Retirees: How to Create a Combo Passive Income Portfolio With a TFSA and RRSP

Passive income in retirement is a key option for those seeking income that lasts. And making use of the TFSA and RRSP is the way to go.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 18, 2024 8:45 pm EDT

| More on: BIP.UN

Passive income investments are crucial in retirement, as they provide a steady stream of income without requiring ongoing work, thereby helping to cover daily expenses and maintain your lifestyle. In Canada, stats show that the average retirement income needed is around $46,000 per year, and building passive income streams through dividends or other investments can help fill that gap. By generating regular returns, retirees can supplement government benefits and savings, reducing the risk of running out of money during retirement. But, how?

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Combine it

Canadians can increase passive income through a smart combination of Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Plan (TFSA). The RRSP allows for tax-deferred growth, meaning your investments can grow faster since you’re not paying taxes on the gains until you withdraw in retirement.

Meanwhile, the TFSA offers tax-free growth, meaning both the returns and withdrawals are completely tax-free. By contributing to both, Canadians can maximize their retirement savings potential. In this way, they can use the RRSP for larger, longer-term growth and the TFSA for flexibility in accessing funds without tax penalties. All while re-contributing with income from dividend stocks.

Find the right stocks

One strong option for passive income is Brookfield Infrastructure Partners (TSX:BIP.UN). As a diversified infrastructure stock, BIP.UN generates consistent income through essential services like utilities, transportation, and data infrastructure. Its global portfolio ensures steady cash flow, even during market volatility.

The stock offers an attractive forward dividend yield of 5.2% at writing, making it a reliable choice for income-focused investors. BIP.UN’s ability to grow through strategic acquisitions and infrastructure developments has solidified its reputation as a strong, income-generating stock.

Get in on momentum

BIP.UN has also demonstrated earnings momentum over the last three quarters, showcasing its resilience in an unpredictable economy. For the quarter ended June 30, 2024, the company reported a 20.7% increase in quarterly revenue, reaching $19.8 billion. This strong growth was driven by its diverse portfolio and infrastructure expansion projects.

As the company highlighted, “Our revenue growth reflects continued strong performance across our infrastructure assets.” With a market cap of $19.5 billion and an enterprise value of $83.7 billion, BIP.UN is well-positioned to continue its upward trajectory.

Foolish takeaway

Despite its high debt-to-equity ratio, BIP.UN remains a safe investment due to its steady cash flow and essential service offerings. Its current ratio of 0.8 and operating cash flow of $4.5 billion ensure the company has the liquidity to manage debt while continuing to reward shareholders with consistent dividends. With a solid track record of growing revenue and a forward price/earnings (P/E) of 45.3, BIP.UN is a strong, stable choice – ideal for Canadians looking to boost their passive income in a safe and reliable way during retirement.

In a nutshell, passive income is key to enjoying a comfortable retirement, and combining your RRSP and TFSA is the perfect strategy to maximize those earnings. BIP.UN is a fantastic option for Canadians seeking a reliable, income-generating stock. With its strong dividend yield and impressive earnings growth, it’s a safe and steady choice. One to help keep that passive income flowing!