How to Bridge the Gap When CPP and OAS Won’t Cover Your Expenses

For many Canadians, retirement comes with an uncomfortable realization: government benefits alone are probably not enough to maintain the lifestyle they want. While the Canada Pension Plan (CPP) and Old Age Security (OAS) provide an important financial foundation, rising living costs and inflation can quickly erode purchasing power over time.

According to the Government of Canada, the average CPP payment at age 65 was $925.35 per month in January 2026. Meanwhile, the maximum OAS payments for April to June 2026 are $743.05 per month for Canadians aged 65 to 74 and $817.36 per month for those aged 75 and older. However, not every retiree qualifies for the full OAS amount, since payments depend on residency history and may be reduced through income-tested clawbacks if 2025 net income exceeds $93,454.

Even when combined, these benefits likely leave retirees with a meaningful income gap. The good news is that Canadians have practical ways to boost their retirement income and improve long-term financial security.

Turn long-term savings into reliable passive income

One of the most effective ways to supplement CPP and OAS is to build an income-generating investment portfolio. Instead of leaving long-term savings in low-interest accounts, retirees can consider dividend-focused investments that generate regular cash flow for money they don’t need for the next three to five years or beyond.

Dividend exchange-traded funds (ETFs) can be worth considering because they offer diversification and recurring income. For retirees seeking higher immediate income, BMO Canadian High Dividend Covered Call ETF (TSX:ZWC) is worth exploring. The dividend ETF holds a diversified basket of high-yielding Canadian dividend stocks and uses covered call strategies to generate additional option premium income.

This approach helps boost the fund’s yield while also aiming to reduce volatility during uncertain markets. Recently, ZWC offered a yield of approximately 5.7%, making it appealing for retirees focused on monthly income.
The key advantage of dividend investing is that it allows retirees to generate income without constantly selling investments. Over time, this strategy can provide a more sustainable retirement income stream while also offering the potential for modest capital appreciation.

Use your TFSA to maximize tax-free retirement income

The Tax-Free Savings Account (TFSA) is one of the best tools available to Canadian retirees. Any income or capital gains earned inside a TFSA are completely tax-free, which can make a significant difference over a long retirement.

Retirees with unused TFSA contribution room may benefit from holding reliable blue-chip dividend stocks that can provide both income and stability. One popular example is Enbridge (TSX:ENB), a leading North American energy infrastructure company.

Enbridge currently yields roughly 5.1% and has built a strong reputation for paying and increasing dividends over time. Because much of its business is tied to regulated pipelines and infrastructure, its cash flow tends to be relatively stable even during periods of economic uncertainty.

Holding dependable dividend payers inside a TFSA can create a growing stream of tax-free passive income that helps offset rising living expenses throughout retirement.

Lowering expenses can be just as powerful as increasing income

While boosting retirement income is important, reducing expenses can be equally effective. Some retirees may benefit from downsizing their home, relocating to a more affordable community, or cutting discretionary spending.

Moving to a city with a lower cost of living can significantly reduce housing, transportation, and everyday expenses. Even modest reductions in monthly spending can ease financial pressure and make CPP, OAS, and investment income stretch much further.

Investor takeaway

CPP and OAS provide valuable retirement support, but many Canadians will still face an income shortfall. Building a diversified dividend portfolio, maximizing TFSA contributions, and lowering living expenses can help retirees create a more secure and comfortable financial future. By taking proactive steps early, Canadians can bridge the retirement income gap and enjoy greater peace of mind in the years ahead.

The post How to Bridge the Gap When CPP and OAS Won’t Cover Your Expenses appeared first on The Motley Fool Canada.

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More reading

• 3 Dividend Stocks Every Canadian Should Consider Owning
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade
• Here’s How Much You May Need in Your TFSA to Retire – and 3 Stocks That Could Help
• 1 High-Yield Dividend Stock You Can Buy and Hold for a Decade of Income
• Beat the TSX With These Cash-Gushing Dividend Stocks

Fool contributor Kay Ng has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.