Retirees: 3 Hacks to Make $2,500 Per Month in Retirement

Retirees should look to create a diversified portfolio of income sources by investing in dividend stocks and ETFs.

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Thinking about retirement can make you nervous as you need to save enough to lead a comfortable life while accounting for inflation and other expenses. It’s advisable to have multiple income sources in retirement that will help you offset these expenses easily.

According to a Stats Canada report, Canadian couples over the age of 65 spent an average of $48,453 per household back in 2019. This amount will vary depending on factors such as housing, inflation, and location, among others.

Let’s say on an individual basis you will require $2,500 per month to in retirement. So, how do you get to this financial milestone, which seems overwhelming at first? Well, investing in liquid, high-yield asset classes is a low-cost way to help you earn a predictable and recurring source of passive income.

Here are three ways to make $2,500 per month in retirement.

Invest in dividend stocks such as Enbridge

Enbridge (TSX:ENB) is among the most popular dividend stocks in Canada and offers you a tasty yield of 7.75%. Enbridge is a midstream infrastructure giant that owns and operates a widening portfolio of cash-generating assets.

Enbridge’s cash flows are extremely resilient. For instance, a majority of its EBITDA (earnings before interest, tax, depreciation, and amortization) originates from long-term contracts indexed to inflation, making the energy heavyweight immune to fluctuations in commodity prices.

Enbridge pays shareholders an annual dividend of $3.66 per share, and these payouts have risen by 10% annually in the last 29 years. You can purchase 2,733 shares of Enbridge for $128,833, which will help you earn $10,000 in annual dividends, indicating a monthly payout of $833.

Enridge is just one example of a blue-chip dividend stock. Investors should identify other dividend stocks with a tasty payout and a widening earnings base.

Investing in dividend ETFs

Investing in individual stocks is quite risky as you need to analyze a company’s fundamentals to ensure its dividend payout is sustainable across market cycles. Comparatively, investing in dividend ETFs, or exchange-traded funds, such as iShares Core MSCI Canadian Quality Dividend Index (TSX:XDIV) provides you with exposure to several companies across sectors, resulting in portfolio diversification.

In the last five years, the ETF has returned 57% after adjusting for dividends and currently offers you a yield of 6%.

The ETF has a monthly payout of $0.13 per share. So, to earn $833 each month or $10,000 per year, you need to buy 6,408 shares of the ETF worth $1,65,646.

Investing in GICs

Canadian investors can consider investing in Guaranteed Investment Certificates, or GICs. Compared to stocks and equity-focused ETFs, GICs are low-risk instruments that offer you an annual yield.

Here, you deposit a particular amount with a bank or financial institution and earn interest on the investment. Higher interest rates in recent years have meant several banks now offer a yield of 5% on GICs.

Investors can allocate $200,000 to GICs and earn $10,000 a year, or $833 each month.

The Foolish takeaway

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Enbridge$47.142,733$0.915$2,500Quarterly
XDIV ETF$25.856,408$0.13$833Monthly

The above investments, totalling $494,479, will help you earn $30,000 a year, or $2,500 a month, in dividends, indicating a yield of 6%. You can change the allocation of these asset classes depending on your risk appetite and investment horizon.

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. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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