# Pension for Self-Employed?



## Polarbear (Feb 21, 2017)

Hi there,

I have a couple of basic questions.regarding my wife's pension. She is self-employed, except for a brief stint working as a receptionist many years ago. The other day, she asked me if she gets any retirement pension from the Government when she turns 65. I was at a loss to answer - so I said "I'd imagine you'd get something."

1) Does she get any CPP or any retirement pension from the Government when she turns 65? We live in BC - and as far as I know, she has never contributed to CPP, other than those few months as a receptionist.

2) what is the best way for her to save for Retirement? Start buying RRSPs?

Thanks in advance


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## Ponderling (Mar 1, 2013)

You are starting a family with a child. Start seriously pooling finances,and budget, because with her self employed and a young child things might be tight money wise for a while. Yes, life gets in the way. 

When you figure how much you jointly have to invest, figure the best place to invest it. Usually it is in the primary wage earner RRSP third after tfsa of both are fully funded every year in my book. Then spousal rrsp is a possibility if you have more to invest ad her income is less than yours. 

CPP contributions for future CPP income can be created by self employed. You have to pay the employee and employer amounts. Yah, sucks, I know.


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## Beaver101 (Nov 14, 2011)

^ OAS = Old Age Security if it's still around by the time your wife retires ... 40 years from now? Not quite a pension as it's based on years of residency in Canada rather than wages. Still something, and only available at earliest of age 65 (currently).

Another thought is what about "your" pension? And then there's RRSPs (indivdual & spousal) for both of you to consider as "pensions". TFSAs is another savings vehicle that can be used for retirement, if not an emergency fund. Much like what Ponderling above mentioned.


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## Gator13 (Jan 5, 2020)

Depending on her situation, an IPP might be an option.


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## agent99 (Sep 11, 2013)

You might start by reading the GofC website on public pensions. It explains CPP and OAS.





Public pensions - Canada.ca


Information on the Canada Pension Plan, Old Age Security pension and related benefits, the Canadian retirement income calculator and retirement planning.




www.canada.ca





I was under the impression that self employed taxpayers had to contribute to CPP. It is well worth doing. If not contributing now, maybe re-arrange things so wife gets paid a salary from part of the self employed income? More explained here' For example, a couple who have made close to the maximum contributions over their working lives could get something like $40k/yr today for life. That would be equivalent to saving about $750,000. Being a forced saving, no chance of frittering it away 

There are some finer details of CPP that are worth researching:

Survivor benefit. (If one of you have more than the other, you will receive less, but survivor continues to get income
Child Rearing allowance. I forget detail, but I am sure my wife got "x" years of credit when not working and raising kids.

Re investing - TFSAs are best place to start. What to put in them is another subject.

Good Luck. Lot's to learn!


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## Spudd (Oct 11, 2011)

Is she incorporated or sole proprietor? 

If she's sole proprietor, then when you do your income taxes each year, they force you to pay into CPP both the employer and employee portions. She can easily check her CPP history on the Service Canada website. 

She will also get OAS. 

And yes, investing for retirement via RRSP and/or TFSA should definitely be done as well, if you guys will need more income for retirement than your current pensions provide.


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## james4beach (Nov 15, 2012)

I'm self employed as well. Luckily we are forced to pay (doubly) into the CPP, so as long as you keep earning income and working over the years, you will build up a CPP pension.

Investing and building up your own diversified portfolio is an absolute necessity. The TFSA would be the ideal starting point, and if she doesn't know what to put in it, a low fee "balanced fund" would be an excellent option that will build up something very much like a pension. Just keep adding to it every year.

My own pension is my TFSA + RRSP


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## james4beach (Nov 15, 2012)

Polarbear said:


> 2) what is the best way for her to save for Retirement? Start buying RRSPs?


Here are some specific investment ideas, either for the TFSA or RRSP. These are very "pension-like" assuming you routinely contribute money to them over the long term.

Mawer Balanced Fund (mutual fund code MAW104)
PH&N Balanced Fund (mutual fund code RBF1350), series D
VBAL or XBAL (an ETF which trades like a stock)
These particular investments are "best in class" as far as I'm concerned. You could pick any one of these, add money to it over the years, and end up with a great nest egg.


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## CAP (Apr 20, 2021)

@Polarbear As others have mentioned, your spouse will get OAS with the amount depending on the number of years she has lived in Canada. It makes sense to start saving and building an RRSP and/or TFSA (the best choice would depend on self-employment income). As for what to buy, a good place to start is the "all in one" ETFs offered by the big ETF providers (Vanguard, Blackrock etc). I would also suggest doing some research on the couch potato portfolio as part of your DIY investing homework.

Lots of helpful people on this forum, so ask away!


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## Polarbear (Feb 21, 2017)

Thank you all for the detailed responses!

@Spudd It's a small "corporation" (definitely not sole proprietorship)

Personally I've been working for tech companies since I graduated, so didn't have to think much as they just deducted whatever out of my paycheck. 
But having a self-employed spouse really got me wondering, so I decided to post here and I'm very glad I did.

I really need to start reading the Federal Government sections on CPP and OAS, and see where that leads (leaning towards TFSA rather than RRSP for her atm) 😄


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## james4beach (Nov 15, 2012)

Polarbear said:


> I really need to start reading the Federal Government sections on CPP and OAS


Definitely check out the Service Canada website as @Spudd mentions. You can see not only the history (so this will confirm you are paying into CPP) but you can even see your estimated payments at retirement.

The site tells me that my estimated payments would be $400/month from CPP. This is pretty low because I'm young, and I didn't pay into CPP when I was working outside of Canada. The longer I work and pay into CPP, the higher that number will be.

If someone has been paying into CPP their whole life and closer to retirement, they would see a figure more like $1200/month


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## cainvest (May 1, 2013)

james4beach said:


> If someone has been paying into CPP their whole life and closer to retirement, they would see a figure more like $1200/month


The average payout is just over $600/month. In order to get $1200/month you'd need almost 40 years of maxing out your CPP contributions. Of course that's all changing now with the enhanced CPP.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... If someone has been paying into CPP their whole life and closer to retirement, they would see a figure more like $1200/month


Perhaps you have always paid into CPP at the max (i.e. you have a built in assumption)?

There's two factors to get the larger amount ... number of years _and_ maxing out the income level.
Someone who only cracked YMPE for the last couple of years of paying into CPP isn't going to get the max.

This article says six percent of those receiving CPP in 2016 received the max.








Full CPP benefits are a tough goal to reach


Only 6 per cent of people received the highest possible amount in 2016, but that doesn’t mean it isn’t a good base for retirement




www.theglobeandmail.com





This is why I dislike the pension calculators as they assumed the max with the disclaimer that YMMV is in small print.


Cheers


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## james4beach (Nov 15, 2012)

Eclectic21 said:


> Perhaps you have always paid into CPP at the max (i.e. you have a built in assumption)?


I just looked up what the absolute maximum was. I forgot that you also have to max out the income level.


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