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Canada Pension Plan (CPP)

Today, the maximum amount your parents are likely to be able to collect from the Canada Pension Plan (CPP) when they turn 65 is $13,110 per year. Now having said that, the average payout to new CPP beneficiaries in 2016 is $7,975. That is a lot less, but still not bad. CPP benefits have recently been improved to a maximum of $20,000 per year, with a long phase-in period.

Here is a summary of the major CPP rules that influence how much your parents will actually collect today:

  • CPP is kind of like a forced savings account: the amount one gets out of CPP depends on how much one has put in while working.

  • The contributory period begins when one reaches age 18, and ends when one either starts receiving the CPP retirement pension, turns 70 or dies (whichever happens first).

  • Almost every person over the age of 18 who works in Canada and earns more than a minimum amount ($3,500 per year) must contribute to the CPP.

  • The contribution rate is 9.9% of earnings, split equally between the employee and your employer.

  • The minimum one must contribute is 9.9% of $3,500 per year and the maximum you can contribute is 9.9% of $53,600 per year.

  • One can elect to receive a full CPP retirement pension at age 65 or as early as age 60 with a reduction, or as late as age 70 with an increase.

If you have a special situation, or want to learn more about CPP increased benefits, visit the CPP website.

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