40 years of your work life. But if you delay your retirement by five years to age 70, you can get a $1,855 maximum CPP benefit.
How can you get the maximum CPP benefit?
The CRA rewards you for delaying your CPP payout. After 65, for every month of delay, the CRA increases your CPP payout by 0.7% till age 70. If you are earning well and don’t need a pension, you can delay your CPP benefit, increasing it by 42% to $1,855, a $549 monthly increase.
Even if you do not qualify for the maximum but average CPP payout of $760.07/month, you can increase this by 42% to $1,079/month.
Most Canadians don’t get the maximum CPP benefit, as they have to max out on contributions for 40 years without any misses. If you started working at age 25 and are retiring at age 70, you probably started working in 1983. At that time, if your annual income was at or above $20,000 and grew along with the maximum pensionable earnings, you probably qualify for the $1,855 payout. If you turn 70 this year and are earning $66,600 in 2023, or $5,500/month, you could qualify for the maximum payout.
Build your personal pension account
If you didn’t max out on your CPP contribution, you may not qualify for the maximum benefit. But you can still get a $1,855 monthly passive income by transferring your retirement savings to reliable dividend stocks.
The bear market has created an opportunity to buy TC Energy (TSX: TRP) stock at its low. You can lock in a 7.76% yield.
TC Energy
Since June, TC Energy stock has slipped 35% below its March 2020 pandemic low. The dip came as the company announced a split of its gas pipeline and oil pipeline business. The company has been shifting to natural gas pipelines and considering offloading its oil pipeline business. Instead, it decided to split the two. As the oil business decelerates, the company will focus on squeezing out as much cash flow as possible. It will increase the capacity of existing pipelines and use the underused portions, thereby improving its efficiency.
The oil business might not generate sufficient growth, but a toll rate increase and improving efficiency could give 2-3% dividend growth. The focal point of dividend growth will be the natural gas pipeline business. This segment has significant capital requirements. The company is building its gas infrastructure to capture North America’s natural gas export market. This segment could give 3-5% dividend growth.
Now is a good time to buy the stock as it trades at its low. The company aims to maintain the $3.72 dividend per share to its existing shareholders. Once the split is over, you could sell the oil stock and retain the gas stock.
How to earn $1,855 in maximum CPP?
TC Energy is just one stock. Enbridge, BCE, and CT REIT have also slipped to their low levels, creating an opportune time to invest. A 7% dividend yield that grows annually can hedge your passive income against inflation, just like your CPP. If you have a lump sum amount saved in your Registered Retirement Savings Account, now is the time to cash in on some stocks and buy these dividend stocks to fill the CPP gap.
