Retirees: Here’s How to Boost Your CPP Pension in 2024

You can supplement the CPP by investing in GICs, dividend stocks, and high-dividend ETFs. Let’s see how.

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The Canadian government has a retirement pension plan called the Canada Pension Plan, or CPP. Introduced in 1965, the CPP is a taxable retirement benefit that aims to replace a portion of your income in retirement.

The average age to begin the CPP payment is 65. However, you can start receiving the payments at the age of 60 or delay them until you reach 70 years of age.

In 2024, the average monthly CPP payment for a 65-year-old is $758.32, while the maximum payment is $1,364.60. We can see that just relying on the CPP to fund your retirement expenses may not be an ideal plan, and it is crucial to supplement the pension with other income streams.

Here are three ways to boost your CPP pension in 2024.

Invest in GICs

A Guaranteed Investment Certificate, or GIC, is an investment plan where investors can earn interest for a specific period. At the end of the period, you will get your principal amount back.

Several banks offer this fixed-income instrument, which is fast gaining popularity in Canada due to rising interest rates. In fact, the GIC rates offered are as high as 5%, allowing investors with a lower risk appetite to derive inflation-beating returns without significant risk.

Given an interest rate of 5%, an investment of $100,000 in a GIC will help you earn $5,000 in annual interest.

Invest in blue-chip dividend stocks

Another way to supplement your retirement pension is by investing in blue-chip dividend stocks such as Enbridge (TSX:ENB). Here, you need to identify a portfolio of high-dividend stocks that offer you an attractive yield. Moreover, these companies should be positioned to generate cash flows across business cycles and grow earnings over time, resulting in higher dividend payouts.

For instance, in the last 29 years, Enbridge has raised its quarterly dividends from $0.0625 per share to $0.888 per share, enhancing the effective yield significantly. Since February 2004, ENB stock has surged by 267%. However, after adjusting for dividends, cumulative returns are closer to 770%.

Despite its market-beating gains, ENB stock offers you a forward yield of 7.7%. You need to identify other blue-chip stocks similar to Enbridge that have the potential to increase their dividend payouts in the upcoming decade.

Invest in dividend-focused ETFs

Investing in low-cost exchange-traded funds (ETFs) is the best way to gain exposure to the equity market. Generally, ETFs hold a basket of stocks across multiple sectors, which diversifies overall risk.

One high-yield ETF is iShares Core MSCI Canadian Quality Dividend Index ETF (TSX:XDIV). With $986 million in assets under management, the XDIV ETF holds 17 companies in its portfolio and offers you a yield of over 6%.

The top holdings of the fund include Manulife, Royal Bank of Canada, Pembina Pipeline, Sun Life Financial, and Fortis. These five holdings account for 46% of the fund.

In the last five years, the XDIV ETF has returned 10% annually to shareholders, outpacing the TSX index in this period.

The Foolish takeaway

Diversification is the key to building long-term wealth. You need to hold a variety of asset classes, such as bonds, stocks, and ETFs, that should help you achieve financial independence and support you in retirement.

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 Aditya Raghunath has positions in Enbridge and Fortis. The Motley Fool recommends Enbridge, Fortis, and Pembina Pipeline. The Motley Fool has a disclosure policy.

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