**Updated with 2018 rates**

To calculate your CPP retirement pension, the first thing you should do is go online to the My Service Canada site and obtain your most recent CPP Statement of Contributions (SOC).

Also on the My Service Canada site, you can request an estimate of your CPP benefits. These estimates are very accurate if you’ll be eligible for your CPP retirement pension in the next few years. Otherwise, they can be misleading, especially if your future earnings will be significantly higher or lower than your previous average lifetime earnings.

If an estimate of your CPP retirement pension is not accurate enough for your purposes, you can do a more precise calculation of your CPP retirement pension. I’ll explain each of the steps in the calculation briefly in this article, and then you can ask questions if anything is unclear or you need more detail.

## Step 1 – Calculate your number of contributory months (NCM)

Your contributory period begins either the month after you turn 18 or in January 1966, whichever is later. It ends either the month you turn 70 or the month before the month that your CPP retirement pension starts, whichever is earlier. Your contributory period excludes any month that you received a CPP disability benefit.

Your NCM would simply be the total number of months in your contributory period, minus any months excluded as a result of receiving CPP disability benefits.

For example, the contributory period of someone applying for the CPP at age 65 in 2013 or later, and having never received CPP disability benefits, would be 47 years (from age 18 to age 65). The NCM would be 564 months (47 years x 12 months).

## Step 2 – Calculate your Total Adjusted Pensionable Earnings (TAPE)

First, find the “Your pensionable earnings” amounts for each year on the SOC that you got from the My Service Canada web site. These are referred to as your Unadjusted Pensionable Earnings (UPE).

For each year, divide the UPE for that year by the corresponding Year’s Maximum Pensionable Earnings (YMPE).

(UPE/YMPE)

The following link will provide you with a list of all YMPEs since the CPP began in 1966:

http://www.drpensions.ca/cpp-rate-table.html

Next, multiply that result by the average YMPE for the five-year period ending in the year that your CPP will start.

(UPE/YMPE) x average YMPE for five-year period

Example calculation using the year 2018:

The average YMPE for the five-year period ending 2018 is $54,440, based on YMPEs of $52,500 for 2014, $53,600 for 2015, $54,900 for 2016, $55,300 for 2017 and $55,900 for 2018.

($52,500 + $53,600 + $54,900 + $55,300 + $55,900) / 5 = $54,440

So if a person had a UPE of $4,000 in 1966, the APE calculation would be:

($4,000/$5,000 (the YMPE for 1966) x $54,440 (the average YMPE for the five-year period ending in 2018)

The resulting APE would be $43,552.

This step effectively brings the earnings for each year up to a current year value. This means, for example, that a UPE of $5,000 in 1966 (when the YMPE was $5,000) is worth the same as a UPE of $55,900 in 2018 (when the YMPE is $55,900) when calculating your CPP retirement pension.

Your Total Adjusted Pensionable Earnings (TAPE) is now calculated by simply adding together all of the APE calculations for your entire contributory period.

**NOTE**: If you have been in receipt of a CPP disability pension after age 60, the APE calculation is somewhat different. Instead of adjusting the UPE using the 5-year average YMPE ending with the year that the retirement pension starts, you adjust it using the 5-year average YMPE ending with the year that the disability pension started and then you escalate that amount based on CPI increases between those two years.

## Step 3 – Determine your “dropout” periods

The two most common dropouts are the general dropout and the Child Rearing Provision (CRP).

**Related article: The Child Rearing Drop Out Provision **

If you are eligible for the CRP, you can drop out any period of time that your children were under the age of 7 and where your APE was less than your average APE. The CRP is done first and then the general dropout is applied.

The general dropout, for which everyone is eligible, drops out a percentage of the lowest remaining earnings in your contributory period. The general dropout percentage was 15% before 2012, was 16% for 2012 and 2013, and is 17% since 2014.

Example 1: As mentioned in Step 1, for someone reaching age 65 in 2013 or later, the contributory period would be 47 years or 564 months. If they never received CPP disability and weren’t eligible for the CRP, they would use the general dropout to remove the lowest 96 months of APE (564 x 17% = 95.88, rounded up to 96).

Example 2: If the same person from Example 1 was eligible for the CRP for two children born three years apart, that person could drop out up to 10 of those years (or 120 months) under the CRP, plus a further 76 months ((564 – 120) x 17% = 75.48, always rounded up to 76) under the general dropout.

While it’s true that you can drop out any period of time under age 7, there is sometimes a complexity in determining what “less than your average APE” means.

Before I review what this means, you should probably read my article on the child-rearing provision itself. Now that you have a good understanding of who qualifies for the CRP and the difference between CRDO1 and CRDO2, you will better understand how to determine what periods of CRP are less than average.

First, any periods of CRDO1 (where earnings were less than the Year’s Basic Exemption or YBE) are always excluded from someone’s contributory period, because zero is always less than average.

Next, you have to calculate a temporary average monthly pensionable earnings (AMPE) value in order to see which months should be dropped out under CRDO2. To do this, simply divide your total adjusted pensionable earnings (TAPE) by your number of contributory months (NCM), after excluding any periods of disability pension or CRDO1 eligibility as mentioned above.

Any months of CRP eligibility where your adjusted pensionable earnings are less than this temporary AMPE value can now be dropped out under CRDO2, along with the accompanying earnings.

## Step 4 – Calculate your Average Monthly Pensionable Earnings (AMPE)

First, subtract all of the APEs that you identified in Step 3 as being dropped out, from the TAPE that you calculated in Step 2. For example, if you are dropping out 96 months, you would identify your 8 years of lowest earnings and subtract the APEs for those years from the TAPE. The result of this calculation is the TAPE (after dropout).

If you are dropping out less than a full year of APE, just pro-rate that amount. For example, if you are dropping out 76 months, you would drop out your lowest 6 full years of APE, and 4 months of the next lowest year. When dropping out the 4 months, you would drop out 4/12ths of the calculated APE for that year.

Next, subtract the number of months identified as dropout periods in Step 3 from your original number of contributory months (NCM) calculated in Step 1, to get your NCM (after dropout).

For example, 564 NCM – 96 months dropped out = 468 NCM (after dropout)

Finally, your AMPE is simple math using the formula:

AMPE = TAPE (after dropout) / NCM (after dropout)

## Step 5 – Calculate your retirement for benefit calculation (RTR-FBC)

This is the easiest step. Just take 25% of the AMPE that you calculated in Step 4.

The result of this step is the amount that your monthly CPP retirement pension will be, if your pension is starting the month after you turn 65.

**NOTE:** For retirement pensions starting in 2019 or later and if the contributor has pensionable earnings in 2019 or subsequent years, this step will include additional calculations under the “enhanced CPP changes”. Watch this article for further details on these additional calculations in the near future.

## Step 6 – Apply any applicable actuarial age adjustment factor

If you are starting your CPP retirement pension earlier than age 65, decrease your RTR-FBC calculated in Step 5 by the appropriate age factor (now always 0.6% per month since 2016).

**Related article: How to Get Your CPP Early**

## What happens if you start your CPP after 65?

If you are starting your CPP retirement pension later than age 65, increase your RTR-FBC calculated in Step 5 by the appropriate age factor (now always 0.7% per month).

If you delay starting your CPP until after age 65, there is an additional dropout provision, known appropriately enough as the over-65 dropout (surprisingly, there is no acronym for this dropout.)

Under the over-65 dropout provision, one of two things will happen:

- First, if you are still working after age 65, you can use these earnings to replace any periods of time under age 65 where you had lower APE.
- Second, if you are not working after age 65 or if your earnings after age 65 are less than any of your under-age 65 APE, you can simply drop out all periods after age 65 from both your NCM and your APE.

## Impact of receiving a CPP disability pension

Receiving a CPP disability pension affects the calculation of a CPP retirement pension in two different ways.

First, any period of time when you were in receipt of a disability pension is excluded from your contributory period. For example, if you received a CPP disability pension for 10 years and applied for a retirement pension at age 65, your number of contributory months (NCM) would be 444 (47 years – 10 years x 12 months) and your general dropout would be 76 months (444 x 17% = 75.48, rounded up to 76.)

Second, if your disability pension continues right up to age 65, your adjusted pensionable earnings (APE) is based on the average Year’s Maximum Pensionable Earnings (YMPE) for the year that your disability began, instead of the year that you turn age 65. Your APE is then escalated from that value by any increase in the consumer price index up to age 65.

## Conclusion

If all of the above is too confusing or complex, you can email me at [email protected], along with a copy of your SOC and any “scenarios” for which you want CPP retirement pension calculations. (For example, you might want to find out how much your CPP retirement pension will be if you start taking it at different ages, say 60, or 65, or 70.) I charge a small fee for each calculation that I do, but I also guarantee the accuracy of my calculations.

Another informative post that I will email to myself and friends.

I was a stay at home mom for a decade and will be applying for a portion of my ex-spouses credits. I understand it is an easy process even though it will probably make his head explode when I tell him. He managed to go all those years without ever doing a load of laundry, washing a dish or feeding a chicken. The cows always got out when he waa at work and it was always me chasing them.

Every year he received huge tax return cheques because he could deduct me and the children and he used the return for trips and big toys. He will be receiving a huge pension from his employer and won’t miss a bit of CPP.

Does the calculation result in today’s dollars? If so, how would you calculate what the income would be, say 30 years from now?

Hi Anthony – Yes, the answer will be in today’s dollars. To calculate in future dollars, you would have to predict the YMPE for future years.

I’m curious if Service Canada’s online estimate of CPP retirement benefit takes into account the years on CPP disability. I’ve been disabled since 1995, so it shows “B” below minimum for all years since. My est at age 65 is 364.00/month. I’m really hoping it is so low because their online system hasn’t considered the dropout period while receiving disability benefits.

Hi David – You are right that the online estimate is wrong. If you tell me what your current CPP disability amount is, I can tell you how much your retirement pension will be when you turn age 65.

Jane

I’m glad that you found this article useful. I can understand how you feel about your ex-husband, but you should be aware that a credit split will likely reduce his CPP pension by much more than it will increase yours. I intend to write an article on this subject in the not-too-distant future(I call it the CRDO/DUPE overlap), but if you haven’t already done so, you might want to check out the above link to Jim’s article on the Child Rearing Dropout, and read some of my comments.

A much better solution in this situation (in my opinion) is a negotiated agreement outside of the CPP. That way you can split the difference that the government would otherwise be saving, if you simply apply for a credit split (Division of Unadjusted Pensionable Earnings).

you could sell that spreadsheet and be a Canadian hero!!

Wow! I’ve been looking for this detailed information for some time. There are hundreds of hand-wavy explanations on the web, but this is the first one I could code up in a spreadsheet. Thanks!

Michael

Glad that you found this article useful for your spreadsheet. Let me know if you need any further explanation for any of the steps, and I’ll be please to assist you in refining your spreadsheet.

Hi Michael,

I just read this article and i am in the process of an income split with my x husband. I am on disability benefits so my income is low and i am able to apply for child rearing at 65 but i am turning 60 and want to start collecting ccp benefits then because of my low income. Can you enlighten me on the best way to go about this that would be beneficial to both me and my x husband? Would really appreciate,

Cheers,

M.

“Marlene: I think Doug (this article`s author) would be in a better position to help you than I am. I`m learning from him.

Michael

Thanks again for the positive feedback on this article. In reading your own blog, I see that there is one further dropout that I should have mentioned in this article, and that’s the “over-65 dropout.”

I left it out intentionally, trying to keep things a bit simpler and because it used to be that very few people waited beyond age 65 to take their CPP retirement pension.

Basically, if you’re working beyond age 65 at a high income level, you’re allowed to replace an equal number of lower earning months with these after-age-65 earnings. And if you’re not working or working only minimally, you can simply drop out those over-65 months so that it doesn’t reduce your calculated retirement pension.

My apology if this omission has misled you in calculating a breakeven date for waiting past age 65 to start your retirement pension.

Thanks for the article. I used it to build a spreadsheet to compare two scenarios. CPP at 60 and 65. I’m 58 and retiring at 60; will not be working for $ going forward. Currently at the max if taking CPP at 60.

Question; the 65 scenario uses the 5 previous years ending 2020; which will of course be inflated by CPI. To compare apples to apples with “constant dollars” at 65 should I simply use the five years prior to 2015?

Thanks again.

Grant

As far as I’m concerned, I would do both calculations using the 5-year period ending 2013, as those are the only real numbers that you have. If you do try to estimate the 5-year average ending 2015 for your age-60 estimate, I would strongly suggest using the same average for your age-65 calculation. Otherwise you’re artificially inflating your age-65 calculation, and perhaps ignoring that if you choose the age-60 option, it will also be indexed to CPI for those same 5 years

Thanks;

Thought so. When I do that I end up with an age 60 max (before age reductions) of $12,150/yr. which matches the government web site. The amount at age 65 goes down to $11,695/yr. which is the likely impact of adding five years of “zeroes” at the end. So there’s a $455/yr. “loss” due to waiting, which, while minor, will have to be considered as part of the age 60 vs. 65 vs. 70 start date debate.

Gord

Sounds like you’ve got a good handle on it now. Glad that my article helped you to get there! Let me know if you have any further questions.

Hello Doug, I’m turning 65 in 6 months. I retired at 60 and decided not to apply for CPP as I have sufficient savings. In looking at some of the questions you have received and I see that I may have penalized myself. As I have not contributed to CPP for the past 5 years will I be penalized because I did not contribute to CPP during the past 5 years ? Up until age 60 I had being contributing the maximum to my CPP each year. I avoided taking CPP early because I didn’t want to have the early withdrawal factor reduce the monthly payment I would receive. Perhaps I made the wrong decision. I’m looking forward to your comments.

Thank-you

Hi Mike – If you have at least 39 years of max earnings, you won’t have lost anything by waiting until 65 and having the last 5 years of zero earnings. If you have fewer than 39 years of max earnings, your “calculated retirement pension” would have decreased with the 5 extra years of zero earnings. This means that you’ll get a larger slice of a smaller pie by waiting.

Very informative, thanks!

I would like to ask 2 questions:

1. In step 3, you’d mentioned “The two most common dropouts are …”, which implies there are other less common dropouts. Would you be able to give more details about these other dropouts, if any?

2. For the CRDO, does it apply to both parents, or only one of the parent is eligible?

Charles

The only other real dropout is the over-65 dropout, where you can either automatically drop out any years after age 65 if they are lower than your average, or if they’re better than your average earnings, you can use them to replace lower years (this dropout is performed after the CRDO and prior to the general dropout). The only other situation that is sometimes referred to as a dropout concerns periods of time in receipt of CPP disability. These periods of time are really excluded from your contributory period, but this has virtually the same impact as dropping those years out when calculating your benefit.

Your question about the CRDO is a bit more complicated, and is a bone of contention for me. Firstly, only one parent can claim the CRDO for the same period of time. In theory, that would be the primary caregiver for the child(ren), but by legislation and in practicality it is primarily the female parent who qualifies.

I intend to do an article specifically on the CRDO in the coming months, so maybe that will clarify the situation for you.

Doug,

Thanks so much for the information.

I look forward to reading your next post about CRDO.

So if I retire at 54 and don’t plan on earning any income after that, and I start my CPP at 70, does that mean I can drop all five years after turning 65 plus nine years (47 x 17%) prior to 65?

Chuck

It’s true that you can drop all 5 years from age 65 to 70 plus the 17% dropout.

The only thing that you have wrong is that 17% of 47 years is eight years, not nine.

Hello Doug,

CPP Contributions:

you said “The only other real dropout is the over-65 dropout, where you can either automatically drop out any years after age 65 if they are lower than your average, or if they’re better than your average earnings, you can use them to replace lower years (this dropout is performed after the CRDO and prior to the general dropout)”… In my case, I immigrated to Canada in Dec 28 1989 and I was the primary caregiver of my 4 children (only one of them was 4 years old, the other 3 were over 7 years of age) Even after my youngest became 7 (in 1992) it was difficult for me to generate a good income: the first 8 years contributions were under the “Maximum”. After 1998, and currently, I am contributing the maximum. But, since on Aug 2064 I became 65 and kept/keep contributing the Maximum, I wonder how my early contributions will be adjusted… Would you please explain?

Other question: PRB

After reaching 65 (Aug 2014) I kept contributing the Maximum… I plan to begin cashing the CPP on April 2017 (+retroactive to April 2016) and stop making CPP contributions as soon as I get the CPP first payment (+ retroactive) I wonder how much I would get as a monthly PRB.

Thank you in advance for your response.

I am in the same situation as you. If you have got a reliable answer to your question, please post it.

If you replace the before 65 $0.00 APEs with after 65 high APEs and get 0.7% increase for every month after 65, that will be great.

Hi Zewdu

Yes, both of those things will happen.

I am trying to find out how CPP disability will affect my CPP payment when I turn 65. I am currently 49 and just started CPP disability. The CPP site gives me an estimate of what I would receive at age 65 (just shy of the maximum) but as I will have no income between now and then does this mean I will receive nothing or very little at age 65?

thanks

Cathie

Assuming your condition doesn’t improve and you continue receiving CPP disability until age 65, that entire period of time is excluded from your contributory period (see Step 1 above). That means that the fact that you’re no longer working and contributing (while receiving CPP disability) won’t reduce your CPP retirement pension calculation at all.

This means that the amount showing on the CPP site is probably fairly accurate. But there’s a way of validating that once you receive your first CPP disability payment, by reverse-calculating that disability amount. To do so, take your disability amount, subtract the flat-rate portion ($453.52 for 2013) and divide that result by 75%.

Using the maximum 2013 amounts to demonstrate this procedure, take the maximum disability amount of $1,212.90 – $453.52 = $759.38 = $1,012.50 (which just happens to be the maximum CPP retirement pension for 2013).

Sorry but I forgot one step in my example above!

That should have been:

$1,212.90 – $453.52 = $759.38 / 75% = $1,012.50

Doug, I am confused about this answer.

If you take $759.38 and divide by 75% it =

$569.53

Did you mean just divide by 75 or 75%?

Thanks

Terry

Dividing by 75% is the same as dividing by 0.75 or dividing by 3/4, and $759.38 divided by any of those 3 methods = $1,012.50 not $569.53. You have multiplied by 75% to get your answer.

Great article Doug – thank-you! My husband had a great opportunity to work overseas – so I’m temporarily retired until I can become fluent in the language here in our new country. I’ve been wondering how this hiatus was going to affect my CPP benefit – now I have the answer! With your easy to follow steps I’ve been able to create an excel spreadsheet to keep track of it all.

I do have one question that I hope you can answer – I have 4 years that qualify for drop out because of the child rearing rules. But I still have some earnings in those years. Do I specifically have to drop those years – or can I choose my years where I had zero earnings?

Valerie

Glad to hear that this article helped you to understand and calculate your CPP retirement pension. Unfortunately, you do have to drop out the specific periods that apply to the child-rearing dropout (CRDO). Here is a link to another article that I wrote on that very subject: https://retirehappy.ca/child-rearing-dropout/

Very helpful, thanks. I have a question about how the dropout is treated in the first year of the contributory period. By way of example, suppose a person’s contributory period starts July 1 of a particular year, and that earnings are minimal in that first calendar year so that the period qualifies as dropout. Would those earnings be counted as (i.e. use up) six months of dropout or a full year?

Glen

For the first year of your contributory period (and for the last or any partial year), it is the actual number of months that are dropped.

In your example (for a person born in June, whose contributory period starts in July), they would use up 6 months of their dropout period if they had low earnings in the year that they turned 18.

By the same token, in determining whether those earnings are lower than average and should be dropped, the earnings would be pro-rated when comparing them to a full year of earnings. Thus $10,000 of earnings in that first year would be equivalent to $20,000 in a full year, in determining what months to drop.

I’ve worked through the calculations and think I’ve ‘got it’ but one thing nags at me…

I’m planning to take CPP at 60 so that’s 42 contributory periods. Subtract the drop off periods (will be 17%) and I’ve got 34.8 years (418 months) of required contributory time. Currently I’ve got about 23Ms and ~7 partial years that are equivalent to approx. 2 more M years. So ~25Ms out of 34.8 required for the max (at 60).

My question is with what I’ve got so far as far as qualifying contributory periods, if I don’t work (say for the next 10 years) will I lose some of what I’ve got to date? That is, does what I’ve built up so far stay as a constant so I won’t get less than that amount?

OR by not working are you eroding your balance? I understand that by working for the next ten years I would get more added (get closer to the max for age 60) but does not working actually erode what you have accumulated to date?

Shannon

It sounds like you do have a good understanding of how the CPP calculation works. Congratulations!!

Having 10 years of zero earnings will certainly reduce your CPP from what it otherwise could be, but you’ve already taken that into consideration in your formula of 25/34.8.

If you are using the Service Canada estimates however, 10 years of future zero earnings will reduce those results. That’s because the System Canada system averages your current earnings over your current contributory period (25/(32-17%), which would give you a near-maximum estimate. The only way to maintain that estimate is to maintain the same average earnings until your pension starts.

Make sense?

Doug,

Thanks for making the calculation details available – the Service Canada website doesn’t seem to give correct info when you use their retirement calculator and change the future earnings. I feel much better being able to know the real impact on CPP of working or retiring early.

One more thing – As we don’t yet know the future YMPEs, I made an assumption that that it would rise by approx. 2% over the previous year. I used that to calculate a 5 yr average for retiring in 2024.

Shannon

I agree that it’s very important to be able to figure out how much your CPP will be under various scenarios, and I also agree that the current version of the Service Canada website doesn’t always do that accurately.

As for escalating the value of future YMPEs, I prefer to just use the 5-year average ending 2013, even when doing future calculations. That way it keeps the results relative to my current spending needs. I agree that your method probably gives you a more accurate result in 2023 dollars, but I’d be a bit concerned about how meaningful that number is for current retirement planning decisions. Just two different schools of thought is all.

Hi Doug,

I am 57 years old and 2013 is my last year of CPP contributions. My intention is to start CPP at 60 in February 2016. How do I calculate average of 5 years. Would 2014 and 2015 be zero or I take last 5 years from 2013.

Richard

If you check out the previous question from Shannon and my reply to her, you’ll see that my recommendation when you’re estimating a future pension is to use the 5-year average ending in 2013. That way, your result will be comparable to the current maximum of $1,012.50, and it will be meaningful compared to today’s prices.

When your benefit is actually calculated in 2016 however, you will use the 5-year period ending in 2016.

This is very similar to my situation, but it’s not making much sense to me. I plan to stop working at 55, so the 5 year average before I turn 60 (or 65!) will be zero. Does that mean I will recieve no CPP?

Very helpful web page by the way. Thanks!

Ian

The 5-year average refers to the average of the YMPE for the 5 years ending with the year that your benefit starts, not to the average of your own earnings for those same years. Retiring at age 55 will definitely reduce your age-65 CPP retirement pension, but only because that means that you’ll have at least 10 years of zero earnings, which exceeds the gneral dropout (which will soon be 17% or 8 years for an age-65 pension).

This means that you might want to consider taking your CPP before age 65, and before your zero earnings starts to reduce your “calculated retirement pension”,

I can do some actual calculations for you (for a fee), if you email me at [email protected], along with a copy of your recent CPP statement of contributions.

My husband is at the maximum CPP allowance but will continue working after age 65 and contribute if allowed. We aren’t clear if there is any advantage until waiting until 70 to start collecting? If he waits, can he collect more than the maximum benefit or does the maximum not increase which means he will collect the same amount regardless if he takes it at age 65 or 70?

Kaye

If your husband delays starting his CPP beyond age 65, his “maximum benefit” will increase by the 0.7% per month factor, based on his increasing age. If he’s currently at the age-65 maximum however, it will NOT increase based on any additional contributions that he makes after age 65.

If you haven’t already read them, I’m attaching links to two other articles that I wrote on this subject:

https://retirehappy.ca/contributing-to-cpp-after-age-65/

https://retirehappy.ca/cpp-for-the-over-65-and-still-working/

If you want me to do any detailed calculations for your husband (for a fee), email me at [email protected].

Hi Doug. Do you know if if would qualify for any CPP benefits as i only worked for a short period of time before i got married and raised my kids and never returned to work. I’m 51 years old and wonder if it would be worthwhile to go back into the work force for a few years in order to qualify or will it not make much difference?. Thanks

Ingrid

If you worked and paid into CPP for even one year, you will be eligible for a CPP retirement pension, although the amount of that pension may not be very much. It will however be larger than otherwise, due to the fact that you were raising children for some of the years that you weren’t contributing.

The best place to start is by calling Service Canada at 1-800-277-9914 and asking them to mail you a copy of your “CPP Statement of Contributions”. That will show exactly what you have contributed to CPP, and it will estimate your CPP benefits. The estimates will be on the low side, as they don’t consider the child-rearing dropout.

Once you have your statement though, you could email it to me at [email protected] and I can do some accurate calculations for you (for a fee), including some advice on how any future earnings would affect your pension amount.

Hi, I’m 63 and thinking of stopping work when I’m 64 in June and using my RRSP until I’m 65 and then collecting my CPP and OAS. is that the best method? I’ve been told if I wait until I’m 65 and don’t use my RRSP my OAS will be reduced?

Jay

Unfortunately, it’s not quite as simple as a Yes or No answer.

Firstly though, I should clarify that the only time that RRSP income will reduce your OAS is if your total income exceeds the clawback threshold (approx. $70,000). Here’s a link to one of Jim’s articles that explains this issue a bit more: https://retirehappy.ca/minimizing-old-age-security-clawback/#comment-29429 .

The other way that RRSP withdrawals can affect you however, is by reducing your eligibility to GIS (Guaranteed Income Supplement). That is an add-on benefit to the OAS program, intended for low income seniors. Here’s a weblink for more info on GIS: http://www.esdc.gc.ca/en/cpp/oas/gis/index.page

The decision of when to start your CPP is totally separate from OAS, and I can only give you advice on that if I have a look at your complete CPP statement of contributions, and do some calculations for you (for a fee). If you’re interested in that, email me at [email protected].

Hi Doug,

Thanks for all the valuable information!

I’ve used the Service Canada Pension Estimate tool. It says “If you were 65 today, you could receive a monthly retirement pension of $600”. But, now I’m 55 … planning to retire say tomorrow. I won’t be working and contributing to CPP from 55-65. When I start collecting CPP at 65, will I get $600 per month or less? Will the amount decrease as I’m not working from 55-65? Many thanks.

To Fu

If you don’t contribute for the next 10 years, your CPP at age 65 will definitely decrease from the $600 that your CPP statement indicates.

Whether it will decrease by just a bit or by quite a lot, depends on how steady your earnings are from age 18 to age 55. If your earnings were steady for all 37 years around 60% of the YMPE, your estimate of $600 would still be fairly accurate. If you already had several years of zero earnings though, the decrease could be up to about $125 monthly.

If you want me to do some detailed calculations for you (for a fee), email me at [email protected]

Thanks very much for your advice.

One of our readers recently advised me that one of the two links that I provided for the historical YMPE figures was out-of-date. I checked, and he was right!

I therefore created my own version of the CPP rate tables (including YMPE), and it is now available using this link: http://www.drpensions.ca/cpp-rate-table.html

Service Canada has a Retirement Income Calculator that makes an estimate on CPP payout. I’m planning to retire early, and am trying to estimate the effect of early retirement on CPP payout.

The Service Canada estimate is pretty high compared to the result I get using the algorithm described here– about $900 vs $650. I’ll have about 20 years at max CPP contribution and about 10 years averaging about 50% of max CPP.

I’ll re-check my calculations to see if I’ve messed something up. If anyone has any comments on the reliability of the Service Canada site in the meantime, I’d be interested in hearing it….

Roy

You obviously haven’t read my recent article on Service Canada’s retirement calculator. Using it is sort of like using a random number generator, except then you’d know not to expect any accuracy!

Here’s a link to my article: https://retirehappy.ca/online-cpp-calculator/

If you want any help to ensure that you have accurate numbers (for a small fee), email me at [email protected]

I’ve been looking for this calc all over the net for a project at work and you’ve saved me hours of time! Thanks a bunch!

Lara

Glad that I could help you. You can send the cheque to …

Also Doug, If a person waits to age 70 to start CPP would there be any enhanced widowers pension to the spouse or is the widowers pension just based on the age 65 pension?

Dave

The amount of the survivor’s pension is the same whether the deceased started his/her retirement pension early or late. It is always based on the age-65 calculated retirement pension.

Hi Doug. I spoke to a CPP rep today, who told me that, because I would be at or over the max pension at age 70 (if I delayed receipt til then, while not working), I would receive no survivor’s pension. She said the maximum payable wld still apply, even tho I had elected to delay. I specifically asked about an age-65 base pension calculation. Can you provide me a reference for that, as I have been unable to find one, and am very confused. Thanks so much.

Hi Paula – The only reference that I could give you is the CPP legislation, and that’s too lengthy and complicated to post here. What was the amount of your CPP retirement pension estimated at when you turned age 65, and what do you expect it to be at age 70? What is your current age and what is the current amount of your monthly CPP survivor’s pension (prior to any tax withhold).

I am 65. My pension wld be abt $840.00 right now. At age 70 it should be abt $1192.00. My husband is 68 (still alive, but less healthy), and receives $860.00. So, $516 maximum survivor’s benefit. I am trying to be sure that, if I delay to 70, I won’t gain anything due to losing survivor’s benefit. I thought I understood til the CPP rep told me the opposite. Thank you.

Hi Paula – Did your husband start receiving his CPP right at age 65? If Yes, then $516 is the amount of your survivor’s pension if you’re not receiving your own CPP. When you are receiving your own CPP, your survivor’s pension will be approx. $310 regardless whether you take your own CPP now or at age 70. Is this what the CPP rep told you? Read this article: https://retirehappy.ca/cpp-survivor-benefits/

No, she clearly said that my increased pension due to delay would result in no survivor benefit, due to being over the max amount. She even double-checked. I was dubious, but confused. Thank you so much for the clarification. Your answer makes much more sense.

I am now 67 and have been receiving my cpp for 4 years. I am still working and will retire for good in a year or two. Will my cpp increase when I retire?

Ron

Your regular CPP pension will never increase (except for the annual cost-of-living increases), but if you have made any contributions since 2012, you should be eligible for post-retirement benefits. Have you made contributions for 2012 or 2013?

Will the 6-step calculation on your website change if you entered Canada after 1966 (for eg. NCM etc.)? I am 67 and wanted to check if the CRA has calculated my pension correctly

Lloyd

Unfortunately, for CPP purposes it doesn’t matter when you entered Canada. Everyone’s contributory period begins either at age 18 or Jan 1/66, whichever is later.

Just FYI, CRA collects the CPP contributions but Service Canada calculates and pays the CPP benefits.

If you’re receiving your pension, I can validate your pension calculation for $25, if you email me at [email protected]

I would like to clarify how the first and last years are treated in the calculation. Let’s use the example of someone who’s birthday is in April and turned 18 in 1967. I understand that the NCM for 1967 would be 8 and the NCM for 2014 would be 4. However, I don’t understand if I also must scale the APE for those years. For example, the APE for 1967 is multiplied by 8/12 and the APE for 2014 is multiplied by 4/12. If I don’t then the TAPE value is wrong, no?

In this case, would it not be true that for someone who contributed the maximum in both 1967 and 2014, that they have contributed more than they are being given credit for?

Ron

Good questions, and slightly different answers at both ends.

For someone that turned 18 in April/67, their maximum pensionable earnings for 1967 would have been 8/12ths of the YMPE of $5,000 = $3,333 and that’s all that they would have contributed on. Their adjusted pensionable earnings would be calculated in the normal manner to $33,227 for a pension starting in 2014.

Assuming they applied for their CPP when they turned age 65 in 2014, their maximum pensionable earnings for purposes of the calculation would be 4/12ths of the 2014 maximum of $52,500 = $17,500 and their adjusted pensionable earnings would be $16,613.

If their actual earnings for 2014 is more than $17,500 they have two choices. First, they can continue contributing on earnings up to the $52,500 amount and anything over $17,500 will be used to calculate a post-retirement benefit (PRB) that would become payable starting January 2015, OR they can file a request with Revenue Canada and their employer to stop making CPP contributions after their CPP pension starts.

Thank you for the formula for CCP calculation – the explanations and examples are the most useful we were found on the Web! One question we have not seen is about the effect of deferring CPP for a month or two for those who become eligible late in the year? We have had no pensionable earnings since retirement at age 57. We turn 60 in October, November 2014 respectively. Would starting CPP in January 2015 mean that the calculations would be based on the 2011-2015 5-year average YMPE, which would increase the current value of contributions (Adjusted PE) from the 2014 level?

Diane

You are 100% correct that starting your CPP retirement pension in January would result in a higher pension as a result of the higher average YMPE, but starting the pension in December gives you the full yearly CPI increase for the cost-of-living. It’s usually fairly close which gets you the higher net benefit, but there have been a few years when one alternative was clearly better than the other.

Hi Doug, I’m turning 60 in July 2014, I only worked from 19 to 20 yrs old ,and then raised 4 children , so my CPP that I paid it would be like maybe 15.00′, but would I be eligible for the child rearing dropout program.

Cathy

Yes, the child-rearing dropout (CRDO) provision will certainly help you, but unless you work and contribute more now, your CPP pension still won’t amount to very much. The CRDO simply allows you to “drop out” Low income years when your children were under age 7. This increases your average lifetime earnings and thereby increases your CPP pension. But if you only have those 2 years of contributions, the CRDO will probably only double your pension calculation.

Just wanted to say thanks for the article and answering all these peoples questions. You are obviously a kind an intelligent person. Have a good day and I wish you the best.

Ivan

Ivan

Thanks for your very kind comments!

You have a typo on the above page — Related article: The Child Reading Drop Out Provision

If everyone is eligible for the general dropout is the dropout already calculated into the CPP SOC? Or does the government wait to apply it at retirement. Currently, I am eligible for $590/month at 65. I am just trying to figure out if that already includes the general dropout or not. Thanks for some GREAT articles.

Jane

That’s a very good question!

Yes, the SOC calculation does include the general 17% dropout, or at least partially. For instance, if you’re 50 years old now, your contributory period would currently be 32 years (from age 18 to 50) or 384 months, so the SOC calculation would drop out your lowest 66 months (17% of 384 = 65.28, rounded up to 66).

I was 51 Feb of 2014. I have been on CPP disability since 1995 March and still am. In March 1995 my CPP disability was $720 a month. At age 65 what CPP retirement should i hope to receive approximately? With Old Age Security given now at my age 67(last month of any adjustment), there is no gains and i will have two years of CPP only. Do you know if the government is making adjustments for people like me that were permanently disabled before changing OAS rules and GIS that goes with it? Thanks!

James

I wish that I had better news for you, but under the current legislation your disability pension of $720 will convert to a retirement pension of approximately $350 at age 65.

I’ve wondered myself whether the government will do anything to help people in your position, but I haven’t heard about anything in that regard

James

Further to my earlier reply, I now see that you said that your disability pension was $720 in 1995. That means that it should now be about $1,030 in 2014, and if so it will convert to a retirement pension of approximately $763 when you turn age 65.

Thank you thank you thank you…

I finally found the exact formula from your website and was able to put it on a spread sheet for what-if calculations. Thank you again!

kimberly

I just turned 60. I started working part of my 19th year and have paid the maximum CP premiums every year since I turned 20 until December 2013 when I retired. except for one year when there was no CPP contributions made due to being off work on Worker’s Compensation (approx. 1 year). I am not sure if the year off work reduces my CPP benefit. Also, if I read it correctly, will My CPP benefits decrease with each month/year that I don,t apply for them, or will they increase until I collect them at age 65? I’m still not sure.

Norman

If you have 39 years of maximum earnings (which it sounds like you do), you will receive a maximum CPP retirement pension for whatever age you apply.

The one year when you were on WCB will be part of your dropout period, along with the years when you were age 18-19 and the years since 2013.

Factoring in the pension reduction for early retirement, and annual inflation, am I further ahead applying for my pension now at age 60 or would I still take a big hit even factoring in my maximum CPP deductions I made for 39 years?

At age 60 it takes 35 maximum contribution years to get the max reduced amount.

At age 65 it takes 39 years to get the maximum unreduced amount.

You state you have 39 years of max contributions (I take it that’s after the drop out) If you are in good health your life expectancy is age 82. There may be other reasons why you want/need it early but if you do take it early – in my opinion, you’ve thrown away 4 years of entitlment. On the other hand for a person who has less than 35 max years its likely a reason to take it early because you are just adding zeros to the calculation and therefore the reduction is actually greater than the stated factor… but even then there may be reasons not to take it early.

In deciding to take it at age 60 or 65 inflation (in my opinion) is not relevant. But inflation is very relevant once you take it, so ask yourself do you want inflation applied on the reduced amount for life or on the unreduced amount.

Norman

Using the 2015 age-reduction factor of 0.58% per month for taking CPP early, the “break even” period is about 9.4 years. That means that you’re better off taking it early if you don’t live past age 74.4 and better off waiting until age 65 if you live longer than that.

Hi,I have been on disability for over 2 years,first short term and now long term. My employer tells me they cannot accomodate the restrictions indicated by an assessment the insurance company ordered.I have just turned 57 and contributed maximum CPP for the past 20 years.I worked part time from 1982-1996 as I had 4 children.If I am deemed not capable of working at all how will my pension be calculated? Thank you

Donna

If you haven’t already done so, I suggest that you apply immediately for a CPP disability pension. If approved, your retirement pension calculation at age 65 will exclude any period of time while you’ve been in receipt of CPP disability. If you don’t apply or aren’t approved, those years of zero earnings might reduce your CPP retirement pension calculation, and you might therefore want to apply for your CPP retirement pension at age 60.

Im turning 60 this month (September 2014).

I have been working since 1976. I have approx

21 years of M contributions. CPP Calculations

show my 2014 contributions as zero. Even

though I have been working full time steadily since

1976. Is it advisable for me to start receiving my CPP

as of age 60 or delaying it. If I start at age 64 I do

get higher CPP.

Thanks,

Angela

I’d need to see your entire CPP record to give you any qualified answer to your question. If you want to have me do some calculations for you (for a fee), email me at [email protected]

Hi, Really helpful information! Thanks to take time answering our questions!

I was immigrate to Canada when I was 30 with a kid 1.5 years old then when he was 8 year old I have second child. My question is:

1. how I should caculation NCM? should that start from I immigration to Canada?

2. How many years CRP I should count on? 12years?

3. I have max pensionable earning for all the years since I came to canada, my husband has much less income and sometime parttime after we have the second child, Who should claim CRP in this case to max. the CPP?

Thanks!

Amanda

1) Your contributory period starts at age 18, even though you weren’t in Canada at that time. So start counting your NCM at age 18.

2) Your CRP could be 5.5 years for the first child and 7 years for the second child, so 12.5 years in total (but only if your APE during each of those 12.5 years was less than your lifetime average APE.

3) If you had max earnings since your arrival in Canada, the CRP won’t help you at all. The CRP may help your husband, but he can claim it only if he received the family allowances and/or child tax benefit for the children OR if he was the primary caregiver and you waive your rights to the CRP in his favour.

Great article.

What impact does working in the US for 8 years have?

Paul

Working in the US for 8 years would have no impact on your CPP benefit at all, except that would presumably be 8 years that you didn’t contribute to CPP.

Hi Doug. Thanks for this article. It’s been very helpful. A question:

I’m a Canadian citizen but only worked 5 years in Canada (and only lived there until I was 26). If I apply the general dropout (.17 * 564), wouldn’t I be eliminating all my years of earnings? Is the dropout optional? Or is my NCM reduced because I have very few years of Canadian residency/income?

Hi Paul – If you apply for your CPP at age 65, your NCM is 47 years even though you only lived in Canada for 8 years after age 18 and only worked in Canada for 5 years. The 17% dropout allows you to drop out 8 years of zero years of earnings (which could include 8 years where you were outside Canada), which means that the 5 years of earnings will be averaged over the remaining 39 years to determine your AMPE.

Ahh I see. Thank you!

I’m age 60. Fulltime Pastor at our Church. QUES: What is the approx. impact to CPP Receivable at age 65 for every $1,000 of Clergy Residence Deduction that reduces my CPP Pensionable Earnings below the Maximum in the next 5 years?

Ron

It’s impossible to answer your question accurately without seeing your entire lifetime record of CPP earnings, but one way of estimating the possible impact is by using the fact that each year of max earnings is generally worth about $25 towards an age-65 CPP retirement pension.

For 2014, that means that every $1,000 decrease from the max of $52,500 could reduce your age-65 CPP retirement pension by about 50 cents per month.

The 2014 Yearly Max Pensionable earnings is 52500 so if you only contribute on 51500 your max contribution (and credit) is reduced by approx. 2%.

1000/52500 – .019

I will be 64 next month,,,, I have been receiving cpp disability since 94,,, presently getting $1,117.24 per month,,, am wondering how much that amount will decrease when I convert to cpp???

I’m turning 65 on Dec 6 2015,,,, I presently am receiving cpp disability at the rate of $1117.24,,,, how much will this be reduced when I convert to Canada pension plan??

Bob – Your CPP disability pension will convert to a CPP retirement pension at age 65, and the amount will reduce to approx. $879.52 effective January 2016.

Thanks Doug,,,, very helpful,, then I top that off with OAS which I believe to be about $550,,, correct added together maskes $1429, which is more than I am getting know,,, is that right?? Thank you,,, also,,, I understand the switch from disability is automatic,, but I have to apply for OAS,,, how soon should I apply for OAS thanks

Bob – Yes, OAS is currently $563.74 if you have at least 40 years of residence in Canada after age 18. You may also receive your OAS automatically since you’re already receiving a CPP pension, but if you haven’t received a letter saying so by next June/July, I would apply then.

Does anyone know the CPP (CPI) increase for 2015?

Dave

I’m guessing that it will be 1.7%, but I haven’t seen it released anywhere officially yet.

Monday 29th… I see now that it’s just been announced at 1.8%.

Dave

Thanks for sharing this info!

Here’s a link to the official news release: http://news.gc.ca/web/article-en.do?nid=916899

Hi, Doug, very helpful info…

I only start contributing when I am about 30 years old, (some 12 years with 0 contribution.) after the automatic/ general drop out, I would still be having a number of years without contribution, if I work pass 65 to 71, those extra years would replace my 0 contribution years, correct?

Thanks

Steve

You’re right that any contributions past age 65 can be used to replace lower earlier years, but that’s only until age 70, not 71.

Since the general (17%) dropout will allow you to drop out 8 of those 12 years, working until age 69 would allow you to replace the other 4 years with your higher earnings now.

Hi Doug

Nice article, much appreciated, but I have two questions.

1.I can not find any info on the government site about the over 65 double dropout. At 65 I will have used all my 8 years of dropout and I am considering waiting until age 70. DO I use A or B for this calculation?

A 1,945,088.10 / 528 * 42% = 1,307.78

B 1,945,088.10 / 468 * 42% = 1,475.44

2.Two people receiving maxium benefit with same situations, one started benfits 2012 (986.67), the other 2015 (1065.00). Would 2012 be receiving the same amount (1065.00) in 2015 if taken the 986.67 and add inflation or would that still be less than 1065.00? Because benefits are increased by percentage, would the 2015 person be pulling larger and larger benfits than the 2012 person in the same year?

Evan

1. Assuming the $1,945,088 is your TAPE after dropout, your CPP retirement pension at age 70 would be:

$1,945,088/468*25% = $1,039.04 x 142% = $1,475.44.

2. If someone received the maximum of $986.67 in 2012, that would be escalated to only $1,031.71 by 2015. This amount is less than someone who receives the maximum starting in 2015. This is because pensions in pay are indexed based on price increases as measured by the CPI, and new pensions are indexed on wage increases as measured by the YMPE.

Hi Doug,

I have lived in Canada, worked and contributed to CPP for about 19 years. I had an opportunity overseas and am currently working in Switzerland. I just turned 60 in December 2014. I plan to continue to work in Europe for about four more years. Should I apply now (or as early as possible) for my CPP, or should I wait until after my retirement? Please advise.

Regardless of when I should claim CPP, I would like to have an idea about the amount of my pension payout and would be interested in your assistance for the calculations after I request a copy of my CPP Statement of Contributions form Service Canada. What would the fee be?

Consuelo

I would be pleased to do some calculations to help you decide when to apply for your CPP. My fees are $25 for a single calculation, $75 for the six calculations of ages 60-65 or $125 for the eleven calculations of ages 60-70.

If you are interested in this service, email me at [email protected]

Doug,

Thank you. I will contact you as soon as I receive a copy of my CPP Statement of Contributions from Service Canada. As I have three children, i wonder if somehow the the Child Rearing Dropout (CRDO) provision would also help me? I remember having received a child allowance when my children where small, but I cannot remember for how long. Where can I get this information and would you need it in order to do my calculations?

Consuelo

Yes, the CRDO will help you if you were still living in Canada while your children were under age 7. All you should need to know is your date of departure from Canada.

Thanks again, Doug. I will be in touch. I have not received the Statement of Contributions yet. I was told it would take a few weeks, but will follow-up if I do not hear from them in the next few days.

You can register for a cpp account online which will give access to all of your info.

If you retire in your 50’s and you withdrwal $15,000 from your RRSP each year until your 65, does that 15k of annual income count as earned income in terms of counting towards your CPP benefits?

Mark

The short answer to your question is “No”.

The only income that counts towards CPP benefits is earned income from employment or self-employment.

Dear Doug,

First of all, thank you! Amazingly clear information and the most detail I could find anywhere.

I do have one question related to the calculation of CPP when one is on a CPP disability pension until age 65, when it reverts automatically to the CPP retirement pension, as this is my own situation.

You have said above: “Second, if your disability pension continues right up to age 65, your adjusted pensionable earnings (APE) is based on the average Year’s Maximum Pensionable Earnings (YMPE) for the year that your disability began, instead of the year that you turn age 65. Your APE is then escalated from that value by any increase in the consumer price index up to age 65.”

In my situation, I started receiving the CPP disability pension in February 1991 so the YMPE for 1991 is 30,500. Using your chart, the escalation factor for 1991 is 1.048, so do I actually apply the escalation factor for 1991 to the 1991 YMPE and then go forward from this amount? That is, would it be 30,500 x 1.048 = 31,964 for 1991? And then I would applying the subsequent escalation factors for each year to this base amount? So, if I am 65 in 2015 the adjusted amount would be 51,348 versus the actual YMPE of 53,600?

This is the only part of your explanation that I’m a bit confused about and I really do want to make sure CPP calculates this correctly as the information I got when I phoned in was totally incorrect.

Thank you again for this amazingly detailed explanation. There is absolutely no other site on the Internet with the details necessary to check CPP’s calculations and phone information.

Much Gratitude!

Jo-Ann

Jo-Ann

Glad to hear that you found this article mostly useful, but sorry for any confusion.

In your situation, you would adjust all of your earnings up to a 1991 value using the average YMPE for the 3 years ending with 1991 ($29,033) and then start applying the CPI increases starting with the 1992 increase of 1.058.

An easy way to estimate what your retirement pension will be when it converts from a disability pension at age 65 is to subtract the flat-rate portion of the disability pension (which is $465.84 for 2015) and divide the result by 75%.

For example, if your current CPP disability pension is $1,000 it would convert to a retirement pension of approx. $712.21 if you turned age 65 in 2015 ($1,000 – $465.84 = $534.16 / 75% = $712.21).

Email me at [email protected] if any of this is unclear.

Dear Doug,

Thank you for the fast reply!

I actually don’t retire until June 2017 but kept the example calculation simple. 🙂

The rule of thumb you provided is a great way to quickly check CPP’s calculations.

Right now they are show me with an estimated pension of $471 on my online account which is crazy as my disability is $1,172.75 and when I phoned in last year the person I spoke with said my retirement pension would be much lower as I hadn’t worked for so many years… clearly they didn’t know these years are dropped out!

So thank you so much again, and if I need some help I will certainly be hiring you to do some calculations for me.

And I will absolutely be referring you to all my friends!

Jo-Ann

Jo-Ann

I find that amazing that their online estimate doesn’t consider the fact that you’ve been on a CPP disability pension since 1991, and it’s very disappointing that they couldn’t provide a better response when you phoned Service Canada.

Hi again Doug!

Yes… I also find it amazing that they do not seem to have taken it into account and you can see why I was thrilled to find your site and do the calculations myself.

I just went into my account a few minutes ago to get the numbers for you… this is the exact information given on the site for me as of today:

If your pension were to begin next month… you could receive a monthly retirement pension of: $398.06

If you were 65 today… you could receive a monthly retirement pension of: $471.97

Disability Benefits: Our records show you currently receive CPP disability benefits.

As you can see, they know I am on disability and as I mentioned, I get $1,172.75 per month CPP disability pension so was shocked by the numbers I was seeing… and, as mentioned, when I called last year, the person on the phone was absolutely no help.

If you know people in the department, you might like to let them know that there is a BIG problem with their program estimates for people receiving the disability pension!

I can only imagine how upset some people might be when they check their CPP estimates, if they are on a disability pension, and then phone and don’t get the right information.

Thanks again and keep up the good work!

Jo-Ann

I have a copy of my CPP SOC. The numbers are correct, they reflect my actual Pensionable Earnings and my actual paid Contributions. However, in yrs 1995 to 1997 inclusive, I am listed as being “S” self-employed. Will this affect my CPP payout when I retire? Do I need to get this corrected, or, in that the numbers are correct it won’t make a difference? FYI I won’t be retiring for 15 years, but I don’t want to leave this error that long if it will have an impact on the numbers.

Irene

If the earnings are correct, there is no need to worry about the “S”. The “S” probably means that you had more than one employer those years and were under-deducted for your CPP contributions because both employers would have deducted for the Year’s Basic Exemption. When you filed your tax return for those years, you would have had the option to make up any shortfall in contributions, and that would have been done at the self-employed rate.

Hi Doug, when I look at my CPP on my account on the government page, I see my contributions made for specific years then parallel to those numbers are higher numbers under pensionable earnings. so in 2004 I contributed $54.98 then my pensionable earnings is like $5,123.56. I don’t understand the 2nd set of numbers. Could you explain what the 2nd set of numbers mean? Thanks

Valerie

Valerie

For the purpose of calculating your CPP, the important number is your “pensionable earnings” column.

That number should match your actual salary and/or self-employment earnings for that year unless you under-contributed to CPP, in which case it would be the amount of earnings that your contribution would support.

Very informative Doug.

I am retiring next month at 60 years of age. I have worked full time from age 18 and always paid the maximum into the CPP. Am I right to believe that I can wait until I am 65 to take out CPP and have no penalty applied as I will have the 8 years of drop out to apply to those 5 years. I will use some of my rrsp while being taxed at a lower rate and move some to a tfsa if not needed.

Thank you.

Gerry

Gerry

Yes, if you have 39 or more years of maximum contributions, you will always qualify for a maximum CPP retirement pension at any age, as the general (17%)dropout will allow you to drop out your lowest 8 years at age 65.

For DIYers there is a free Excel CPP Calculator at pensionplanner.ca on the Resources page; pick any month/year to receive CPP and it includes CRDO provision

I had a quick look at it. Stopped when I realized I had to manually enter all of my 34 M years with the specific earnings

May I suggest you provide people with a way to default to either M years or a zero year. in my case I only have 4 years which were not M.

This would also reduce the risk of data entry error.

Dave,

Thank you for your feedback. It’s a good idea for the next version – I will gather all suggestions for improvement for all 4 files and make the changes and then post the upgrades on my web site.

So if you (or anyone else) have more ideas, I’m all ears!

I imputed my earnings into the calculator and I have also done it manually (with my own spreadsheet) following Doug’s precise instructions. As I am very soon to be age 62, my estimated pension according to the CPP site changes each month and my manual calcs , which I have tracked for many months have been exactly matching their info (-/+ .01)

In my case I turn 65 in May 2018 and since if you want to start ones pension at age 65 it will actually start the month following your 65th birthday. Your input screen (when do want to start your pension) creates an error in this regard.

Also while I appreciate the opportunity to input inflation escalation I think that will create confusion for users. You have 1.5% inputed and I changed it to 0% then I got an amount very close to yours (0.13 difference) but I had to change the start month in your calc. My Bday being in May my actual first pmt will be Jun. I suggest where your estimate populates the screen you add a note that it is based on 2015 rates and either explain the inflation entry or in my opinion better to do away with it. I think the important thing for users is to know is how much in relation to the current max they are going to get. The present max is known, inflation is not.

You could say based on the 2015 current maximum of 1065.00 your estimated pension is xxxx.000.

Hope my beta testing results are helpful. I appreciate your efforts.

Dave

Dave,

First, thank you for trying out the CPP Calculator and posting about your testing.

Re the inflation – another good idea for the next version; I prefer inflation built in but I can understand why many would like to see the estimate in today’s dollars.

As for your comment: ” … if you want to start ones pension at age 65 it will actually start the month following your 65th birthday. Your input screen (when do want to start your pension) creates an error in this regard …”

Since it is up to the user when to start CPP, any time from the month after turning age 60 to the month turning age 70, the Calculator does not force the user to select the month of turning age 65 (or any other age); the user selects the month and year.

Unless I am misunderstanding your comments, the same issue is referred to in your comment: “…You have 1.5% inputed and I changed it to 0% then I got an amount very close to yours (0.13 difference) but I had to change the start month in your calc. My Bday being in May my actual first pmt will be Jun …”

If you selected June, 2018 to start CPP and got a wrong amount, then changed the month to something else to get the 0.13 difference, then that is something I need to fix for the next version.

Thanks again for your feedback!

Ivan if you would like to post your email I could correspond directly and not make clutter here.

I think I found another issue which contributes to errors.

In your Data box “MPEA” . It appears you have the 2015 amount as 52500 which is the same as 2014. In fact 2015 is 53600.

My May 2015 estimate which I have done manually and is confirm as the same as my online CPP account, differs from yours by about $28.

Dave,

Here is my email address: ivan[at]pensionplanner[dot]ca

Don’t want those nasty spam bots to get my email address.

Since the MPEA calculation depends on actual earnings and YMPEs of future years, the inflation issue comes into play here as well.

I’m guessing that the $28 delta to which you refer is about 2% of your estimated CPP. The relevant question here then: “Is 98% an acceptable level of accuracy in a free tool which anyone can use?”

Just noticed another problem. You have the reduction factor at .56 for 2015. It is .58 and goes to .60 next Jan 2016 not Jan 2017 as your table indicates.

Dave,

Let’s do a little math. The typical CPP per month is about $700.

0.58% – 0.56% = 0.02%

$700 x 0.0002 = 14 cents per month

After working in accounting for 20 years, I know that there are times when pinpoint accuracy is important; I don’t see getting an estimate of money to be received 10, 15 or even 20 years from now, especially with the inflation issue, as being one of those times. But if it is important to you, and you have the spreadsheet skills, go for it!

Your still using 2012 max CPP of 1012.50 and then relying on the user to input inflation. Any inflation they input would be wrong because inflation was different in each of the succeeding years! Clearly this has not been updated.

Its not for me, and I can only suggest that viewers in the RH website follow Doug’s instruction on how to do the calcs using their own CPP statement.

Sorry to be so critical but the pensionplanner CPP calculator is a mess.

Dave,

The inflation from 2013 on is assumed to be 1.5% – which the user can change. The actual inflation each succeeding year will of course be different; the issue here, again, is “How accurate do you need an estimate to be, considering you won’t receive the CPP for x number of years?” and we either estimate the inflation or ignore it.

People who ask the question “How much should I expect to get in CPP?” can be divided into 3 groups:

1. Those who are willing and able to build spreadsheets; like you and I, Dave, these people can take Doug’s article and custom build a spreadsheet solution

2. Those who don’t want anything to do with spreadsheets; these people are quite content to pay someone (like Doug) to crunch their numbers and give them an estimate

3. Those who fall between the first two groups; these people don’t have the skills to build a complex spreadsheet, and don’t want to pay for something if they can get it for free; they are willing to open a file, point and click, and enter some numbers.

The free CPP Calculator, for Excel or the free OpenOffice, is meant for the 3rd group.

Here is a critical point most people miss: The amount of CPP you will get, combined with other income, will affect the amount of taxes you pay. It will also affect,if applicable, the amount of GIS you get, and if married, the amount of Allowance you will get (if any). It will also affect the amount of Survivor’s Pension you will get if you are in that unfortunate situation.

If readers of this blog are looking for a simple, easy way to get an estimate of future CPP earnings, the free CPP Calculator is the way to go (for pinpoint accuracy, please consult your crystal ball).

If readers want to know if they should take their CPP early or late, please remember that other factors come into play: Taxes, GIS,

Allowance, Survivor’s Benefits. To see how these interdependent factors work, get the free (for a limited time) PensionPlanner on my web site pensionplanner.ca

Thank you Dave for your honest critique, and thank you Jim for posting my comments!

Ivan,

Just a quick post to let you know I’ve read your response posts.

I wish you well with your website / calculators.

Dave

Doug, I have one rudimentary question. My wife and I moved to the USA with Green Card status in 1995. I now qualify for US SS but have been told I may be able to collect both US and Canada retirement benefits since I paid into the Canadian CPP and SS for over 25 years prior to our move. My wife also contributed the same period of time, but has not worked in the USA.

Do I qualify for some amount and may I collect it while residing in the United States during our retirement?

Michael

Yes, you and your wife should likely be eligible for both Canada Pension Plan (CPP) and Old Age Security (OAS) pensions from Canada, even though you’re currently residing in the USA.

Hi,

In step 2 of the CPP Benefit calculation one of the components is the 5 year average YMPE. I am 55 years old and retired a couple of years ago and am not contributing to CPP. I plan to take CPP when I am 65 (in another 10 years). Is there any way for me to get the 5 year average YMPE for the calculation for when I am 65. Thanks

Stephen

The short answer is “no”, you can’t know for certain what the 5-year average YMPE will be in another 10 years. You could possibly estimate it based on how the YMPE has increased for the previous 10 years, or based on any other assumptions you might want to make. I prefer to keep my calculations in 2015 values though, knowing that the actual amount will keep pace with inflation (or at least with any increases in the “average industrial wage” in Canada).

I like to know if there are cases in which the net payments of CPP can be reduced by SC from one month to other. I understand that increases in the rates ,increases the month payments, but there are also decreases in these rates? or there are other factors for the decrease of the payments.

Enrique

The only two reasons that I can think of that would cause a CPP retirement pension to be decreased are:

– earnings that really belonged to another contributor had been credited to your account in error;

– a loss of pensionable earnings as a result of a CPP credit split.

If at age 60 I have stopped working and have 21 years at maximum PE and 21 years at low earnings or 0 earnings, is it better to take CPP early at 60 rather than waiting until 65 or 70 since I would have 0 earnings in those years and have already reached the maximum general drop off years of 0 earnings? I plan to live until at least 90 years of age if not 100 years.

James

If you do live until 90 or 100, you will always be better off if you wait until age 65 or even 70 to take your CPP.

If you want some actual numbers to base your decision on, contact me at [email protected] and I will do some calculations for you (for a fee).

So taking the CPP benefit at age 65 or 70 for 25 years or more will make up for the reduction in the monthly benefit from having 0 income years from age 60 to 65 that won’t be dropped from the calculation and will end up better than taking it at 60 and not having those extra 0 income years count against me? When I get closer to age 60 and the decision I might have you run calculations for me.

James

I look forward to doing some calculations for you whenever the time is right for you.

this page seems to be missing something, part two “the following two links” … but there is only one!

Elizabeth

Thanks for pointing this out. There used to be two links to Service Canada sites, but they deleted those sites and I posted the information on one table on my own site. I will correct the above article ASAP.

I am 60 and have been collecting CPP Disability for the last 3 years. This amount I am getting is higher than my regular CPP pension I would be receiving if I were 65 in 2010. I understand that at age 65 my disability pension ends and I go on to regular CPP benefits. I haven’t been able to work since 2010, so I am wondering does my CPP rate remains frozen at that 2010 rate going forward?

Joan

When you turn age 65, your earnings will be escalated to a 2010 value when your disability pension started. From then it will be escalated based on CPI increases from 2010 to 2020.

If you tell me your current CPP disability amount, I can estimate what your CPP retirement amount will be.

Doug,

Thank you very much for sharing you expertise, and great articles on this web site!

Could you please clarify a few things found on servicecanada.ca web site?

1. Eligibility details Your CPP retirement pension:

1a) an applicant have worked in Canada and made at least one valid contribution to the CPP;…

on the other hand,

1b) You have to contribute to the CPP for at least one-third of all the years of your “contributory period”

So, if 1b) rule prevails, rule 1a) holds automatically, right?

what is 1a) clause standing for then?

2. If rule 1b) holds, how is required one-third of total contribution period is calculated, based on years or months or both?

That is, for example, I worked in Canada for 12 years and 3 months [12.25 years] and required, say, to have 15 years of

contributions to be eligible for CPP pension, more precisely, at the time of presumable start of CPP, I need

519mon/3=173months=14.4 years, in such case what would I need:

2a) 2 more years of valid contribution to CPP [if 12.25 years will be rounded to 13 yrs and 14.4yrs rounded to 15

years]

OR otherwise,

2b) 173 mon – 147 mon=26 months ->rounded to 3 years of valid contribution to the CPP ?

OR else?

3. If I worked in the US for some time, say, for 1.25 years=15 months, will it be counted as 2 years of work under Soc. security agreement or just as 15 months towards required contribution period?

4. if, say, my CPP application is denied for some reason,like insufficient contribution period, would I be able to reapply after situation changes in a few years?

Again, thank you for help!

Alex

Alex

I think you’re mixing things up a bit. The eligibility criteria for a CPP retirement pension is simply one contribution.

The requirement for contributions for one-third of the years in your contributory period (with a minimum of 3 years and a maximum of 10 years required) applies to death and survivor benefits, NOT to a retirement pension.

Hi Doug, I have a quick question if you are able to answer it.

I have been on private LTD through work for about a year. I was made to apply for CPPD and was just informed that I am eligible. CPP then paid my insurance plan for the 11 months that they said I was eligible for CPP. In reading the information package today, I see that CPP is taxable and I will have to pay tax on this lump sum. However, I already paid tax on the original amount that was first paid my LTD plan. Is there a way to get a rebate on this, so that I am not paying double tax?

Jim

Good question! I’ve never really thought about this issue before, but it seems to me that the T4 slip you receive from your LTD plan for 2015 should show only the net amount that you received from them after they received your retroactive CPP. If so, that will ensure that you will only be taxed once on that money.

I “retired” at 47 with 27 years of maximum cpp contributions. I started my CPP at age 60.5 and it was $580/month. This is only about $80 than the maximum (with 36% reductions to age 60). Maybe they made a mistake? If not, one has to wonder why anyone would work all those extra years.

John

I’d need to know some more details before I can comment on the amount of your CPP:

– what month and year were you born;

– what month and year did your CPP start;

– did you qualify for the child-rearing dropout at all, and if so for how many months/years

– did you have any employment earnings before/after your 27 years of max contributions, and if so how many and how much.

I can say that if you started your CPP at age 60.5 (54 months early), depending on what year your CPP started it would have been reduced by 31.32% at most (54 months x 0.58%).

Dec/53

July 2014

no CRDO’s

No earnings before or after

Yes, 31.32%, I was just approximating with the latest reductions. There were 2 partial years, 1972 and 1974 with earnings of $2200 and 4200. 1975 thru 2001 were all at maximum

John

Based on this info, your CPP retirement pension in 2014 should have been $576.11, which is $148.23 less than the 2014 maximum of $724.34 for someone your age.

At age 60.5, your best 35.275 years are used to calculate your CPP. You had the equivalent of 28.04 years of maximum, so your CPP was approx. 79.5% of the maximum for someone your age.

Thanks for the calculations.

In this scenario, if one had waited until 65, with no further earnings, would their portion of the maximum have dropped from 79.5% to 71.8%? The years at max of 28.04 would be the same but the NCM periods and dropout would increase the “best years” from 35.275 to 39.01

If so, waiting until 65 would reduce the max entitled CPP by 8%. That doesn’t seem quite fair.

BTW, isn’t the max $713.13 for 2014, with my reductions of 31.32% (1038.33 x .6868)?

John

You have the math substantially correct if you had waited until age 65 to start your CPP. I won’t comment on the fairness of the situation, but it’s a good example of my expression that by waiting “you get a larger slice of a smaller pie”, but you do get more pie if you wait.

As to your reduction factor, I said “31.32% at max” before I knew what year you started your CPP. For 2014, the reduction factor was 0.56% per month or 30.24% for starting 54 months earlier than age 65.

Service Canada will tell me what my CPP benefit would be if I was 65 now, but i’m 57. Is there a quicker way than your calculations above to simply extrapolate from the figure they give me today and add in eight more years where I expect to earn close to the YMPE (around $53,000 this year) to come to a rough idea of my benefit at age 65?

James

There really isn’t a shortcut that would give you an accurate result.

If you want, I can do the calculation for you for a fee of $25. If you’re interested in this service, email me at [email protected]

Have you calculated the Breakeven point if one delays CPP to 65 (from age 60) with zero earnings (from 60-65)?

Reason I ask is that I understand if one waits until 65 and doesn’t earn anything from 60-65, the CPP payment will be based on a lower average earning.

John

There is no simple answer to this question, as it varies from person to person, depending on their record of earnings from age 18 to age 60.

If you have 39 years of similarly good earnings between age 18 and 60, having 5 years of zero earnings from age 60 to 65 won’t reduce your average earnings at all (because the general 17% dropout allows you not to count your lowest 8 years if you take your CPP at age 65).

On the other hand, if you already have 8 or more years of zero earnings between age 18 and 60, having 5 more years of zero earnings from age 60 to 65 will reduce your average earnings significantly.

Sorry, I should have mentioned that the scenario with 8 years of zero earnings between 18 and 60 is what I am interested in. So, how significant is the reduction if one does not earn anything after 60?

Here’s what I calculated based on 2014 max of $49,840, 34 years earnings at max contributions with 7 years dropout at age 60 and 8 years at 65:

(49840×34) / (12×35) x .25 = $1009 unreduced CPP at age 60

less 36% = $646

If I wait until age 65 with zero earnings:

(49840×34) / (12×39) x .25 = $905 (would have been $1009)

So, the ‘penalty’ for waiting those 5 years is approx 10% (1009-905)/1009

The new break even point moves up about 4 years

Does this appear correct?

John

You are just about bang on!

If you wanted to be slightly more accurate, the dropout at age 60 is actually 86 months, so if you used 418 months as the divisor for your age-60 calculation you would be 100% correct.

Hi John, I always defer to Doug but here’s what I think.

If you had 35 M years (after dropout)at age 60 you would get the max available age 60 CPP. 100% – 36% penalty = 64%. For 2016 the max age 65 CPP is 1092.50 so x .64 = 699.20.

At age 65 you need 39 M years after dropout to get the max. So if the same person had no additional earning years (zeros to age 65) they would get 35/39 of maximum pension at age 65 (1092.50/39*35 = 980.45. (89.74 % of max).

In my view your 10 % figure is pretty accurate. The break even point for the example is about age 77 (144months after age 65

In my own case I won’t begin adding “zero” months until about age 63 yrs 4 mths. and I have decided to wait until at least age 65 (possibly a little later) to start my CPP.

Hi Doug, I just saw your website for the first time. Thanks for making your estimated CPP calculations available. I’m told that Service Canada’s CPP estimates at age 60/65 are based on a sustained income average until age 65. The strange thing is when I use your calculator, I’m closer to Service Canada’s figures when I input my pensionable earnings upto the date they have earnings for? If I enter income estimates to age 65 I end up with a much higher CPP amount than Service Canada’s estimate? What would you charge me if I send you my Excel spreadsheet to confirm my figures? Thanks, John

John

I’ll email you directly so that we can connect.

Hi Doug:

There appear to be two Service Canada/Govt of Canada CPP benefit calculations, that provided by the “Canadian Retirement Income Calculator”, of which I’ve read your article and consequently will ignore, and that provided by the Service Canada “Estimated Monthly CPP Benefits” webpage which provides (in my case) “If your pension were to begin next month, you could receive a monthly retirement pension of: $423.45. If you were 65 today, you could receive a monthly retirement pension of: $505.31.” I understand the first figure to be merely the reduction of the second figure by the current .6%/month based on my current age (I’ll be 65 May 2018), so the crux of the matter is how Service Canada comes up with the second/$505.31 figure, and also the cryptic qualification “If you were 65 today”. I’ve tried calculating this figure and have got very close to it, but just wondered if you had any insight/info on how Service Canada calculates this figure?

John

This estimate is calculated the same way as the estimate on the CPP statement of contributions. Here’s an article that I wrote about the SOC estimate: https://retirehappy.ca/understanding-cpp-statement-contributions-soc/

Doug:

I checked out your linked article ‘Understanding the SOC’: I keep falling short trying to duplicate their $505.31 cpp monthly estimate for me using an average pensionable earnings value for ‘future contributary years’ which in my case are 2015-(May)2018, then putting each ‘future’ year, as well as all known contributory years, through the (UPE/YMPE) x average YMPE for five-year period (ending in 2016, which is why I think they say ‘If you were 65 today, you could receive … $505.31’). I think I’m pro-rating the partial years correctly, so perhaps there is some other ‘wrinkle’ to the process I’m missing. Could you confirm that while you say in your article that the process does not “mean simply calculating the mathematical average of all of the pensionable earnings shown on the SOC”, it does start with exactly that (followed by everything else you mention).

I’m doing my calculations on a spreadsheet constructed from the information you provide in “How to calculate your CPP retirement pension” (for which, with the same gratitude expressed by so many others, I heartily thank you). I’m both curious as to how Service Canada is calculating their estimates, and it would serve as a check on my own calculations/spreadsheet if I could duplicate their results on it.

Doug,

I am retiring from the post office at 55,after 30 years, but have working continuously from 18.I have a bridge until I turn 65,so I will not be collecting CCP until 65,as well will be working part time making about 20,000 until 58,so given your math that makes 40years of contributions but not at the maximum for my teen years and my late 50s.Most of my fellow CPC retirees find that CPP and the bridge are almost a wash around 950.00 per month.Thanks for the info

I’d like to see you write an article on the overall value of the CPP as compared against the contributions that individuals and their employers make over a working lifetime. For me personally I’ve calculated (using net-present-value analysis and average yearly historical rates of returns) that the present value of all my CPP contributions would be approximately $50,000. Given that employers also contribute to the CPP by an amount equal to the employee’s contributions, that would make my total CPP contributions, in today’s dollars, around $100,000. If I started collecting CPP today (assuming age 65) it would take me about 11 years to ‘recover’ all my CPP contributions and reach a break even point in terms getting back all the funds (with interest) I and my employers have contributed to the CPP over my working lifetime. Makes me wonder what the medium age of ‘death’ is for all CPP recipients – if more than 75 then the CPP investment fund must be making more than the average historical rates of returns.

I think you’d also have to factor in the disability benefit which has been an increasing draw from the fund over the years – more people claiming it. Example a relative of mine suffered a stroke at 52 and began getting it, so he will have not made full contributions. When we think of the value of whether CPP is good or bad you have to factor in that it is also a disability insurance plan for those age 35 or older.

Just like the term insurance and disability insurance I used to pay each month for, they are real costs. But I’m happy I never used either… or the CPPD.

I don’t know if you are inclined to answer my question about CPP contributions, but will appreciate if you do so.

I am trying to help a friend with very low income of only $4800 for 2015. (Reported on Line 104.) This is money she earns babysitting in her home. The two families she sits for gave her receipts but no T4s or anything like that and they claim the expenses on their taxes.

She never worked before 2014 and is in her forties. Her only income has been Social Assistance which now supports her and her 20 year old son who is not disabled but has no income yet. (She does report her earnings to Social Assistance.)

I did her taxes for her the last 2 years (no earned income one year and only $2500 another) but she said she didn’t want to ‘bother’ me with it this year, so I feel bad for her that she is having a problem. So she had her taxes done at a volunteer center this year and they say she owes almost $130 for CPP contributions. (Her tax assessment came in her mail and confirms this.) As far as I understand they did not apply for the WITB – but am assuming if her earnings are considered legitimate enough to pay into CPP then she should also qualify for the WITB. At least if the got that, it would offset the CPP contribution.

So my question would be if there is anyway to avoid this CPP contribution payment and if you happen to know if she should qualify for the WITB. I am only guessing, but I imagine this tiny amount of CPP contribution will result in on a very tiny payment if anything when she turns 65. I guess I also wondered if she reported that income on line 150 and wrote ‘babysitting’ in the space provided – if that would have prevented the CPP bill she can’t afford to pay. I apologize if I have taken things way of subject, but I feel bad for her predicament especially since she is trying so hard to do the right things in the right ways.

Thanks so much for your time, Linda

Linda

I’m not a tax expert, so I can’t comment at all on your questions about the WITB. I can tell you that if she does make the $130 contribution to CPP, it would be worth $2.50 per month towards a CPP retirement pension at age 65.

I calculated her WITB as $10.20 on $4800 income. She may be able to reduce her income (and CPP payable) by claiming expenses incurred to generate the babysitting income (rent, food, utilities etc)

The good news is that she’ll be able to collect about $16.000 in OAS/GIS at age 65 providing she has been a Canadian resident for 40 years and has no other income.

Will CPP notify me if my ex-husband applies for the child rearing drop out provision? Do both parents have to agree on who gets to apply for it? He is 18 months older than I am and will likely be applying for CPP before me.

CGJ – Unless your husband actually received the Family Allowances and/or Child Tax Benefit himself, he would indeed need your consent in order to claim the child-rearing dropout. You, on the other hand, can likely claim the child-rearing dropout without his consent as you probably received the FA and/or CTB as being the female parent.

I’m on CPP disability since 2012 and receive $925. I’m a 61 year old. Service Canada website estimates that if I’m 65 today I’ll get $560 CPP and I know that this is not correct. Please tell me, what would be my approximate CPP in 4 years (at 65). Thank you, Jack.

Jack

Your CPP disability pension of $925 will convert to a retirement pension of approx. $605 at age 65 (plus any cost-of-living increases during the next 4 years).

He may also be eligible for GIS/OAS if he has been a resident of Canada long enough and his income is low enough. If his only income is CPP of $605, he could receive $570 OAS and $420 GIS for a total of $1595 as a single person, married rates are different.

http://www.esdc.gc.ca/en/cpp/oas/payments.page?

Hello Doug,

First of all thanks for the great site regarding CPP.

I am on CPP Disability income and expect to be on it until age 65. I have read that the CPP disability benefit automatically converts to regular CPP benefits at age 65. What if I want to defer my retirement CPP benefits to a later age (perhaps even until age 70?). Is this an option for me or because the CPP disability am I forced to automatically convert to regular CPP benefits at age 65 without the opportunity to defer? The .7% per month enhancement for deferring CPP after age 65 intrigues me. I realizes it also depends on my finances (if I can afford to defer at age 65 without the CPP cash flow) and my health at the time I am 65 and life expectancy. Thanks in advance, Tom

Thomas

As you suggested, your CPP disability pension will automatically convert to a retirement pension when you turn age 65. I’ve never heard of anyone doing it, but in theory you should be able to request cancellation of your CPP retirement pension within 6 months of that conversion happening. You should then be able to reapply anytime after that and receive the 0.7% increase for every month of delay after age 65 (up to a max increase of 42% at age 70).

Hello Doug, I was born in 1953. Started to work when I was 18. , I suffered a work injury in 1991 and have never been able to return to work. I am on the serious injury program with Ontario wsib. I had to apply for cpp disability and have been in receipt of the maximum cpp disability benefit since 1994 …I will be 65 in 2018. Can you tell me how much cpp retirement I will receive at age 65 I presently receive the maximum amount of cpp disability. It appears that I’ll be penalize for being unable to work and will not simply transfer to the maximum retirement benefit dollars. Thank you

Hector

If you started receiving a max CPP disability pension of $839.09 in 1994, it should be approx. $1,242.94 now in 2016 compared to the max of $1,290.81 for a max CPP disability pension starting in 2016. This is because your CPP disability pension has been indexed to price increases since 1994 rather than wage increases that affect a CPP disability pension starting in 2016. In the same manner, your CPP retirement pension will approximate a max CPP retirement pension from 1994 indexed to 2018 based on price increases, so it will be approx. $1,028.66 compared to $1,092.50 which is the current max for a new CPP retirement pension.

Hector. What is the amount of your 2016 cppd.

Hi Doug,

This is really a great source for all of us who are trying to figure out what our CPP benefits will be.

I’ve used this info to do my own calculation and got the result that is about 10% lower than what My Service Canada site estimate.

I am 62 years old, retired 3 years ago (zero earnings for the last 3 years). Planning to start collecting CPP at the age of 65, so there will be another 3 years of zero income.

What surprised me a bit is that when I did the “what if” scenario calculation, taking into account the zero earnings for the next 3 years, I’ve come up to about 10% higher CPP monthly benefit than in my original calculation (2019 versus 2016).

Since there will be 3 more years of zero income, and zero contribution, I expected the monthly CPP benefit to go down. I estimated the average YMPE to go up approximately 2.5% every year, for these next 3 years, which brought my TAPE and TAPE after dropouts to a higher level, than in the original (end of 2016) calculation.

Does this make any sense to you? Is it possible that my monthly CPP benefits might go higher, if I wait another 3 years?

Thank you sir, for being such a valuable source of information.

P.S. If I am to get a really accurate estimate from you of what my CPP benefits will be (if I start collecting 3 years from now), what is the fee that you charge nowadays for such a service?

Hi Doug,

I read your article with interest! I have a question pertaining to my wife’s and my CPP payments. I contributed $3,458.25 from 1969 through 1986 and the estimated payout is $395.29. My wife contributed $2,440.47 from 1971 through 1986 and her estimated payout is $376.82. Considering the considerable discrepancy in contributions what could explain the small difference in estimated payouts? Much appreciate your take on this!

Thanks and Regards,

Larry

Larry – Comparing CPP estimates on the basis of total CPP contributions is pointless, because a maximum contribution of $82.80 in 1969 is equivalent to a maximum CPP contribution of $419.40 for the purpose of calculating a CPP retirement pension.

Thanks for the very helpful post!

I turned 18 in February of 1968. I finished working in July of 2016 and will be collecting my first CPP payment in August of 2016.

Two areas I’m still not sure about:

1) When calculating the UPE/YMPE for 1968 do I prorate the YMPE for this year 10/12 since I didn’t turn 18 until February? Similarly in 2016 do I prorate the YPME to 7/12 since I only worked until July and will begin collecting CPP in August?

2) My NCM is 581 months – March 1968 (the month after my 18th birthday) to July 2016 (first CPP cheque in August 2016). Based on this contributory period I have a dropout of (581 months * 17%) = 99 months (rounded up from 98.77). I’ve worked for 17 months after my 65 birthday (March 2015 to July 2016). Can I now add these 17 months to the 99 months dropout I already have to effectively increase my dropout to 116 months?

Thanks,

Richard

Richard – Good questions!

1) No, you don’t prorate the UPE/YMPE when you calculate the APE, but you do consider that it was earned in less than 12 months in deciding whether it should be dropped out as being your lowest earnings.

2) You apply the over-65 dropout first to drop out 17 months and then you drop out 96 months (564 months * 17%) under the general dropout.

Doug fantastic reading. Question about survivor benefits the information I could dig up on the Service Canada website was not all that helpful. My monthly CPP is about $700.00/month, my wife who still is working will receive an estimated monthly CPP at age 60 of $540.00. If I pass away before she, will she be eligible for any survivor benefits? The only information I could find is that survivor benefits are reduced if the survivor is collecting their own CPP.

Bruce – Read this article for the answer: https://retirehappy.ca/cpp-survivor-benefits/

I am looking for information on the CPP in My Account and I cannot find anything related. All I see is information regarding my income tax returns and child tax benefits.

Where exactly do I find the information to obtain a CPP Statement of Contributions or place to apply?

Very confusing because the CPP information page tells me if I want to apply I must go to My Account to do so and there is nothing there that pertains to the CPP?

I have went through every menu choice and every page in My Account and have found nothing.

Any suggestions?

Monte – Here is the correct link: http://www.esdc.gc.ca/en/msca/access.page

Here is a quote from Fred Vettese from the Financial Post (http://business.financialpost.com/personal-finance/retirement/why-you-should-wait-until-you-are-70-to-collect-cpp-benefits):

“By starting CPP pension at age 70, the initial amount payable is at least 42 per cent greater than if CPP starts at age 65. In fact, it is more likely to be about 49 per cent greater for certain technical reasons.”

Any idea what these technical reasons are? When I use your information to run my numbers, my increase is less than 42% because I have too many yeas of low income (assuming I stop working long before age 70).

Michael – I think he’s referring to the “over 65 dropout” that I discuss in my article above (which is in addition to the 17% dropout). If you’re not working after age 65, those months can simply be dropped out and your increase would always be 42% at age 70. If you are working after age 65, those months can replace earlier lower years on a one-for-one basis, making the increase greater than 42%.

That makes sense. Thanks very much once again, Doug.

Doug, thank you for this most helpful article.

I am not sure that I understand the Maximum CPP Payment Amount as presented on the Government’s website identified below.

Your calculation algorithm reveals my expected monthly CPP payment at age 65 in 2016 to be $1092.50.

, lower table, cell C2, shows that the Maximum Retirement Pension Payment Amount (2016) is also $1092.50.

Assuming that the Maximum Retirement Pension Payment Amount does not increase in future years, and that it is independent of age(?), the fact that my expected monthly CPP payment already equals the Maximum Amount suggests that it would be strongly disadvantageous for me to postpone the commencement of my CPP past age 65; i.e. the monthly payments would not be allowed to grow above the Maximum Amount, and during the deferral period I would miss out on all the monthly payments that I would have received had I not deferred commencement of CPP past age 65.

If there are error(s) in my assumptions/conclusion, could you please correct me.

I really appreciate the support you are providing.

The amount of $1,092.50 is the maximum for a CPP retirement pension starting at age 65 in 2016. If you delay, your actual CPP retirement pension could exceed $1,092.50 due to the age-adjustment factor and/or the 5-year average YMPE ending in the year that you actually start your CPP.

Terry, Just a note, you will also want to apply for GIS. Processing times stated on website are a joke. it suggests three months before your birthday. In actual fact processing times are 20+ weeks. (mine has been over 6 months) Talk to a person 6 months before your birthday and see what is happening then. Also ask for a form that re-assesses your GIS based on your new lower amount of income. Then find out if they can be submitted together, I was told to wait until i started to recieve GIS which I was doing, then i was told to send in the form, this ended up causing a delay in my original GIS application.

Doug , thank you for all the info. I am still confused over the transition from CPP disability to regular CPP. When I called Service Canada they told me that when I turn 65 in 2021 I will receive roughly $713.00 including the child rearing.

I have been on disability since 2007 and currently receive $1161.00. They told me my rate was based on the amount I receive now – the flat rate. She told me that is how they calculate it.

Please enlighten me on the formula you give to establish the rate and the one Service Canada is using because I really don’t understand this.

Thank you

Terry

Your CPP disability pension of $1,161 will convert to a retirement pension of approx. $919.43, not $713.00.

I can’t explain how Service Canada came up with their number, but they’re wrong.

The correct method is to subtract the current flat-rate benefit ($471.43) from what you’re currently receiving, and divide that result by 75%.

$1,161 – $471.43 = $689.57 and $689.57 / 75% = $919.43.

Doug

Taxtips.ca is reporting that the 2017 YMPE is 55300.

Which govt agency reports this. Stats Can ? I can’t seem to find the news release.

Found it ….. CRA yesterday …. 55300.

Dave – Thanks for providing this info! And with that YMPE, the new maximum CPP for 2017 will be $1,114.17. You read it here first!

2018 $58,000 $58,000 100% 0% 0% 0% 0%

2019 $59,700 $59,700 100% 15% 0.30% 0% 0%

2020 $61,500 $61,500 100% 30% 0.60% 0% 0%

2021 $63,500 $63,500 100% 50% 1.00% 0% 0%

2022 $65,600 $65,600 100% 75% 1.50% 0% 0%

2023 $67,800 $67,800 100% 100% 2.00% 0% 0%

2024 $70,100 $74,900 107% 100% 2.00% 100% 8.00%

2025 $72,500 $82,700

The above mentioned are the future YMPE as found on the ministry of finance web site

My only caution is that those are estimated YMPEs, not necessarily the actual YMPEs.

I maxed out my CPP contribution in most years over the past 35 years but have not been making as much money the past 3 years. How critical is it to max out your CPP contribution, particularly as you near retirement. I am 59. Thanks!

Mike – It won’t likely make much difference in your situation, but it depends a bit on what age you plan to start receiving CPP. If you want me to do some calculations for you (for a fee), email me at [email protected]

Hello Doug,

I received a letter from Service Canada dated 28 Sept 2015.

I had turned 64 in early Sept 2015.

Quote from the letter:

“We have calculated the approximate amount you could receive if your pension were to begin now. Based on your past contributions to the CPP, you would receive $943.18 /per month.”

What does this quote mean? Service Canada knew my age (64)when they sent this letter. This quote tells me that if I were to take the CPP as of Sept 2015 (12 months early at age 64), the monthly pension amount would be $943.18 and some greater amount if I took the CPP at a later date.

Any clarity that you could provide would be appreciated.

Thanks

Darryl – You’re right that they knew your age and they knew your earnings up to Dec 2014. Their calculation should have been exact unless you also had earnings in 2015 and/or were eligible to claim the child-rearing dropout provision.

I was born in November. In calculating the NCM for the year that I turned 18, do I count 12 months or 2 months? Similarly if I retired in May 2012, do I count 5 months or 12 months for that year?

Your contributory period starts with the month after you turn age 18, so your NCM for that year is 1. Your contributory period ends with the month prior to the month that your CPP retirement pension starts, so if by “retired in May 2012” you mean that your CPP started in May your NCM is 4. If however you simply stopped working in May and didn’t start your CPP until some later year, your NCM for 2012 would be 12.

For 2017

AYMPE (Average yearly max pensionable earnings) that is used to calculate new pensions increased 2.0%.

For existing pensions the CPI increase is 1.4%

When I turn 65 in 2017, I will have worked only 33 years in Canada because I immigrated in 1984.

From what I understand, all the years I worked have to be included in the calculation of my cpp benefits because I haven’t worked over 40 years?

Am I right?

Zewdu – Yes, you will count all 33 years and they will be averaged over 39 years.

FANTASTIC article, Doug! Huge thanks for this, it had exactly all the details I was missing to make some REAL calculations, instead of the vague misinformation I found in the SOC.

I’m turning 60 in May, and will stop working June 1, but was wondering about the pros and cons of starting CPP right away vs. waiting. I currently have 91 months of 0 contribution, so at age 60 will only be able to drop out 86 of these. If I wait until 65, I will add another 60 months of zero contribution, but would only be able to drop out 5 of these months (in addition to dropping out the full 91 earlier months). So my RTR-FBC erodes from $1068 to $954 if I wait. On the other hand, that’s more than offset by avoiding the penalty. Waiting until 65 would give me the full $954, while starting at 60 would only give me $683 (36% penalty off the $1068). So even with 5 years of 0 earnings that I can’t drop out, I’d still be better off waiting. Waiting until 65, my cumulative breakeven point is at age 83, though, so starting at 62 or 63 may make more sense (breakeven at 75 or 78). Am I interpreting all this correctly?

Hi Doris – It sounds to me like you have a solid understanding of your CPP choices. Congratulations!!

Doris – FYI once you reach age 60, if you have a online CPP account you can watch as your monthly entitlement amount changes each month. I’m also adding zeros after age 62.5 (36.8505 net contribution years)and am going to wait until age 65 to start my CPP.

I created a spreadsheet of my own using (Doug’s explanation)and my calcs match the monthly online amounts exactly.

Cool, thanks Dave, I’ll keep an eye on that starting in May!

When you calculate the average of the last 5 years YMPE, do you prorate based on when your pension commences during the year? ie if you begin drawing your pension in Feb 2016 do you use the YMPE for 2012 to 2016 or do you prorate so that you are only using 2/12ths of the 2016 YMPE (with a similar proration for 2012) Seems to me this could have a significant effect if it wasn’t prorated and you started receiving your pension early in the year.

Ken – No, you don’t prorate the YMPE. All CPP pensions starting in 2016 will be adjusted to $52,440 which is the 5-year average for 2012 thru 2016.

To maximize survivors benefits, Is it better for the surviving spouse to take CPP early, at 65 or defer beyond 65?

Assume both are entitled to approximately 70% of maximum. The non survivor took his CPP at 62.

I tried to go through your example calculations but it was just too complicated.

Hi Mart – Depending on life expectancy, it’s usually best to either take CPP at age 60 or defer until 70. It’s rarely best to take it at age 65. If/when the non-survivor took their CPP is not a factor. If you want me to calculate then numbers for you (for a fee), email me at [email protected]

Read this article for more details: https://retirehappy.ca/cpp-survivor-benefits/

Doug

How do years working in the US affect your contributory months for CPP?

I have 30 years in Canada (26 at MPE) plus 5 years working the US. For CPP calculations are my contributory months still 468 (564 less 17%)with the US earnings listed as $0 earning years?

Paul – Yes, you have it exactly right for an age-65 CPP calculation.

Hello,

I continue to work after 65 (I plan to retire at 72) … and in the above article it reads I can use my working contributions after being 65 to replace where I have lower APE (under 65 years).. how this is done?

If I do that, I will be denied the 0.7 monthly increase for the period I am working after 65?

Thank you!

Hi Ana – It’s done automatically, and yes you will also receive the 0.7% monthly increase.

Thanks, Doug… You are very right!!!!

I just contacted Canada Government and an employee CPP contributions area confirmed that they have already deleted the first 3 years with very low contribution since I have a son 4 to 7 years old during that time.

Best regards,

Ana

Thanks for your informative article and comments. I have built a spreadsheet based on your information and it has been very helpful to me.

My original plan was to retire at 65 and take by CPP then but circumstances have conspired to keep me working until at least 66. I have also been considering using my RRSP’s to cover the period from 66 to 70 and taking the increased CPP at 70.

I am trying to assess how my CPP would change depending on those two scenerios.

1. If I take it at 66 it is currently projected to be $1127.

2. If I take it at 70, the projection is $1476.

How will these incomes change over time assuming my income remains the same relative to the YMPE.

1. Once I start taking the CPP I will get CPI adjustments annually So by the time I am 70 it will have increased by that %. If things stay as the have been 5-7%.

2. Will the $1476 increase by the amount that the 5 year average YMPE increases over those 4 years (something that is harder to project)? That is my assumption but I want to be sure.

The other factor that I see is that I will have and additional year of better income that will allow me to drop a 9th year of lower income. I don’t expect that to have a big impact as my 9th lowest year is not that low compared to my average.

Am I on the right track?

Thanks,

Larry

Larry – Yes, you’re on the right track. The $1,476 will indeed increase along with the later 5-year average YMPE, and you will get that extra year of dropout for your earnings after age 65.

Thank you for all this, Doug. Beyond the math and break-even points, I like to keep in mind that delaying CPP and replacing it with RSPs has the nice effect of shifting income from a source that has risk and MERs. This increases the portion of income that is guarenteed to last for life and is tied to CPI. I think of it as taking out insurance against living too long. If I die before the break-even point then the loss was the premium for the unused protection. If it helps to cover my basic cost of living forever wouldn’t be worth the peace of mind?

Hi Wayne – I agree with your analysis.

My question Doug deals with the drop out period. I started drawing CPP disability in 2001 so they used 15% drop out rule to calculate my monthly benefits and adjusted each year by CPI. When I turn 65 will they recalculate my pension base on the 17% rule or will they use my (Disability Benefit -the flat rate)/.75 rule. It make a considerable difference.

Hi Patrick – It’s a very good question and I’m not 100% sure what the answer is, but I believe it will be adjusted up to the 17% dropout. I can’t imagine that it will make much of a difference though.

I was working full time and was contributing to CPP. About one and a half years ago I went on disability and am currently on disability through the company benefit plan. I have not been contributing to CPP while on disability. I only have about 1 year and 6 months until I am 65. If I am able to go back to work full-time and work 4 to 5 months this year and about 9 months next year, how will that affect the amount of CPP I will receive when I turn 65? If I am only able to go back to work part time, how will that affect the amount of CPP I will receive when I retire at age 65? If I am not able to go back to work, how will that affect my CPP?

Cate – None of those scenarios will have a huge impact on your CPP at age 65, because the rate is based on your best 39 years overall.

Hello Doug,

CPP Contributions:

you said “The only other real dropout is the over-65 dropout, where you can either automatically drop out any years after age 65 if they are lower than your average, or if they’re better than your average earnings, you can use them to replace lower years (this dropout is performed after the CRDO and prior to the general dropout)”… In my case, I immigrated to Canada in Dec 28 1989 and I was the primary caregiver of my 4 children (only one of them was 4 years old, the other 3 were over 7 years of age) Even after my youngest became 7 (in 1992) it was difficult for me to generate a good income: the first 8 years contributions were under the “Maximum”. After 1998, and currently, I am contributing the maximum. But, since on Aug 2014 (when I became 65) I kept/keep contributing the Maximum, I wonder how my early contributions will be adjusted… Would you please explain?

Other question: PRB

After reaching 65 (Aug 2014) I kept contributing the Maximum… I plan to begin cashing the CPP on April 2017 (+retroactive to April 2016) and stop making CPP contributions as soon as I get the CPP first payment (+ retroactive). I wonder how much I would get as a monthly PRB?

Thank you in advance for your response.

Hi Ana – Your max earnings from Sept 2014 (month following age 65) thru April 2016 (month prior to effective date of CPP) will be used to replace 20 months of earlier low/zero earnings months.

I think you already have the PRB answer for your 2016 earnings. You may also receive a PRB effective Jan 2018, depending on your 2017 earnings/contribution.

Thank you, Doug

The year I turned 18, I contributed to the CPP only for 6 months as my birthday was in Jun. If I cannot prorate the YMPE for that first year, this brings down by half my percentage (UPE/YMPE) for that year. In earlier posts you mentioned not to prorate it. What is the rationale behind not prorating? This somehow does not seem right. The same would happen for the year that I turn 65. Is there any way to address this beside dropping off both partial years of contributions?

Hi Ray

Prorating the YMPE is exactly what you do, so you could earn a 1/2 year of max earnings at both ends.

Hi. Dear. My name Is Kent, I born on 1956 June, I had worked over 36 years, last year out of work,then collect unemployment for 31 weeks, and still can’t find work.now I taken some moneys from my rrsp saving for spend. I think to take early retirement!. i have more than 350,000$ on RRSP. My question here: what best way plan to do my rrsp or take early retire or wait to to after 65 year old. anything not to affect my pension income. I would like to have some advice from you. Thanks

Hi Doug,

I have a question regarding First Nations being CPP exempt. If there are no contributions made by an individual or they are not being paid by the First Nation Band on their behalf, does this qualify for a drop out year? I am 55 and have been exempt from cpp deductions since last year and if I don’t contribute until age 65, does this affect my cpp monthly income? Can I elect to pay on my own? I have been contributing to CPP in all my previous years of employment.

Hi Mary – Being exempt from CPP contributions doesn’t qualify as a specific dropout, but the general 17% dropout will allow you to drop out your lowest 8 years between age 18 and 65. I’m not positive whether you can elect to make contributions on your own or not, but if you can it would be at the self-employed rate (9.9%), so it might not be worth it.

2017-06-15

Hi Doug,

If a surviving spouse started their own CPP at age 70 in 2017, which maximum CPP amount would be used in the calculation to determine the survivors’ benefit. The 2012 max (986.67) indexed by the CPI – 1058.71 or the 2017 – 1114.17 max.

Hi Dave – It would be the 2017 max of $1,114.17

Dear Doug,

I just wanted to say a huge “Thank You” for the information you gave me last year on how to calculate my CPP retirement pension after my CPP Disability pension ended at 65.

I’ve just received my first CPP retirement pension payment in June and the spreadsheet made from the information you provided to me confirmed they had done the calculations correctly and this has given me ‘peace of mind’ that I am receiving the right pension.

As mentioned in my post last year, the information on the CPP site as well as the information I received in telephone conversations with CPP agents was incorrect and so I was concerned about not receiving the correct pension. Fortunately their computers got the numbers right and so again, thank you for giving me the information to confirm I am getting the right pension.

I have told all my friends about you as well as my financial advisor and told them, if in doubt, hire you to crunch the numbers for them!

Again… a HUGE Thank You! You are providing an amazing service for everyone.

Jo-Ann

Hello Doug,

My CPP will be $650 at 65 but during my working period I’ve not contributed 2 straight years being on long term disability. Will my CPP be increased due to those circumstances. Thank you, Allan

Hi Allan – Are you receiving a CPP disability pension? If so, the time will be excluded from your contributory period so that it doesn’t reduce your CPP retirement pension. If not, any years of zero earnings may reduce your CPP retirement pension at age 65.

YMPE for 2018 is 55900

AYMPE (5 yr average) 54440

Max CPP for 2018 1134.17

Hi Dave – Thanks for the heads-up on the YMPE for 2018, and you’re 100% correct on your calculations!

what will I use for the 5 year average YMPE in your computation if the earning is zero from 60 to 65 and if I take my cpp pension at 65.

Hi Shinji – It doesn’t matter whether there are earnings present or not, the actual calculation is always based on the 5-year average YMPE ending with the year that the CPP retirement pension starts. If that’s a future year, rather than guesstimating future YMPEs and getting the result in future-year dollars, I always use the current AYMPE and get my result in current-year dollars.

Hi Doug, in your article https://retirehappy.ca/how-to-calculate-your-cpp-retirement-pension/ you said

Under the over-65 dropout provision, one of two things will happen:

• First, if you are still working after age 65, you can use these earnings to replace any periods of time under age 65 where you had lower APE.

• Second, if you are not working after age 65 or if your earnings after age 65 are less than any of your under-age 65 APE, you can simply drop out all periods after age 65 from both your NCM and your APE.

The first case applies to me. If I use after-age-65-earnings to replace periods of time under age 65 with lower APE, can I drop out all periods after age 65 from both NCM and APE before calculating my 17% drop out rate for the remaining period?

I am asking because in the beginning of the article you state that (in my case) my contributory period begun the month after I turned 18 (March 1970) and that it will end the month I turn 70 (Feb 2022) which also is the month before the month I plan to start my CPP retirement pension (Mar 2022).

Here are my stats:

Born Feb 1952

18-year-old in Feb 1970

Started work in Ontario, Canada: Sep 1981

Plan to end working: Aug 2021

Plan to start CPP: Mar 2022

As you can see, if my contributory period is 52 years (from 18 to 70 years old), 17% drop out rate (8 years+11 months or is it 8 years+10 months?) will leave me with few zero APE years since I will have worked for “only” 40 years. However, if I can consider my contributory period to be 47 years (from 18 to 65 years old), 17% drop out rate (8 years) will allow me to drop out all zero APE years and also the next lowest APE year (1981). Can I set it up so?

Hi Chris – Your contributory period is 52 years. You will drop out your lowest 5 years under the over-65 dropout, plus 17% of the remaining 47 years (which is 8 years) under the general dropout.

Hi Doug, thank you for such clear and succinct answers. I have a follow up question(s)

1. I am over 65. Can I stop my CPP contributions while still working?

2.My NCM after drop out is then 39 years*12 = 468. What return would I have if I continue contributing to CPP in 2020? In 2019, I will have 38 UPE/YMPE of 100% and a single value of 56.7% (back when I started work in Sep of 1981). I presume that if I contribute to CPP in 2020, I will be able to replace this 56.7% factor with 100%. My 39 year average will grow from 98.9% to 100%. What would be the approximate break even time?

Hi Chris

1. You can’t stop contributing unless you start receiving your CPP retirement pension.

2. Yes, your CPP will increase from 98.9% of max to 100%, but it will further increase by 0.7% for every month of delay, plus 2019 is the first year of the “enhanced CPP” changes, so it will grow even more. The breakeven is approx. 12 years.

Hi Doug. Thank you so much for the great info. It was so nice for a numbers guy like myself to be able to work things through and do the game play for myself, running various scenarios. There is one thing I would like to double check on though.

I understand that if I start collecting CPP at age 60, my benefit would be reduced by 0.6% per month * 60 months = -36%. However, taking CPP at age 60 would also mean that the number of contributory months would also decrease, which in turn increases the CPP, correct?

If I collect CPP at 65, number of contributory months would be 564, then subtract the 17% dropout (96 months) = 468 adjusted contributory months.

If I collect CPP at 60, number of contributory months would be 504, then subtract the 17% dropout (86 months) = 418 adjusted contributory months.

Is that correct?

The reason I ask is because I may stop working at age 50 (but still not collect CPP until 60, which means my TAPE would not increase after age 50.

So, if my math is right, despite taking a 36% hit to the CPP by taking it at age 60, the reduced number of contributory months seems to increase the CPP, such that taking it at age 60 really only drops CPP by 28%.

Do I have that right?

Hi Jeff – You understand perfectly correct.

Thank you so much for your explanations ! I’ve been frustrated with the Service Canada Calculator for so long !

I’m looking forward to being able to set up a spreadsheet to run some scenarios.

I do have a question. I took two 5 month mat leaves and worked part time so that several years are below max. But I don’t recall qualifying for Child Tax Benefit until after my marriage ended. If so, would I not be able to drop the Child Rearing years ?

Thank you so much

Hi Marianne – If you and your children were living in Canada legally, you were eligible for the Family Allowances and/or Child Tax Benefit. If you didn’t actually receive it when you were married because your spouse’s income was too high, that is irrelevant and you are eligible to claim the child-rearing dropout.

Doug, as it turns out, my pension numbers are higher if I don’t take the CRDO. Do I have to use it ?

Thanks !

Hi Marianne – Done correctly, the CRDO can never hurt you. If your earnings were less than your average during any year when the children were under age 7, they will get dropped out. If not, they stay in.

Ya sorry, I realized a little too late that they are only dropped if lower than average. Thank you for your patience !

I turned 18 in March 1971 and turned 65 in March 2018.

Do I use the AYMPE 2018 amount of 54440 for all my calculations?

And I would take the best 39 years dropping off the lowest 8. In my spreadsheet it if I count my APE from 1971 to 2018 is that not 48 years?

Hi Bill – I sometimes speak in years, but all CPP calculations are actually done in months. Your contributory period is 564 months and you drop out your lowest 96 months. 1971 counts as 9 months and 2018 counts as 3 months. When determining whether 1971 and/or 2018 months are dropped out, consider the average monthly pensionable earnings compared to other full years, and not just the APE for the whole year.

As to what AYMPE to use, it is the AYMPE for the year that your pension begins and not necessarily for the year that you turn age 65.

Thanks for the great information!

Earlier in my career, I had earnings less than the YMPE in those year. Now my earnings are greater than the YMPE. My AMPE is now greater than the ‘average YMPE for 5-year period’. Is the APE in each year limited by the ‘average YMPE for 5-year period’ or can my higher earnings later in my career be used to offset the lower earnings earlier in my career in calculating my AMPE? Thanks!

Hi Rick – Your pensionable earnings for any year cannot exceed the YMPE, so your APE for any year cannot exceed the 5-year average YMPE. Your good years now will help bring up your average, but not any more than if the earnings were at the YMPE.

Hi Doug, Thanks for the post. Some questions regarding a peculiar situation:

Scenario: If someone worked in Canada for 20 years, but then moved away to work internationally and did so independently (not as a deployed representative of the Government of Canada). Throughout this time, they remained a deemed factual resident of Canada for taxation purposes only, filed a return every year, and maintained ties to Canada, but never worked in Canada again nor made CPP contributions. They then wish to collect CPP at age 60 in either Canada or elsewhere.

Questions

1- Between now and age 60 (approx. 15 years) should this person voluntarily contribute to the CPP (both their and their employer portions) on an annual basis if they could afford to? (approx. $5,500/year)?

2- Is the status of “deemed factual resident for taxation purposes” sufficient to be able to claim CPP for the years worked outside of Canada even if no contributions to CPP were made throughout the time of international employment?

OR

3- Should the person not make any voluntary contributions at all and simply rely on the first 20 years of employment in Canada which did include CPP contributions?

Thanks in advance.

Hi Max – Regardless where you’re living, you can only make CPP contributions on valid pensionable earnings (income from employment or self-employment in Canada); so the person in your scenario has no option other than to rely on their contributions for their 20 years of employment in Canada.

Thanks Doug, much appreciated.

But one of the “types of employment on which you can elect to pay CPP” on CRA form CPT20-17e is:

Para J: “Employment outside Canada where, under the laws of the other country, you did not have to contribute to a plan that is similar to the CPP”.

If CRA accepts such a claim, should someone voluntarily contribute? Or, would such contributions not result in significant enough CPP payments at age 60? (assuming one contributes the maximum).

Thanks again,

Max

Hi Max – Probably the best way that I can answer this question is by providing this link to an article that I wrote about the value of one year of maximum contributions: https://retirehappy.ca/much-one-year-maximum-cpp-contributions-worth/

Great article. Question I have is if you are not going to receive the maximum benefit, is there anyway to top up to get your CPP benefit to the max?

Hi Bruce – The short answer is “No”. You can only contribute on valid earnings from employment or self-employment, up to the max (YMPE).

Hi Doug

First i’d Like to say thank-you for this post!!! You are a knowledge and kind man!

Secondly i’d Like to ask….

I turned 65 Aug 11th (2018) last year at which time I started receiving cpp all the while continuing to work full time.

Is it to my benefit to continue to contribute to cpp till I stop working!

My yearly contribution is roughly $2500.00 per year and would get roughly an extra $28.00 on my pension once I stop working…. I’m not sure if it’s to my benefit to continue this contribution…

Thanks in advance.

Hi Mary – Using your own figures, it will take you approx. 7.4 years to recover your $2,500 “investment”, after which time you’ll receive a profit of $336 every year, indexed, for life. To me, that’s a very good investment unless you have good reason to believe that you won’t live for another 7.4 years. Here’s an article that I wrote on this subject: https://retirehappy.ca/contributing-to-cpp-after-age-65/

Hello

Enjoyed your very practical article and was able to produce a spreadsheet.

I calculate I should get about $1068 per month if I start CPP at age 65. But is that amount the total amount I will get from CPP per month ? What I mean is I also currently get about $450 per month survivor benefit form my late wife’s CPP.

So when I start to get CPP myself will I get the total $1068 + $450 = $1518 per month, or will my CPP be limited to $518 for a total of $1068 per month. Or is there some other maximum amount that will come into play ? I was not able to find any sort of answer to this on government websites.

Thanks

Hi Robert – Read this article to find out how it works: https://retirehappy.ca/cpp-survivor-benefits/

Thanks Doug.

Things are never simple, are they ?

And I guess I should have looked on this site first the answer 🙂

Robert

Robert, you will lose a very large amount of the survivor’s benefit when you start your own CPP. When planning, suggest you give strong consideration to delaying your own CPP to age 70. You would then continue to receive the full survivor’s benefit until 70. Then at 70 your own CPP would be increased by 42% and you would also still be eligible for the reduced survivor’s benefit.

Obviously we don’t know your complete financial position but to me your facts strongly suggest delaying your CPP to 70 is the best plan. If you struggle determining the numbers I would encourage you to get engage Doug.

This post never showed up so I did the second, now both show!

Hi Dave – I have now deleted the duplicate comment.

Hello, sorry if this is a duplicate, but I am thinking of early retirement (age 45) to become a stay at home mom of teens. I have been working for 20 years outside of quebec. How will becoming a stay at home mom impact my CPP?

Hi Fara – If you have 20 years of zero earnings, it will reduce your CPP at age 65 by as much as 50%.

Great site! So, in preparing my retirement plan with my Financial Advisor, I need to have a more accurate idea of my CPP as I stayed home for 10 years to raise my 3 children. I want the estimate for my child rearing benefit now, before I apply, not after.

I don’t see any where on the My Service Canada site to request this.I don’t want to have to “figure it out” manually myself, do they provide a tool? This will affect many people, yes, mostly women.

Thanks,

Liz

Hi Elizabeth – If you Google form SC ISP1003A, you should be able to print and forward the form to request Service Canada to provide you with that estimate for free. Alternately, if you have your SOC I can do an estimate for you for a fee of $30 plus GST, if you email me at [email protected].

Hi Doug

I am not totally clear on what months I can use for the 96 months of the General Dropout provision.

My contributory period started October 1973 (turned 18 in September), so with my pensionable APE being very low and this being the first year of my contributory period, as I understand it, I would only have to use 3 months of the dropout provision and not 1 year or 12 months.

If this is the case, with these 9 months “not used up”in 1973, could I use these months to pro-rate other years when I was a student and had APEs of approx. 65% per year? By dropping out 4 months in 1974 and 5 months in 1975, I figure I could gross-up these years to the 100% maximum and thus have two additional “M” years.

In total, due to other low income years, I would utilize the full 96 months of the drop-out provision.

Hi Gordon – You’re correct that 1973 counts as only 3 months for dropout because that’s the year that you turned age 18. For all subsequent years however, your earnings are deemed to have been earned evenly over the whole 12 months. 1974 and 1975 will therefore each count as 12 months of dropout.

Thanks for clarifying that Doug. So, what you are saying is, excluding the calculation for the initial and final CPP contributory years (which are in months and always less than a full year), the remainder of the general drop out provision is calculated in years and not months. For a student typically working only the 4 summer months (and often making maximum CPP contributions in each of these months), it does not seem fair that these contributions are then deemed to have been earned evenly over the whole year when often there would have been no earnings over the other 8 months. If the government has a record of everyone’s yearly contributions, would they not also have a record of their monthly contributions? Averaging over 12 months really means that the general drop out provision is more of an “8 year” calculation versus a “96 month” calculation.

Doug, your answers are an incredible source of information that we can all confidently rely on, thanks again.

Hi Gord – You are 100% correct in your understanding. The sources of the government’s records for CPP purposes are the T4 slips issued by employers and the income tax returns completed by the contributor for self-employed earnings, neither of which provide earnings details by months.

Hi Doug

I couldn’t find the answer to this…. apologies if already asked and answered.

I was born December 1955, moved to Canada in 1969 at age 13, so would have started contributing to CPP in January 1974 (first month after 18th birthday). I moved to the US in November 2001, and filed a Canadian / Ontario tax return for 2001. I have not lived in Canada since, and have not been required to file a Canadian tax return. So, my last CPP contributions would have been for tax year 2001, and I would have made the maximum contribution. I believe I made maximum contributions every tax year 1978 to 2001.

My question is, how has my not living in Canada and paying CPP since have affected my pension? Not looking for an exact answer, just a ballpark means to estimate.

Thanks!

Hi Russell – There’s no difference in how your CPP is calculated because you lived outside Canada. If you apply at age 65, your 24 years of maximum earnings will be averaged over 39 years. Your retirement pension will be 24/39ths of the maximum (currently $1,154.58) or approx. $710.51 monthly. If you delay past age 65, that amount will increase by 0.7% monthly up to a maximum increase of 42% at age 70.