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Discussion Starter · #1 ·
If a person will be turning 45 in December 2014, and his CPP statement of contributions indicates that he could receive the maximum CPP retirement pension of $1,038.33 "if he were age 65 today", what will his actual retirement pension be at age 65 (in 2014 dollars) if he makes no further CPP contributions after 2014?

Please explain your answer.

I will give the answer in one week, assuming nobody comes up with the correct answer before then.
 

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$726.92/month?

I calculated it by assuming YMPE from age 18-45, removing the allowed dropout and dividing the remaining average pensionable earnings by 4.

I think this may be an overestimate because I think it's possible for the calculator to tell you you'll receive the maximum, even if you didn't have maximum contributions every year since age 18. So I don't know how to account for that.
 

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519.165
have to work 40 years to get max pension. So his statement tells him he needs 20 more years of work to get max pension 65-45 =20

He must have 20 years in already 40-20=20

20 is half of 40 so he would get half his pension 1038.33 divided by 2 = 519.165
 

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519.165
have to work 40 years to get max pension. So his statement tells him he needs 20 more years of work to get max pension 65-45 =20

He must have 20 years in already 40-20=20

20 is half of 40 so he would get half his pension 1038.33 divided by 2 = 519.165
I will second lonewolf's answer but add my gripe that there is a big difference between investing in something in the first 20 years of a 40 year program, then the last 20 years. Have these idiots at the CPP not heard of something called the time value of money?
 

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Gee, this question looks familiar... :)

519.165
have to work 40 years to get max pension. So his statement tells him he needs 20 more years of work to get max pension 65-45 =20

He must have 20 years in already 40-20=20

20 is half of 40 so he would get half his pension 1038.33 divided by 2 = 519.165
Actually, since CPP starts at 18, he has been working 27 years not 20, which puts your calculation awry.

My CPP calculator comes out at 726.83 (pretty much Spudd's) assuming a $0 contribution for December 1969; I'm not sure when exactly CPP is first deducted around the 18th birthday, but it should be within a few dollars unless there's a trick in the question I'm missing. As I mentioned elsewhere, this assumes he doesn't later qualify for Child Rearing dropout credit.
 

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Love a good mind bender....first, there are a lot of assumptions. As the statement of contribution is very general it has (or had last time I looked) three categories at the bottom. One is the amount you get at 65, one a disability and one a survivor. So, I am going to assume this fellow started work at 18 and has worked for max contribution up until 45, giving him 27 years at max. I am also going to take the eight year dropout for lower earning years from the max of 40 years. So now we are missing only 5 years.

My magic number is $ 908.54
 

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$1,038.33

As CPP contributions are mandatory on employment income, and the person will not contribute again, I assume the person began collecting CPP disability benefits at age 45 and will continue to do so until age 65.

The months collecting CPP disability benefits are not considered contributory months and are dropped from the calculation.

Therefore the person has contributed enough years of the maximum CPP contributions required for maximum CPP benefit.
 

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Your assumption of disability is not valid.
There could be any number of scenarios for not working between 45 - 65, such as working abroad, early retirement, etc.
The latter case fits our own Jon_Snow, who recently retired at 43 but will be eligible to collect CPP at 65 (or 60 at a reduced rate).
 

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Love a good mind bender....first, there are a lot of assumptions. As the statement of contribution is very general it has (or had last time I looked) three categories at the bottom. One is the amount you get at 65, one a disability and one a survivor. So, I am going to assume this fellow started work at 18 and has worked for max contribution up until 45, giving him 27 years at max. I am also going to take the eight year dropout for lower earning years from the max of 40 years. So now we are missing only 5 years.

My magic number is $ 908.54
It looks like you took 8 years of dropout from 40 years. But I think you meant to use 47 (65-18=47 years of contributions for the basic case). You'd be "missing" 12 years, not 5.
 

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Discussion Starter · #10 ·
$726.92/month?

I calculated it by assuming YMPE from age 18-45, removing the allowed dropout and dividing the remaining average pensionable earnings by 4.

I think this may be an overestimate because I think it's possible for the calculator to tell you you'll receive the maximum, even if you didn't have maximum contributions every year since age 18. So I don't know how to account for that.
Spudd - You're pretty close to the correct maximum value, but figuring out the minimum is the tricky part!
 

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Your assumption of disability is not valid.
There could be any number of scenarios for not working between 45 - 65, such as working abroad, early retirement, etc.
The latter case fits our own Jon_Snow, who recently retired at 43 but will be eligible to collect CPP at 65 (or 60 at a reduced rate).
True there are many scenarios, but I was looking for one that guaranteed the individual would receive the maximum CPP benefit.

I could be wrong though.......and it appears I am.................again.
 

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Discussion Starter · #12 ·
519.165
have to work 40 years to get max pension. So his statement tells him he needs 20 more years of work to get max pension 65-45 =20

He must have 20 years in already 40-20=20

20 is half of 40 so he would get half his pension 1038.33 divided by 2 = 519.165
lonewolf - Sorry, but this is not the correct maximum or minimum.
 

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Discussion Starter · #13 ·
Gee, this question looks familiar... :)



Actually, since CPP starts at 18, he has been working 27 years not 20, which puts your calculation awry.

My CPP calculator comes out at 726.83 (pretty much Spudd's) assuming a $0 contribution for December 1969; I'm not sure when exactly CPP is first deducted around the 18th birthday, but it should be within a few dollars unless there's a trick in the question I'm missing. As I mentioned elsewhere, this assumes he doesn't later qualify for Child Rearing dropout credit.
Some birds really get around! CPP deductions begin the month following age 18, so a $0 contribution for 1969 is correct. I made the same assumption about not being eligible for the child-rearing dropout or CPP disability between age 45 and 65. Pretty close to the correct maximum. What is the minimum?
 

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Discussion Starter · #14 ·
Love a good mind bender....first, there are a lot of assumptions. As the statement of contribution is very general it has (or had last time I looked) three categories at the bottom. One is the amount you get at 65, one a disability and one a survivor. So, I am going to assume this fellow started work at 18 and has worked for max contribution up until 45, giving him 27 years at max. I am also going to take the eight year dropout for lower earning years from the max of 40 years. So now we are missing only 5 years.

My magic number is $ 908.54
Itchy - Good try, but the "magic 40" is now actually 39 years, but the way you get there is by subtracting the 8-year dropout. You can't therefore drop those years out a second time.
 

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Discussion Starter · #15 ·
It looks like you took 8 years of dropout from 40 years. But I think you meant to use 47 (65-18=47 years of contributions for the basic case). You'd be "missing" 12 years, not 5.
A gold star for NorthernRaven!! So 27/39ths is the correct maximum that he can receive at age 65. Now what's the answer to the minimum that he might receive?
 

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Discussion Starter · #16 ·
$1,038.33

As CPP contributions are mandatory on employment income, and the person will not contribute again, I assume the person began collecting CPP disability benefits at age 45 and will continue to do so until age 65.

The months collecting CPP disability benefits are not considered contributory months and are dropped from the calculation.

Therefore the person has contributed enough years of the maximum CPP contributions required for maximum CPP benefit.
sags - I considered adding an assumption that he doesn't qualify for either CPP disability or the child-rearing dropout between age 45 and 65, but I didn't want to make it too complex. You win a prize for one possible correct answer.
 

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Discussion Starter · #17 ·
True there are many scenarios, but I was looking for one that guaranteed the individual would receive the maximum CPP benefit.

I could be wrong though.......and it appears I am.................again.
sags - As stated, you didn't have the answer that I was looking for, but your answer was 100% possible because I didn't state my assumption that he was not disabled.
 

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Of course, how silly of me....then I need to take about $200 off my estimate.
$708. I am too lazy to go and grab the calculator for an exact number....
Lots of smart folks here!
 

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Discussion Starter · #19 ·
Of course, how silly of me....then I need to take about $200 off my estimate.
$708. I am too lazy to go and grab the calculator for an exact number....
Lots of smart folks here!
Itchy - That's close enough to his age-65 maximum, but I'm still waiting for somebody to calculate his minimum age-65 pension amount.
 
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