When talking about retirement, we often talk about planning for retirement over the next 10-20 years. However, one also needs to plan finances after retirement. Building a retirement portfolio is the first step. The next step is for a retiree to retain and protect the investment from market volatility, build stable passive-income streams that pay irrespective of the economic condition, and adjust the income for inflation.
Image source: Getty Images
Three TSX essentials every Canadian retiree should consider
Diversify passive-income streams
After retirement, passive income plays a crucial role. Even if you have invested in one of the safest dividend stocks, diversify your passive-income stream to reduce concentration risk. Enbridge (TSX: ENB) and Telus (TSX: T) are safe dividend stocks for retirees. While the two stocks are seeing volatility and short-term challenges, which have lowered their share price, their dividend remains safe.
Enbridge’s stock price has declined due to tariffs on Canadian oil exports, a majority of which is transmitted through its pipelines. However, the company has diversified into natural gas by acquiring three gas utilities in the United States. Any weakness in oil cash flows could be offset by gains in natural gas cash flows. Its strict discipline of paying out 60-70% distributable cash flow has given it financial flexibility to sustain dividends per share.
Enbridge stock can give you a 5.89% annual dividend yield and a 3% annual growth rate, which could increase to 5% in 2027 if things go as planned.
Grow passive income
Investing in safe dividend stocks like Enbridge can preserve your passive income. Diversifying some investments to dividend growth stocks like Telus can help you make ends meet.
Remember, the average inflation is 3%, but there are times when inflation jumps. The sky-high grocery costs in 2022 made us realize that inflation-adjusted passive income is not enough. With tariff wars heating up, Canadians should brace themselves for another round of high inflation. And you don’t want inflation to deplete your years of retirement savings.
Telus grows its dividends twice in a year by 3.5%. Although its dividend payout ratios are slightly stressed at 81%, above its targeted range of 60-75%, the telco is looking to improve them by reducing debt and increasing cash flow by monetizing 5G infrastructure.
Even retirees should focus on growth stocks for one-off expense
While retirement is all about passive income, you should set aside a small amount in resilient growth stocks for any one-off expenses. The capital appreciation from that stock can keep your mind at ease and help you avoid selling your dividend stocks during emergencies.
Constellation Software (TSX: CSU) is a safe and more resilient growth stock that can grow your money even if you stay invested for two years. Even in the worst crisis, like the March 2020 pandemic dip, the 2022 tech stock sell-off, or the 2018 U.S.-China trade war, Constellation stock fell by around 20% to its 12-18-month low and was quick to recover. The support at the downside makes it a stock to buy and hold for at least two years. After two years, whenever you sell the stock, you could get more than what you invested because of its long-term growth trend.
