Canada Pension Plan – How stable is it?

Author: Vince Olfert, MBA, CIM, CFP® – Certified Financial Planner®

Canadian workers rightly assume that the Canada Pension Plan (CPP) will be there for them when they reach retirement. In honor of this expectation we thought we would dig a little deeper into this national program. Here is what we found:

Interesting Facts:

  • It is the 10th largest pension in the world ($392 Billion as of March 31st)
  • It is run as an independent entity (not government run)
  • 10.2% of an employee’s income (up to $57,400 (2019)) goes to CPP (split equally between employee and employer)
  • There are five (5) departments that oversee 25 mandates
  • It currently has projected pension stability for the next 75 years
  • There is a lot of great information on this web-site such as:
    • Investment Philosophy
    • Investment Performance

How much will you receive when you retire?

  • The CPP is a contributory plan. This means, it depends on how much you have put into the plan during your working career
  • The maximum CPP (2019) is $1154/mo
  • This amount adjusts annually for inflation

When should you start taking your CPP?

  • There are several factors to consider:
    • Your life expectancy
    • Your marginal tax rate when you start taking CPP
    • Your current age
    • The penalty or bonus from CPP
      • If you are below age 65 and start CPP you are penalized at a rate of 0.6% per month (7.2% per year)
      • If you are over age 65 you get bonused at a rate of 0.72% per month (8.4% per year)
      • In other words, it can pay to wait
  • If you would like to run some “what-if” scenarios, check out our web-site.

CPP is currently a well-run, stable pension plan that will provide pension income for Canadian workers for a long time to come.

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