Whether you’re nearing retirement or not, you’re likely already familiar with the Canada Pension Plan (CPP). CPP is a social insurance program that provides retirement, disability, and survivor benefits to Canadians. And while that is certainly excellent, providing support for Canadians during these times, it’s not enough on its own.
The CPP is designed to replace just a portion of an individual’s pre-retirement income. Right now, the maximum monthly amount you could receive if you start your pension at age 65 is $1,364.60. Yet the average in January 2024 was just $831.92. This might not even cover living expenses, especially if you have a higher standard of living.
That’s why today, we’re going to look at passive-income streams that will help any retiree manage. With that, let’s get into three options.
GICs
First off, one of the best options that retirees can lock in right now are Guaranteed Investment Certificates (GIC). Whether it’s for the next five years or two decades, there are many offering 5%-yielding GICs. That would mean you’re bringing in a fixed income each and every year of 5%!
These investments provide a fixed or variable rate of return, with interest payments typically made on a regular basis, either monthly, quarterly or annually. While interest rates may be high now, they won’t remain that way. Therefore, these investments can offer a stable source of income with lower risk compared to other investments.
Therefore, retirees can hold multiple GICs depending on when they believe they will need them. Choosing different maturity dates will allow you to bring in easy passive income, and safely as well.
Rentals
Now, you could certainly consider real properties, and owning one can provide you with a reliable source of passive income. However, managing rental properties comes with its own struggles. There’s the property acquisition, maintenance, and tenant management to deal with.
However, there are other options to rent out. From your parking spot to your storage shed, this can be an easy way to create monthly income — especially if you bring in multiple rental sources. Rental income can, therefore, provide you with steady cash flow on a monthly basis and even offer tax advantages for property expenses and depreciation.
Dividend stocks
Finally, dividend stocks are likely the easiest and steadiest stream of passive income that requires pretty much zero active involvement. Retirees can build a diverse portfolio of dividend stocks across different sectors and regions. These dividend payments can then be made to you annually, quarterly, or even monthly!
Furthermore, some companies have a history of increasing their dividends year after year. This can help retirees keep pace with inflation as well. While there can be risk involved, there is less when considering blue-chip companies with a strong track record of consistent dividends.
A great option to consider right now would be Royal Bank of Canada (TSX:RY). This dividend stock is a Dividend Aristocrat, increasing its dividend each year during the last 12 years. That’s even during incredibly difficult financial times.
Right now, investors can grab hold of a dividend yield of 4.08% and use it to also help finance their future! So, think beyond CPP and grab hold of these passive-income streams any retiree can enjoy.
