Wondering How Much CPP You’ll Get? You Might Be Missing the Bigger Picture

Get your money working for you ASAP by investing in solid dividend stocks that could increase your dividend income through retirement!

| More on:
Investor wonders if it's safe to buy stocks now

Source: Getty Images

Who doesn’t wonder how much the payment they get from the Canada Pension Plan (CPP) will be? As the Government of Canada website says, the CPP monthly payment you get depends on the age you decide to start your pension, how much and for how long you contributed to the CPP, and your average earnings throughout your working life.

For 2024, the maximum monthly amount you could receive if you start your pension at age 65 is $1,364.60. The average monthly amount paid for a new retirement pension (at age 65) in October 2023 was $758.32. The factors listed in the first paragraph will largely determine how much you’ll receive up to the maximum.

Here’s the bigger picture, though. It doesn’t matter as much what your CPP monthly payments will be because your personal savings are more important. It is expected that your personal savings, along with any employer pension plan, will make up for the bulk (two-thirds to 75%) of your retirement source of income. Personal savings include your Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP).

Where can you invest for retirement?

BCE stock

BCE (TSX:BCE) is among the favourites for retirees to earn juicy income. If retirees like it, it can also be a solid stock for other investors’ diversified portfolios. The big Canadian telecom stock has moved lower since 2022 in a higher interest rate environment, making the big dividend stock reasonably priced for income.

At about $56 per share at writing, it offers a whopping dividend yield of 6.9%. A lower level of capital spending over the next few years should increase BCE’s free cash flow generation and drive more dividend growth.

To be sure, BCE is a Canadian Dividend Aristocrat that has increased its dividend for about 15 consecutive years. Over the last decade, its dividend growth rate has, more or less, been 5%. So, it’s possible for BCE to deliver total returns of about 10-12% per year over the next five years with most returns coming from its dividend.

BMO stock

Another contender for your retirement fund may be a big Canadian bank stock like Bank of Montreal (TSX:BMO). The big banks are also great sources of income in retirement. BMO has paid dividends since 1829.

Notably, bank results are sensitive to the economic health of the markets they serve. In the last two recessions, for example, BMO stock declined about 40-50% from peak to trough, while its adjusted earnings saw a cut of 33% and 18%, respectively. So, there was fear in the markets, leading to cheap stock prices. Those are the times to ignore the butterflies in your stomach and back up the truck to invest for the long term!

At the recent price of about $126 per share, the bank stock is reasonably valued at a price-to-earnings ratio of roughly 10.7. It offers a safe dividend yield of 4.8% and can deliver long-term returns of about 10%.

Investing takeaway

Start building your personal savings and get your money working for you through solid long-term investing as soon as possible. You can start now with blue-chip stocks that offer nice dividends today and the potential to grow that dividend income over time — in time for a comfortable retirement fitting for your lifestyle.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Bank of Montreal. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

coins jump into piggy bank
Dividend Stocks

Invest $15,000 in This Dividend Stock for $61 in Monthly Passive Income

Monthly passive income is well within reach, especially when you have a solid dividend stock like this on hand.

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

RRSP: 2 Reliable Canadian Dividend Stocks to Own for Decades

These stocks offer high yields and a shot at decent capital gains.

Read more »

concept of real estate evaluation
Dividend Stocks

Invest $7000 in This Dividend Stock to Make $600 in Passive Income

Looking to make monthly passive income? Timbercreek Financial (TSX:TF) stock's 8.6% dividend yield could turn into a steady stream of…

Read more »

space ship model takes off
Dividend Stocks

Dividend Investors: 2 Stocks That Could Soar in 2025

These top TSX dividend stocks might be oversold right now.

Read more »

Start line on the highway
Dividend Stocks

TFSA Passive Income: 4 Stocks to Buy and Never Sell

Looking for stocks that create perfect passive income? This TFSA dream team is the perfect portfolio just waiting to happen.

Read more »

analyze data
Dividend Stocks

Is Canadian Tire Stock a Buy for its 4.4% Dividend Yield?

Canadian Tire may have a current dividend yield of 4.4%, but that's not the only reason to buy the high-quality…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Make $5,985/Year in Tax-Free Income

Investing in First National Financial (TSX:FN) stock could produce $5,985/year in tax-free passive income.

Read more »

Asset Management
Dividend Stocks

3 of the Best Dividend Stocks to Buy for Long-Term Passive Income

These companies have fundamentally strong businesses and a growing earnings base that supports their payouts.

Read more »