Home Personal Finance Wondering How Much CPP You’ll Get? You Might Be Missing the Bigger Picture

Wondering How Much CPP You’ll Get? You Might Be Missing the Bigger Picture

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Written by Kay Ng at The Motley Fool Canada

Who doesn’t wonder how much the payment they get from the Canada Pension Plan (CPP) will be? As the Government of Canada website says, the CPP monthly payment you get depends on the age you decide to start your pension, how much and for how long you contributed to the CPP, and your average earnings throughout your working life.

For 2024, the maximum monthly amount you could receive if you start your pension at age 65 is $1,364.60. The average monthly amount paid for a new retirement pension (at age 65) in October 2023 was $758.32. The factors listed in the first paragraph will largely determine how much you’ll receive up to the maximum.

Here’s the bigger picture, though. It doesn’t matter as much what your CPP monthly payments will be because your personal savings are more important. It is expected that your personal savings, along with any employer pension plan, will make up for the bulk (two-thirds to 75%) of your retirement source of income. Personal savings include your Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP).

Where can you invest for retirement?

BCE stock

BCE (TSX:BCE) is among the favourites for retirees to earn juicy income. If retirees like it, it can also be a solid stock for other investors’ diversified portfolios. The big Canadian telecom stock has moved lower since 2022 in a higher interest rate environment, making the big dividend stock reasonably priced for income.

At about $56 per share at writing, it offers a whopping dividend yield of 6.9%. A lower level of capital spending over the next few years should increase BCE’s free cash flow generation and drive more dividend growth.

To be sure, BCE is a Canadian Dividend Aristocrat that has increased its dividend for about 15 consecutive years. Over the last decade, its dividend growth rate has, more or less, been 5%. So, it’s possible for BCE to deliver total returns of about 10-12% per year over the next five years with most returns coming from its dividend.

BMO stock

Another contender for your retirement fund may be a big Canadian bank stock like Bank of Montreal (TSX:BMO). The big banks are also great sources of income in retirement. BMO has paid dividends since 1829.

Notably, bank results are sensitive to the economic health of the markets they serve. In the last two recessions, for example, BMO stock declined about 40-50% from peak to trough, while its adjusted earnings saw a cut of 33% and 18%, respectively. So, there was fear in the markets, leading to cheap stock prices. Those are the times to ignore the butterflies in your stomach and back up the truck to invest for the long term!

At the recent price of about $126 per share, the bank stock is reasonably valued at a price-to-earnings ratio of roughly 10.7. It offers a safe dividend yield of 4.8% and can deliver long-term returns of about 10%.

Investing takeaway

Start building your personal savings and get your money working for you through solid long-term investing as soon as possible. You can start now with blue-chip stocks that offer nice dividends today and the potential to grow that dividend income over time — in time for a comfortable retirement fitting for your lifestyle.

The post Wondering How Much CPP You’ll Get? You Might Be Missing the Bigger Picture appeared first on The Motley Fool Canada.

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Fool contributor Kay Ng has positions in Bank of Montreal. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2024

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