Canada Pension Plan (CPP):
Canada Pension Plan (CPP):
The amount you collect is dependent upon you and your employer making regular contribution based upon a formula tied to your income each year. CPP is designed to provide a base level of income tied to your Yearly Maximum Pensionable Earnings (YMPE). In 1966 the YMPE was $5,000 of Income. The YMPE in 2022 is $64,900. If your earning has exceeded this YMPE income each year you were employed and you worked 40 years, then at age 65 you will qualify for the Maximum CPP Benefit payment. You can start collecting as early as age 60 and delay it till age 70. For those applying prior to age 65 you benefit is reduced by 0.5%/month to a maximum of 36% less than the full benefit at age 65. For those who delay receiving a benefit after age 65 your benefit is enhanced by 0.7%/month to a maximum enhancement at age 70 of 42% over the age 65 amount.
For those of you who are interested in greater detail in our Resources Section we have several CPP Benefit Tables as well as Provisions made for years of Child Rearing that may have affected the Primary Caregivers ability to earn a YMPE income. We also have links to Service Canada that has calculators, detailed information overviews and some useful examples.
Old Age Security (OAS)
Is a social program that offers supplemental income for those 65 years of age and older. Currently the maximum monthly benefit amount is $635.26. This is subject to adjustment every quarter. The benefit will be subject to a clawback for all those earning $79,054 of net income and is assessed at a rate of 15% of every dollar of net income above $79,054. OAS is fully clawed back @ $129,757 of net income. Like CPP, deferring OAS payments after 65 results in an enhanced benefit. For each month of deferral your benefit will improve by 0.6%/month to a maximum of 36% at age 70. No further enhancement occurs after age 70.
Financial Planning CPP, QPP, OAS
Whether to apply, when to apply and how to maximize the money available from these programs for your financial well being, is one of the benefits of Financial Planning. The timing and splitting of benefits can result in improved net income for you and/or your spouse. If there is a substantial disparity in taxable income between you and your spouse, then income splitting these benefits can result in better net income. Further structuring your income around continuing to tax shelter other parts of your savings’ portfolio may have longer term benefits. Other than a spouse, and in the case of very young children, no portion of CPP, QPP or OAS can be passed along to family or other beneficiaries.
Financial Planning can weigh these options and help you achieve your best financial outcome.
“Let him who would enjoy a good future waste none of his present.”