Retirement Planning: 3 Stocks to Bridge Your Pension and Expenses Gap

Retirement plan
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Written by Adam Othman at The Motley Fool Canada

Even when working, a gap between your expenses and your income is common. Some people fill that gap by increasing their income (taking on a second job, making investments, etc.). Others focus more on reducing their expenses and adopting a more frugal lifestyle.

But when you are retired, your options are limited on both ends. It’s difficult to earn a steady income by working, and the expenses, especially if they are tied to your healthcare needs, may be impossible to cut down on. As a retiree, your primary income stream would be the government pensions. If they are not enough to cover all your retirement expenses, you may have to develop a secondary income stream.

As a retiree, the most practical choice you have is investing in income-producing assets (like dividend stocks). Ideally, you should work on bridging this inevitable gap when you are decades away from retirement and start investing in good, long-term holdings.

A utility company

Emera (TSX:EMA) is primarily an electrical utility company that started out as a small electrical utility business and has now expanded across the border. The current Emera has a far more diverse portfolio, which includes electrical utility, power generation, and renewables. However, the bulk of its revenue comes from regulated businesses, which is good news from the dividend sustainability perspective.

While the growth has slowed in recent years, the company has traditionally offered a decent mix of growth and dividends, beefing up its overall return potential. In the last 10 years, the stock returned about 150%, and a sizable segment came from its growth.

It’s currently trading at a discounted price (about 25% down from the last peak) and a discounted valuation, though it cannot be counted among the undervalued stocks. The price discount has also pushed the yield up to an attractive level.

At its current 5.7% yield, the stock can help you generate about $190 a month with $40,000 invested in the company.

An infrastructure company

Brookfield Infrastructure Partners (TSX:BIP.UN) has an impressive global portfolio of infrastructure assets. The main domains represented in the company’s portfolio are utilities, transport, midstream (energy), and data. The asset class and geographic diversity of the company’s infrastructure portfolio are among its primary strengths.

As a stock, Brookfield infrastructure has been a rewarding pick, especially in the last 10 years. It has returned about 290% to its investors over the decade, and about half of it came from price appreciation.

Thanks to a hefty discount, the yield has risen to about 5.1%, making it a healthy dividend pick. At this yield, the stock can offer investors about $170 a month with $40,000 invested.


If we discard the current slump it’s experiencing and the general uncertainty around the COVID period, Granite REIT (TSX:GRT.UN) has been one of the most reliable growth stocks among Canadian real estate investment trusts (REITs) in the last 10 years. The growth was sustained in part by its international portfolio of logistics and light industrial properties, well positioned to grow alongside the e-commerce industry.

Thanks to the long-term bull market phase this stock experienced, its 10-year price returns are over 90%, even in its current discounted state. The discount has inflated another attractive characteristic of the REIT: its yield to a juicy level of 4.5%.

The dividend becomes even more attractive if you consider its 12-year dividend-growth streak and aristocratic status. That yield is enough to generate a $150-a-month income with $40,000 invested.

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Foolish takeaway

If you have about $120,000 to invest in the three companies, you can generate a monthly income of about $510. That’s a decent enough sum to bridge the gap that may exist between your pension and your expenses.

The post Retirement Planning: 3 Stocks to Bridge Your Pension and Expenses Gap appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners, Emera, and Granite Real Estate Investment Trust. The Motley Fool has a disclosure policy.