CPP is a government sponsored benefit program administered by the Federal Government.

It provides:

  • retirement pension
  • disability pension
  • surviving spouse’s pension
  • death benefit
  • orphan’s benefit

CPP is earnings related income protection for working Canadians, who are retired or become disabled. It also offers benefits to the dependants of those recipients, if they die.

It is the mid-level of three in Canada:

  1. Old Age Security (OAS)
  2. Canada Pension Plan (CPP)/Quebec Pension Plan (QPP)
  3. Private pensions, investments, and savings.

This decade, and the next, will create a large imbalance in the number of payers versus users.

Adjustments are made based on your maximum pensionable earnings, for the last five years of employment. The Years Basic Exemption (YBE) changes annually. This pension can be paid to you (if you apply) as early as 60 and as late as 70.

If you start withdrawing that money at the age of 60, your income could be reduced by 36%. If you start withdrawing that money at the age of 70, your income could increase by 42%. When you pass away, all the unused portion is absorbed into the CPP pot.

Link to 2019 CPP Benefits Chart: https://www.canada.ca/en/employment-social-development/programs/pensions/pension/statistics/2019-quarterly-january-march.html

Here is a hypothetical. Let us say that you are retired. Your retirement relies solely on you and your spouses CPP income. Factor in that you both earned approximately $55,000 annually and paid the maximum contributions. Good news! You might be eligible to receive the highest limit of up to $1,150 a month, each. Is $2,300 a month enough for you both to live comfortably?

Now, let us say your spouse passes. The government may provide you with a one-time payment of up to $2,500 for the funeral expenses. However, if your budget was tight before, now your monthly income has been reduced to one recipient.

Hyperventilating yet? Take a deep breath. You can supplement this income with alternate savings options; such as, a TFSA, RRSP/RRIF, and/or a Whole Life Insurance Policy.

** New Federal Budget of March 2019 states that, if you have not applied by age 70 the Federal Government will automatically start the benefit for you.

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