Personal Finance

I'm a Canada Pension Plan (CPP) expert. Any questions?

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  • Oct 31st, 2017 3:39 pm
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Member
Jan 20, 2007
439 posts
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Niagara
I've check my CPP statement online and I have 29 entries - 15 M and probably 3 or 4 that are just under max for that year and a few others that look a bit low.

When I click on the estimated retirement pension calculator it tells me :

The maximum retirement pension monthly amount at age 65 for this year is: $1,114.17

If you were 65 today,you could receive a monthly retirement pension of: $983.15

Is this calculator just using the current amount of CPP I've payed for its calculations or it assuming that I will max out my contributions for another 18 years yet or is it including GIS or ??? If I didn't work another day for the next 18 years will I get that amount (inflation adjusted and assuming no other government CPP changes)?

Thanks
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Dec 12, 2012
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Courtenay
ancodia wrote:
Jul 14th, 2017 12:40 pm
I've check my CPP statement online and I have 29 entries - 15 M and probably 3 or 4 that are just under max for that year and a few others that look a bit low.

When I click on the estimated retirement pension calculator it tells me :

The maximum retirement pension monthly amount at age 65 for this year is: $1,114.17

If you were 65 today,you could receive a monthly retirement pension of: $983.15

Is this calculator just using the current amount of CPP I've payed for its calculations or it assuming that I will max out my contributions for another 18 years yet or is it including GIS or ??? If I didn't work another day for the next 18 years will I get that amount (inflation adjusted and assuming no other government CPP changes)?

Thanks
Read this article: https://retirehappy.ca/understanding-cp ... tions-soc/
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Dec 27, 2009
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Ottawa, ON
ancodia wrote:
Jul 14th, 2017 12:40 pm
I've check my CPP statement online and I have 29 entries - 15 M and probably 3 or 4 that are just under max for that year and a few others that look a bit low.

When I click on the estimated retirement pension calculator it tells me :

The maximum retirement pension monthly amount at age 65 for this year is: $1,114.17

If you were 65 today,you could receive a monthly retirement pension of: $983.15

Is this calculator just using the current amount of CPP I've payed for its calculations or it assuming that I will max out my contributions for another 18 years yet or is it including GIS or ??? If I didn't work another day for the next 18 years will I get that amount (inflation adjusted and assuming no other government CPP changes)?

Thanks
I think it is assuming that things continue as they have been and you work for the next 18 years at that level.
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Courtenay
Chickinvic wrote:
Jul 14th, 2017 2:43 pm
I think it is assuming that things continue as they have been and you work for the next 18 years at that level.
That's not exactly what happens, but in simple terms, that's the effect of what happens.
Member
Oct 4, 2003
262 posts
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"If you are receiving a CPP disability benefit when you turn 65, your disability benefit will automatically be converted to a retirement pension. You will not need to apply. " I know the disability CPP ends at age 65, but is there a way to delay receiving the regular CPP at age 65?
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stemfi wrote:
Jul 14th, 2017 6:48 pm
"If you are receiving a CPP disability benefit when you turn 65, your disability benefit will automatically be converted to a retirement pension. You will not need to apply. " I know the disability CPP ends at age 65, but is there a way to delay receiving the regular CPP at age 65?
There is no way that I'm aware of under the legislation, to stop the disability pension from converting to a retirement pension at age 65. Once the retirement pension has started however, you should be able to request within 6 months that the retirement pension be cancelled and you must repay any retirement pension received. You could then apply for the retirement pension to start at some later date.
Newbie
Jun 6, 2017
8 posts
Hi Dogger,

So, your advice is to take CPP at 60 and stop working or continue working???

If we stop working, we are going to loose the income generated by employment.
If we continue to work, the CPP will be taxed at the highest (30% or more), so on top of the reduction for taking it earlier we will loose money from being taxed at a higher rate.

An example:

"For a person who is still working and may make around $100,000 before the pension, then the CPP will be taxed at roughly 40%. If a person in this tax bracket took the CPP early at age 60 it would first cost the 30% penalty for taking it 5 years early, and then the person would be taxed at 40% on that 70% balance (=28%). Assuming a CPP pension might be $600 at age 65, then a person on a 40% tax bracket who takes the pension at age 60 would get a taxable pension of $420 ($600 -30%) and then pay tax of $168, and be left with only $252 cash in hand. In this case, if the person would retire at age 65 with no other income, it seems their smart move would be not to take the CPP until they actually retire.


And in the case of a person who might work after 65 or have some other income past then, there would be a good argument for delaying the CPP beyond 65 and letting it grow bigger by .7% a month."
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claudiu wrote:
Jul 15th, 2017 5:54 am
Hi Dogger,

So, your advice is to take CPP at 60 and stop working or continue working???

If we stop working, we are going to loose the income generated by employment.
If we continue to work, the CPP will be taxed at the highest (30% or more), so on top of the reduction for taking it earlier we will loose money from being taxed at a higher rate.

An example:

"For a person who is still working and may make around $100,000 before the pension, then the CPP will be taxed at roughly 40%. If a person in this tax bracket took the CPP early at age 60 it would first cost the 30% penalty for taking it 5 years early, and then the person would be taxed at 40% on that 70% balance (=28%). Assuming a CPP pension might be $600 at age 65, then a person on a 40% tax bracket who takes the pension at age 60 would get a taxable pension of $420 ($600 -30%) and then pay tax of $168, and be left with only $252 cash in hand. In this case, if the person would retire at age 65 with no other income, it seems their smart move would be not to take the CPP until they actually retire.


And in the case of a person who might work after 65 or have some other income past then, there would be a good argument for delaying the CPP beyond 65 and letting it grow bigger by .7% a month."
My earlier recommendation to take their CPP at age 60 was based on the goal of maximizing GIS, and I still think that's generally a good plan in that situation. There was no indication whether they would still be working after age 60, but if they were, I didn't get the feeling that their earnings were in the $100,000 range. In the scenario that you describe, I totally agree that taking their CPP at age 60 would not be advisable (and it's now a 36% penalty) and they should clearly delay CPP until age 65 or beyond, unless they have good reason to believe that they have a shorter-than-average life expectancy.
Newbie
Jun 6, 2017
8 posts
Dogger1953 wrote:
Jul 15th, 2017 10:39 am
My earlier recommendation to take their CPP at age 60 was based on the goal of maximizing GIS, and I still think that's generally a good plan in that situation. There was no indication whether they would still be working after age 60, but if they were, I didn't get the feeling that their earnings were in the $100,000 .....
I do not see applying for CPP at 60 as the best option to maximize your overall money in retirement.

If you decide not to work after 60 because you are rich, you do not care about GIS.
If you are poor but cannot work after 60, this is not a choice but the only option: apply for CPP at 60.
If you still can work ,regardless of the employment income between 60 and 65, an early CPP will be taxed 15%-30%, in addition to the 36% penalty and this would be a serious reduction in CPP value( 51%-66%) between 60 and 65 and furthermore after 65.
Jr. Member
May 24, 2009
140 posts
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That's not entirely true. In my parents' case, they are only aged 60, and plan to retire soon. they don't HAVE to take out CPP, and can instead opt to use up their RRSPs or TFSAs. I guess my question is, when someone has access to the various pools of money, in what order should they take the money in order to maximize overall cash (keeping GIS income eligibility and tax ramifications in mind)
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canucksfan19 wrote:
Jul 16th, 2017 8:04 pm
That's not entirely true. In my parents' case, they are only aged 60, and plan to retire soon. they don't HAVE to take out CPP, and can instead opt to use up their RRSPs or TFSAs. I guess my question is, when someone has access to the various pools of money, in what order should they take the money in order to maximize overall cash (keeping GIS income eligibility and tax ramifications in mind)
If there were a single formula that applied to everyone, retirement planning would be very easy. All that I can recommend is that your parents understand what their CPP choices really are, and how those choices affect and interact with their other income streams.
Newbie
Jun 6, 2017
8 posts
canucksfan19 wrote:
Jul 16th, 2017 8:04 pm
That's not entirely true. In my parents' case, they are only aged 60, and plan to retire soon. they don't HAVE to take out CPP, and can instead opt to use up their RRSPs or TFSAs. I guess my question is, when someone has access to the various pools of money, in what order should they take the money in order to maximize overall cash (keeping GIS income eligibility and tax ramifications in mind)
Your parents (2) will need around $3500 a month for a decent living, which will make $210,000 for 5 years.
If they have $210,000 in RRSP and TFSA and they decide to spend it, they will no contribute to CPP anymore; CPP after 65 will be low, OAS will be the same, GIS will be higher, but all together below $3500/ month.
The amount spent between 60 and 65 would have been helpful now, to supplement CPP+OAS+GIS.
Newbie
Jul 3, 2016
4 posts
Hi Dogger i have a question please.
I have been diagnosed with cancer and can no longer work ,will be starting ,to receive a CPP disability .
I have a small rental income ,will this effect what CPP pays to me ??
Member
Jul 27, 2017
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GTA
For someone presently receiving CPP, is it possible to 'stop' or 'delay receiving' CPP for a certain period of time?
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Courtenay
cannot wrote:
Sep 4th, 2017 2:04 pm
Hi Dogger i have a question please.
I have been diagnosed with cancer and can no longer work ,will be starting ,to receive a CPP disability .
I have a small rental income ,will this effect what CPP pays to me ??
No, rental income will not affect your CPP disability entitlement.

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