Contributing to CPP after age 65
It used to be that this decision was made for you. Once you started receiving your CPP retirement pension, you could not make further contributions to the CPP. If you weren’t receiving your CPP retirement pension, you had to continue making contributions until age 70.
Since the new changes to CPP were implemented January 2012, you have been able to choose whether to contribute to the CPP after reaching age 65 (up to age 70), but only if you’re receiving your CPP retirement pension. The default, however, is that contributions are mandatory until age 70, unless you “elect not to contribute.” You can find more information about how to make this election on the Canada Revenue Agency website.
If you are over age 65 and receiving your CPP retirement pension, the decision as to whether to contribute to the CPP should be made based on a cost/benefit analysis. The main factors affecting the cost are the amount of your earnings, and whether you’re an employee or self-employed. The main factors affecting the benefit are the amount of your earnings and your age.
Related article: CPP for the over 65 and still working
Cost/Benefit analysis if receiving CPP retirement pension
The cost of contributing to the CPP in 2020 is 5.25% of your earnings above the Year’s Basic Exemption ($3,500 for 2020) and up to the Year’s Maximum Pensionable Earnings ($57,400 for 2020). For self-employed people, this cost doubles because they must pay both the employee and the employer share of the contribution. The actual cost of contributing to the CPP is proportionately lower for lower wage earners due to the Year’s Basic Exemption (YBE), but for the purpose of this cost/benefit analysis, let’s just say that the cost is a fixed 5.25% of earnings.
The benefit of contributing beyond age 65 while receiving a CPP retirement pension is that you will become eligible for a new monthly benefit known as a post-retirement benefit or PRB. Each year that you contribute to the CPP after starting your CPP retirement pension will generate an additional PRB, paid monthly for life.
The annual amount of a PRB for 2020 contributions is equal to 0.6874% of the adjusted earnings on which you made the contributions, adjusted by the actuarial factor based on your age as of January of the year following the contributions. This means that the annual maximum PRB for a 65-year-old in 2020 would be $387.97 (based on maximum adjusted earnings of $56,440 for 2020 x 0.6874%) or about $32.33 monthly.
The cost, benefit and “breakeven period” for deciding whether to elect contributing to CPP are shown in the following table:
Approximate Breakeven Period for PRBs (earned for working ages 65 to 69)
|“Cost” of contributing||
|“Benefit” of PRB||
- “Cost” of contributing to CPP: 5.25% of earnings, ignoring the YBE
- “Benefit” of PRB: Annual amount of PRB, expressed as a percentage of adjusted earnings
- Breakeven (years): Cost of contributions divided by Benefit of PRB
- Breakeven (age): Age at which PRB starts, plus number of breakeven years
Let’s use an example to make sure that the above table makes sense to you.
If Joyce decides to apply for her CPP retirement pension at age 65 in January 2020 but she still wants to contribute to CPP in order to receive a PRB, the cost of doing so will be 5.25% of her 2020 earnings. As a result, she will be eligible for a PRB starting in January 2021, at an annual rate equal to 0.745% of her 2020 adjusted earnings. This PRB is payable for life, and it would take her 7.0 years until age 73.0 for her total PRB received to equal the cost of her voluntary 2020 contributions to the CPP. If she decided to contribute the following year also, she would qualify for a second PRB which would be 0.808% of her earnings. For that contribution she would break even in 6.5 years at age 73.5.
Note: As mentioned previously, the “cost” of contributing and therefore the breakeven period would double for a self-employed person.
Cost/Benefit analysis if NOT receiving CPP retirement pension
The only time that there is a somewhat easy answer to this question is if you already have 39 or more years of maximum contributions to the CPP. In this case, any additional contributions do not increase your basic CPP retirement pension at all, so additional contributions are effectively wasted (Note: Starting with 2019, the “enhanced CPP changes mean that any additional earnings for the next 40 years will always increase at least the enhanced portion of your CPP retirement pension). In this case, you may want to consider whether you would be better off applying for your CPP immediately. This would allow you to either opt out of making additional contributions and save that money, or any further contributions that you made would at least result in PRBs as detailed above, rather than being “wasted” (except for the enhanced portion of the contribution).
Related article: Child Rearing Drop Out – Getting more out of CPP
In all other situations, I strongly encourage you to get an accurate estimate of your future CPP retirement pension with and without the additional earnings/contributions that you will make if you continue working and don’t apply for your CPP retirement pension. For estimating purposes, you can try calling Service Canada at 1-800-277-9914 or use their online CPP calculator.
Wow thanks for the thorough explanation. I knew you could continue to contribute to the CPP after starting the retirement pension, but didn’t know about the calculations. I wonder how the breakeven points will change after considering tax…
Thanks for the positive feedback!
As for considering tax implications, I don’t see that it would change the breakeven points much. The CPP contributions would be tax exempt (which would reduce the “cost”) and the PRBs would be taxable (which would also reduce the “benefits”).
The breakeven points should therefore be identical, unless your actual tax bracket changes. In that case, most people would likely be in a lower tax bracket when receiving their PRBs, which would make the breakeven point even sooner. On the other hand, I can only hope that I am in a higher tax bracket when I’m receiving my PRBs. In that case, I would gladly put up with a slightly later breakeven point!
It is good people like you are writing this type of article. It is a start but leaves a lot out – for example the tax implications of contributing or not and the potential investment gains by not sending more money to the government but investing it between 65 and 70. Also, I imagine the normal case is for the self-employed scenario (not a lot of people are working like a normal full-time employee after 65 – they tend to be under contracts), which you did not use in your chart. The break-even periods are really double for most people.
Sorry for the bad news, but things are more complicated than you thought.
Thanks for your comments, but I’ll have to disagree with your assessment. I’ve talked about the tax implications in my reply to Brian above, so I won’t repeat those thoughts here.
I won’t pretend to be an investment expert, but I calculate that if you took the annual maximum contributions to CPP ($2,356.20 for 2013) for the 5-year period of age 65-70, and invested them at a 10% annual rate of return, you would have accumulated a total amount of $15,823.45 at age 70. Not a bad savings, but if you continued to receive a return of 10% on that investment for life, your annual income would be a fixed amount of $1,582.35.
If on the other hand, you invested those same amounts into your CPP contributions, I calculate that your cumulative annual PRB at age 70 would be about $1,999.29, indexed to the CPP for life. And that’s not counting the approximately $3,730.23 that you would have received in PRBs between the ages of 66-70.
So, unless you know of an investment oportunity that will guarantee a higher rate of return than 10% for life, I think the decision is as simple as I’ve described (for employed persons over age 65 who are in recipt of their CPP retirement pension).
And yes, I recognize that the breakeven points that I have calculated are double for the self-employed, and I mentioned that twice in my article.
TYPO! My comment above should have read:
“I calculate that your cumulative annual PRB at age 70 would be about $1,999.29, indexed to the CPI (not CPP) for life.”
We can disagree. My only major point is I believe things are much more complicated, and vary considerably from person to person.
One question. I am curious about your source for the sliding scale of PRB benefits. The CRA site hast it maxed at a flat 1/40 of the CPP max. I think you leave inflation out of your calculations, and I don’t blame you. But then the increasing % Benefit from PRB becomes more of a mystery.
My source for the sliding scale of PRB benefits is the legislation. Here’s a quick copy & past:
59.1 (1) Subject to subsections (2) and (3),
a post-retirement benefit payable to a contributor
is a basic monthly amount determined by
[(A × F/B) × C × D × E] / 12
A is the amount determined under subsection
53(1) for the year prior to the year in which
the post-retirement benefit commences to
B is the Year’s Maximum Pensionable Earnings
for the year prior to the year in which
the post-retirement benefit commences to
C is 0.00625;
D is the Maximum Pensionable Earnings Average
for the year in which the post-retirement
benefit commences to be payable;
E is the adjustment factor referred to in subsection
46(3) or (3.1), as the case may be,
based on the age of the contributor on January
1 of the year in which the post-retirement
benefit commences to be payable; and
F is the amount determined by the formula
G / H
G is the amount of the earnings referred to
in subparagraph 53(1)(b)(i), and
H is the aggregate of the earnings referred
to in subparagraph 53(1)(b)(i) and those
referred to in subparagraph 53(1)(b)(ii).
What’s missing from the CRA “max” is the actuarial factor specified as point #E. It’s similar to the advertised “maximum retirement pension”, which really applies just to an age-65 pension, not to an age-70 pension.
TYPO! My comment above should have read: Here’s a quick copy & paste (not past).
I refer your answer to Robert-
And that’s not counting the approximately $3,730.23 that you would have received in PRBs between the ages of 66-70.
PRB for age
65 is 319.38
66 is 319.38+346.20=665.58
67 is 665.58+373.03=1038.61
68 is 1038.61+399.86=1438.47
69 is 1438.47+425.85=1864.32
70 is 1864.32 + 453.51=2317.83
Terefore total for 66 – 70 is
and not 3,730.23 as you mentioned. Is this correct?
Slightly different results from my numbers, but two errors with your conclusion, and the first error might have been caused by my chart in the original article.
Firstly, if you start receiving your regular retirement pension at age 65 (and I assumed in January)and continue to contribute until you’re age 70, your first PRB would be payable at age 66 in the annual amount of approx $346.20. That puts your total out by 5 x $319.38 = $1,596.90.
Secondly, I stopped my calculation when he turned age 70, having recieved only 4 years of PRBs totalling about $3,730.23 by that time and receiving a cumulative annual PRB of approx $1,999.29 for age 70 and beyond.
Does this make sense now?
I think this discussion has helped make my main point, that things are more complicated than they may appear.
Doug you seem to take the time to get the numbers correct, which is a great service. I wish I had you working on my major retirement financing issues where things are harder to reduce to a table.
It is possible for some that the PRB break-even math makes a bit of sense with certain assumptions. One is that you do not contribute both sides of the cost which probably most do over 65. Another is that your need for money will be greater after the break-even point than before it (I would think that is a very unusual situation – people normally slow down purchases precipitously before age 80).
Robert – OK, slightly more complicated that at first suggested, and I’ll concede on the self-employed issue. I might even concede on the lower spending issue! But I’ll defend the value of the PRB for those people who are employed past age 65 and who don’t have much savings or any pension aside from OAS & CPP (and there are lots of such people).
And although I didn’t mention it in my article (I thought it was complex enough already), the PRB is an even better investment for lower wage earners (many of the employed seniors) than for people earning near max, as the Year’s Basic Exemption (on which no contributions are made) makes up a larger portion of their earnings, and thereby reduces their true percentage cost below 4.95%.
One of the RHB readers has emailed me to point out that I have made a fairly important mistake in the above article.
I have indicated that if you are between the ages of 65 and 70 that you have the choice to opt out of future CPP contributions, regardless whether you are receiving your CPP retirement pension or not. That is NOT TRUE.
The only time that you have a choice is if you are between the age of 65 and 70 AND you are in receipt of your CPP retirement pension.
I will revise this article as soon as I figure out how to do so!
Corrections have now been made to the article, and it should be accurate as above.
So I have read through these
detailed comments and will read again as parts of it are not quite clear. Guess my biggest question is why are single, not previously married seniors not receiving more? Surely many single people have passed leaving significant sums in the CPP coffers to make up for it! In my case a long time single parent without a Company Pension….
I find it disheartening that people without company pensions are considered lowly given many of the best Company Pensions are from Government based institutions.
Hi Marja – I’m sorry, but I can only answer the who, what, where and when type of questions and I leave the why-type questions for the politicians to answer.
It is nice that you are so diligent with your blog. I would be so lucky to find this sort of detailed discussion on matters that are more directly relevant to my more pressing retirement issues. I am only 60 so the after 65 discussions are important but not weighing on me so much yet.
Thanks for your kind words!
And in case you haven’t found it yet, here is a link to an online guide that Jim maintains in order to help consolidate some of this information:
I think you’ll find links to at least a couple of articles that are directly applicable to you now.
And if you still have any questions, fire away!
Because you asked, Doug:
Retirement is complex and to even phrase questions is complicated, so I can only give a taste here. I turned 60 in March. I have not started collecting CPP although I am aware it may be the best option financially. But I am still working so I figure even if I get nipped a bit I can afford waiting a bit with employment income flowing. I could retire any day and almost certainly will by next February.
Thanks to the new rules I have to decide when to retire in 3 senses (articles seem to assume the MEANING OF RETIREMENT , but it has many depending on the person – often article mean quitting and getting a company pension which has no meaning in my world): 1. Actually quit my day job – the financials of this are more obvious than many things but amount saved through not working is tricky to calculate, and their are a bunch of personal issues around planning that new abundance of time in a satisfying manner. 2. Start collecting CPP – the optimum for this date is highly interactive with other issues, but as mentioned above I figure I can suffer the hit of not collecting for now. 3. Stop paying premiums – this means living off resources not subject to premiums – and calculating whether the 9.9% whopping tax savings is really a deal or not.
(At least for a few years I can chose to be paid to the YMPE from company assets – maybe to age 70. Several years before it squeezes my income flow from investments there)
I am single – most articles assume a partnership in living, although they do often throw in an undersized morsel for the single. (btw I do not think singlehood is special any more – very common) I went through an unimaginably messy divorce and raised my kids from preschool to college without help. I guess one day live with a woman again but single finances has to be my assumption as I am a hard sell on the idea.
I am self-employed. So it is my choice (and to some extent my accountant) whether to pay myself as much as possible in dividends rather than salary – this is another complicated area as it heavily affects my company’s wealth also. Putting aside that issue, I can certainly fire myself at will and start collecting income from company assets when I hit 65, thereby avoiding the hefty CPP tax. I would then be living off cash assets, RRSP savings, and maybe TFSA savings, while I meantime am either collecting CPP payments OR NOT, or while paying my PRB premiums. (A zillion variables but these are highlights)
Staying in a 4 bedroom detached home alone is another one with sky-high real estate prices near the Toronto subway where I live. A wonderful area and it in many ways is a great area to get older in but obviously downsizing or renting after a sale would free up tremendous capital, which then would need managing in unsheltered instruments. One complicating factor is a house is a place to live as well as an asset class. I need to know where I want to be for the next 10+ years.
Should I drain corporate assets quickly, at the YMPE, or last since the corporate coffers can legitimately be used for business expenses if I choose activities that are potentially of business value such as education and conference travel. Or hiring one of my kids to manage things, etc. Point is, company assets are taxed higher than RRSP money but bring a lot more flexibility for personal taxes.
So Doug, I do not think any of these things are rare situations – they do heavily interact with each other and there lies the real devil. Most of these issues receive very little coverage and so there are few to share ideas with. I do appreciate a lot those such as yourself that take a few common issues and work to elucidate them.
I set up spreadsheets to calculate effects of variables such as amount received from CPP depending on age and Service Canada’s statement, age to start getting RRSP dividends paid rather than reinvested, age to take CPP, age to stop working, personal tax ramifications based on income source, and age to stop paying premiums. Spreadsheets and my skill with them both collaborate against the accuracy of my results, but it all helps a bit.
Sorry I droned on too long and yet I have not nearly explained all the factors I wrestle with.
By the way, what is the meaning of “retire” and “retirement” in your blog? I suspect it is more related to government income security programs more than other things.
You certainly do have lots of choices to make! Sorry that I really can’t offer much advice to you, except around the CPP and OAS benefits. I could certainly calculate or validate your CPP numbers if you wanted to email me at [email protected].
As to the meaning of “retire” or “retirement”, I agree totally that those words have multiple interpretations, which is why I normally try not to use them in isolation. For me however, they would normally mean stopping your regular fulltime job and entering the next stage of your life, which could look very different from individual to individual.
I sort of retired in mid 2009 at 60. I took a discounted CPP. I returned to the workforce in 2011. In 2012, I was required to resume contributions to CPP. My earning were well in excess of the max, yet my 2013 benefit was only adjusted by +$9.00/month. Not much of a return on the +4000.00 annually going from myself and my employer.
I am assuming that the PRB doesn’t kick in until age 65 and my contributions for 2012 and 2013 are just something I have to do by law??
That’s interesting Don – I thought once you were getting CPP benefits all new contributions went toward PRB, which should show a better return than that.
Robert is correct. There has been some kind of error here. I’d suggest that you contact Service Canada at 1-800-277-9914 and ask for an explanation.
If you’re not satisfied with that explanation, email me at [email protected]. For a small fee, I can do some calculations to make sure that you’re receiving everything that you should be from CPP.
I realized in re-reading my reply, that I didn’t fully reply to your question about the timing of your PRB.
The PRB based on your 2012 contribution should have been effective Jan 2013, and the first payment should have been around April or May 2013, with retroactivity to January.
Your 2013 contributions will generate a new PRB effective Jan 2014, that should be paid with similar timing after your 2013 taxes are processed by Revenue Canada and your earnings info is relayed to Service Canada.
You are required by law to contribute until you are age 65, at which time further contributions will become optional.
Robert & Doug,
I did call Service Canada right after posting my comments. All of the literature I have read deals with working after 65 and continuing to contribute.
There is little regarding being under 65 and the impact of mandatory contributions to age 65. The PRB resulting from my mandatory contributions in 2012 and 2013 is subject to some complex discounting scheme.
The person I spoke to at Service Canada was extremely helpful but had to request that the calculation details be mailed to me. That could take a few weeks.
When I returned to work in 2011, I requested my CPP benefit be stopped. Nope. That could not be done. With the rule change in 2012, I made the same request, Nope can’t be done. I went over the PRB with my accountant an he was unaware of any discounts or penalties.
I did get the notice advising of my PRB payable in 2013 along with the retroactive adjustment. No reference to any discounts.
As soon as I get the details I will post them. It may provide some info for a separate topic.
I think I am glad I am not 62 or I would be paying back the PRB!
I’ll be very interested to see any reply that calculates a PRB for you in the range of $9.00/mth.
Depending on your exact birth date (I used June 1949), I calculate that a 2013 PRB for max 2012 earnings should be approx. $22.85/mth. Service Canada’s own website at: comes up with an annual PRB of $273 (ie, $22.75/mth).
I requested an explanation about a month ago. It is in progress and could take up to 9 weeks. Don’t want to hurry things do we?
Don – If you’re not satisfied with the explanation that you eventually receive, I’d be happy to do an independent audit of your CPP benefit entitlement.
Check out the two options that I offer on my website: http://www.drpensions.ca/dr-pensions-cpp-audit.html
Still. Waiting. My call last week to Service Canada resulted in being told that the CRA reported my 2012 income at about 1/10th of what it really was, so CPP were waiting for verification of the amounts. I asked if I could provide my documents, which I could, so I took everything into the Service Canada office and let them take copies and do the certification.
Well I am still waiting for an explanation. After several phone calls, at least once a month, and weekly since mid february, I finally encountered an agent who knew enough about the process. Up to 2012, there was no requirement for employers to complete the CPP earning box on the T4 if you hit the maximum contribution. This changes for 2013, possibly because of cases like mine. My employer has provided an amended T4 for me, and I will be sending it along to CPP Client services.
Now, just yesterday I got Jim’s email regarding Understanding the PRB. In this article you talk about a discount for those under 65! This was never brought up in this conversation, and while I have not looked hard, I have not found anything on the CPP site discussing it, nor have any of the bureaucrats I have spoken to discussed a discount. Yet you now even have a percentage.
Maybe this discussion should be a part of the thread, because no one understands the PRB, at least from a “pre 65” point of view.
I think I know more than I did on Friday, but not really sure.
I’m not sure that I fully understand what your situation is, and whether you have a question for me?
If you can provide clarification on this forum or email me at [email protected], I will help if I can.
I finally got a response from the CPP Client Services acknowledging that the CRA made an error in reporting my 2012 pensionable earnings. The letter advised that I should be getting an adjustment in the near future.
There was no discussion in the letter about any penalty being assessed because I was under 65 when receiving CPP.
My 2014 benefit, based on my 2013 earnings (max) is $25.38 or 304.56/year so it appears I am penalized about $50.00/year.
But at least I will get an adjustment and this full amount will now be indexed annually.
So I hope everyone eligible for the PRB based on 2012 earnings conducts their own review.
Glad to hear that things are resolved to your satisfaction. I thought you may be interested in checking out this further article that I wrote to explain the PRB calculation: https://retirehappy.ca/calculate-cpp-post-retirement-benefit-prb/
Well my adjustment did not materialize as planned, and I did not persist in my followup until this year. I did get my pensionable earnings corrected, but no adjustment was made.
Doing my taxes I noticed the Box on the T4A(P) showing the PRB amount. Having had the maximum earnings since the PRB benefit was implemented, my annual benefit was less than $600.00 for 2015. It should have been around $900.00.
Further checking, I had not received the acknowledgement letter for any adjustment nor confirmation of my 2015 or 2016 benefit.
I requested an audit and was informed that I would get a retroactive adjustment for 2015 and year to date 2016.
IS It WORTH IT?
My contributions for 4 years = $9658.35
My annual benefit today = $1317.60/year
In 7.5 years or less I will have gotten back my contribution, so I am getting a pretty good guaranteed, indexed return on my investment.
When just looking at the amount in vs the amount out, it may not look attractive, but in order to meet the maximum contribution, one is still drawing an income in excess of $50,000.00/year. Compared to not working after age 65, this income provides for additional RSP contributions, possible extended participation in an employer benefit plan etc.
I posted the above link to the CRIC (Canadian Retirement Income Calculator) before I realized that the CRIC itself was very flawed (read this article: https://retirehappy.ca/online-cpp-calculator/.
Please do not use the CRIC results, or use them with extreme caution!!
I spent the day trying to get answers from CPP and Service Canada about the pros and cons of electing to stop paying CPP. I was frustrated that no one could help me.
I see little benefit in paying them so much and getting so little in return. I am self employed , low income, 65 and collecting CPP and not much of it. You show they pay a bit more than I pay in but is it really worth it for such a small increase monthly? Thanks
Only you can decide whether it’s worth it to you. As mentioned above, the “breakeven” period doubles because you’re self-employed, but it’s better with lower earnings because you don’t have to contribute at all on the first $3,500 of earnings (due to the Year’s Basic Exemption).
If you want accurate numbers (for a small fee), email me at [email protected]
Thanks Doug…I was suspecting that. I guess if I plan to live to 100 that will be a bonus LOL
It will be my main source of Income with OAP so putting out hundreds now in case I need it at 100 seems silly . But thanks . I appreciate yo being the voice for us out there. Your pages are very good.
I was wondered who are the people behind the invention of policies and regulations and whatever, that is so cumbersome to understand and it gives a spin in our heads, until I was told that if I work after 65 I have to continue to pay taxes. I went searching for the advantages and disadvantages and landed here. Low and be-hold the guy that used to “create” the cumbersome policies behind the intrinsically difficult explanation of the advantages, himself has a website and has a business consulting…Hey what a great scheme…if I knew that 30 years ago…I would have gone to work for the government and creating an incredible complex policy, rules, regulations and help design a cumbersome legislation in order that in 30 years I can open a business to help people to unravel the misteries of a problem I created in the first place, with the help of other bureaucrats like minded, just as myself….
That is why Trump is getting so much tracktion…People are sick and tired of the nightmare.
I just found out about the Post Retirement Benefit, but as I’m too cheap to hire an accountant, I’m a little confused about how this applies to self employed individuals. So hoping you might be able to give me a little guidance.
I’m now 66 and started receiving my CPP effective April last year. I’m planning on continuing to work in my capacity as a consultant until at least aged 70. My total gross income is in excess of $100K. From my calculations I don’t think it is worth me continuing to contribute to CPP until 70.
As a self-employed person earning over the YMPE, you would pay a CPP contribution of $5,088.60 for 2016 and you would receive a PRB of approx. $29.60 per month effective January 2017. At that rate you would “break even” in 14.3 years at age 80.
As noted in my situation, being an employee makes the PRB much sweeter, still, that initial input of $5088.60 starts paying back $355.20/year next year, indexed, for life. While there is no survivor benefit,is this return not a modest 6.98%. For an employee X2.
Plus you get the 100% deduction to make the investment.
I am not an investment specialist, so maybe way off n my thinking.
Would opting to pay CPP premiums at age 60 while receiving CPP benefits be an option since I plan to work to age 70?
Larry – If you’re receiving your CPP retirement pension and still working, contributions are mandatory until age 65 and optional between age 65 and 70.
Thanks so much Doug, I learned math from you, and more for keeping effort even after retirement. I searched your article for my father, very good sample.
Sometime the thing becomes much simple — just bought one more house at age 40 then sell it when you get 65! I will do in this way.
I’m currently collecting Long Term Disability due to a sky diving incident back in July 2015. While I was on Short Term Disability my company continued to make all deductions, which included CPP. However, in early 2017 I entered the LTD phase of my recover. The monthly payments are net of withholding income tax only. Will I be responsible for CPP payments for 2016 when I summit my taxes? Thru to the end of 2016 I contributed for 41 years.
Mark – CPP contributions are only payable on “earned income”, which doesn’t normally include LTD payments. You should consider applying for a CPP disability pension if you haven’t already done so.
Sorry I meant to say…Thru to the end of 2015 I contributed for 41 years.
I also forgot to indicate that I am currently 61. Soon to be 62.
Thanks for confirming Doug. I thought it was only on “earned” income but your confirmation is most helpful. Regarding applying for a CPP disability. The insurance company expects me to apply but I didn’t think I would qualify based on the definition outlined on the Service Canada site. While currently things look somewhat bleak it’s important to keep positive in these situations. It is my hope to eventually be able to get back to work.
I lived in Canada until 8 years old, then left (with my family!). I have worked in the USA and receive social security from them (I’m 65 years old). I make a small income as an writer/artist as well. I am moving to Canada this year :). I intend paying tax on my online writing/art income in Canada until I am 70. Will I then be able to receive monthly CPP payments?
Jonathan – If you contribute to CPP from age 65-70, certainly you be eligible for CPP at age 70. Each year of maximum earnings/contributions is worth approx. $28 per month towards an age-65 CPP pension, and it’s worth 42% more if you start your CPP at age 70.
When it reads that a person could continue to contribute to her CPP till age 70, it means during the whole year she is 70, and stop contributing when she turns 71…. or she stops contributing when she becomes 70?
Hi Ana – You can contribute up until the month of your 70th birthday, not beyond.
Thanks for your response, Doug.
I have another question:
If I begin to receive my CPP this March 2017, and I decide to continue contributing my CPP (2,544.30 yearly for 2016), how much I will receive each year till I reach 70 (Aug.2019)?
And the amount I receive at 70 will be for life?
How long will it take to break-even with the CPP contributions done between March 2017 and Aug 2019, when I turn 70)?
Thanks So much for the article Doug.
I’m 65, have been receiving my CPP since 63 yrs of age.
I initially thought I would opt out of contributions until I read this article and all the discussion. I particularly enjoyed Joy’s comment. This all seems so unnecessarily complicated. In the end, I see that the PRB will be the way to go for me. The fact that it is indexed is important.
I am 71 and have a small part time job. I contribute $36 a month and just received a letter that I will receive 98 cents a month. Why can I not stop paying into it. Seems rather odd to me
Gale – You should have stopped contributing when you turned age 70.
Just to make something clear. I believe you said that if you are 66 and working, and are waiting for your CPP until 70, then you must make contributions until 70. But you then said that such contributions will not benefit you if you already have 40 years of top earnings.
So you won’t get a PRB and you won’t get increased CPP even though you have contributed for 5 more years?
Hi Don – You understand correctly.
How can that possibly be considered fair or reasonable to contribute for 5 years yet receive no benefit from the contributions?
So there is a maximum CPP benefit. Does the maximum increase if you defer taking until age 70?
Tgerr is a maximum OAS benefit. I belive it increases if you defer taking it.
Hi Don – The published “Maximum CPP benefit” is the maximum amount for someone taking their CPP right at age 65, so if you defer taking it until after age 65 your personal maximum would indeed increase proportionately.
Really old folks. It is a way to keep taking more. My part time job allows me to not be a burden on anyone. I take a bus and guess what. Still pay full price. Still pay full amount of msp. Now at 71 I am not allowed to stop paying cpp!!! That kind of discriminates.
Hi Gale – If you are past your 70th birthday, you are not allowed to contribute any further to CPP. If your employer is wrongly deducting CPP from your salary, it will all be refunded when you file your tax return.
I have just turned 65 in July 2017. When I inquired with Service Canada about my CPP benefits, the agent told me that I would be receiving $1,034.50 per month starting August. If I wait to collect till I am 70, the maximum monthly premium I will receive is 1,469.00 ($1,034.50 x 1.42). I can not opt out of contributing to CPP, until I start collecting). The CPP contributions I will make for next five years will help to increase my CPP benefit at age 70. However, If start collecting at age 65, any CPP contribution I make for next five years will earn me PRB, which could add up to $175 per month extra benefit.
I am contemplating, whether I should wait till age 70 to collect or start collecting at age 65.
I figure, my break even point will be around 87, if I wait till I turn 70.
Any suggestions from your side?
My only suggestion is to double-check the amount of your CPP at age 70. For your 5-year PRB total to be $175, your estimated earnings for the next 5 years must be at or near the YMPE in each year. If that is the case, your $1,034.50 amount should increase so that your 142% will amount to something more than $1,469.00.
– please confirm. You cannot opt out of mandatory contributions after age 65 unless you are collecting CPP? That would defeat the benefit to the plan by deferring benefit.
The max benefit (+$175./month) from deferral or working and making max. PRB contributions are the same, the advantage seems to favour taking CPP at 65 and continuing to work until 70.
Also, PRB increases kick in the following year, so you get the extra INDEXED amount as you earn it. If you defer, you see nothing until age 70, if that is your target.
If something changes along the way, it is better to receiving some benefit rather than waiting for you application to be approved.
Hi Don – It’s not quite that simple. It’s true that you can’t opt out of making contributions unless you are collecting your CPP and it’s true that the maximum PRBs that can be earned between age 65 and 70 are approx. $175. What varies though, is how much those contributions between age 65 and age 70 will have on your CPP at age 70. You’ll always get the 42% increase for deferring, but the extra contributions can also increase your “calculated retirement pension” by as much as approx. $140.00 or as little as $0.00 (if you’re already at max). That variation can greatly affect the “breakeven age” for deferring.
Hi Doug, thanks for your reply to my comment.
I have one more confusion about PRB, on working past 65 and not collecting CPP until 70. On your website under PRB benefit section (on third page) I have found this comments, which I have copied it here.
If a contributor is nearing age 70, their PRB will be increased by 42% (8.4 per cent x 5 years or 60 months x 0.7 per cent). (This is the post-65 increase that is applied to both the CPP and PRBs, as described earlier.) So a maximum CPP contribution of $2,564.10 will earn a monthly PRB of approximately $39.55 ($27.85 x 142%) — or about $474.56 per year indexed for life. This is a return of $474.56/$2,564.10 = 18.5 per cent.
My understanding is that, I don’t get PRB for each year of additional contribution to CPP, if I am not in receipt of CPP benefits. This is what Service Canada told me. If what you say in your article is true, I may hold off collecting CPP at 65. My CPP contribution will be maximum for each of next five years.
I appreciate your help. Thanks
Hi Robert – Once you apply for your CPP, any subsequent contributions will result in PRBs. Until you apply for your CPP, any contributions (even those made after age 65) will be used to calculate your regular retirement pension. If you want me to run some numbers for you (for a fee), email me at [email protected].
I have recently received my CPP contribution statement through mail. And using your method of calculating CPP monthly benefits, I have come to within 10 cent of the figure Service Canada quoted me. The CPP contributions I will be making over the next five years will amount to $10,000(net, after tax credits), which will further increase my monthly CPP benefit by approx. $40, and at age 70, it will amount to $60.
That amount is equivalent to two years of PRB. So, all in all, I am losing about $6,000 in CPP contribution if I chose not to take CPP at 65. This way I keep myself open to apply for EI benefit, if I happened to lose my job during that time, and will receive full benefit of over $2,100 per month, because my CPP benefit(if I am not collecting) won’t reduce my EI benefit, which will continue for over 40 weeks. It is a risk I am taking for losing another $6,000 worth of my CPP contribution, if I continue to work up until 70 and beyond.
So, I have decided to stay put.
For the OAS benefit, I definitely have to wait till 70 to start collecting, due to claw-back and my higher tax bracket.
If I begin to receive my CPP this March 2017, and I decide to continue contributing my CPP (2,544.30 yearly for 2016), how much I will receive each year till I reach 70 (Aug.2019)?
And the amount I receive at 70 will be for life?
How long will it take to break-even with the CPP contributions done between March 2017 and Aug 2019, when I turn 70)?
Hi KG – I charge $30 for this type of calculation and analysis. If you’re interested in this, email me at [email protected]
If I am an employee and also self employed, can I opt out of paying CPP after the age of 65 on my self employed income but still pay it on my employee income? Also after 65 do I have to pay both the employee and the employers part of the CPP on my self employed income?
Hi Dorothy – I presume that you are receiving your CPP retirement pension already, otherwise you have no choice but to contribute. I believe you cannot opt to exclude only self-employed income, but you should check with Revenue Canada just to make sure. If you contribute on slef-employed income, you must contribute both parts.
The is a small detail that I haven’t been able to pin down and it probably applies to many of your readers.
Things I understand:
– from age 18 to 65 is 47 years of CPP contributions
– you can drop 17% of the lowest years, or about 8 years, leaving 39 years of CPP contributions
– if you have 39 years of maximum contributions, you get the maximum CPP amount, and working and contributing to CPP from age 65 to 70 while NOT collecting CPP will NOT increase your benefit. Of course, your benefit increases by 8.4% every year due to deferring until age 70, but that’s not part of this question.
What I can’t figure out is my case of having less than 39 years of max contributions. I have 32 years of maximum contributions and 7 years where I contributed, say, 80% of maximum. I have no zero years. The online estimate indicates that I’m only about $50 below the maximum CPP benefit, but I’m sure many readers are probably even lower.
I plan to continue working self-employed from 65 to 70, but only earning about $22,000 per year which means contributing less than 50% of the maximum. This means that none of my contribution years from 65 to 70 will be high enough to replace my existing low years that have 80% of maximum contribution.
I’ve always thought that they never count more than 39 years years, and take the best 39 years. For example, if I did have some zero years, I think (hope!) they would be replaced by these extra years of around 50% of maximum contribution?
But since these extra 5 years won’t be higher than any of my existing 39 years, are the contributions wasted or will my benefit increase?
Rick – You have a very good understanding of the CPP calculation process. In your case, any contributions after age 65 that are less than 80% of max (or whatever actual % your 33rd best year is) would be wasted, and even a year of max wouldn’t increase your CPP very much.
If you’re self employed the CPP system seems to be a very poor method to save for retirement (it’s just a forced savings plan really). I started collecting at 60 and I earn income from day trading which is reported as income. Based on the monthly bump in benefits it’ll take me 230 months just to get back the 2017 CPP payment and I would have lost 10 yrs gains on the 2200$ I paid. Can’t wait until I can stop contributing. 🙂
To continue with Rick’s above example, I have 28.5 years with Max earnings, 8 years with 80% earnings, and 2.5 years with 0 earnings, as I arrived in Canada late.
I believe if I continue to work 2.5 additional years past 65 with Max earnings, and then apply for cpp hopefully my cpp would be
(1)equal to Max cpp payable less 20% for 8 years,+
(2) 21% increase over (1) = 8.4 + 8.4 + 4.2.
Please let me know if it’s correct.
Hi Sam – You are correct, and it will be even slightly more for any “enhanced earnings” in 2019 or later. Your quick formula would be 37.4/39 x maximum x 121%.
Thanks very much!
I had learnt all about cpp pensions by reading your articles for Free!!
This chain contains an interesting discussion about an issue I hadn’t thought about. My mistake. I elected to collect my CPP when I turned 60. I remain employed and, if all goes well, plan to stay that way until I am 70. I am now 66 and still contributing to the CPP. I just realized I could opt out of continued CPP deductions. I’m already losing about half of my reduced CPP to taxes and the “modest” PRB I am getting and will get probably means I should stop the CPP deductions and use the cash for something else. With my 35 year superannuation pension, I won’t really need the CPP PRB amount, even if it is indexed. Besides, if my wife survives me she won’t benefit from it. Probably better to have the cash I would otherwise pay by way of continued CPP deductions. I think I’ve got this right!
Hi Michael – I see no flaw in your logic.
Hi Doug, I turned 65 this year (2019). I am still working and contributing towards CPP. I have not started receiving CPP yet. As per my CPP contribution statement from service canada, so far have 37 full contributions. Is it worth for me to keep on contributing to CPP. Do I have a choice to optout?
Hi Ashok – You can only choose to opt out of CPP once you are over age 65 AND receiving your CPP retirement pension, so the answer to your first question is somewhat irrelevant. In order to answer it though, I’d need to know if you have any year of partial contributions, and if so, how much they were in terms of percentage of YNPE for that year.
Hi Doug, I’m pretty sure I understand where you’re going with the reply to Ashok, but let me verify that.
My age and situation is identical to his. However, I can tell you that my income from current part-time contract work is not enough to contribute a higher percentage than any of my prior partial years. So, I figure that all of my current contributions do nothing to help my eventual CPP benefits.
Hi Rick – If your current earnings are lower (in terms of percentage YMPE) than your 39th best year, you’re right that your current contributions won’t help your CPP benefits at all, at least not under the “old rules”. Under the “enhanced CPP rules” though, any earnings/contributions after 2019 will increase your “enhanced benefit”, albeit it will be a very small impact.
Before 65 I contributed the max. to cpp for 41 years (that is more than required). Therefore,
I will have reached the max by 65. I continued to contribute to cpp for an extra 2
years and chose not to receive any cpp. You mentioned that I might have wasted my extra contributions since I was already at max.
If that is the case, can I get my extra contributions refunded provided
I ask before 4 years has passed.
Hi Stanley – No, there is no provision in the CPP legislation that allows for the refund of any contributions in excess of what is required in order to receive a maximum retirement pension.
please remove last name from previous comment. thanks.
My one and only question is if I am eligible to collect the maximum monthly CPP benefit, ( 2020 is $1,175.83). Would that amount increase by 0.7 per cent for each month after 65 that I don”t collect until I elect to start collecting.
Hi Glenn – Yes!
I have been receiving a PRB since I have been collecting CPP benefits since age 62. I am now 65 and considering opting out of CPP contributions with my current employer. Is there any impact to my existing PRB amount or will it continue?
Hi Jim – It will continue for life no matter what you do.
Hi Doug. Appreciate all your information and all the replies to specific questions.
Myself started collecting cpp at age 60. Unlike most I worked all my life but often in remote places or attending university and what not so I only have 3 maximum cpp contributions.
My gross cpp back in 2016 was $293 a month prb was $9 of that monthly total. Today at 64 and five months shy of 65th b-day I receive $392.16 gross cpp with $48.26 prb of that total. With all the lockdowns etc the adjustment for 2020 taxes hasn’t been made yet probably June so my cpp will increase tiny bit and my prb will be pro-rated back to Jan 2021 too now so figuring cpp being around $420 month with prb up to about $74 month of that total. I’m not asking for concrete answers for those numbers just providing possible income.
I have no rrsps never needed them for tax credits had since age sixteen regular work plus side business. Last 4 years though had 2 MVA’s at work still waiting, for the big payout from ICBC. I plan to go to a 4-day work week in 2022 with reduced earning of about $40,000 year.
Would like too know whether it is really a sizeable benefit to continue to pay into cpp after turning age 65 and receiving OAS in Nov 2021 as well. As I have been receiving very little CPP since age 60 compared too most people, but my PRB up until this point according to the charts will continue to increased substantially for the years I continue to work and pay into cpp ? or would stop paying cpp so prb won’t go up and use the monies attributed to cpp contributions and make a better return on those monies saved then what the government provides ? Right now pay $92 and change bi-weekly to cpp new year with reduced income maybe $74 bi-wkly into cpp too gain extra $25 monthly going forward beyond my prb indexed for life, is it still worth it?
Hi Philip – I would continue contributing and earning more PRBs if I were you.
Thank you Doug for the confirmation to continue to contribute and build more PRB’s.
I would like to provide a donation but must be e-transfer as i mentioned ICBC has pushed me into insolvency so have no cheques no credit cards etc. Provide the usual secret ? and answer glad to help out. Late Oct I turn 65 and will continue work and paying into cpp.
What happens though I noticed under a different title on retirehappy.ca you mention even after a person starts cpp at age 60 and receives yearly prbs. After the 5 year period like in the New Year following when you do your taxes the 5 years prbs earned are indexed / added together divide by12 and that’s your monthly new prb for life added to your regular cpp.
Presently my cpp by itself is 344.13 and my prb is 69.14 four months shy of 65 receiving a total of $413 plus change. Expecting according to my calculations my prb will be readjusted to 92.65 in May of next year + 344.13 (plus inflation) comes to $436… plus the five years of prbs earned from 60-65 equals 2037/12? is this correct that would make my new calculated in 2022 prbs at almost $170 + cpp 344 more than what I would have obtained had I waited till I was 65 to draw my cpp.
And what or percentage will my prbs grow each month beyond 65. Were I too live long enough to make it to 70 years of age would another 5 year indexed for those years be added to existing overall prbs combined with cpp at the time? I see the graphs you post and mostly the prb situation is based on someone starting too collect cpp based on being at age 65 and working and paying into cpp up to 70 but doesn’t show the full range from the age of 60 to 70 too see how exactly though you take a 36% deduction from 65 age the prbs over a 10 year period could dramatically increase your overall cpp by the time you reach 70 if doing so.
Thanks so much for your information.
Hi Philip – I’m sorry, but I don’t fully understand your calculations. Can you explain how you go from PRBs of $69.14 to $92.65 and then suddenly up to $170?
Hi Doug apologies for the confusion. Presently Service Canada finally adjusted 2021 is at $20.89 this year + the $48.25 I was receiving since 2020, now prb at $69.14 + my cpp at $344.41 = $413.45. This my 5th year receiving cpp + prb be 65 in Late Oct.
I’m expecting have a working excel of all the contributions et cetera for the past 5 years that in 2022 when Service Canada re-adjusts my prb that it will increase another $20…and in May or June 2022 my prb will be at $92 + and cpp at around $350 to$442 or thereabouts. What happens between in the age now of 65 to 70 as I will work and pay into cpp and receive prb as well but what are the possible increases? According to Service Canada my yearly increases in prb amounts to $20 and change added to my previous years total monthly prb.
As I mentioned on another article you give a description of some who from age 60 to 65 receving far greater cpp then me, was receiving $200+ each year for 5 consecutive years totally around $1300 of prb over those 5 years. You go on to mention that that prb earned in the 5th year, previous years added and that becomes your total prb indexed for life per year. Well $1300 divided by 12 months is over $108… for that individual. I’ve received by Oct 2021 $2037.24 of prb for 5 years divided by 12 months indexed for life is $169.90 + my monthly cpp presently at $344.31. Is this 5th year indexing as you mentioned in fact true or what? And if so or if not how is prb calculated beyond 5 years as I have taken cpp at age 60 and possibly all the way to 70, maybe, haha.
It would be great to see a working graph showing an individual taking cpp at age 60 to 70 and working and paying in too cpp all the way and what those individual numbers look like and what the true and real benefits are. At age 60 anyone will receive only 64% of your cpp rated at age 65 but your prb at that age go up every month at rate of .7% per month but for how long and does that rate increase after 5 to 10 years and what can a person expect to receive. Thanks Doug for all your help.
My husband will soon be 67 and he has continued to contribute to CPP. We are going to apply this summer to commence his CPP as he will retire. I was advised recently that it was a waste of money to continue contributing after 65 as he is at the maximum CPP payment and that there is no benefit to continue contributing in this instance. I called Service Canada and was redirected CRA to stop contributions but neither confirmed my understanding.
HI Trudy – IT used to be true that once you had 39 years of max earnings/contributions, any further contributions would be “wasted”. This is no longer totally true, because under the “enhanced CPP” each year of earnings/contributions will always increase your CPP by at least the enhanced portion. On the other hand, even if there was no such thing as the enhanced CPP, anyone with earnings has to continue making CPP contributions until age 70, unless they are receiving their CPP and are over age 65, in which case they could opt out of making any further contributions. In any case, since he’ll be retiring soon, it’s probably easiest to do nothing for now.
I had made the decision at 61 to start receiving CPP, of course it was a reduced amount because I was not 65. The funds that I have been receiving for CPP I opted out no tax deducted, and sheltered in an RRSP. As the years went by I did receive the PRB and sheltered this as well. Over this time the funds received from CPP were indexed, adding a further amount of CPP. Now that I am 65 this month, last year I was thinking of opting out of CPP contributions (Max). But now I think I will continue on contriubuting to CPP, with the Enhancement program now introduced. By the time I retire from first receiving CPP it will be approx 9 years of extra income to stash away, I had no room with my income to save. So, I get the opportunity to invest with these monies, which I had none in the past. Your asking yourself why Did I take out the CPP early. I am a single mother of 23 years raised my kids on my own, and I rent, and lets just say I have dishes and silverware my kids will inherit. Even with Canadians that are single and with no family, If they stash away these funds and we die, at least I can give these funds to my kids, or the single person could will to there favorite charity. If I had waited until 70 I would have had 0.00 in the bank for them, if anything had happened to me. At least I know while I am working, all this money is being re invested, for them. Of course when I do decide to retire, I would have to start drawing on the funds, but, I still max out to age 70 and would receive the full CPP benefit, indexed along the way. Something for your audience to think about. Of course this only applies to Canadian that have no assets, but, still wants to give if anything should happen to them. Before they retire.
Just an idea, to give back. (Please note: Will be receiving OAP as will, will re-invest, adding to my kids inheritance. I have a ton of contribution room in my RRSP, as I did not have the money to invest in RRSP for 19 years. Also, watch out for clawbacks with the OAP if your net income while working.) Just a thought.