Retirees: How to Create Income for Retirement Even With No Savings

No income? No problem! Consider some easy passive-income streams and invest for years of retirement income.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 6, 2023 8:15 pm EDT

| More on: CM

Many retirees in Canada face the challenge of limited savings and the need to generate additional income during their retirement years. While it may seem daunting to create passive income with little to no savings, there are strategies that can help retirees achieve this goal.

In this article, we will explore how Canadian retirees can start from scratch by creating a side hustle and investing in stocks like Canadian Imperial Bank of Commerce (TSX:CM) to generate passive income.

Retirees sip their morning coffee outside. — Source: Getty Images

Step #1: Create a side hustle

The first step to creating passive income without savings is to establish a side hustle that generates additional cash flow. However, you won’t have all that much time to look after a side hustle that could really be just a part-time job. Nor should you want to!

One innovative way to achieve this is by renting out assets you already own through online platforms. If you have tools or equipment that are not in constant use, consider renting them out through websites like Toolfetch or RentItToday. If you live in an area with limited parking, you can rent out your unused parking space on platforms like JustPark or Rover Parking. Furthermore, if you have extra storage space in your home or garage, websites like Neighbor or Spacer allow you to rent it out to individuals in need of storage.

By leveraging these platforms, you can potentially earn $500 per month or more in passive income, depending on the demand for your assets and your pricing strategy. This income can be a valuable supplement to your retirement finances.

Step #2: Invest in CIBC stock

Once you have established a source of additional income, it’s essential to make smart investment choices to grow your wealth over the long term. CIBC stock is an excellent candidate for a long-term investment.

CIBC stock has demonstrated impressive growth over the years. The bank has a strong track record of dividend growth. CIBC has consistently increased its dividends over the years, providing shareholders with a reliable stream of income. As of the latest data, CIBC boasts a dividend yield of 6.91%. This means that for every $1,000 invested, you can expect to receive approximately $69.10 in annual dividends.

CIBC stock currently trades at 10.25 times earnings, which is considered a reasonable valuation for a stable financial institution. This could present an opportunity for investors looking to buy into a well-established bank at an attractive price. While CIBC’s shares have faced a 15% decline in the last year, this could be seen as an opportunity for investors looking for a potential recovery play. As the economy rebounds, banking stocks like CIBC may benefit from increased lending and economic growth.

Calculating potential returns and dividends

Suppose a retiree decides to invest $6,000 in CIBC stock at a price of $50 per share, which is where it sits as of writing. Let’s look at what this could turn into in the next year, adding in both returns and dividends, with shares increasing back to 52-week highs.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY	TOTAL PORTFOLIO
CM – today	$50	120	$3.48	$417.60	quarterly	$6,000
CM – highs	$65	120	$3.48	$417.60	quarterly	$7,800

In addition to the dividend income, if CIBC experiences growth similar to its historical performance, the value of the retiree’s investment could appreciate significantly over the years. While past performance is not indicative of future results, CIBC’s track record suggests the potential for capital appreciation. So, with dividends and returns taken into consideration, you could achieve passive income of $8,217.60!

Bottom line

In conclusion, Canadian retirees with little to no savings can create passive income by first establishing a side hustle, such as renting out their assets online. This can provide them with additional cash flow, making it possible to invest in long-term opportunities like CIBC stock.

CIBC’s historical growth, dividend track record, reasonable valuation, and potential for a recovery make it an attractive choice for retirees looking to generate passive income and grow their wealth over time. By combining these strategies, retirees can take proactive steps towards securing their financial future in retirement.