Canadians who are nearing the age of their retirement are becoming increasingly worried about the possibility of not being able to get enough retirement income.
There is a high likelihood that your Canada Pension Plan (CPP) payments might not be substantial enough to ensure a comfortable retirement life after the deduction of taxes. The average CPP payment is only around $679 per month, an amount that is hardly enough.
Boosting your CPP
The CPP payments also depend on the years of contribution. Depending on your situation, you are allowed to start collecting your CPP payments before the age of 65.
Starting your CPP payments early on, however, exposes you to the risk of losing a significant amount in potential income. If you start taking your CPP payments at the age of 60, you will get a 36% lower payment than you would if you wait until you are 65.
If you elect to receive an early start to the payouts, you stand to get payouts for a longer time. Still, the lower amount can be a significant trade-off.
It’s best to defer receiving your CPP payments until at least the age of 65. If you can delay it to the age of 70, you will earn an additional 42% than what would receive at 65.
Save and invest your money
It is a fact that no matter what you do, the CPP is designed to bolster your retirement income. You can never rely on your CPP payments to make the entirety of your income in the golden years of your life. Deferring your CPP till you are older is a practical strategy to boost your after-tax income.
A great way to achieve this and receive an additional source of income is by saving your money and investing it in income-producing assets.
As far as income-producing assets are concerned, the ideal option for retirees to consider is investing in high-yield dividend-paying stocks like Fortis Inc (TSX:FTS)(NYSE:FTS).
Purchasing shares of the company, storing them in your TFSA, and forgetting about them can allow you to earn a substantial amount of income.
Storing any investment vehicles in your TFSA allows you to earn using your investments completely tax-free!
Fortis gets a majority of its revenue from its operations in Canada’s utility sector. It also operates in the United States and the Caribbean.
Through its global operations, the $52 billion in Fortis’ assets deliver stable cash flow to the company. With each passing year, the company is becoming increasingly profitable and increasing its dividend payments to shareholders.
As of this writing, stocks from Fortis are trading at $53.19 per share with a dividend yield of a juicy 3.59%. Fortis stocks have also gained 18.52% in value since the start of 2019.
Retirees will not just be able to enjoy growth in wealth through dividends. The capital gains from the utility sector giant will also allow you to become wealthier during the best years of your life.
Foolish takeaway
Deferring your CPP payments and utilizing the contribution room in your TFSA to hold reliable dividend-paying stocks can help you to earn more than a respectable retirement income. I think Fortis is a stock that could be an ideal option to consider adding to your portfolio to that end.
