The CPP has three main drop-out provisions - general, child-rearing and disability - that remove low-earning years from the calculations and boost benefits
, in which Globe Advisor explores the decisions behind when to take CPP benefits and reviews different aspects of the beloved and often-debated government-sponsored pension plan.
When the CPP calculates the base component of a person’s pension, it drops out up to eight years of their lowest earnings from age 18 to 65. That’s 17 per cent of those 47 years. Mr. Castling notes the 47-year maximum can be further reduced by child-rearing and disability drop-out years, which are done before the general drop-out calculations.
Some people who retire early may wish to delay starting their CPP as long as possible as it will result in a higher monthly payment, says Jason Heath, certified financial planner and managing director at Objective Financial Partners Inc. in Markham, Ont. “It means you’re not penalized for having low-income years while your kids are young, and can potentially enhance your pension through that provision,” he says.
“In effect, your enhanced CPP average would remain unchanged, as if you had continued to work at the same contributory level during the child-rearing years,” Mr. Castling says.Canadians can benefit from the disability drop-out provision if they’ve received CPP disability benefits during their career. Like the child-rearing provision, the disability provision removes years someone received a CPP disability pension from the base component of their CPP benefit.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Your CPP questions answered: Should I take my CPP benefits early and invest them?Readers ask about taking CPP at 60 and investing it - and what returns are needed to do better than waiting until 65
Read more »
CPP to invest up to US$2.2 billion in Telecom Italia’s networkCanada Pension Plan Investment Board has agreed to acquire a minority stake in Telecom Italia SpA’s landline network.
Read more »
Nearly Half of Canadians Plan to Buy a Home in the Next Five YearsA recent report reveals that 49 percent of Canadians have intentions to purchase a home within the next five years, indicating an increase from the previous year. However, only a small percentage plan to buy a home within the next 12 months. The report also highlights the percentage of Canadians who plan to use a down payment and the various sources of assistance they receive.
Read more »
Four years later, Canadians with long COVID are still strugglingThe Globe followed up with readers who shared their experience with post-COVID-19 condition last year.
Read more »
Four years later, Canadians with long COVID are still strugglingThe Globe followed up with readers who shared their experience with post-COVID-19 condition last year.
Read more »