TFSA: How to Invest for $250 in Monthly Retirement

A recent study published by BMO Financial Groupback in February revealed that 74% of those surveyed were worried about how the current economic conditions would impact their personal financial situation. Meanwhile, 59% of respondents said that those economic conditions made them less confident in reaching their retirement goals. Perhaps the most surprising result from the survey was that a good portion of respondents now believe they will need at least $1.7 million to retire comfortably.

Today, I want to explore how you can generate income if you have already reached retirement. That income is much sweeter when generated in a Tax-Free Savings Account (TFSA). Let’s dive in and explore why.

Here’s why the TFSA is the perfect tool to improve your retirement

The TFSA was launched in January 2009. At the time of this writing, the annual contribution sits at $6,500, while the cumulative contribution room for those who have been eligible since 2009 sits at $88,000. All capital growth and income generated in the TFSA is entirely tax free. That should pique the interest of retirees no matter what their situation is.

In this piece, I want to explore how you can look to generate $250 per month in your TFSA. First, you will need to target equities that deliver monthly income.

This is the first dividend stock I’d target for monthly retirement income

Freehold Royalties (TSX: FRU) is the first monthly dividend stock I’d target for our TFSA in retirement. This Calgary-based company is engaged in acquiring and managing royalty interest in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Shares of this energy stock have jumped 1.1% over the past month as of close on Friday, September 8. Meanwhile, the stock is still down 2% so far in 2023.

This company unveiled its second-quarter (Q2) fiscal 2023 earnings on July 31. Funds from operations (FFO) fell 37% to $53.0 million, or 38% to $0.35 FFO per basic share. That still more than covered Freehold’s dividend payments. Total production in barrels of oil equivalent per day (boe/d) rose 9% to 14,667.

Shares of Freehold closed at $14.77 on September 8. For our hypothetical, we can snatch up 1,500 shares of Freehold for a purchase price of $22,155. This stock offers a monthly dividend of $0.09 per share. That represents a superb 7.3% yield. Our investment will allow us to generate monthly tax-free income of $135 going forward.

Why this REIT belongs in your income-focused TFSA

Chartwell Retirement Residences REIT (TSX: CSH.UN) is a real estate investment trust (REIT) that aims to provide living for Canada’s growing senior population. Retirees should look to invest in this steadily growing space in the 2020s. This REIT has seen its shares rebound nicely from sharp losses it sustained at the same time in 2023. Investors can see more about how it has recently performed with the interactive price chart below.

In Q2 2023, this REIT reported that same-property adjusted net operating income (NOI) jumped 8.7% to $55.9 million. Chartwell benefited from higher resident revenue, a higher deferred tax benefit, and improved net income from long-term-care (LTC) discontinued operations.

This REIT closed at $10.07 on Friday, September 8. Retirees can snatch up 2,300 shares of Chartwell REIT for a total price of $23,161. The REIT last paid out a monthly dividend of $0.051 per share. That means our investment will let us churn out monthly income of $117.30 in our TFSA.

Bottom line

These two investments, which total $45,316, will allow us to generate monthly tax-free income of $252.30 from here on out. That works out to annual income of $3,027.60 in our TFSA.