The Smart Way to Retire: Choosing Where to Save and Invest

Canadians can look forward to a financially comfortable retirement by preparing the smart way.

Is retirement planning a big deal? To achieve a financially comfortable retirement, take it seriously and create a plan. The Canada Pension Plan (CPP) and Old Age Security (OAS) are lifetime incomes, but are not sufficient to cover all financial needs, including basic living expenses, in retirement.  

Retirement planners and financial advisors recommend supplementing CPP and OAS benefits to prevent economic dislocation in the sunset years. The Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) address the concern of future retirees on where to save. Use both retirement accounts to save, invest, and secure your financial future.  

The next step is crucial because it will determine your readiness to transition to retirement life. You can build substantial retirement wealth or a nest egg over time with the right investment choices. Dividend stocks are preferred holdings in an RRSP and TFSA. Your account balances grow faster with dividend reinvesting and through the power of compounding.

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Start your wealth-building journey

Big bank stocks are ideal for a successful wealth-building journey. My bet right now is Canadian Imperial Bank of Commerce (TSX: CM). The $93.5 billion lender, Canada’s fifth-largest bank, has been paying dividends for 157 years. I don’t see headwinds strong enough to disrupt or stop the payments.

At $100.04 per share, CM pays an attractive 4.01% dividend. The payouts should be safe and sustainable given the 46.8% payout ratio. Guaranteed Investment Certificates (GICs) are safer investment options. However, CIBC Capital Markets analyst Ian de Verteuil predicts a migration towards high-dividend-yield TSX stocks such as banks, insurers, and pipeline operators for the remainder of 2025.

Its president and CEO, Victor G. Dodig, said CIBC continues to deliver strong business results despite an uncertain economic environment. In the second quarter (Q2) of fiscal 2025 (three months ending April 30, 2025), revenue and net income increased 15% and 14% year over year to $7 billion and $2 billion, respectively.

The CIBC of today is a modern, relationship-oriented bank with a powerful organic growth engine across borders,” added Dodig. “We are navigating the volatility in the global business environment from a position of strength, supported by our robust capital position, disciplined risk management and strong credit quality.” If you invest today, expect pension-like income for years.

Strong buy

Pembina Pipeline (TSX: PPL) is down 2.54% year to date, but a surge is imminent. National Bank of Canada raised its rating for the pipeline stock from sector perform to strong buy. As of this writing, the share price is $50.43 while the dividend offer is 5.55%. Market analysts’ 12-month average price target is $60.28 (+20%).

The $29.3 billion energy transportation and midstream service provider is an industry stalwart in North America (70 years in operation). In Q1 2025, revenue and earnings increased by 48.2% and 15% year over year to $2.28 billion and $502 million. Meanwhile, cash flow from operations and fee-based contracts jumped 92.7% to $840 million versus Q1 2024.  

Pembina’s long history of consistent payments since inception makes it a reliable income stock. National Bank views the anticipated growth in the gas and natural gas liquids (NGL) infrastructure value chain as a strong tailwind for the stock.

Smart way

Utilizing the best retirement accounts is a smart way to retire. Holding shares of CIBC and Pembina Pipeline in your RRSP and TFSA will help build retirement wealth.   

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Pembina Pipeline. The Motley Fool has a disclosure policy.

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