Are you approaching age 60?
Are you feeling unsure about whether to take the Canada Pension Plan (CPP) or delay taking the benefit until you’re older?
If so, you have a big decision in front of you. The decision whether or not to take CPP as soon as possible has major implications for your retirement. If you take CPP right away at 60, you’ll get fewer benefits per year. If you wait until later to take CPP, you’ll get more benefits per year, but fewer years of them.
The “correct” decision ultimately depends on how long you expect to live, how much retirement savings you have, and whether or not your spouse works outside the home.
In this article, I will explore how much you can expect to get from CPP if you take the benefits at age 60 and how much more you could get by waiting.
$770 per month
$770 per month is the amount you can expect to get from CPP if you retire this year at 60, having worked your entire adult life prior to this year. Some variables may make your amount slightly greater or lesser. For example, if you had long stretches of being unemployed or earned less than the maximum pensionable earnings threshold, then you may get somewhat less than $770 per month. Regardless, the figure is a pretty good ballpark estimate of what your benefits will work out to if you elect to take CPP today.
How much more you could get by delaying taking CPP
If you delay taking CPP, then you could get more benefits per year. There are several reasons for this.
First, a longer period of work may overcome lapses in your employment history.
Second, CPP enhancement is currently underway, and the more premiums you pay post-enhancement, the more benefits you’ll get.
Third, the CPP program has a formula for how much extra money you can get per year you delay. It depends on a number of variables, but you can get up to $1,306 per year if you delay taking CPP until age 65. You can get even more if you wait until age 70.
What you can do if you can’t afford to delay taking CPP
If you can’t afford to delay taking CPP but want extra retirement income, you have a few options. You can work longer. You can take a part-time job or start a side hustle. Or — easiest of them all — you can invest. If you have a substantial amount of savings, you can simply invest your money in stocks and/or stock index funds and collect dividend payments.
Consider Alimentation Couche Tard (TSX:ATD) stock. It’s a Canadian gas station company whose shares yield 0.81%. That might not sound like much of a yield, but it’s been growing over time. Over the last five years, ATD has increased its dividend by 22.4%. Over 10 years, the dividend-growth rate was even higher!
Can ATD’s management keep up the dividend growth?
Potentially, yes.
First, as a gas station company, ATD makes more money when oil prices are rising, and oil prices are rising now.
Second, the company is very profitable and has excellent growth rates. Over the last 12 months, it grew its revenue by 1.4% and its earnings per share by 24%. That is pretty strong growth, all things considered. Over the last five years, revenue has grown by 4% per year and earnings by 14% per year. So, pretty good long-term growth as well. Over the years, ATD has proven itself to be a reliable company by its prudent acquisition strategy. It’s definitely a worthy addition to any portfolio.
