I'm a CPP expert. Any questions?

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Dogger1953

Discussion Starter · Mar 9, 2013

I worked for CPP for more than 32 years, and have recently retired.

I'd like to share my knowledge if you have any questions, especially around the calculation of CPP benefits.

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Daniel A.

· #2 · Mar 9, 2013

Sounds good thanks.

Question I retired at 56 and had maximum contributions for most of my working life so from age 18.
The year I turned 56 was also a full year of contributing.
Between 57 and 65 I don't have any contributions.

I'm trying to decide when to start CPP.

My Own Advisor

· #3 · Mar 9, 2013

Welcome Dogger1953.

Congrats on the retirement - good for you!

I wish I was able to retire, early as well. In my late-30s, got at least another 15 years to go.

I'm tempted to take CPP early, at 60. Take the money and enjoy it while I can, even with the 30+% reduction.

Dogger1953

Discussion Starter · #4 · Mar 10, 2013

Daniel A. said:
Sounds good thanks.

Question I retired at 56 and had maximum contributions for most of my working life so from age 18.
The year I turned 56 was also a full year of contributing.
Between 57 and 65 I don't have any contributions.

I'm trying to decide when to start CPP.

If I knew your current age, I could give you a better response than just ballparking.

Daniel A.

· #5 · Mar 10, 2013

Just turning 59 next month.

Dogger1953

Discussion Starter · #6 · Mar 10, 2013

Daniel A. said:
Sounds good thanks.

Question I retired at 56 and had maximum contributions for most of my working life so from age 18.
The year I turned 56 was also a full year of contributing.
Between 57 and 65 I don't have any contributions.

I'm trying to decide when to start CPP.

Daniel - With your current age being 59, and with 39 yrs of max contributions (age 18 to age 56 inclusive), your choices are fairly simple, even with the evolving legislative changes in the general dropout and in the age adjustment factors. I will give you some approximates here, and if you want exact calculations you could email me at [email protected]. I charge $25 per actual calculations, but I guarantee the accuracy of those calculations!

Using 2013 rates, your approximate choices are $672.30/mth at age 60, $730.62/mth at age 61, $793.80 at age 62, $866.70 at age 63, $939.60 at age 64 or $1,012.50 at age 65. Your actual start date doesn't have to be at those ages, but this gives you the range. If you want to calculate the "breakeven points", let's use age 60 and 65 as an example. You can receive $672.30 for life starting at age 60, or choose $1,012.50 for life starting at age 65. If you delay to age 65, you will have passed up on $40,338 ($672.30 x 60 month), but you will be ahead by $340.20/mth if you wait. It would take you 119 months ($40,338/$340.20) or 9.9 years to make up the "passed on benefits", or age 74.9.

So, purely from a CPP benefit perspective, you are better off taking the CPP at age 60 if you die before age 75, but better off waiting until age 65 if you live beyond age 75. I'll let you work out the other breakeven points.

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RBull

· #7 · Mar 10, 2013 (Edited)

I will be turning 54 in May and plan to retire from my P/T position in December 2014 at age 55 & 7 months. My most recent statement (Feb 07, 2013 says I would collect $938.43 at 65)
22 of my 35 working years on the the statement (1977-2011)were at MPE, 3 had no contributions(self employed) and 10 yrs at various levels probably averaging 60%, and a little higher % for the years 2012-14.

I would like to know what benefits would be at ages 60 through 65 as I'm not sure the government calculator factors in leaving work earlier than when benefits would be available. (I'm not expecting $938.43 at 65)

TIA

Sherlock

· #8 · Mar 10, 2013

Should someone more than 35 years from retirement still count on CPP being there for them when they retire?

Dogger1953

Discussion Starter · #9 · Mar 10, 2013

RBull said:
I will be turning 54 in May and plan to retire from my P/T position in December 2014 at age 55 & 7 months. My most recent statement (Feb 07, 2013 says I would collect $938.43 at 65)
22 of my 35 working years on the the statement (1977-2011)were at MPE, 3 had no contributions(self employed) and 10 yrs at various levels probably averaging 60%, and a little higher % for the years 2012-14.

I would like to know what benefits would be at ages 60 through 65 as I'm not sure the government calculator factors in leaving work earlier than when benefits would be available. (I'm not expecting $938.43 at 65)

TIA

RBull - Your calculations are a little more complicated than Daniel's. Since you have less than 39 years of max contributions, although you'll get a higher % each year that you wait, your actual "calculated retirement benefit" decreases because of the extra year of zero earnings. I could still do precise calculations if you wanted to email me @ [email protected], but for now I can give you the following estimates, based on the equivalent of 30.4 yrs of max contributions (22 @ max, 10 @ 60% and 3 @ 80%):

At age 60, you could receive $586.29 (66.4% of $882.96); at age 61 $622.33 (72.16% of $862.43); at age 62 $660.78 (78.4% of $842.83); at age 63 $705.43 (85.6% of $824.10); at age 64 $748.14 (92.8% of $806.18) and at age 65 $789.23 (100% of $789.23).

Using the ages of 60 and 65 to compare, your breakeven calculation changes a bit from Daniel's. You could choose $586.29 at age 60 or delay until age 65 and receive $789.23. You would be passing up $35,177.40 ($586.29 x 60 mths) to receive $202.94 ($789.23 - $586.29) more monthly. It would take you approx 173.3 mths (14.4 yrs) to make up this amount, so your breakeven age would be 79.4 yrs old.

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Dogger1953

Discussion Starter · #10 · Mar 10, 2013

Sherlock said:
Should someone more than 35 years from retirement still count on CPP being there for them when they retire?

Not my area of expertise, but I think (hope) so!

RBull

· #11 · Mar 10, 2013

Thank you very much for the calculations. Now I have some more planning to do.

Dogger1953 said:
RBull - Your calculations are a little more complicated than Daniel's. Since you have less than 39 years of max contributions, although you'll get a higher % each year that you wait, your actual "calculated retirement benefit" decreases because of the extra year of zero earnings. I could still do precise calculations if you wanted to email me @ [email protected], but for now I can give you the following estimates, based on the equivalent of 30.4 yrs of max contributions (22 @ max, 10 @ 60% and 3 @ 80%):

At age 60, you could receive $586.29 (66.4% of $882.96); at age 61 $622.33 (72.16% of $862.43); at age 62 $660.78 (78.4% of $842.83); at age 63 $705.43 (85.6% of $824.10); at age 64 $748.14 (92.8% of $806.18) and at age 65 $789.23 (100% of $789.23).

Using the ages of 60 and 65 to compare, your breakeven calculation changes a bit from Daniel's. You could choose $586.29 at age 60 or delay until age 65 and receive $789.23. You would be passing up $35,177.40 ($586.29 x 60 mths) to receive $202.94 ($789.23 - $586.29) more monthly. It would take you approx 173.3 mths (14.4 yrs) to make up this amount, so your breakeven age would be 79.4 yrs old.

Red

· #12 · Mar 10, 2013

Dogger 1953

I'm not looking for exact calculations just idea whether early CPP or waiting to age 65 is better.

Some details -
Wife is aged 60 & not planning to work any longer.
She has 8+ years of no CPP contributions due to me being transferred around in my employment (so about 13 non contributory years at 65)
Based on family history she could easily be drawing CPP for 20 years +

I'm mainly not sure how taking a reduced CPP is offset by the affect of not contributing to CPP age 60 to age 65, especially when there are non-contributory years earlier in workig career.

Thanks

Karen

· #13 · Mar 10, 2013

I had a pleasant surprise from Canada Pension last year. My husband, who was 16 years older than I, died in 2003. He had been receiving a CPP pension for 11 years at the time of his death and I received a survivor's benefit. A few years later, I retired and started taking my own CPP which brought me close to the maximum so my survivor's benefit was reduced to only a few dollars. Then just last year (2012) I received a letter from Canada Pension informing me that my husband's pension amount had been miscalculated and enclosing a cheque for about $3800 payable to his estate. A separate letter came addressed to me personally explaining that an error had been made calculating my husband's pension, so therefore my survivor's benefit had also been miscalculated. I received an extra amount of about $1100. Obviously I was pleased to receive a completely unexpected amount of over $5000, but I was very surprised that it had taken them nine years to discover the error, and I couldn't help but wonder what would have happened if the error hadn't been in my favour. Would I have been expected to repay them after all that time?

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OptsyEagle

· #14 · Mar 10, 2013

Another question came to mind. I am not sure if it was asked or addressed. If a person takes CPP at 60, with the reduced amount as opposed to age 65, do they also have to factor in 5 years of 0 earnings and CPP contributions (years between age 60 and 65). Assuming they are retired by or before age 60.

Dogger1953

Discussion Starter · #15 · Mar 10, 2013

OptsyEagle said:
Another question came to mind. I am not sure if it was asked or addressed. If a person takes CPP at 60, with the reduced amount as opposed to age 65, do they also have to factor in 5 years of 0 earnings and CPP contributions (years between age 60 and 65). Assuming they are retired by or before age 60.

Optsy - No, if they take their CPP at 60, they don't have to worry about the 5 years of 0 earnings between age 60 and 65, but if they don't take it at age 60, those same 5 years of 0 earnings can reduce their calculated CPP significantly.

Dogger1953

Discussion Starter · #16 · Mar 10, 2013

Karen said:
I had a pleasant surprise from Canada Pension last year. My husband, who was 16 years older than I, died in 2003. He had been receiving a CPP pension for 11 years at the time of his death and I received a survivor's benefit. A few years later, I retired and started taking my own CPP which brought me close to the maximum so my survivor's benefit was reduced to only a few dollars. Then just last year (2012) I received a letter from Canada Pension informing me that my husband's pension amount had been miscalculated and enclosing a cheque for about $3800 payable to his estate. A separate letter came addressed to me personally explaining that an error had been made calculating my husband's pension, so therefore my survivor's benefit had also been miscalculated. I received an extra amount of about $1100. Obviously I was pleased to receive a completely unexpected amount of over $5000, but I was very surprised that it had taken them nine years to discover the error, and I couldn't help but wonder what would have happened if the error hadn't been in my favour. Would I have been expected to repay them after all that time?

That's an unusual situation that you describe. I can't imagine how it would happen in reverse, but I don't think there would have been any significant effort to recover the overpayment of your husband's retirement pension from you. They would likely however, attempt recovery of any survivor's overpayment directly to you.

Dogger1953

Discussion Starter · #17 · Mar 10, 2013

Red said:
Dogger 1953

I'm not looking for exact calculations just idea whether early CPP or waiting to age 65 is better.

Some details -
Wife is aged 60 & not planning to work any longer.
She has 8+ years of no CPP contributions due to me being transferred around in my employment (so about 13 non contributory years at 65)
Based on family history she could easily be drawing CPP for 20 years +

I'm mainly not sure how taking a reduced CPP is offset by the affect of not contributing to CPP age 60 to age 65, especially when there are non-contributory years earlier in workig career.

Thanks

Red - Assuming there were no children and the child-rearing dropout (CRDO) isn't a factor, your wife's situation would be very comparable to RBull above. Even if the actual amounts are different, the percentages would be similar, and the breakeven calculation would therefore be similar. From a CPP perspective only, your wife would therefore be ahead of the game by applying at age 60 IF she dies before age 79.4, and she would be better of waiting until age 65 if she lives past age 79.4.

peterk

· #18 · Mar 10, 2013

Hey Dogger, welcome to the forum!

If I, as a canadian citizen, work in Canada from age 25 to 35, then never hold employment again, will I still qualify for 10/40 years of the max CPP payment, or will the 30 non-earning years reduce or eliminate my entitilement? What if I spend some years between 35 to 65 as a non-resident out of the country? What if I spend ALL years between 35-65 out of the country? Will this affect my pension entitlement at 65?

Daniel A.

· #19 · Mar 11, 2013

Thanks Dogger 1953

You have given me something to think about I may contact you likely will as what I receive could cost me more without your help.

Something else folks can consider.

My wife turns 60 this month and has five years to go before retiring.
She has decided to apply for her CPP now and put the money to her RRSP as she does have plenty of room.
The net effect is it won't change her income but she can build her RRSP with the money she receives .

Given that she has five more years of work it will adjust her CPP pension at 65.

Dogger1953

Discussion Starter · #20 · Mar 11, 2013

peterk said:
Hey Dogger, welcome to the forum!

If I, as a canadian citizen, work in Canada from age 25 to 35, then never hold employment again, will I still qualify for 10/40 years of the max CPP payment, or will the 30 non-earning years reduce or eliminate my entitilement? What if I spend some years between 35 to 65 as a non-resident out of the country? What if I spend ALL years between 35-65 out of the country? Will this affect my pension entitlement at 65?

PeterK - If those 10 years of employment were all at the max contribution rate (ie., your earnings were at or above the YMPE in those years), then YES, you will qualify for 10/40ths of the max CPP payout at age 65. And if that occurs in 2014 or later, you actually get a raise to 10/39ths, as the general dropout increases to 17%, and you can then drop out your lowest 8 years of earnings. It doesn't matter why you don't contribute those other years, or where you're living or whether you remain a Canadian citizen or not. Some of those factors would affect if and how much Old Age Security you qualify for however, although I'd need a bit more detail to fully answer that for you.

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