Thinking about retirement can make you nervous as you need to save enough to lead a comfortable life while accounting for inflation and other expenses. It’s advisable to have multiple income sources in retirement that will help you offset these expenses easily.
According to a Stats Canada report, Canadian couples over the age of 65 spent an average of $48,453 per household back in 2019. This amount will vary depending on factors such as housing, inflation, and location, among others.
Let’s say on an individual basis you will require $2,500 per month to in retirement. So, how do you get to this financial milestone, which seems overwhelming at first? Well, investing in liquid, high-yield asset classes is a low-cost way to help you earn a predictable and recurring source of passive income.
Here are three ways to make $2,500 per month in retirement.
Invest in dividend stocks such as Enbridge
Enbridge (TSX:ENB) is among the most popular dividend stocks in Canada and offers you a tasty yield of 7.75%. Enbridge is a midstream infrastructure giant that owns and operates a widening portfolio of cash-generating assets.
Enbridge’s cash flows are extremely resilient. For instance, a majority of its EBITDA (earnings before interest, tax, depreciation, and amortization) originates from long-term contracts indexed to inflation, making the energy heavyweight immune to fluctuations in commodity prices.
Enbridge pays shareholders an annual dividend of $3.66 per share, and these payouts have risen by 10% annually in the last 29 years. You can purchase 2,733 shares of Enbridge for $128,833, which will help you earn $10,000 in annual dividends, indicating a monthly payout of $833.
Enridge is just one example of a blue-chip dividend stock. Investors should identify other dividend stocks with a tasty payout and a widening earnings base.
Investing in dividend ETFs
Investing in individual stocks is quite risky as you need to analyze a company’s fundamentals to ensure its dividend payout is sustainable across market cycles. Comparatively, investing in dividend ETFs, or exchange-traded funds, such as iShares Core MSCI Canadian Quality Dividend Index (TSX:XDIV) provides you with exposure to several companies across sectors, resulting in portfolio diversification.
In the last five years, the ETF has returned 57% after adjusting for dividends and currently offers you a yield of 6%.
The ETF has a monthly payout of $0.13 per share. So, to earn $833 each month or $10,000 per year, you need to buy 6,408 shares of the ETF worth $1,65,646.
Investing in GICs
Canadian investors can consider investing in Guaranteed Investment Certificates, or GICs. Compared to stocks and equity-focused ETFs, GICs are low-risk instruments that offer you an annual yield.
Here, you deposit a particular amount with a bank or financial institution and earn interest on the investment. Higher interest rates in recent years have meant several banks now offer a yield of 5% on GICs.
Investors can allocate $200,000 to GICs and earn $10,000 a year, or $833 each month.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $47.14 | 2,733 | $0.915 | $2,500 | Quarterly |
| XDIV ETF | $25.85 | 6,408 | $0.13 | $833 | Monthly |
The above investments, totalling $494,479, will help you earn $30,000 a year, or $2,500 a month, in dividends, indicating a yield of 6%. You can change the allocation of these asset classes depending on your risk appetite and investment horizon.