Steps to take if CPP partially replaces pre-retirement income

The Canada Pension Plan (CPP) is an income for life once monthly pension payments begin, regardless of whether you are age 60, 65 or later. This taxable benefit replaces pre-retirement income, but not the entire income. Canadian seniors also receive Old Age Security (OAS), a universal old-age pension, when they turn 65.

For 2025, the maximum CPP at 65 is $1,433. However, the average amount for new beneficiaries is lower at $843.87 per month (as of July 2025). You can do some pencil pushing to assess whether the CPP is enough to support your lifestyle in retirement.

While the CPP is a reliable foundation for retirees, it will not guarantee a comfortable foundation. Those with retirement anxiety can take steps to fill the CPP shortfall and increase retirement income.

Use the best Canadian retirement accounts

Canadians can plan for the future by taking advantage of retirement plans outside the formal pension system. The government introduced the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) to motivate Canadians to save and invest for retirement.

RRSP contributions are deductible from taxable income, while earnings are deferred. You only pay taxes when you withdraw the money. However, the TFSA is a tax-sheltered retirement account. It means that any profits or interest earned on the account are tax-free. TFSA users also pay no tax on withdrawals.

Invest in a dividend Knight

Guaranteed investment certificates (GICs), bonds, mutual funds, exchange-traded funds (ETFs), and stocks are eligible or qualified investments in both the RRSP and the TFSA. Canadian utilities (TSX:CU) is highly recommended if you want a retirement-like income.

The $10.6 billion global energy infrastructure company is Canada’s first Dividend Knight. A company earns this title if it has increased dividends for 50 consecutive years. Canadian Utilities boasts a 53-year dividend growth history. Dividends grow in line with earnings growth. The highly contracted and regulated earnings base forms the basis for continued dividend growth.

In the first half of 2025, revenue fell 1.2% year over year to $1.9 billion, while adjusted profits rose 3.2% to $353 million from a year ago. Approximately 95% of the company’s capital expenditures of $382 million in the second quarter (Q2) of 2025 were invested in regulated utilities.

The global interest base is $15.9 billion. Earnings growth and cash flow should increase significantly over the next two years. Canadian Utilities plans to invest $6.1 billion in regulated utilities between 2025 and 2027.

CU trades at $39.28 per share, with a year-to-date yield of plus 16.99% and a dividend yield of 4.66%. An investment of $20,000 today will generate $233 in passive income every quarter. Assuming you reinvest the dividends, the original investment will add up to $50,518.80 over twenty years.

Take advantage of the financial incentive

The CPP provides a financial incentive for longevity protection. A user can defer payments until the age of 70. For every month of postponement, the pension amount increases by 0.7% or 8.4% per year. The maximum increase in five years is 42%. So the average CPP payment will be $1,198.30, instead of $843.87.

Avoid financial disruption

Canadians can strengthen their financial well-being in retirement with the right strategies and available tools. Taking steps such as earning passive income outside of the CPP (and OAS) can prevent financial disruption.