Working after you turn age 60 can increase your CPP retirement pension calculation significantly, or it can have virtually no effect at all (except for the “enhanced CPP” portion). It all depends on your individual record of pensionable earnings from age 18 to age 60.

To calculate how it will affect you individually, a good starting point would be to obtain a copy of your CPP statement of contributions (SOC).

Related article: Understanding your CPP statement of Contributions.

Now let’s look at a few examples of people taking CPP after age 60 and still working to see the different possibilities.

Fred’s situation

Fred started working at a bank right out of high school, and he always had a good salary after the first couple of years. Fred’s SOC indicates that he could receive a CPP retirement pension of $1,175.83 at age 65, based on his 39 years of earnings at or above the level of the Year’s Maximum Pensionable Earnings (YMPE) between age 18 and 60.

If Fred continues to work and contribute beyond age 60, that will have absolutely no impact on his base retirement pension at age 65, but it will increase his enhanced CPP portion. This amount of the enhanced CPP portion isn’t significant during the phase-in period from 2019 to 2022, but at the YMPE level it amounts to approximately $9.80 per month from 2023 onwards.

As a result, Fred might want to consider applying for his CPP retirement pension at age 60. Although his regular pension would be reduced by 36.0% (using the age-adjustment factor of 0.6% for every month he’s under age 65 when he starts his CPP), his contributions would at least be used to earn post-retirement benefits (PRBs), instead of being virtually “wasted”.

He would obviously need to consider the tax implications of receiving his CPP while he’s still working and many other factors, but he should at least consider the option of applying for his early CPP.

Peter’s situation

Peter came to Canada at age 40. He was an engineer and had a good salary every year since his arrival in Canada. Peter’s SOC indicates that he could receive a CPP retirement pension of $672.00 at age 65, based on 20 years of maximum earnings from age 40 to 60.

If Peter continues to work and earn at the YMPE level, his CPP at age 65 would be approximately $800.00.

While this is an increase of only approximately $128.00 from the amount shown on his SOC, those extra five years of maximum earnings actually increase his CPP by about $197.00 (or about $39.40 for each year of maximum earnings after age 60) – compared to what he would receive at age 65 if he stopped working at age 60.This is because the SOC estimate already assumes some earnings from age 60 to 65 based on his average lifetime earnings to that point (approximately $33,520 annually, compared to the YMPE of $58,700 for 2020). If he didn’t work at all after age 60, his actual CPP at age 65 would reduce from the amount shown on the SOC to about $603.00.

Sandy’s situation

Sandy has been self-employed her whole life. Some years her net earnings were well over the YMPE; other years her business operated at a loss. Most years, however, her net earnings were approximately half of the YMPE and her SOC showed that she could receive a retirement pension of $588.00 at age 65.

If Sandy continues her self-employment after age 60, the impact on her CPP will depend on her net earnings during those last years.

If she has five years above the YMPE, her retirement pension could increase by approximately $75.00 from the SOC estimate; if she has five years of losses it could decrease by about that same amount. If her pattern of averaging half of the YMPE continues, her CPP at age 65 will remain at the $588.00 amount.

Betty’s situation

Betty had her first child when she was age 18 and then two more children born about three and six years later. She didn’t start working outside of the home until the youngest child turned age 14, when she was age 37.

For the first six years she worked only part-time and earned approximately half of the YMPE each year, but for the last 17 years she has been working full-time and earning above the YMPE.

Betty’s SOC indicates that she could receive a retirement pension of $672.00 at age 65 (the same as Peter’s SOC above). Betty’s situation is very different from Peter’s though, because she is eligible for the child-rearing provision (CRP) for approximately 13 years, from age 18 to age 31.

Related article: Understanding the CPP Child Rearing Drop out

As a result of the CRP, Betty’s SOC estimate is virtually meaningless. Her actual CPP retirement pension at age 65 would be about $840.00 if she doesn’t work after age 60 and it could be as much approximately $1,090.00 if she continues to work and earn at the YMPE level for those five years.

That means that working those five years after age 60 could increase Betty’s CPP by about $250.00 which works out to $50.00 for each extra year of maximum earnings.

Conclusion

As you can see from the above four examples, how working after age 60 will affect your age-65 CPP retirement pension calculation depends on:

• Your individual lifetime record of pensionable earnings under the CPP
• Your level of earnings after age 60, relative to the YMPE
• Other “dropout provisions” that you might be eligible for under the CPP

I recommend that you understand these impacts before you decide when to retire and when to start receiving your CPP retirement pension.