Author: Vince Olfert, MBA, CIM, CFP® – Certified Financial Planner®

Canadian workers rightly assume that the Canada Pension Plan (CPP) will be there for them when they reach retirement. In honor of this expectation we thought we would dig a little deeper into this national program. Here is what we found:

Interesting Facts:

• It is the 10^th largest pension in the world ($392 Billion as of March 31st)
• It is run as an independent entity (not government run)
• 10.2% of an employee’s income (up to $57,400 (2019)) goes to CPP (split equally between employee and employer)
• There are five (5) departments that oversee 25 mandates
• It currently has projected pension stability for the next 75 years
• There is a lot of great information on this web-site http://www.cppib.com/en/ such as:
  • Investment Philosophy
  • Investment Performance

How much will you receive when you retire?

• The CPP is a contributory plan. This means, it depends on how much you have put into the plan during your working career
• The maximum CPP (2019) is $1154/mo
• This amount adjusts annually for inflation

When should you start taking your CPP?

• There are several factors to consider:
  • Your life expectancy
  • Your marginal tax rate when you start taking CPP
  • Your current age
  • The penalty or bonus from CPP
    • If you are below age 65 and start CPP you are penalized at a rate of 0.6% per month (7.2% per year)
    • If you are over age 65 you get bonused at a rate of 0.72% per month (8.4% per year)
    • In other words, it can pay to wait
• If you would like to run some “what-if” scenarios, check out our web-site. https://connectwealthp.wpengine.com/resources/#cpp-calculator

CPP is currently a well-run, stable pension plan that will provide pension income for Canadian workers for a long time to come.

Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting edge technology to maximize financial efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at connectwealthp.wpengine.com