Here's the Average CPP Benefit at Age 60, 65 and 70

Here’s the Average CPP Benefit at Age 60, 65 and 70

The CPP payout is not enough to support a comfortable life for most retirees. You need to supplement the CPP with other income streams, such as dividends.

Aditya Raghunath

Aditya Raghunath joined the Motley Fool Canada team in 2019 and has close to seven years of experience in covering publicly-listed companies. With a post-graduate degree in finance, Aditya aims to educate and engage Canadians by writing extensively about growth, dividend, and value stocks. If you are considering investing in the stock market, he recommends reading The Intelligent Investor by Benjamin Graham before taking the plunge.

Published December 25, 2023 9:00 am EST

The CPP, or Canada Pension Plan, is a retirement program launched back in 1965. It initially aimed to replace 25% of your pre-retirement income, providing Canadian residents with a stable source of recurring cash flows. Then, Canada launched something known as the CPP enhancement in 2019, where you can increase your contribution toward your retirement account and benefit from a higher payout.

How much does the CPP benefit pay retirees?

The average age to start withdrawing the CPP is 65. However, you can choose to start the payments at the age of 60 or delay them until you are 70 years old. If you begin CPP payments early, the payout reduces by 0.6% each month. It suggests the CPP will fall by 36% over the course of five years. Alternatively, the payment rises by 0.7% for each month you delay the CPP after the age of 65, increasing total payouts by a maximum of 42%.

The maximum CPP payout for a 65-year-old in 2023 is $1,306.57 per month, while the average payment is much lower at $760.07. So, for a 70-year-old, the average CPP payment will increase to $1,079 in 2023, and it will fall to $486.44 for those withdrawing it at 60.

Supplement the CPP with dividend stocks

We can see that just depending on the CPP payment is not sufficient to lead a comfortable life in retirement. You need to supplement your pension payouts with income streams such as fixed-income securities and dividend stocks.

Right now, several banks offer guaranteed income certificates, or GICs, which allow investors to earn a fixed yield of 5%. Given inflation is under 5% right now, GICs are ideal for those with a low risk appetite and a near-term investment horizon. But with multiple interest rate cuts scheduled in 2024, GIC yields will also move lower in the next 12 months.

Alternatively, Canadians can further diversify income streams by investing in blue-chip dividend stocks such as Nexus Industrial REIT (TSX: NXR.UN), which currently yields over 8%.

A real estate investment trust, Nexus acquires industrial properties located in primary and secondary markets in Canada. It owns a portfolio of 116 properties totaling 12.4 million square feet of gross leasable area.

Companies in the real estate sector have underperformed in recent months due to rising interest rates. However, the industrial sector is comparatively quite stable, making Nexus Industrial REIT a top investment choice right now.

In recent months, Nexus has focused on completing developments that are expected to drive outsized returns and drive future cash flows higher. Further, it is pursuing the sale of its retail and office assets, the proceeds of which will be used to lower balance sheet debt.

Nexus Industrial emphasized its recent acquisitions will help it generate incremental net operating income in 2024. The company stated, “Recent acquisitions and developments have significantly high graded the quality of the REIT’s portfolio.”

Nexus Industrial pays investors a monthly dividend of $0.053 per share, indicating a yield of over 8%. Given its funds from operations stood at $0.198 in Q3, the REIT has a payout ratio of roughly 80%.