3 Stocks Retirees Should Absolutely Love

Being a retiree doesn’t mean you should not invest in stocks. These stocks can give you the financial freedom for a comfortable retirement.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

Social Media Profiles

Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published October 31, 2024 7:00 pm EDT

Retirement comes with its own set of opportunities and challenges. You have time to pursue the dreams and hobbies you wanted to but never had time. You could consider investing in these stocks to ensure you have the financial freedom to chase your dreams.

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Stocks retirees should absolutely love

While it is true that low-risk investment options are the best for retirees, they may not give you the financial freedom you need to chase your dreams. However, retirees would love these low-volatility stocks as they help you beat inflation and keep your accumulated wealth intact.

Suppose you built a Tax-Free Savings Account (TFSA) portfolio of $500,000 by retirement. You can diversify this amount into three segments.

Passive income stock

The first segment of your TFSA portfolio can be used to earn passive income and support the Canada Pension Plan (CPP) and Old Age Security (OAS) payout. I suggest TFSA passive income as it is tax-free and may not impact your OAS payouts, which depend on your income.

Telus Corporation (TSX: T) is a good stock to generate immediate passive income. The telecom stock is trading near its pandemic low, creating an opportunity to lock in a dividend yield above 7%. Moreover, the company increases the dividend at an average annual rate of 7%, helping you beat inflation.

You could consider investing 25–35% of your TFSA portfolio ($125,000–$175,000) in this stock. A $175,000 investment can give you $12,900 in annual passive income in 2025 if the stock continues its 7% dividend growth. And by 2029, your passive income could be $16,995.

However, if the company slows its dividend growth, it would be enough to beat inflation. And while you get the tax-free payouts, your $175,000 investment will be sustained as you purchased the stock at the dip, which reduced its downside.

Wealth restoration stock

You can use the second segment of your TFSA portfolio to restore wealth. You can withdraw this amount in small tranches to fulfill your dreams while the invested amount will keep growing, keeping your portfolio intact.

Constellation Software (TSX: CSU) is a resilient growth stock that can grow your money at an average annual rate of over 20%. The company keeps acquiring vertical-specific software companies that enjoy stable cash flows. It uses these cash flows to acquire more companies, compounding the value. The price of one stock is above $4,300 as the company never did a stock split. You can consider investing 10–20% of your TFSA portfolio ($50,000–$100,000) in this stock. If you invested $100,000 in this stock in November 2019, its value would be worth $329,000.

If you even withdraw one stock, it would be sufficient to fund your dream vacation. The remaining stocks will continue to grow your money and help you fund your next dream.

An emergency pool

The third segment of your TFSA portfolio can be invested in a slightly risky stock that gives you both dividends and growth. I suggest keeping the allocation to 10–15% ($50,000–$75,000). goeasy (TSX: GSY) gives you both dividends and capital appreciation. The non-prime lender is growing its loan portfolio and this portfolio is driving the stock price. The high yield of around 33% that it earns from this portfolio is used to distribute dividends.

Since the portfolio is growing, the dollar value of the interest income is also growing, allowing goeasy to increase its dividend at an average annual rate of 30% in the last 10 years. The risk with this stock is that the stock price can fall by 20–30% for a longer term if credit risk increases. However, the 20% dividend growth can give you liquidity for emergencies. A $75,000 investment will earn you an annual dividend of $1,946. This annual passive income could grow to $4,000 in five years and accumulate a $14,500 emergency pool. And this pool will keep getting bigger as you age, keeping up with medical inflation.

The remaining $150,000 can be invested in low-risk fixed deposits. A diversified pool of stocks and fixed securities can make your retirement comfortable.