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I'm a CPP expert. Any questions?

353K views 850 replies 175 participants last post by  jlunfirst 
#1 ·
I worked for CPP for more than 32 years, and have recently retired.

I'd like to share my knowledge if you have any questions, especially around the calculation of CPP benefits.
 
#54 ·
I would basically agree with Charlie's assessment, but did you remember to adjust your CPP calcs for the extra years of zero earnings/contributions? And did you remember to adjust the OAS for the "voluntary deferral" which starts July 2013?

Just out of curiosity, what did you use for cost-of-living increases and for a rate-of-return on your investments?
 
#52 ·
Interesting graph Steve. Seems if our 59 YO lives past 81 he's better off delaying the CPP (kind of counterintuitive to me...but it does make sense). If he dies before 81 he would have been best collecting early.

And of course, his plan must weather 21 yrs of federal budgets which might change the parameters yet again.
 
#59 ·
I have a good question that I am attempting to figure out. Retired from the Canadian Armed Forces and in receipt of a Defined Benefit Pension Plan. Similar to Retired RCMP's pension, it is clawed back once I am able to draw CPP at 65. Not sure how much the claw back % is. My question is it better for me in my specific case to start drawing CPP at age
60 (reduced of course) and invest the money each month into my TFSA. If I invest the amount for the full 5 years this may reuce the impact of the clawback for a while anyway. Opinions are most welcome, there may be no 100% right answer but I have to plan for it.
 
#61 ·
Newfi61 - I will leave it to others to comment on the wisdom of investing in TFSAs, but I can do detailed calculations to estimate your CPP at age 60, and at any other age(s) that you wish. I can only do that to any degree of accuracy if I have your entire CPP record of contributions, and I do charge $25 per calculation (I used to do it for free, but I couldn't keep up with the volume of such requests). If you're interested in this, email me at DRpensions@shaw.ca, along with your CPP statement of contributions.
 
#60 ·
First off Thank You for your kind offer to help out the folks on this forum!

I'm so messed up trying to figure out if I should retire or not I can hardly think straight, which of course isn't making the planning any easier.
I'll be 55 in Sept. of this year and have contributed the max. amount since 1977. My wife and I both have defined benefits pension plans (no we are not gov. employees:)) and we know our monthly income's from those pensions.

Current Service Canada print-out for me states $1012.50 at 65, $648 at 60 and $1437.75 at 70.

If I retire Jan.1, 2014 and don't work anymore can I expect to get those dollar value's at those ages or will it be reduced? Also what would be the best age to actually start drawing? And finally is there a magic number/age where the service Canada print-out will always be accurate. i.e. do I have to be a certain age or have contributed the max. amount for x years?

Our current plan is to use my RRSP's to tide me over until age 62 so that my company pension is not reduced(and pay less tax), then live on our company pensions and gov. benefits. My wife is 3 years older than me and plans to work until 62, unless her health won't allow it.

TIA
 
#62 ·
jmarks - The only magic number is that if you have at least 39 years of max contributions, you will receive the maximum CPP ($1,012.50 for 2013), adjusted up or down if you start receiving it at other than age 65.

If you want a personalized calculation, email me at DRpensions@shaw.ca, along with a copy of your CPP statement of contributions. You can give me various scenarios of when you might retire and when you might start your CPP. I charge $25 per calculation, but I can guarantee their accuracy.
 
#63 ·
I just wanted to say that Dogger has just finished doing some calculations for me, based on my own and my late husband's CPP situation, and I am so impressed with both his knowledge and his ability to make things clear to his clients. I think he must have been a big loss to Service Canada when he retired. This is a completely unsolicited and unexpected recommendation, by the way; he will be very surprised to see it.
 
#64 ·
My thought would be that if an expert can give someone real numbers for 25.00 dollars its well worth jumping on.
Dogger 1953 will be hearing from me before I make my move.

He can save me more in a month than my own assumptions can because once the decision is made there is no changing.

Karen I have followed your posts and agree, Dogger 1953 is someone you had been hoping for.
 
#65 · (Edited)
You're right, Daniel, that it will be a good idea to check with Dogger before you make the decision. In my case, I have been collecting my CPP for about six years now (from age 63) and I've not ever regretted that decision, but I never really understood the long-term effects of making it. I'm one of those curious people who likes to understand things, and it's always bothered me that I didn't understand what happened when the two different changes to my survivor's benefit occurred, so I was really interested in finding that out. It wasn't important in the overall scheme of things, but it resolved a question in my mind, and I like that!
 
#70 ·
Hi Dogger, I printed out my estimated CPP benefits from the My Service Canada website. Are the estimates that they make based on the assumption of me making maximum contributions between now and retirement?

Also, I currently receive a Survivor's Benefit. Will I continue to receive the same amount in retirement?

Thanks,
Judy
 
#71 ·
Judy - The Service Canada calculation assumes that you're eligible now, which has the same effect as if it projected your "average lifetime earnings" through until your date of eligibility. Depending on how close you are to actually being eligible and depending on whether your current earnings are above or below your average lifetime earnings, the Service Canada estimate can be quite accurate, or it can be quite misleading (higher or lower). Also, if you had no or reduced earnings while raising children under age 7, the Service Canada calculation can be significantly under, as it doesn't account for the Child Rearing Dropout (CRDO) provision.
The really bad thing about the Service Canada estimate is that it doesn't even mention what happens when you are eligible for both a retirement pension as well as a survivor's benefit. Your survivor's benefit is definitely recalculated (always lower) at age 65, but it will also be reduced when it becomes "combined" with your retirement benefit. Here is a link to an article that I wrote recently on the subject: http://retirehappy.ca/cpp-survivor-benefits/
 
#72 ·
First and Last year in the contributory period

I have a question regarding the treatment of the start year and the end year of the contributory period of the CPP.

Once you have entered the CPP plan (in my case, the month after my 18th birthday), for the second year to the calendar year
before you retire your pensionable earnings are captured on a yearly basis. For these years, monthly values are just
(Yearly Value)/12.

For the first and last years of the contributory period, for most plan participants, the divisor to calculate monthly values
will be some integer that is smaller than 12. For example, in my case, my first "year" is only comprised of 2 months, and my
last "year" will be 9 to 11 months (depends on Service Canada).

You have indicated that much of the CPP calculation is done with months (NCM, CRDO, and general dropout) and Service Canada
definitely has the information to calculate the properly adjusted first and last year of Adjusted Pensionable Earnings.

Do they make these adjustments to account for smaller first and last years? And if so how?
 
#73 ·
I have a question regarding the treatment of the start year and the end year of the contributory period of the CPP.

Once you have entered the CPP plan (in my case, the month after my 18th birthday), for the second year to the calendar year
before you retire your pensionable earnings are captured on a yearly basis. For these years, monthly values are just
(Yearly Value)/12.

For the first and last years of the contributory period, for most plan participants, the divisor to calculate monthly values
will be some integer that is smaller than 12. For example, in my case, my first "year" is only comprised of 2 months, and my
last "year" will be 9 to 11 months (depends on Service Canada).

You have indicated that much of the CPP calculation is done with months (NCM, CRDO, and general dropout) and Service Canada
definitely has the information to calculate the properly adjusted first and last year of Adjusted Pensionable Earnings.

Do they make these adjustments to account for smaller first and last years? And if so how?
Duerf - Yes, they make adjustments to account for any partial year in your contributory period. Both the Year's Basic Exemption (YBE) and the Year's Maximum Pensionable Earnings (YMPE) are pro-rated for partial years. Using 2013 as an example, if you started your CPP benefit effective May, your contributory period would be just 4 months and your YMPE would be 4/12ths of $51,100 = $17,033. If your 2013 earnings exceeded that amount, you would be credited with 4 mths of max earnings when your benefit was calculated. Hope this helps?
 
#77 ·
Hello,

I have contributed to CPP for 4 years, but now I am incorporated and paying myself with dividends. If I can help, I will never be an employee again. Am I ever going to get that money back? How?

Thanks in advance![/QUOTE

with even one year of contribution to CPP, you will be eligible for a retirement pension. Each year of max contributions is generally worth about $25/mth for an age-65 retirement pension.
 
#78 ·
http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/rates.shtml
http://www.servicecanada.gc.ca/eng/isp/oas/oasrates.shtml

Hey Dogger, this is more of a general beginner quesiton on CPP, for those of us who have several years/decades until retirement.

I saw on the above mentioned links for CPP and OAS, that the average person monthly receives $535 for CPP and $515 for OAS. once they are 65, assuming they have been an employee for X number of years and have paid into it.

How is that different/affected for self employed or buisiness owners who have a corporation and pay themselves dividends.

How are both CPP and OAS scaled back if you are in higher tax brackets in retirement?

Is everyone entitled to both payemnts or are their situations where one may be scaled back?

Any info for those of us that really aren't at that point in our lives, but would appreciate a beginners lesson or a heads up, regarding these matters would be appreciated. Thanks for sharing your expertise and knowledge.
 
#79 ·
Cal - OAS entitlement is based on the number of years of residence in Canada after age 18, so it would be the same amount regardless whether you were an employee or self-employed (or even unemployed). The maximum is approx $540 per month (Apr 2013), and is generally based on 40 years of residence in Canada after age 18. It is taxable, and is subject to a specific suratx if you have income over $69,562 (for 2012). It is payable anywhere in the world, if you have at least 20 years of residence in Canada after age 18. There are also supplementary benefits payable under the OAS program (GIS and Spouse's Allowance), but they are payable only if you reside in Canada and have low income, and I don't think you are interested in them.

CPP is based on your "average lifetime earnings", which includes only salary and self-employment earnings on which contributions have been made. The maximum for 2013 at age 65 is $1,012.50, and that amount would be payable only if you had made almost 40 years of max contributions. CPP benefita are taxable income, but there is no specific surtax or clawback at higher incomes. CPP benefits are payable anywhere in the world.
 
#88 ·
RedRose - The simple answer to your question is "No", nothing is deducted from your CPP based on whether or not you receive OAS. The slightly more complicated answer is that your survivor's benefit from your husband's CPP contributions will be recalculated when you turn age 65, regardless whether you qualify for and/or apply for OAS at that time. This recalculation is relatively simple if you weren't also receiving your own CPP retirement pension, but it is quite complicated if you are.
Here is a link to an article that I wrote to give you some idea of the calculation that is involved: http://retirehappy.ca/cpp-survivor-benefits/
You could try calling Service Canada at 1-800-277-9914 to see if they will try to estimate what your "combined benefit" will be when you turn 65, but my experience has been that they can't help much. At a minimum though, they should be able to tell you what the current breakdown is between your own retirement pension and your husband's survivor benefit. With that information and all the details on when both of your benefits started, I may be able to give you a fairly close estimate of what will happen when you turn age 65.
It will almost certainly be a reduction, and my very rough guesstimate might be somewhere around $150 monthly.
 
#91 ·
From everything I've read as a general rule it looks like it is 50/50 between being paid out in dividend vs being paid a salary or wage from your own corporation. Specific situations will likely lean one way or the other, but even then I doubt it would be that significant. The government collects their taxes either way.
 
#92 ·
I took my CPP last year, at 60 @ @$700. month. I took it for two reasons. I wanted to take advantage of the old rules. I did not expect to have any earned income after age 60 and wanted to avoid the depreciation of my average earnings for CPP purposes.

Now it seems that I may have maximum CPP income for three years from my former employer-realized at ages 61, 62, and 63. My understanding is that the new rules dictate that I will pay CPP on this. Will these three additional years of maximum CPP contributions have much of a positive impact on my CPP entitlement? Thanks
 
#94 ·
fraser - The additional contributions won't increase your current retirement pension amount, but they will generate additional post-retirement benefits (PRBs). Each year of max contributions after starting your CPP retirement pension will generate a monthly PRB of approx $25 starting the following January, but adjusted (read reduced) based on your age at that time.
 
#93 ·
Dogger -
I looked at my CPP contributions & the payout the I expect on retirement. I have been contributing consistently for the past 23 yrs. I don't plan on leaving the job I'm in for another 5-8 yrs. I am maxing out contributions annually through my employer while also contributing to a DC pension plan.

My question:
Is there a limit that one can contribute (over a working lifetime) to the CPP? I mean, the maximum benefit as I recall is around 1100 per month when one maxes out their contribution after say 25 yrs. Why contribute after 25 yrs if the benefits on retirement do not extend beyond 1100 per month?
 
#95 ·
dubmac - The only limit to how many years you can contribute is from age 18 to age 70 (52 years). A maximum pension currently requires maximum contributions in 84% of your contributory period (soon to be 83%), so 25 years of contributions would never generate a maximum pension. Currently, this requires 39.5 years of max contributions at age 65, and a little less if you took it at age 60 (but it would be at the reduced rate). If you contribute more than 39.5 years of max contributions, it won't increase your pension amount, but it will help maintain the fund!
 
#97 ·
Hi Dogger,

My mother is turning 60 this year and has only been working for the past 10 years (she does not plan to work any longer). My 65 year old father passed away late last year and my mother has started collecting the survivor benefit, I believe there is some sort of clawback to this amount if she were to start collecting her CPP at this point. When would you advise she start collecting?

Thanks
 
#98 ·
dattars - The formulas for calculating "combined" CPP retirement/survivor's benefits are quite complex, and I wouldn't want to give any advice without seeing actual dollar amounts for both her survivor's benefit and for her own estimated retirement benefit. Here's a link to an article that I wrote on the subject of combined benefits, so that you can see what I'm talking about: http://retirehappy.ca/cpp-survivor-benefits/

If you want me to do detailed calculations for your mother, email me at DRpensions@shaw.ca. There is a fee for this service, but I know that others haven't had much success in getting any advice on combined benefits from Service Canada. You could always try calling them though, at 1-800-277-9914.
 
#99 ·
I have a question for you too Dogger.

I am 65 this year and I was widowed at 62.

I receive a combined CPP, mine and my late husbands.
I work on a casual basis as an RN I am still contributing to CPP. Is this wise or am I better to discontinue at this point?
I am not sure if it makes any difference to my future CPP/OAS income?
I may continue to work on a casual basis for a little while longer.

Thanking you in advance for your time and advice.
 
#100 ·
RedRose - Once you're over age 65, contributions to CPP become optional if you're already receiving your CPP retirement pension. Any such contributions won't affect your existing combined benefit (which I previously mentioned will be reduced at age 65 anyway), nor will it affect your OAS directly. Each year of contribution after you started receiving your retirement pension will create a new "post-retirement benefit"(PRB), and that could reduce your GIS eligibility if you have a low enough income to qualify for GIS.

I feel that the PRB is a pretty good investment for your voluntary contributions, and here is a weblink to an article that I wrote on this subject:
http://retirehappy.ca/contributing-to-cpp-after-age-65/
 
#107 ·
Dogger, I will certainly post or email you the reduced amount of the combined CPP, I am expecting a $150 drop as you suggested. I am not 65 until December so a wee bit of a wait.

Sags, I received a letter from work stating that if I continue contributing to CPP no form to be completed.
If I opt out a CRA form, but they do add that I can opt back in, but only once per year.
 
#108 · (Edited)
RedRose - I could try to give you a more accurate estimate than a $150 decrease if you wanted. If so, what I would need to know is:
- when your survivor's benefit started, and the initial amount;
- when your retirement started, and the initial amount;
- your current combined benefit amount, and the split between survivor's and retirement amount
 
#109 ·
Thanks RedRose..............

After reading Dogger's blog..............it looks like the payback doesn't add up to much.

Dogger.............is it possible to give an example where the extra CPP may be optimal?

For example............someone with no other income................a high earner.............a low earner..............??

As I understand your blog article, the maximum that a person can gain is maybe 25 a month...........hardly worth the effort.

Maybe I misunderstand though.
 
#110 ·
Sags - My goal is not really to convince anyone to make the voluntary contributions after age 65. It's mostly that I'd like them to do so (or not) with an accurate understanding of what they'll receive for their money. Having said that, I do think the PRB payback is pretty good for an employee (not so much for the self-employed), and I do think it's generally a good investment (minimum return of approx. 13% per year, indexed, for life); although nobody's going to get rich from their PRBs.

Having said that, there are two situations where the payback is even better than usual, and that's for a low wage earner or for someone nearing age 70.

For the low wage earner, it's a better payback because you don't contribute on the first $3,500 of income (the YBE), so they're in effect paying much less than 4.95% of their overall earnings. For example, if someone earned $3,501 their total CPP contribution would be $0.05 for the year and their PRB the following year would be about $1.75/month or $21.00/year. A pretty good return on a 5 cent investment?

For someone nearing age 70, their PRB would be increased by 42% (60 mths x 0.7%), so their max contribution of $2,356 would buy them a monthly PRB of approx $35.50 ($25 x 142%) or approx. $426/year (a return of about 18% per year, indexed, for life). Again, a pretty good ROI in my opinion?

Does this make it sound any better? Again, for self-employed the returns are only half as good because the contribution cost is double.
 
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