The Canada Pension Plan (CPP) sets the standard retirement age at 65. Eligible pensioners can receive payments as early as 60 at a reduced benefit. Contributions to the CPP are mandatory for all working Canadians aged 18 to 65 who earn over $3,500 annually.
Voluntary contributions past 65 are allowed for those working up to age 70. As of January 2024, the maximum CPP payment at age 65 is $1,364.60 per month. Yet the average monthly payment for retirees is approximately $831.92.
Instead of the maximum annual benefit of $16,375.20, most retirees can expect to receive around $9,983.04 per year. This total amount replaces only about 25% of pre-retirement income, so many Canadians will need to find additional sources of income to fill the gap.
Supplementing CPP with dividend stocks
One investment strategy to supplement CPP benefits is investing in dividend stocks. For example, Sienna Senior Living, a provider of retirement residences and long-term care services, appeals to income-focused investors due to its monthly dividend payouts.
With a share price of $16.69 and a dividend yield of 5.57%, investing in this stock can generate attractive passive income. $100.71 monthly for every 1,300 shares owned, yielding $21,697. Sienna Senior Living is experiencing substantial growth in 2024.
Its net operating income increased by 31.3% year-over-year to $109.5 million for the first half of the year. This growth, along with long-term solid fundamentals in senior living and a limited new supply of senior living accommodations, suggests a positive outlook for the company. While the CPP provides a foundational income for retirees, additional investments such as dividend stocks can help bridge the income gap.
They can provide financial stability in retirement.
