Personal Finance

# Retire at 40, how much CPP will I get?

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• Aug 31st, 2021 6:08 pm
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[OP]
Newbie
Dec 31, 2013
35 posts
Arviat
seems like if you want to receive early at 60, there will be 36% deduction, so you get 64% of the full amount
Deal Expert
Dec 12, 2009
25482 posts
Toronto
Bleys007 wrote: Could you give a bit more info on that calculation? Looks like .282 is 11 YMPE/39, but what's the 0.64? And is there a good way to build a spreadsheet to incorporate other years of past earnings and plug in estimates for future years?
It takes 39 years of CPP contribution to annual YMPE to earn a full pension. If OP is expecting only 11 years of contribution, then 11/39=0.282. OP wants to collect CPP before age 65. There is a reduction for early CPP commencement. The earliest commencement of CPP is age 60 with the amount reduced to about 64% of age 65 pension amount. If you want to do a more precise calculation, follow this website.

https://retirehappy.ca/how-to-calculate ... t-pension/
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Deal Fanatic
Apr 16, 2007
8132 posts
Financial District B…
Is it just me or do other people think this guy just wants to claim he's retired to grift off the Gvnmt and then continue working?
----------------------------Licensed Credit Bureau member, S1, FI Automotive, CCP forums most banned = x 13 and counting, guess who that is?... stomped to the curb once again
Member
May 9, 2013
277 posts
Lower mainland BC
Dogger1953 wrote: A very good analysis, except that if someone takes their CPP at age 60 it should be over 35 years (34.8 if you want to be more accurate) instead of 39 years. That means that the equation is really \$1,200 x 11/35 x 64% = \$241. This formula also only covers the base portion, so the enhanced CPP will probably add another \$30 at age 60, making his net CPP approx \$271 (in 2021 dollars) at age 60 in 2046.
So that would effectively reduce his discount from 36% to ~ 28.7% ? His full CPP at 65 would be 1200*11/39 = 338 and 338*.713= 241 whereas 338 * .64 = 216

This would reduce the breakeven point from age 74 to 78 (taking CPP at 60 vs 65)
Deal Expert
Dec 12, 2009
25482 posts
Toronto
martik818 wrote: So that would effectively reduce his discount from 36% to ~ 28.7% ? His full CPP at 65 would be 1200*11/39 = 338 and 338*.713= 241 whereas 338 * .64 = 216

This would reduce the breakeven point from age 74 to 78 (taking CPP at 60 vs 65)
Yeah it does. A lot of sites use the 0.6% reduction for each month as a round number. It is a little less in that once CPP is taken, the working lifetime end point is advanced. The reference working lifetime is 47 years (age 18 to age 65). Starting CPP at age 60 reduces working lifetime to 42 years. There is a 17% drop out allowance regardless of when CPP is taken. For the reference 47 year working lifetime, dropping 17% means 39 years count toward the CPP estimate. For the 42 year working lifetime, dropping 17% results in a 34.86 years counting toward CPP estimate.
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Member
May 9, 2013
277 posts
Lower mainland BC
will888 wrote: Yeah it does. A lot of sites use the 0.6% reduction for each month as a round number. It is a little less in that once CPP is taken, the working lifetime end point is advanced. The reference working lifetime is 47 years (age 18 to age 65). Starting CPP at age 60 reduces working lifetime to 42 years. There is a 17% drop out allowance regardless of when CPP is taken. For the reference 47 year working lifetime, dropping 17% means 39 years count toward the CPP estimate. For the 42 year working lifetime, dropping 17% results in a 34.86 years counting toward CPP estimate.
I just updated my CPP Breakeven sheets to add this as an option. That 4 years is a significant difference and should be reflected in discussions of when to take CPP as it is probably more the norm than the full discount.
Sep 14, 2012
2373 posts
Montreal, QC
mikeymike1 wrote: Is it just me or do other people think this guy just wants to claim he's retired to grift off the Gvnmt and then continue working?
I had to look up the word "grift" and I think that the original poster is a troll but there is nothing wrong with "retiring" and continuing to work.

In my eyes, "retiring" just means stop working and if the company/institution that the employee worked at, gives certain benefits/privileges for people who retired from the company, I can see people "retiring" but in reality it is really "quitting". Just because one retires, doesn't necessarily mean that one will start using/collecting the company pension or government pension or government retirement programs right away. Regardless of age, some people who retire either return back to work full-time or work part-time (some because they need the money and some because they need to "keep busy".)

For example, if I won \$5M, I could "retire" and live off the interest or income generated by investing that \$5M (I could even live on the interest or investment income generated with investing a lot less than that amount).

One could retire at 55 ("Freedom 55") and live off their non-registered accounts provided that they had enough funds there and then convert their RRSP to a RIF at 71 and their LIRA to a LIF at 71 and do likewise with their company pension plan if they have one then start withdrawing/using the minimum amounts as well as start collecting CPP/QPP and OAS at that age. One doesn't need to do this immediately when one "retires" even if it were possible based on the age of the person.
Deal Fanatic
Mar 10, 2018
5128 posts
does it matter?
lmcjipo wrote: I had to look up the word "grift" and I think that the original poster is a troll but there is nothing wrong with "retiring" and continuing to work.

In my eyes, "retiring" just means stop working and if the company/institution that the employee worked at, gives certain benefits/privileges for people who retired from the company, I can see people "retiring" but in reality it is really "quitting". Just because one retires, doesn't necessarily mean that one will start using/collecting the company pension or government pension or government retirement programs right away. Regardless of age, some people who retire either return back to work full-time or work part-time (some because they need the money and some because they need to "keep busy".)

For example, if I won \$5M, I could "retire" and live off the interest or income generated by investing that \$5M (I could even live on the interest or investment income generated with investing a lot less than that amount).

One could retire at 55 ("Freedom 55") and live off their non-registered accounts provided that they had enough funds there and then convert their RRSP to a RIF at 71 and their LIRA to a LIF at 71 and do likewise with their company pension plan if they have one then start withdrawing/using the minimum amounts as well as start collecting CPP/QPP and OAS at that age. One doesn't need to do this immediately when one "retires" even if it were possible based on the age of the person.
"retiring" and continuing to work.

And then
"retiring" just means stop working

What the heck?
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.
Sep 14, 2012
2373 posts
Montreal, QC
callernamet wrote: "retiring" and continuing to work.

And then
"retiring" just means stop working

What the heck?
Where I currently work, when one "retires" (i.e. they get the "retired" status as their reason for leaving), one gets certain benefits "for life" such as subsidized medical/health coverage among other things so once they reach the point that the company allows them to retire, some people will quit but use the "retire" option to get this benefit and then look for a job elsewhere or work part time at the same company if they can find a part-time job at the company (since they aren't guaranteed a part-time position once they decide to "retire"). If I "retire" at that stage from the company, it doesn't mean that I have to start drawing on the company pension, convert my RRSP to a RIF, and/or convert my LIRA to a LIF. It just means "quitting from that company/position" (so not being able to collect EI) where hopefully I don't have to work but there is nothing stopping me from working at a different company or returning to the same company later on in the future whether full-time or part-time.

One can work and collect QPP/CPP, a company pension, make the minimum withdrawals in a RIF/LIF but that would just increase one's tax obligations. There is no rule against working.

Where I currently work, there are people over 71 who are still working on contract or teaching/training positions and that being said, at that age, they would need to be drawing the minimums for their LIF/RIF and collecting OAS, and CPP/QPP.
Jun 8, 2004
2082 posts
Oakville
I "retired" when I was 43 when I was given an exit package by my employer.
I had enough saved to FIRE, and so I was "retired" (ie. not actively looking for work) for 2 years.
At 45, I accepted a 3-month contract job to keep busy and earn a bit more "play" money (beyond FIRE).
That 3-month contract got extended multiple times and 5 years later, I "retired" again, at 50.
I had even more now saved to FIRE (with even more play money).
I am still passively listed out there as "semi-retired" and available for short term contract work to keep my professional mind busy.
Deal Fanatic
Mar 10, 2018
5128 posts
does it matter?
lmcjipo wrote: Where I currently work, when one "retires" (i.e. they get the "retired" status as their reason for leaving), one gets certain benefits "for life" such as subsidized medical/health coverage among other things so once they reach the point that the company allows them to retire, some people will quit but use the "retire" option to get this benefit and then look for a job elsewhere or work part time at the same company if they can find a part-time job at the company (since they aren't guaranteed a part-time position once they decide to "retire"). If I "retire" at that stage from the company, it doesn't mean that I have to start drawing on the company pension, convert my RRSP to a RIF, and/or convert my LIRA to a LIF. It just means "quitting from that company/position" (so not being able to collect EI) where hopefully I don't have to work but there is nothing stopping me from working at a different company or returning to the same company later on in the future whether full-time or part-time.

One can work and collect QPP/CPP, a company pension, make the minimum withdrawals in a RIF/LIF but that would just increase one's tax obligations. There is no rule against working.

Where I currently work, there are people over 71 who are still working on contract or teaching/training positions and that being said, at that age, they would need to be drawing the minimums for their LIF/RIF and collecting OAS, and CPP/QPP.
Thanks you for explaining.
And its i off topic I have when people work after 71. No wonder young generation have hard time getting jobs. but that is another topic for now.
Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.
Sep 14, 2012
2373 posts
Montreal, QC
callernamet wrote: Thanks you for explaining.
And its i off topic I have when people work after 71. No wonder young generation have hard time getting jobs. but that is another topic for now.
I can't speak for these people since I am not one of these people because of my age and even if I reached that age, I don't see myself continuing to do the same work that I'm doing now "just to keep busy" or "too keep my mind sharp" even though technically I probably could continue to do the type of work that I'm doing.

These people "know" their job so I guess they want to stay and make some more money, keep busy and/or keep their minds sharp which are the 3 most common reasons for working after 65. Not sure if this is the same at all companies that offer company pension plans but once someone reaches 65 where I work, the company no longer contributes their share (which is a higher percentage to what the employee contributes) to the employee's pension plan.
Apr 27, 2015
2887 posts
Mississauga
I retired at 50 (4.5 years ago). If I log into my service canada account, I can see all my contributions and estimated pension.
They give you estimated CPP numbers depends on age you would like to start getting CPP
The estimates for your CPP retirement pension are calculated based on your pensionable earnings and contributions to the CPP.

If you choose to start your CPP retirement pension:

at 60, you could receive \$xxx
at 65, you could receive \$xxx
at 70, you could receive \$xxx

P.S. Not sure if numbers are correct though
"All animals are equal but some animals are more equal than others" George Orwell
Apr 27, 2015
2887 posts
Mississauga
MARKTAMU wrote: seems like if you want to receive early at 60, there will be 36% deduction, so you get 64% of the full amount
OK, so if you retire at 60, your amount will be less by 36% from 65 years amount.
But what will be deduction if you aplly for CPP at 61 or 63?
"All animals are equal but some animals are more equal than others" George Orwell
Apr 27, 2015
2887 posts
Mississauga
CNeufeld wrote: If someone is depending on that \$216 (or even \$250) to retire early, I think they need to rethink their retirement plan...

C
But why do you think CPP is only OP's source of income?! I retired at 50, planning to start getting CPP at 60 (in 5 years). As per service canada estimate , i will be getting \$4,200 per year, sure , it's nothing, I spent more on LCBO and sigs , but our annual income from investments (already now) is around 70K. Plus is 10 years my spouse can start receiving DB pension (after 10 years working in bank) and start getting OAS.
I heard pension in Canada is great and most of people retire between 45-55.
it's not true at all that "most of people retire between 45-55", only prettysmall %.

I also wouldn't say that pension in Canadais great . It's just OK. Canada ranked #9
1 Netherlands 82.6
2 Denmark 81.4
3 Israel 74.7
4 Australia 74.2
5 Finland 72.9
6 Sweden 71.2
7 Singapore 71.2
8 Norway 71.2
https://www.investopedia.com/articles/p ... -world.asp
"All animals are equal but some animals are more equal than others" George Orwell
Deal Fanatic
Feb 4, 2010
6698 posts
will888 wrote: I will treat this as a serious question. Full CPP requires 39 years of contributions at full YMPE. For someone commencing their pension at age 65 with 39 years of contribution, you are looking at about \$1200 per month. 11 year out of 39 means only collecting 28.2% of full pension commencing at age 65. The earliest CPP can commence is age 60 with a 36% reduction in payout. OP you will need to wait to 2046 to collect CPP regardless of when you decide to stop working. With 11 years of full contributions, you should expect 0.282*0.64*\$1200=\$216. This is not a wage adjusted number. So you are not too far off on the amount, but 2 decades early on commencing the pension. I suggest not counting on CPP for the first 20 years of retirement.
How are years of service calculated? Is it cumulatively for each month worked? Is there a way for each of us to check how many years we've paid into it? Is there an online calculator that estimates as you have done?

Question for anyone/everyone - how will you decide when to start receiving CPP? E.g., will you start right at 60 or will you wait? Some people argue it's better to start receiving at 60 b/c you don't know how long you're going to live so might as well as start collecting earlier - others argue that you can get more if you wait.
Mar 3, 2018
3054 posts
GTA
hierophant wrote: Question for anyone/everyone - how will you decide when to start receiving CPP? E.g., will you start right at 60 or will you wait? Some people argue it's better to start receiving at 60 b/c you don't know how long you're going to live so might as well as start collecting earlier - others argue that you can get more if you wait.
When to collect CPP is a personal decision based on things like do you need the money now or your health situation. Generally if you live past age 74 you will collect more total CPP if you started at age 65 rather then 60. It is rolling the dice.

In my case I should be retired by 60 but will wait till 65 to collect CPP. Reason being the CPP payout increases approximately 7.2% for each year delayed. I will use that period to decumulate my RRSP by the same amount I would have received in CPP. Achieves two goals: 1. Guaranteed return of 7.2%. 2. RRSP gets to be drawn down at a lower tax rate during that period. One of the biggest issues with RRSP's is dying with a large balance that gets taxed heavily on your final tax return.
Deal Fanatic
Feb 4, 2010
6698 posts
DaveTheDude wrote: In my case I should be retired by 60 but will wait till 65 to collect CPP. Reason being the CPP payout increases approximately 7.2% for each year delayed. I will use that period to decumulate my RRSP by the same amount I would have received in CPP. Achieves two goals: 1. Guaranteed return of 7.2%. 2. RRSP gets to be drawn down at a lower tax rate during that period. One of the biggest issues with RRSP's is dying with a large balance that gets taxed heavily on your final tax return.
That's my plan too. I'm not really relying on CPP ...just looking at it as a few extra thousand.
Apr 16, 2015
1019 posts
hierophant wrote: How are years of service calculated? Is it cumulatively for each month worked? Is there a way for each of us to check how many years we've paid into it? Is there an online calculator that estimates as you have done?

Question for anyone/everyone - how will you decide when to start receiving CPP? E.g., will you start right at 60 or will you wait? Some people argue it's better to start receiving at 60 b/c you don't know how long you're going to live so might as well as start collecting earlier - others argue that you can get more if you wait.
Deal Expert
Dec 12, 2009
25482 posts
Toronto
hierophant wrote: How are years of service calculated? Is it cumulatively for each month worked? Is there a way for each of us to check how many years we've paid into it? Is there an online calculator that estimates as you have done?

Question for anyone/everyone - how will you decide when to start receiving CPP? E.g., will you start right at 60 or will you wait? Some people argue it's better to start receiving at 60 b/c you don't know how long you're going to live so might as well as start collecting earlier - others argue that you can get more if you wait.
It's actually calculated by month, not year but it's the same thing different by a factor of 12. Set up a services Canada online account and you will find all your contribution information there. Or you can call them and they can mail you the information.

On the question of when to commence CPP, I will start at age 65, but closer to the date, I will re-evaluate.
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