Written by Christopher Liew, CFA at The Motley Fool Canada
Abacus Data’s 2024 Retirement Survey for the Ontario Health Care Pension Plan (HOOPP) finds that 49% of Canadians approaching their sunset years have not saved or are trying to save for retirement. While money is the main concern of most, 43% expressed readiness to retire because they have saved enough.
If the Canada Pension Plan (CPP) is part of your financial planning, it is essential to know the CPP benefits, at least the average, at age 60 and 65. I skipped the delay option (age 70) since nine out of 10 Canadians take benefits at age 65 or earlier.
Standard retirement age
The standard CPP retirement age is 65. A young retiree age 65 and claiming CPP today could receive an average monthly amount of $831.92 (January 2024). The maximum benefit is $1,364.60, although only a few contribute enough each year for 39 years.
The difference between the maximum CPP and the average payment is $532.68. If you have money to invest, dividend income Toronto Dominion Bank (TSX:TD) could fill the gap. The bank’s stock trades at $74.94 per share and pays a dividend of 5.44%. Over time, you can accumulate 1,568 shares ($117,500) to generate the desired income.
TD is Canada’s second-largest bank, and the $131.8 billion lender has paid dividends for 167 years. In the first half of fiscal 2024 (six months ended April 30, 2024), total revenue and net income rose 12% and 10% year-over-year to $27.5 billion and $5.4 billion, despite growth of 61% in the provision for credit losses (PCL) to $2 billion from a year ago.
Bharat Masrani, president and chief executive officer (CEO) of TD Bank Group, said there is solid momentum across its franchises in Canada, the US and around the world. Most importantly, quarterly dividends are well covered by earnings.
Early pickup
There is also a difference in payments if you start CPP payments at 60 instead of 65. The pension amount is reduced by 0.6% per month (7.2% per year) before age 65. Therefore, the permanent reduction of 36% translates to $532.43 per month from $891.72. Again, dividend income can make up for the shortfall.
Pembina Pipeline (TSX:PPL) in the energy sector is a dividend heavyweight. At $50.31 per share (+13.36% year-to-date), the dividend yield is 5.49%. Assuming the yield is constant, an investment of $40,248 (800 shares) will become $69,430.50 in 10 years, including dividend reinvestment. Your money will generate $952.93 every quarter (roughly $317.64 per month).
The $29.15 billion company operates transportation and storage infrastructure and ships oil and natural gas to and from Western Canada. In the first quarter (Q1) of 2024, revenue fell 5% to $1.54 billion versus the first quarter of 2023, while net earnings rose 19% year over year to $438 million.
On June 26, 2024, Pembina Pipeline confirmed its takeover of the $4 billion Cedar liquefied natural gas (FLNG) project, a 40/60 partnership with the Haisla Nation. Its president and CEO, Scott Burrows, said the project will provide industry-leading, low-carbon, cost-competitive Canadian LNG to overseas markets and contribute to global energy security.
A foundation, not a plan
CPP users should know that the annuity is a basis for retirement and not a retirement plan. Whether you start payments at 60 or 65, you need other resources to boost your retirement income.
The post Average CPP Benefits at 60 and 65: What You Need to Know in 2024 appeared first on The Motley Fool Canada.
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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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