Today's video is all about CPP. If you've ever asked yourself how much is CPP, what
are my estimated monthly CPP benefits or what happens if I take early CPP, then
this video is for you. This channel is all about making personal finance easy,
so we can be more confident and independent with our money. If that
sounds like something that you're interested in, hit the subscribe button
and let's get started on today's topic. CPP is our Canadian pension plan. The
amount that you're entitled to depends on a few factors: how long you've been
paying into the pension, how much you've paid into the pension and the age at
which you decide to start receiving your CPP. Now typically CPP is normally paid
to us once we reach the age of 65. However we can elect to take it as early
as age 60 or as late as age 70. So if you're planning on retiring, how much can
you actually get in CPP payments every year? Well according to the Government of
Canada, the average amount Canadians will receive in CPP is about $730 a month.
So compared to the maximum of $1,155,
it's important to understand that most
Canadians are only going to receive about 50% of the maximum entitlement.
That's why it's so important to find out ahead of time what you're entitled to
while making your retirement plans. You can do this by logging into your "My
Service Canada" account and I'll include a link in the description so it's easy
for you to find. if you've never logged in before, you will need to create an account.
In some cases, you may decide to take your CPP before the age of 65. So in
that case, what happens to the amount of your monthly pension? Taking CPP before
the age of 65 reduces the monthly payment amount that
you'll receive and that's simply because your pension is now being spread out
over a longer period of time. Each year that you take CPP prior to 65 will lower
your payment amount by 7.2%. So, if you were to take CPP at age 60 for
example, that would lower your CPP payment by a total of 36%. In this
example let's assume that Bob would be entitled with the average Canadian
receives at age 65 $730. However he's going to retire early and he'd like to
start collecting his CPP pension at age 60. As a result, Bob's new CPP
pension is going to be $467 a month not 730. That's 36%
less than what he was initially entitled to. But what if the situation was
different and Bob decided he wasn't going to collect a CPP until age 70?
Well in that case, every year that you wait to collect your CPP after age 65 it
increases by 8.4%. So at age 70, Bob's $730
payment would now be $1,036 per month starting at age 70.
That's 42% more than his original payment.
So how do you know when the best time is to take CPP? Well part of the decision is
going to be based on financial need. Do you need the money now to maintain your
lifestyle or to afford the basic necessities? If not, then the other main
deciding factor is going to be longevity. What is the average lifespan of someone
in your family and how long would you have to live to make it worth it to hold
off on taking CPP early? So let's assume that Bob's making his decision based on
longevity. He's retired at age 60 but he doesn't need his CPP right away. So he's
trying to decide: should he take it now or should he wait until age 65.
This chart is showing us how much Bob's CPP payments would be at age 60 versus
waiting until 65. It also shows us the total cumulative amounts he'll receive
over his lifetime based on those two ages. Let's take a look at age 75, that's
where we're going to see that over Bob's lifetime he will receive more money in
total CPP payments if he waits until age 65. To put more bluntly, that is a
break-even age that Bob needs to live until, to make a worthwhile postponing
CPP payments until 65... if his goal is to receive the most CPP over his lifetime.
What happens however if Bob does elect to take CPP at age 60 but he decides to
go back to work and work part-time. How is that going to impact how much he's
gonna get every month? If you're working and collecting CPP and still paying into
CPP, then that's referred to as a post retirement benefit. The portion that you
pay into CPP while you're working and collecting CPP will be paid to you the
following year. It increases every single year that you continue to work
and pay into it. The maximum payment that you can receive is $346.47
each year starting in 2019 and that's
assuming your paying the maximum amount every year. Now in Bob's case, he
retired when he turned 60 and he started collecting CPP at 60 as well. But he's
decided to go back to work and is now earning $30,000 a year. so based on
earning 30,000 and how much Bob is required to pay into CPP even though
he's still collecting a CPP pension, this will earn Bob a post retirement benefit
of $108. That just means that Bob's annual CPP amount
will now be a hundred and eight dollars higher moving forward. If he
continues to working until age 65, that amount will increase to $163.
Now it is important to know that post
retirement benefit amounts do not include a survivor's benefit. Meaning, if
Bob were to die that $163 that he's collecting
will be lost forever. Unlike regular CPP which will pay your spouse 65% of
what you were receiving. This wraps up our video on the Canada Pension Plan. If
you have any questions let me know by commenting below and don't forget hit
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Thank you for watching!