Canada Pension Plan (CPP) benefits can make up a key portion of your income in retirement. Individuals receiving the maximum CPP payments at age 65 can expect to collect nearly $14,000 per year in benefits.
The amount of your CPP payments depends on two factors: how much you contributed, and how long you made contributions. Most don’t receive the maximum benefit. In fact, the average amount for new beneficiaries is just over $8,000 per year (as of March 2019).
CPP Payments 2019
The table below shows the monthly maximum CPP payment amounts for 2019, along with the average amount for new beneficiaries:
|Type of pension or benefit||Average amount for new beneficiaries (March 2019)||Maximum payment amount (2019)|
|Retirement pension (at age 65)||$679.16||$1,154.58|
|Survivor’s pension – younger than 65||$439.37||$626.63|
|Survivor’s pension – 65 and older||$311.99||$692.75|
|Death benefit (one-time payment)||$2,394.67||$2,500.00|
|Combined survivor’s and retirement pension (at age 65)||$869.86||$1,154.58|
|Combined survivor’s pension and disability benefit||$1,096.12||$1,362.30|
Now, you may not have a hot clue how much CPP you will receive in retirement, and that’s okay.
The good news is that the government does this calculation for you on an ongoing basis. This means that you can find out how much money the government would give you today, if you were already eligible to receive CPP. This information is available on your Canada Pension Plan Statement of Contribution. You can get your Statement of Contribution by logging into your My Service Canada Account, which – if you bank online with any of the major banks – is immediate.
If you’d prefer to send your personal information by mail you can request a paper copy of your Statement of Contribution sent to you by calling 1.877.454.4051, or by printing out an Application for a Statement of Contributions from the Service Canada Website.
Note that the information available to you on your CPP Statement of Contribution may not reflect your actual CPP payments. That’s because it doesn’t factor in several variables that might affect the amount you’re entitled to receive (such as the child-rearing drop-out provision). The statement also assumes that you’re 65 today, which means that later years of higher or lower income that will affect the average lifetime earnings upon which your pension is based aren’t taken into consideration.
CPP is Indexed to Inflation
Canada Pension Plan (CPP) rate increases are calculated once a year using the Consumer Price Index (CPI). The increases come into effect each January, and are legislated so that benefits keep up with the cost of living. The rate increase is the percentage change from one 12-month period to the previous 12-month period.
CPP payments were increased by 2.3 percent in 2019, based on the average CPI from November 2017 to October 2018, divided by the average CPI from November 2016 to October 2017.
Note that if cost of living decreased over the 12-month period, the CPP payment amounts would not decrease, they’d stay at the same level as the previous year.
CPP Payment Dates
CPP payment dates are scheduled on a recurring basis a few days before the end of the month. This includes the CPP retirement pension and disability, children’s and survivor benefits. If you have signed up for direct deposit, payments will be automatically deposited in your bank account on these dates:
All CPP payment dates 2019
- December 20, 2018
- January 29, 2019
- February 26, 2019
- March 27, 2019
- April 26, 2019
- May 29, 2019
- June 26, 2019
- July 29, 2019
- August 28, 2019
- September 26, 2019
- October 29, 2019
- November 27, 2019
- December 20, 2019
Why Don’t I Receive The CPP Maximum?
Only 6 percent of CPP recipients receive the maximum payment amount, according to Employment and Social Development Canada. The average recipient receives just 59 percent of the CPP maximum. With that in mind, it’s best to lower your CPP expectations when calculating your potential retirement income.
Why don’t more people receive the maximum? Well, because it requires 39 years of CPP contributions at the maximum level to get the biggest possible benefit in retirement. That means you need a salary that meets or exceeds the yearly maximum annual pensionable earnings threshold, which in 2019 is $57,400.
- Year YMPE
- 2019 $57,400
- 2018 $55,900
- 2017 $55,300
- 2016 $54,900
- 2015 $53,600
- 2014 $52,500
- 2013 $51,100
- 2012 $50,100
- 2011 $48,300
- 2010 $47,200
Plenty of variables affect your ability to earn the maximum CPP benefits. Maybe you joined the work force late, dropped out for a period of time, or retired early. Low income earners may not hit the YMPE level often enough to get the highest possible CPP retirement benefit. Business owners who choose to pay themselves dividends don’t need to contribute to CPP, but that means they won’t be eligible to receive benefits either.
When To Take CPP?
Perhaps the most common question about CPP is when to take it. The standard age to take CPP is at age 65. Indeed, Service Canada will proactively send out a notice a few months before your 65th birthday advising you to apply for CPP and giving you an estimate of your expected CPP payments.
But you can take a reduced CPP payment starting as early as age 60. If you do elect to take CPP early, you’ll receive 0.6 percent less for every month you receive it before age 65. That means, for those taking CPP at age 60, a reduction in their CPP payments by 36 percent. Reductions aside, there could be good reasons to take CPP early – namely if you need the income sooner than 65, or if you expect to have a reduced life expectancy.
Conversely, you can enhance your CPP payments by deferring your pension up until age 70. The advantage of waiting is you’ll receive a 0.7 percent increase for every month you defer CPP past age 65. Taking CPP at age 70 results in a 42 percent enhancement to your pension. The biggest reason to defer CPP is to protect against longevity risk – the risk of outliving your money. The trade-off is using your own personal savings to tide you over until the enhanced CPP payments kick-in later in life.
Note there is no benefit to defer CPP beyond age 70, so get your CPP application in on time to avoid delays.
CPP is a complicated system but one that is crucial to retirement planning for many Canadians. It’s important to understand how much CPP you will receive in retirement, and to know how difficult it is to receive the maximum CPP payments. Most CPP beneficiaries receive much less than the maximum, with the average being around 60 percent – so that’s good to know going into your retirement income planning.
You can find out an estimate of your CPP benefits by looking at your Statement of Contribution online at your My Service Canada Account, or request a paper copy by calling Service Canada.
CPP payments are indexed to inflation, with the latest increase going up by 2.3 percent. CPP payment dates are scheduled toward the end of every month and automatically deposited into your bank.
Finally, a big consideration is when to take CPP and how the payments fit into your retirement plan. Do you expect to live a long life? Will you work until age 65? Do you have sufficient personal savings to last until your CPP payments kick-in? Will you take CPP at age 65, or elect to take your pension earlier or later?
Readers: How does CPP fit into your retirement income plan?
Today I’m answering reader mail for a feature I call the Money Bag. I’ll answer questions and address comments from readers on a wide range of money topics, myths, and perceptions about money. No question is off limits, so hit me up in the comments section or send me an email about all the money things you’re dying to know.
This edition of the money bag answers your questions about cell phone and data options for travellers, a no-more air travel pledge, digital savings platforms, taking the commuted value of a pension, and dividends versus indexing.
First up is Peter, who reminded me that I promised to write about my experience with cell phone and data plan options when travelling overseas. Take it away, Peter:
Best Cell Phone and Data Options for Travellers:
“Hi Robb. I think you mentioned you would share info on your experience with cell phone options while travelling. I’m heading to Scotland for three weeks in September. Any thoughts?”
Hey Peter, thanks for your email. Three weeks in Scotland sounds amazing! We seriously didn’t want to leave, and even looked into an Ancestry visa to move there, it’s that stunning.
I did plan to write a post about this but hadn’t got around to it yet. My phone is with Bell and I found they had terrible global data options. My wife’s is with TELUS and they had a better plan – $8/day for unlimited data and that was capped at $180 (I think) for 30 days.
Instead, we went with a service called KnowRoaming. You buy a global SIM card (or sticker for your own SIM card) and then insert it when you get to your destination. Follow some basic instructions and purchase your desired plan and you’re good to go. I liked it because, well, it worked, and also because you preload it with $$ credits (like a prepaid Visa) so you can’t get into trouble if you mistakenly download an entire podcast series using data instead of wifi.
The packages were great. I bought 3 days of global unlimited data for $9.99 – and did that 10 times, so it cost about $100. There’s cheaper data options if you don’t need unlimited (Europe 5 GB 30 days is $39.99).
Finally, it assigns you a U.S. phone number, which was kind of odd but it worked. We also bought a local phone number in Ireland through the KnowRoaming app for $4.
They have a refer-a-friend option so you can get 30% off the global SIM sticker or SIM card using my referral code ROBEN46 at www.knowroaming.com.
No More Air Travel Pledge
Here’s Michael, who is concerned about the impact of air travel on the planet, but still wants to earn and use credit card rewards points.
“Hi Robb. Most travel cards are geared toward airlines, lounges and associated rewards related to air travel. Since we have decided to take the no more air travel pledge, except in emergencies to visit family, what card works best if we are now restricting ourselves to train travel and electric car travel.
As consumers are beginning an evolution towards a more planet conscious citizenry, there may be more of us looking for planet saving alternatives in our financial products. I would be interested to know what you think. And would further be interested in how to get the finance industry to create products for people like me. Or are they there and I am just not seeing them?”
Hi Michael, thanks for your email. Great question, by the way. And I applaud you for taking the ‘no more air travel’ pledge.
I think you still have a few options to earn rewards that have nothing to do with flying. One may sound contradictory, but it’s the
Another option is the PC Financial World Elite MasterCard, where you earn PC Optimum points that can be used instantly in-store at Loblaws stores and Shoppers Drug Marts.
You could get a hotel rewards card, like the
Finally, any card that allows you to charge a travel purchase (be it plane, train, car rental, hotel) and then clear it off your statement with your points balance is a good one because of the flexibility it offers. You can book on your own, likely saving money by shopping around, and then “erase” that charge off your bill by paying with points.
Some examples include the
So, to answer your final questions, I’d say these products are out there – it just takes some creativity to use them in the way that’s most beneficial and still fits with your values.
Digital Savings Platforms
Debbie wants to get my thoughts on a digital saving and investing platform called Mylo:
“Hi Robb, a lot of Millennials are using Mylo for investing purposes. I am just wondering about your thoughts on this service, as my daughter and her friends are quite enthusiastic about it.
Hi Debbie, thanks for your email. I don’t have any direct experience with Mylo but I understand it to be an app or platform that rounds-up your purchases and saves or invests the difference using a portfolio of low-cost ETFs (like a robo-advisor). I think it’s a pretty neat concept and anything that gets young people excited about saving and investing has my support!
I know some other services like Wealthsimple employ the round-up feature within their platform as well – which has proven to be popular.
Investing the Commuted Value of a Pension
Here’s Wayne, who wants to know how I’d invest the commuted value of my pension (assuming I’d take it over leaving it in the plan).
“Hi Robb, Like many, I’ve been following your progress. Well done! I am particular interested in the Commuted Value of your pension. I have been tracking mine for the last 10 years. Assuming that you take the cash as opposed to a pension, have you thought about how you would invest (safeguarding the principal and providing for many years of potential retirement)?”
Hi Wayne, thanks for the kind words. I’m torn about taking the commuted value versus the pension for life. It’ll all depend on when I leave my current employer. If that’s in the next 2-5 years then I’d be more apt to take the commuted value and just invest in something like VGRO inside a locked-in retirement account. If I stay longer then the pension becomes more attractive.
The pension is more attractive at that stage because you can eliminate stock market risk and never have to worry about your money running out.
On the other hand, pension valuations are extremely complicated and can vary widely depending on bond interest rates, among other things. I would not be surprised to hear about $200,000 swings in valuation depending on when you ask for an estimate. To me, that’s another good reason to take the pension rather than being subject to the whims of a calculation at the wrong time. At least with the pension you have a “defined benefit” and know exactly what you’re getting.
Indexing versus Dividend Investing
Finally, here’s Shawn who wants to know how indexing compares to dividend investing in a downturn.
“Hi Robb, you switched to index investing in 2015. Do you think index investing will beat dividend stocks during a recession? Also what percentage of bonds should someone in their 40s hold? Thanks.”
Hi Shawn, thanks for your email. I have no idea whether indexing will beat a portfolio of dividend stocks during the next downturn. The reason why I switched was because I believe the strategy will outperform over the very long term (20-30 years). I also prefer the simplicity of holding one ETF rather than keeping track of a portfolio of 25-30 stocks.
Most investors should hold bonds in their portfolio to lower the volatility with the goal of helping you stay invested during the bad times. Take a look at these statistics which show different portfolios from conservative to aggressive. The conservative ones performed very close to the aggressive ones over a 20-year period without the huge losses during bear markets:
There’s nothing wrong with a traditional 60/40 split between equities and fixed income, and you can get that with just one ETF from Vanguard’s VBAL product.