From Modest to Magnificent: Boost Your Retirement Lifestyle With Enhanced CPP Payouts and TFSA Income

The primary goal for most investors is to save for retirement. In Canada, the government has a couple of pension plans, but these payouts need to be supplemented with other passive-income streams.

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Retirees sip their morning coffee outside.

Until 2019, the Canada Pension Plan, or CPP, replaced 25% of average work earnings. The CPP enhancements began four years back and will soon replace a third of your work earnings. However, the payout from this pension plan also depends on how much you contribute towards the CPP and the number of years of contributions.

For instance, the CPP amount will increase by more than 50% for those with enhanced contributions for 40 years. The average monthly CPP payment for a Canadian starting the pension at the age of 65 is $811.2, and the maximum amount is much higher is $1,306.57.

But you can boost your CPP by holding a basket of dividend stocks in your TFSA (Tax-Free Savings Account), as any returns generated in this registered account are exempt from Canada Revenue Agency taxes.

Here are a few blue-chip dividend stocks retirees can buy and hold in a TFSA in 2023.

Royal Bank of Canada stock

One of the largest banks in the country, Royal Bank of Canada (TSX:RY) offers you a dividend yield of 4.4%. Priced at 11 times forward earnings, RY stock is forecast to increase adjusted earnings by 6% in the next five years, despite a challenging macro environment.

Due to a higher provision for credit losses, RBC’s earnings were down 13% year over year at $2.58 per share in fiscal second quarter (Q2) of 2023 (ended in April).

RBC stock has more than tripled in the last 10 years after adjusting for dividends. The banking giant is currently priced at a discount of 10% to consensus price target estimates.

Sun Life Financial stock

Another company involved in the financial services segment, Sun Life Financial (TSX:SLF) pays investors an annual dividend of 4.4%. In Q1 of 2023, the company’s net income was up 24% at $895 million, indicating a return on equity of 17.3%.

Sun Life’s higher investment income reflects an increase in realized gains from surplus assets as well as net interest income from higher rates. Priced at 11 times forward earnings, SLF stock has surged 227% since June 2013.

Brookfield Infrastructure stock

The final dividend stock on my list is Brookfield Infrastructure (TSX:BIP.UN). Down 13% from all-time highs, BIP stock has a forward yield of 4.2%. Its funds from operations (FFO) in Q1 stood at US$554 million — an increase of 12% year over year.

Its organic growth stood at 9% as the company benefitted from elevated inflation levels on tariffs and strong volumes across transport networks. It also commissioned US$1 billion in new capital projects in the last 12 months.

Brookfield Infrastructure explained, “Partially offsetting the strong underlying performance of our business was the normalization of market sensitive revenues, as the prior year benefited from elevated commodity prices, and the impact of asset sales.”

The stock has gained 444% in the last 10 years and trades at a discount of 20% to consensus price target estimates.

The post From Modest to Magnificent: Boost Your Retirement Lifestyle With Enhanced CPP Payouts and TFSA Income appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.