• Last Updated:
  • Oct 13th, 2018 10:52 am
Tags:
None
Deal Fanatic
Feb 1, 2006
9425 posts
537 upvotes
LoANeal wrote:
Oct 10th, 2018 1:44 pm
I would mention I said "like a tax" not an actual tax. But if I die before 65, I'm single and have no children you know what happens to my money? Absolutely gone. I cannot give it to my nephew, or niece, or brother, I just lose out. Hence why it's like a tax. It's money taken from me that I have absolutely no say over. Ya know why I want my CPP back? 1. I can earn a way higher rate of return and 2. I can donate give, and spend as I freaking want.
It would be the same if you had a DB plan at work. You die single before 65, all gone. CPP is like a DB, as the OP said.
Deal Fanatic
Feb 1, 2006
9425 posts
537 upvotes
nevyn1234 wrote:
Oct 10th, 2018 12:00 pm
Yes, it includes employer returns. And what do you mean by refunding employers? Why would they do that? It isn't the employers' money, it is a benefit they fund for the employee.
He means that if you max out your CPP at one employer, then move to another, your CPP contributions start again (they have to, legally). At tax time, you get your overcontributions back, but the second employer who matched your contributions does not.

This would apply to a pretty slim minority of employers, though.
Jr. Member
Nov 28, 2017
162 posts
148 upvotes
taxrage wrote:
Oct 10th, 2018 1:48 pm
Avg life expectancy for a male in Canada is ~81 now.
Now go to an insurance calculator and plug in your age. Life expectancy gets dragged down based on a number of things that could happen at any stage of life, so the overall number is a child born now. It also makes for a biased data set so an average isn't the best anyway

Point being, if you are already middle age, than unless you already have a major chronic illness, a troubling family history or are a smoker or heavy drinker, you're probably closer to 85. And even then, that expectancy is getting dragged down by the chances of an accidental early death (in which case no retirement savings are super relevant to you). The older you get without a major health issue, the more you will see that number creep higher.

And if the rest of your retirement savings plans are calculated on only make 80-81, you could find CPP very important later on for the same reasons.

Take a look at this

It will give you a generic life expectancy, but also gives a slider to get a sense of the likelihood you outlive that expectancy. You could have a mid eighties expectancy, and still a > 1/4 chance of living past 90.
Newbie
Aug 29, 2018
9 posts
7 upvotes
Toronto
Bullseye wrote:
Oct 10th, 2018 2:11 pm
It would be the same if you had a DB plan at work. You die single before 65, all gone. CPP is like a DB, as the OP said.
This isn't correct. DB plans allow survivor benefits to be passed onto ones spouse, children, designated beneficiary or estate if death occurs prior to retirement. The key is to designate a beneficiary - for potential tax reductions or mitigation/deferral (in the case of a spouse or dependent children). If there is no beneficiary, a pre-retirement death benefit is paid to the estate. The order is Spouse - Children - Designated beneficiary - Estate. The survivor benefit amount and type will depend on the relationship to the deceased pensioner.
Member
User avatar
Dec 24, 2007
329 posts
223 upvotes
BC
Hmmm. Noticed that there's a common thread in this post: Those who nitpick about the CPP returns tend to navel gaze and use "I" and "my" alot and also misuse the word "tax" when it isn't.

So, once again, I will repeat what I said earlier. The CPP is being managed for all Canadians and greater good of the country and not just about "you". It is not an individual "savings account" but more like a life annuity you buy from an insurance company where if you die early you don't get back all of your contributions. Like a life annuity, what happens if you live unusually long? It has to keep paying.

If the CPP was like a "savings account" rather than a "life annuity", your account will be empty when you reach the life expectancy of say 85, and CPP payments will stop and you're on the street. CPP is taking on your longevity risk, so it makes money if you die early and loses money if you live long. That is not a tax - that is your longevity insurance. That is the tradeoff - you get the security of knowing that the CPP payments will continue for your whole life but you might lose if you die early.

Here's an analogy for those raging about how the CPP is a bad deal - would you give up your "free health care" in Canada? I certainly paid a lot in taxes and have never been really sick and could have got a better return for "my money". Would I trade it for a "Health Savings Account" like that proposed by some in the US opposed to "socialized medicine". Not in a million years - that's the risk tradeoff I'm willing to accept to cover some unforeseen catastrophic health issue that would bankrupt me and leave my family with nothing. But that's me, how about you?
Last edited by WetCoastGuy on Oct 10th, 2018 3:44 pm, edited 1 time in total.
Deal Fanatic
User avatar
Dec 27, 2009
5366 posts
2622 upvotes
Ottawa, ON
taxrage wrote:
Oct 9th, 2018 12:53 pm
I did a rough spreadsheet calculation that shows that if I draw CPP at 65 and live to 80 I'll receive roughly $227,000 in benefits. I'm in my 50s, and I've probably paid in something like $100K.
Not unless you are self-employed and have made the maximum contribution every years since 1985. If you are an employee (not paying the employer portion as well), and assuming you have never earned less than the maximum amount for contribution since 1985 you would still have only contributed about $50K.
Deal Fanatic
User avatar
Dec 27, 2009
5366 posts
2622 upvotes
Ottawa, ON
Bullseye wrote:
Oct 10th, 2018 7:00 am
Another way to put this would be to say that people are too stupid to save themselves, so the government better do it for them. Don't worry, we're the government, and we're here to help.
Yes, well most people are. If you aren't, then you are the exception.
Jr. Member
Nov 28, 2017
162 posts
148 upvotes
ParadigmWM wrote:
Oct 10th, 2018 2:53 pm
This isn't correct. DB plans allow survivor benefits to be passed onto ones spouse, children, designated beneficiary or estate if death occurs prior to retirement. The key is to designate a beneficiary - for potential tax reductions or mitigation/deferral (in the case of a spouse or dependent children). If there is no beneficiary, a pre-retirement death benefit is paid to the estate. The order is Spouse - Children - Designated beneficiary - Estate. The survivor benefit amount and type will depend on the relationship to the deceased pensioner.
CPP also has such benefits. Not all to the same extent or with the same rules, but it has a death benefit, a benefit to dependent children , and a survivor benefit.
Deal Fanatic
Feb 1, 2006
9425 posts
537 upvotes
Chickinvic wrote:
Oct 10th, 2018 3:47 pm
Yes, well most people are. If you aren't, then you are the exception.
This is the main argument of the right wing in politics, they rightly accuse liberals of assuming the general population is too stupid to take care of themselves, so the state better do it for them. Not just CPP, but all aspects of their lives. Better leave it to the nanny state, who knows better.

I am very centrist, but this type of thinking makes me very uneasy.
Deal Addict
Jan 2, 2015
1273 posts
341 upvotes
Toronto, ON
Bullseye wrote:
Oct 10th, 2018 4:00 pm
This is the main argument of the right wing in politics, they rightly accuse liberals of assuming the general population is too stupid to take care of themselves, so the state better do it for them. Not just CPP, but all aspects of their lives. Better leave it to the nanny state, who knows better.

I am very centrist, but this type of thinking makes me very uneasy.
I think you wouldn't be so uneasy if you saw it in action.

You "have" to contribute to CPP, unless you're working under the table and just "forget" to declare that income. I've seen some people do just that. Many people end up with terrible retirements, living off of the Guaranteed Income Supplement (taxpayer money, not their own money), due to their failure to save or invest. One suffered from a disability before I met him, so not only does he not get CPP Disability, but when he retires he'll get the minimum amount of income (Old Age Security, maxed out Guaranteed Income Supplement, and that's it). It's very easy for otherwise smart people to be really dumb when it comes to money.

I am well aware that anecdotes are not evidence (it's not statistically rigorous).

Senior poverty rates are the lowest of all (adult) age groups, but bankruptcies are rising. Seniors have a higher floor than working age people (the retirement plans pay better than welfare), but this doesn't mean senior poverty does not exist.
Sr. Member
Mar 13, 2018
964 posts
483 upvotes
Bullseye wrote:
Oct 10th, 2018 4:00 pm
This is the main argument of the right wing in politics, they rightly accuse liberals of assuming the general population is too stupid to take care of themselves, so the state better do it for them. Not just CPP, but all aspects of their lives. Better leave it to the nanny state, who knows better.

I am very centrist, but this type of thinking makes me very uneasy.
History and examples around the world has shown this to be true over and over again (majority too stupid to take care of themselves), let alone basic financial literacy or discpline
Member
User avatar
Jan 15, 2017
463 posts
204 upvotes
WetCoastGuy wrote:
Oct 10th, 2018 3:18 pm
Here's an analogy for those raging about how the CPP is a bad deal - would you give up your "free health care" in Canada?
I'm the only one who's allowed to rage here :-)

I don't think most are saying that CPP is bad and should be discarded, only that it should provide a better payout than just something like 2.5x total premiums (to age 80)...considering that even crappy whole life policies pay out something like 8-10x total premiums paid.
Sr. Member
Mar 13, 2018
964 posts
483 upvotes
taxrage wrote:
Oct 10th, 2018 4:41 pm
I'm the only one who's allowed to rage here :-)

I don't think most are saying that CPP is bad and should be discarded, only that it should provide a better payout than just something like 2.5x total premiums (to age 80)...considering that even crappy whole life policies pay out something like 8-10x total premiums paid.
Except those people have been proven wrong
Deal Fanatic
Nov 24, 2013
5109 posts
1717 upvotes
Kingston, ON
ParadigmWM wrote:
Oct 10th, 2018 2:53 pm
This isn't correct. DB plans allow survivor benefits to be passed onto ones spouse, children, designated beneficiary or estate if death occurs prior to retirement. The key is to designate a beneficiary - for potential tax reductions or mitigation/deferral (in the case of a spouse or dependent children). If there is no beneficiary, a pre-retirement death benefit is paid to the estate. The order is Spouse - Children - Designated beneficiary - Estate. The survivor benefit amount and type will depend on the relationship to the deceased pensioner.
Is named beneficiary actually a thing on DB plans? Most I'm aware of limit survivor benefits to dependent children (not adult ones) and surviving spouses who married the annuitant before the retirement date. No gaming like naming your kid the beneficiary or creatively marrying a young new spouse when you're a widow or widower.

Regardless, in the death with no survivors scenario the funds remain with the DB plan/CPPIB, helping preserve the actuarial soundness of the plan for the people who live to 95 (or their surviving spouses who do).
Member
User avatar
Dec 24, 2007
329 posts
223 upvotes
BC
taxrage wrote:
Oct 10th, 2018 4:41 pm
I'm the only one who's allowed to rage here :-)
Winking Face - Just couldn't resist when you used "rage" in your username.

Anyways, I do not disagree with your comment that the returns are crappy but in the context of what CPP is designed for, it is what it is. Low risk - low returns. Designed for the masses who are unfortunately financially illiterate or unfortunate in life circumstances but must also be sustainable since many are relying on it for the senior years.

Top