Business & Investment

Can I retire with only OAS and CPP pensions without savings?

Can I retire without savings and rely solely on Old Age Security (OAS) and the Canadian Pension Plan (CPP)?

How much do I receive for OAS and CPP pension payments?

Assuming you retire at age 65 in 2021, the maximum CPP payment you can receive is $ 1,203.75 per month. However, most Canadians do not get the maximum. The average monthly amount received in October 2020 was $ 865.27 (up 28% from a year ago).

Your OAS pension payment depends on how long you have lived in Canada since you were 18 years old, but you must have lived in Canada for at least 10 years (40 years to receive your maximum) to receive your OAS payment. There is. Currently, the maximum amount is $ 615.37 per month or $ 7,384.44 per year.

For example, if you live in Canada for 20 years from the age of 18, you will receive 20/40 (that is, half) of the OAS amount, or $ 307.68 per month, or $ 3,692.16 per year.

OAS and CPP payments are not enough, but …

Many Canadians have not lived in Canada for 40 years. To say the least, use half of your average CPP pension and OAS to get a total CPP and OAS payment of $ 1,172.95 per month.

Living expenses and minimum wages vary depending on where you live in Canada. According to the Canadian Retail Council, recent minimum wages range from $ 11.45 to $ 16 per hour across Canada.

At $ 14 per hour, 37 hours of work per week would be $ 2,072 per month. The sum of the CPP and OAS pension payments is only about 56% of this minimum wage. So they aren’t enough to pay a comfortable severance pay, but that’s normal.

According to Mark Machin, President and CEO of the Canadian Pension Plan Investment Board (CPPIB), CPP payments are up to about a quarter of the average employee’s salary.

In other words, you need other sources of retirement income, such as a Registered Retirement Savings Plan (RRSP), a Tax Exempt Savings Account (TFSA), and in some cases corporate pension payments.

Make up your retirement income with safe dividend stocks

You need to save as much as you feel comfortable, But get rid of at least 10% of your after-tax income for your retirement investment fund. The sooner you save and invest wisely, the more you can collect your portfolio and drive the flow of passive income.

Don’t just focus on income. Also pay attention to growth.

Many dividend stocks in a durable business are shareholder-friendly and will gradually increase dividends at a faster pace than inflation.

Here is a list of such strains from my mind: Fortis, Royal Bank of Canada, TELUS, TC Energy,and Granite REIT..

They are leaders in the corresponding industry, each from the utilities, finance, telecommunications, energy, and real estate sectors, so if you choose equal weighting for each stock, you can easily create a diversified portfolio of five stocks. Configure.

At the time of writing, dividend yields range from 3.9% to 5.8%, with average yields close to 4.5%. In addition, long-term earnings per share growth of approximately 5% per year is expected.

So if you buy your stock at a fair valuation, you should get a long-term return of nearly 10% per year, which is well above average. TSX index 7% total return.

In particular, I think Fortis, TC Energy, and Granite REITs are well-received today.

Investor takeaway

OAS and CPP probably aren’t Enough for you to retire, But that’s normal. The majority of Canadian retirement funds are expected to come from their savings.

Contribute to TFSA and RRSP accordingly and make strategic long-term investments in dividend stocks such as Fortis, TC Energy and Granite REITs to quickly increase your passive income. Then, when you retire, you can sit down and enjoy the nest eggs, along with OAS and CPP payments.

Speaking of stocks that will be useful to you after retirement …

10 Best Stocks to Buy This Month

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Stupid contributor Cain It owns shares in the Royal Bank of Canada and TC Energy. Motley Fool recommends FORTIS INC, GRANITE REAL ESTATE INVESTMENT TRUST, and TELUS CORPORATION.

Can I retire with only OAS and CPP pensions without savings? Can I retire with only OAS and CPP pensions without savings?

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