The Canada Pension Plan (CPP) provides a steady source of retirement income for Canadians. It’s a monthly, taxable benefit that replaces part of your earnings once you retire. To qualify, you must have worked in Canada and made contributions to the plan. The amount you’ll receive depends on how long and how much you’ve contributed over your working life.
CPP Payments at Age 65
Most people start receiving CPP at age 65. In 2024, the maximum monthly payment you can receive at age 65 is $1,364.60. However, the average monthly payment in July 2024 for new retirees was $815.00. The actual amount you’ll receive will depend on your earnings and contributions during your working years.
Taking CPP Early at Age 60
You can start receiving CPP as early as age 60. However, if you take it early, your payments will be reduced. For every month before 65 that you receive CPP, your payment decreases by 0.6%, up to a 36% reduction. If you need the income sooner, taking CPP early is an option, but be aware that it results in a lower benefit over time.
Delaying CPP Until Age 70
You also have the option to delay receiving CPP until age 70. For each month you delay past 65, your payments increase by 0.7%. This can boost your payment by up to 42%. If you don’t need the money right away, waiting can provide you with a significantly higher monthly income in the long run.
Situations That Can Affect Your CPP Pension Amount
Several factors can affect the amount you receive from CPP. The government automatically considers these factors when calculating your pension, as long as you’ve provided all the required information in your application.
Working While Receiving CPP
If you keep working while receiving your CPP retirement pension and are under 70, you can continue making CPP contributions. This allows you to qualify for a CPP post-retirement benefit, which will increase your retirement income. Each year you contribute adds to this benefit, which will be paid out to you the following year and for the rest of your life. You can stop contributing at age 65, but contributions automatically stop at age 70, even if you’re still working.
Periods of Low or No Earnings
If there were years when you earned little or no income, CPP will “drop out” up to 8 years of your lowest earnings when calculating your pension. This helps increase your benefit. For the enhanced portion of CPP, which started after January 1, 2019, they’ll look at your best 40 years of earnings, which further ensures you receive the highest amount possible.
How Much Will You Receive?
The amount of CPP you’ll receive is unique to your situation. While the maximum amount at 65 is $1,364.60, most people will receive less. On average, new retirees in 2024 receive around $815.00 per month. Your individual pension will depend on your lifetime earnings and contributions.
Ready to Maximize Your Retirement?
Understanding how CPP works and how to maximize your benefits is key to securing your retirement. Book an appointment with a financial planner today for personalized guidance on when to start CPP and how it fits into your retirement plan.
For more insights on retirement strategies, don’t forget to check out my book, “The Art of Retirement”—your comprehensive guide to achieving financial independence and enjoying a secure, fulfilling retirement!
