Everyone dreams of a retirement where money keeps flowing from various sources without having to work for it. You spend your working years building a pool of money and a pipeline through which passive income flows. However, to achieve the retirement dream, you should work smartly, and dividend stocks alone won’t suffice. Resilient growth stocks can help you build a retirement pool and dividend stocks pipeline for passive income.
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How to turn your retirement dreams into reality
The annual passive income you seek will only be 5-6% of your retirement pool. Suppose you want $5,000 every month, or $60,000 a year, as passive income. Your retirement pool should be $1.2 million.
You could achieve this target by maxing out on Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) since 2009 and earning a 10% compounded return.
| Year | RRSP Contribution | 10% CAGR | TFSA Contribution | 10% CAGR |
| 2009 | $21,000 | $5,000 | ||
| 2010 | $22,000 | $23,100 | $5,000 | $5,500 |
| 2011 | $22,450 | $49,610 | $5,000 | $11,550 |
| 2012 | $22,970 | $79,266 | $5,000 | $18,205 |
| 2013 | $23,820 | $112,460 | $5,500 | $25,526 |
| 2014 | $24,270 | $149,908 | $5,500 | $34,128 |
| 2015 | $24,930 | $191,595 | $10,000 | $43,591 |
| 2016 | $25,370 | $238,178 | $5,500 | $58,950 |
| 2017 | $26,010 | $289,903 | $5,500 | $70,895 |
| 2018 | $26,230 | $347,504 | $5,500 | $84,034 |
| 2019 | $26,500 | $411,107 | $6,000 | $98,488 |
| 2020 | $27,230 | $481,368 | $6,000 | $114,937 |
| 2021 | $27,830 | $559,458 | $6,000 | $133,030 |
| 2022 | $29,210 | $646,017 | $6,000 | $152,933 |
| 2023 | $30,780 | $742,749 | $6,500 | $174,827 |
| 2024 | $31,560 | $850,882 | $7,000 | $199,459 |
| Total | $412,160 | $970,686 | $95,000 | $227,105 |
While it looks easy on paper, it is not a practical solution. Investing $38,560 in a year may not always be possible in the ups and downs of life, and 16 years is a long time. Consider stocks that can act as growth catalysts and make up for those lost years.
Three TSX stocks for your retirement dreams
Constellation Software stock
Constellation Software (TSX:CSU) is a resilient growth stock that works on the principle of compounding. It is an umbrella company of holding companies which buy small vertical-specific software companies and get a right on their cash flows. It then uses these cash flows to buy more such companies, increasing the size of Constellation. This model tends to do well in a market downturn as it can buy more companies at a discount.
Compounding the cash flow, Constellation Software’s stock price surged from $1,000 in 2018 to $3,800 in 2024, growing at a compounded annual rate of 25%. Its strength is efficient acquisitions, where it does not get into a bidding war and pay a hefty premium for a company. With the proliferation of the Internet of Things, more niche companies will spring up, creating a larger market for Constellation to tap. This stock can give you stable growth during tech upturns and mitigate the downside risk through its diversified portfolio of tech companies operating in over 100 verticals.
Nvidia stock
Nvidia (NASDAQ:NVDA) is another tech stock that has begun its ascend in the artificial intelligence (AI) revolution. While you procrastinated buying the stock at US$600 in January when the company released robust earnings, it has now climbed over US$1,100. In long-term investing, the stock price doesn’t matter if the company has the moat.
Nviida’s graphics processing units (GPUs) are unbeatable in AI applications. As more companies adopt AI, they are using Nvidia’s GPUs. The next big revolution for the chip giant is autonomous vehicles and then industrial automation. It keeps innovating to build a futuristic portfolio. The company has talent, money, and demand. It can give your retirement portfolio the boost it needs to reach a billion dollars.
Telus stock
Telus (TSX:T) can give your retirement pool a passive-income pipeline with its 6.9% dividend yield and a 7% average annual dividend growth. This dividend growth may likely slow in the long term, but it can help you beat inflation. Now is a good time to book some profit in the growth stocks and invest in Telus as it trades near its 52-week low amid telecom industry headwinds. You can opt for the dividend-reinvestment plan and compound the returns till you need the cash payouts.
Rebalancing from growth to dividend can help you build a retirement pool and a passive-income pipeline.
