How to Create a $450/Month Income Stream for Your Retirement

Contributing to your Canada Pension Plan (CPP) and other pension programs is a vital part of retirement planning in Canada. That said, the retirement benefits you get are designed only to cover part of your retirement income needs. To set yourself up for a more comfortable retired life, you must utilize your savings and invest them to generate income for you.

If you want to supplement your retirement income with tax-free passive income, using dividend investing to create a portfolio of income-generating assets in a Tax-Free Savings Account (TFSA) can be an excellent approach. By using the contribution room to buy and hold dividend stocks, you can line your account balance with extra cash.

In a TFSA, any returns on your investment can grow without incurring income taxes. For a retiree, having more money to spend without paying taxes on it is a blessing. To this end, we will look at three TSX dividend stocks you can add to a TFSA to create a tax-free income stream.

IGM Financial

IGM Financial (TSX: IGM) is Canada’s largest non-bank-affiliated asset manager. The $7.25 billion market capitalization Canadian company has IG Wealth Management and Mackenzie Investments under its portfolio. With key markets in Canada, the U.S., and Europe, the company has seen its share prices decline due to broader issues in the global economy.

Despite the recent drop in share prices, it is well-capitalized enough to take a hit on its earnings without impacting its dividends. As of this writing, IGM Financial stock trades for $31.58 per share, paying its investors an inflated 17.12% dividend yield after a 28.16% decline from its 52-week high.

TransAlta

TransAlta (TSX: TA) recently announced the completion of its acquisition of TransAlta Renewables, which traded under the RNW ticker. With the recent agreement, TransAlta acquired all of the outstanding common RNW shares.

TransAlta is a $2.79 billion market capitalization independent power producer headquartered in Alberta. Operating over 70 power plants in Canada, the Western U.S., and Australia, it generates power using a diversified portfolio of fossil fuel-based and renewable energy facilities.

While the development will come with a change in its leadership structure, TransAlta stock can be considered a reliable long-term dividend-income stock. The essential nature of its services virtually guarantees strong cash flows. As of this writing, TransAlta stock trades for $10.59 per share and pays its shareholders a 2.08% dividend yield.

Enbridge

Enbridge (TSX: ENB) is a $92.73 billion market capitalization multinational pipeline and energy company. Headquartered in Calgary, it owns and operates a natural gas utility and Canada’s largest natural gas distribution company.

Its pipeline network also transports hydrocarbons across Canada and the U.S., playing a vital role in the North American economy. With its foray into renewable energy facilities, Enbridge is also preparing for a greener future in the energy industry.

As of this writing, Enbridge stock trades for $43.63 per share, boasting an 8.14% dividend yield. Having paid dividends to investors for 68 years, it has grown those payouts for the last 28 years. For many investors, it is a mainstay in dividend income portfolios due to its reliability.

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Foolish takeaway

While the example below paints a picture of how you can use your TFSA to fund a passive-income portfolio that generates around $450 per month, it is purely hypothetical. You should never allocate so much money to too few a number of stocks.

Besides, creating a portfolio offering this much tax-free dividend income takes a lot of time and patience. However, the example shows you how it can be possible to earn this much. By carefully and gradually building and growing a portfolio of dividend stocks in your TFSA, you can set yourself up for a more comfortable retired life.