Baby boomers are in quite the predicament due to the COVID-19 pandemic. Most people from this generation are either retired or reaching retirement age soon. The novel coronavirus has derailed economies to the extent that nobody knows how long its effects will last.
Some people have scheduled their retirements early. However, the pandemic-fueled market crash could delay retirement for them. I am going to discuss what you can do to remain on schedule for your retirement.
Wealth issues
The government has introduced several plans that retirees can use to earn income during retirement. Canadian retirees relying on the Canada Pension Plan (CPP) and Old Age Security (OAS) plan payouts alone might find their financial situations problematic. The payouts from these pension plans alone cannot cover the entire cost of living for the average retiree. Many retirees who have built passive income portfolios in their Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs) for additional revenue are looking at dramatic losses.
Delaying the CPP until you turn 70 can allow you to maximize the benefits you stand to earn from the pension plan. For every month after 65 that you delay beginning your CPP payments, you earn 0.7% more income. By 70 years old, you can make 42% more than you would at 65 years old.
However, delaying your CPP till you blow out the candles on your 70th birthday means you need to secure an effective passive income stream that can help you retire according to plan.
Passive income
You need to create a secondary source of income that you can use to earn money passively until you can retire at the time you want. An ideal way to achieve that is by creating a secondary retirement pension through a reliable portfolio of safe dividend-paying stocks stored in your TFSA.
Reliable income-generating assets stored in your TFSA can earn you regular passive income that you can live off until the ideal time to begin collecting your pension payments. To this end, you can consider investing in a stock like Fortis Inc. (TSX:FTS)(NYSE:FTS).
Fortis is an all-weather investment that is safer than the stock of most other sectors in the economy. A utility sector operator, Fortis enjoys regulated cash flow streams that allow the company to introduce 5% to 6% yearly dividend hikes. The stock does not just pay regular dividends, it keeps increasing them each year.
In a time where most companies are considering slashing dividends, Fortis is on its way to continuing its dividend-growth streak. There is no telling how long the pandemic will last. However, there is little concern for the earnings of utility stocks like Fortis. People still need their utilities, and Fortis does not need to worry about reduced consumer spending.
Foolish takeaway
At writing, the Fortis stock is trading for $53.58 per share. It is up almost 27% from the dip in its price toward the end of March. At its current price, Fortis is paying investors a dividend with a juicy 3.56% yield.
I think that the only reasonable way to avoid delaying your retirement and to stick with your schedule is to create a secondary source of passive income that can help you stay on track. A TFSA portfolio of income-generating assets can make that possible. Fortis could be the ideal option to begin building such a portfolio.
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Fool contributor Adam Othman has no position in any of the stocks mentioned.
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