The Canada Pension Plan (also known as CPP) is one of the premier retirement income programs for Canadians. In other words, it is a Canadian retirement plan that provides retirees with taxable monthly income when they are eligible (i.e., you have made payments).
If you qualify, more on this below, your CPP payments will be paid monthly. You can choose to receive a check or have the money deposited directly into your bank account.
Expect to get paid towards the end of the month for budget reasons. Note that you may also be eligible for OAS payments, and both of these together can make a reasonable addition to your monthly retirement income.
The maximum CPP payment for 2020 is $ 1,154.58 but don’t expect you to get this The average Canadians who received CPP received average $ 679.16 for 2020.
Annual CPP payment growth has been around 2.22% over the past 10 years based on the consumer price index. More details on what to expect below.
It’s worth noting that Quebec has its own version of the CPP known as the QPP (Quebec Pension Plan).
CPP brief information
There are a lot of details below, but here are quick answers to the most common questions.
What is the maximum CPP for 2021?
The maximum monthly CPP for 2021 is $ 1,203.75 for a total annual retirement income of $ 14,445.00 if you meet the contribution requirements. Continue reading.
Will CPP benefits rise with inflation?
CPP benefits increase each year to take account of inflation. The average increase over the past 10 years was 2.2%. Continue reading.
How much CPP do I get at 60?
While you can start getting your CPP when you are 60, it may not be for the best as you will have an impact if you take it before 65.
Average CPP payments are $ 736.58 per month and should give you a quick idea of what to expect. An accurate picture is more complex to compute and varies from person to person. Continue reading.
Should I postpone CPP until the age of 70?
It’s very personal to your situation and, in general, when you have an annuity and a retirement plan the numbers usually suggest they’ll be postponed until later, but you really have to do the math. Continue reading.
Can I collect CPP while working?
The short answer is, yes you can. The long answer is that you need to figure out how best to get your CPP from a tax perspective. Continue reading.
Can I earn CPP while living abroad?
Yes, you can earn CPP while living abroad. It’s your money, after all, as opposed to OAS payments.
Can I collect my deceased spouse’s CPP?
A surviving spouse can receive their deceased spouse’s pension, but guidelines exist. It’s easy and you can find details on the Government of Canada website for Survivor’s Pension.
CPP payments for 2021
As with a retirement plan, the amount of CPP you receive is based on your contributions. The more years you deposit and the more years you deposit, the better your payments will be.
Last but not least, the decision to receive your CPP will also have an impact. In a nutshell, there are 3 variables in the amount of CPP you will receive:
- The number of years you have paid into the CPP plan.
- The amount you paid into the CPP plan.
- When you choose to receive your CPP payments.
How Much CPP Can I Get?
For 2021, the maximum monthly amount that you can receive at the age of 65 is $1,203.75 and the average Canadian gets $ 736.58. How much you get depends on your personal situation, as described above.
In fact, the Canadian government has a calculator that lets you see how much you could potentially make based on your historical contributions. It’s mostly a simulation exercise unless you have the exact numbers.
To get an exact amount of how much you could possibly get, you’ll need your CPP contribution slip. By calling Service Canada (1-800-277-9914) and requesting your CPP Contribution Statement, you will have access to your online statement.
How do I get the maximum CPP?
How to get the maximum CPP is a question many have. Unfortunately, if you ask the question right before retirement, it’s too late. However, if you plan ahead, here’s what you need to do to get the maximum CPP.
Put simply, you have to pay in the maximum CPP for 39 years of your working life between 18 and 65 years of age. If you’ve ever hit the max you know this as your salary will go up once you finish.
As a rule, once your salary has reached a certain level, you have exceeded the maximum limit. For simple math, if you make more than $ 60,000, you’ve crossed the threshold.
The technical term for the maximum threshold is now called threshold Maximum annual pensionable earnings or YMPE. It is adjusted every year and is currently $ 61,600 for 2021. This part covers the income and contribution part to get the maximum CPP and the second part is to work at that level for 39 years .
Let’s say it takes 6 years to hit the cap, that’s 45 years of work experience, and suppose you finish university at 23 or 25 which gets you at 70, which is after the time you did the CPP can begin.
In short, it’s really hard to get the most out of 39 years of work into your Canadian retirement plan.
So don’t count or budget the maximum CPP for your retirement plans.
CPP payment dates for 2021
|January 29, 2020||May 27, 2020||September 28, 2020|
|February 26, 2020||June 26, 2020||October 28, 2020|
|March 27, 2020||29th July 2020||November 26, 2020|
|April 28, 2020||August 27, 2020||December 22, 2020|
Entitlement to a CPP pension
To qualify for the Canadian Retirement Plan, you must:
- be at least 60 years old
- have made at least one valid contribution to the CPP
Valid contributions can either come from your work in Canada or from receiving credits from a former spouse or partner at the end of the relationship.
CPP is not an automatic enrollment, you MUST apply to receive your CPP payments. As long as you are eligible, you will receive your CPP as it is your money. But you should know that CPP payments are taxable, just like OAS payments.
What is the best age to start CPP?
Should I collect CPP at 60? This is the most common and first question that all retirees ask themselves. There are no hard and fast rules as to when you should start collecting CPP payments, it really depends on your own situation.
As already mentioned, this is taxable income, so your annual income after the age of 60 plays an important role. Are you withdrawing from RRSP or TFSA or both?
You need to start planning your revenue streams such as, but not limited to, the following:
- RRSP payouts
- TFSA withdrawals
- Unregistered income (dividends or capital gains)
- CPP payments
- OAS Payments, or more precisely the OAS Clawback.
- Full-time or part-time income
It’s time to get Excel up and running and create a spreadsheet. It will help you find the best approach overall.
While many opt for a CPP, he’s 65. You can opt for an early CPP from age 60. In this case, your benefits will be reduced by 0.60% per month (7.2% penalty per year). The end of the spectrum is to move CPP until age 70 and get a 0.70% per month (8.4% per year) increase.
That means you’ll have to think about a lot of numbers and probably simulate each of the years between 60 and 70. That’s pretty much what a financial advisor would do by plugging in the numbers and running simulations.