The two prime concerns of most retirees are health and pension. There is a lot retirees can do about both of these things in their working years, but once they retire, they have limited control over either. That’s especially true for retirees who rely solely or primarily on the Canadian Pension Plan (CPP) and the Old Age Security (OAS) pensions.
They can push the pension to its limit by delaying it till they are 70, but that’s about it. Afterward, any increase in this pension may come from the government.
The good news is that retirees may experience a modest boost in their monthly pension from 2024.
The CPP pension boost
The CPP pension is going through multiple changes that will be applicable from next year onwards, and these changes will impact both retirees and Canadians who are in the workforce. The Canadians who are still working will experience the impact of the income ceiling rising from $66,000 to $68,500.
The government is also introducing a “second additional CPP contribution” called CPP2, which is set above the maximum pensionable earning threshold. The benefit for retirees would be comparatively limited.
Augmenting the pension
The CPP pension, while literally a financial lifeline for many Canadians, should not be the only source of income. It’s hardly enough to help most retirees maintain a modest lifestyle, and its inflexibility (since it remains the same) makes it vulnerable to inflation. It also can’t account for any unexpected expenses retirees face.
Retirement savings in cash can bridge the gap that exists between pension and expenses but only to an extent, and they are also vulnerable to inflation. One of the best ways to augment your pension-based retirement income is to invest your savings in a reliable stock like Toronto-Dominion Bank (TSX:TD).
Canadian bank stocks, especially the big five, are great for dividend income because they have a solid track record when it comes to dividend sustainability and growth, and the dividends are backed by healthy finances. But Toronto-Dominion is more than just a great pick for dividend-based income to boost your pension. It’s also a decent growth stock.
In the last decade, the stock returned over 150% to its investors through capital appreciation and dividends, and its value grew by about 70%. So, if you invest a sizable sum in this bank, you can generate a dividend income to meet the expenses you can’t cover with your pension while your capital in this investment grows steadily, remaining far ahead of the clutches of inflation.
Foolish takeaway
Choosing the right stocks to stash your savings in is a crucial part of retirement planning. Dividend stocks that offer healthy yields, long-term and financially sustainable payouts, and decent capital-appreciation potential can be the perfect way to augment your retirement pension.
