Do you want to boost your Canada Pension Plan (CPP) by $5,940 per year?
If you’re already drawing the pension, then you’re out of luck. Once you start taking benefits, you’re stuck with very modest annual increases.
However, there is a way to boost your CPP by $5,940 per year if you’re not already retired. It’s fairly simple, and, if you’re healthy, is completely doable.
In this article, I will explore the way you can boost your CPP benefits by $5,940 per year, and what you can do if this method isn’t viable for you.
Wait until age 65
The simplest way to boost your CPP benefits by $5,940 per year is to work until age 65 and try to work as many hours as you can up until that time. If you take CPP with the maximum amount of contributions at age 65, you get $1,306 per month. If you earn the average amount of CPP, you get $811 per month. That’s not nearly enough to cover expenses in most Canadian cities. By waiting until 65 and working a lot of hours, you could get $1,306, which is $495 per month extra. That works out to $5,940 per year.
Now, all of this is simplifying a little, because if you wait until age 65 to take CPP, you will retire at a point in the future when the payouts will be different (likely higher). You never know what the future holds, but the above accurately describes the payouts received by someone taking maxed out CPP at 65 versus an average CPP at 60.
Don’t want to wait that long? Investing could achieve the same effect
If you don’t want to wait until age 65 to retire, there are other ways to boost your retirement income apart from waiting longer on taking CPP. Technically, these methods don’t involve “boosting” your CPP, but they do involve getting some passive income going that will supplement your CPP. You can even take CPP and invest a portion of it while you’re receiving it, thereby boosting and spending your retirement income at the same time!
What should you invest in?
The standard answer from financial advisers is usually “index funds,” and, honestly, it’s a good answer. But if you want to dabble in individual stocks, you could consider economically important companies with few competitors, like Canadian National Railway (TSX:CNR).
CNR is a Canadian rail company that transports $250 billion worth of goods per year. It has only one major competitor in Canada, and only a handful in the United States. It is highly profitable, with a 30% profit margin over the last 12 months. It’s relatively pricey for a non-tech stock, trading at 20 times earnings. However, it has the growth to back it up, with 21% revenue growth and 16.5% earnings-per-share growth over the last 12 months.
Its most recent earnings release easily surpassed analyst expectations, delivering strong growth in revenue and earnings. Overall, CNR is one stock I’d consider holding for the long haul. Diversification is always important, but I’d say that this stock would be a great addition to a well-diversified TFSA portfolio that helps you supplement your CPP.
