Are you nearing retirement? If yes, it is time to restructure your investment portfolio and savings account and convert them into a retirement powerhouse. A retirement powerhouse has three objectives:
- Make your invested money pay your bills.
- Preserve emergency money in a low-risk investment.
- Continue to grow your wealth in the event you outlive your retirement money.
These investment objectives should be met in the above priority. Your Tax-Free Savings Account (TFSA) can play a crucial role in this. The Canada Pension Plan (CPP) and Old Age Security (OAS) payouts can give you 30-40% of your daily expenses.
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Retirement powerhouse amount to be allocated for passive income
The average monthly CPP payout for 2025 is $899.67, and OAS is $727.67. If your monthly expenses are $4,000, CPP and OAS can take care of around 40% of your daily expenses. You need to rely on your savings and investments for the remaining $2,372 per month ($9,490 per quarter).
Note that the CPP and OAS grow with inflation, which means your passive income should also grow with inflation.
You need to build a passive-income pool that can give at least a 7% annual yield and grow dividend payout by 3-5%. A $135,580 investment in such stocks can help you earn $9,490 annually.
What about the remaining three quarters?
A million-dollar retirement pool makes life easy. Around half ($542,000 = $135,580 x 4) of your retirement pool could be allocated to the first objective of generating passive income, around 35% for the second, and 15% for the last third objective. This allocation can vary as per your needs.
Using TFSA as a retirement powerhouse
While Registered Retirement Savings Plan (RRSP) money can go towards passive income, RRSP withdrawals are taxable and could claw back your OAS. Hence, you could consider dividing the passive income portfolio between TFSA and RRSP, as TFSA withdrawals are tax-free.
TFSA helps you earn the maximum CPP and OAS you are eligible for, and also dividend income from your investments, without adding to your tax burden.
A 7.6% dividend stock to build TFSA income
Telus (TSX: T) is a good option to earn a 7% yield and grow your dividends by 3-8%. In the digital age, the internet has become a utility that will thrive in any economic environment. Moreover, internet use cases will only expand, creating multiple cross-selling opportunities for telcos.
Among the Canadian telecom giants, Telus is well-placed to tap this growth. Its 5G infrastructure, health and agriculture solutions, and digital and artificial intelligence initiatives make it future-ready.
You may not see immediate benefits as the company has just completed billions of dollars of capital expenditure in fibre network and spectrum purchase and is facing competitive pricing pressure.
These costs will gradually reduce as the company monetizes its fibre infrastructure and uses the cash flow to reduce debt, reinvest in the business, and pay dividends. It has been paying and growing dividends for the last 21 years and can continue to do so for the next decade.
Now is a good time to invest $40,000 to $50,000 in Telus and lock in a 7.6% yield as the current headwinds keep the stock price near its 10-year low.
