How much will CPP (Canada Pension Plan) and OAS (Old Age Security) pay you in retirement, the Truth about your Retirement Income…
What are the CPP and OAS Opportunities, to Compliment your Retirement?
When we are working with our clients and looking at their income needs in retirement, the first thing we always start with are the benefits that will be provided by the government, such as CPP and OAS. Here we will break down the two income opportunities so you may be comfortable with the numbers that you are using when doing your own retirement planning. If you are asking how much you will receive from CPP or how much will I receive from OAS, below you will find all the answers…
CPP (Canada Pension Plan) Income at a glance.
Here are the current and past CPP maximums to look at when you reach the age of 65, and then we will discuss How to get the Maximums and what rules apply in your own situation. Currently the pensions are indexed to rise, but here are today’s values that you can use to start your calculations.
There are two factors that will influence your ability to receive the Maximum Amounts from CPP and here they are.
1. The time you have contributed into CPP:
The time you spend contributing into the CPP system will be the first factor you must consider when calculating how much you will receive in retirement. Currently you must contribute into CPP 85% of your working years. So this means that if you are able to contribute from age 18 to age 65, then you would have to contribute into CPP for 40 years to qualify for the maximum benefit.
This needs to be a consideration for those who have taken time off to pursue higher education, have lived abroad or have spent many of their working years at home supporting a family.
2. How much you have contributed on an annual basis:
The second part of the equation is based upon how much you have contributed on an annual basis, this is called the YMPE or (Yearly Maximum Pensionable Earnings) and it is a measure to make sure you have contributed “enough” into the system over your working years. The YMPE is a more calculated and complicated number to determine if you are eligible for the full benefit.
To find out each years YMPE see the chart on the CRA website on YMPE Limits here.
CPP Maximums for the Last 15 Years
2016 – $1092 per month
2015 – $1065 per month
2014 – $1038 per month
2013 – $1012 per month
2012 – $987 per month
2011 – $960 per month
2010 – $934 per month
2005 – $828 per month
2000 – $763 per month
How do you find out what your CPP earnings will be in retirement?
It is easy for you to find out exactly how much you will receive from CPP by simply visiting the Government of Canada’s website designed specifically for providing you the information on your contributions here. Canada Pension Plan Statement of Contributions.
How Much will you Get from OAS (Old Age Security)?
How OAS Works, and are you eligible?
OAS or Old Age Security is provided to all Canadians, whether you worked all of your life or not, so unlike CPP there are fewer requirements for eligibility for this benefit.
Here are the 3 main factors to Receive OAS Payments.
1. You must be over the age of 65
So unlike CPP where you can start collecting a benefit as early as age of 60, the OAS benefit will only be available at your 65th birthday. There are no options available to you unlike CPP where you can start collecting a reduced benefit at age of 60.
2. Must be a Canadian Citizen or Legal Resident
At the time you reach the age of 65 and are approved for the OAS benefit, you mus be a Canadian Citizen or Legal Resident of Canada. Even if none of the three stipulations work for you, it is best to check with CRA to see if your country of residence has a shared Social Security Agreement with Canada. See More about Lived or Living outside of Canada here…
3. You must have Resided in Canada for at Least 10 years after your age of 18.
To be eligible, a Canadian Resident must have lived in Canada for at least 10 years after their 18th birthday, and a now Non-Resident of Canada, must have spent 20 years after the age of 18 working to be eligible. Most current residents of Canada do not have to worry about this rule, only offshore Canadians need to be concerned with this calculation.
How Much will you Get from OAS and CPP Combined?
|Year||Max Monthly CPP||Max Monthly OAS||Combined Monthly||Combined Annual Max|
|2016||$ 1,092.00||$ 570.52||$ 1,662.52||$ 19,950.24|
|2015||$ 1,065.00||$ 570.52||$ 1,635.52||$ 19,626.24|
|2014||$ 1,038.00||$ 563.74||$ 1,601.74||$ 19,220.88|
|2013||$ 1,012.50||$ 546.07||$ 1,558.57||$ 18,702.84|
|2012||$ 986.67||$ 540.12||$ 1,526.79||$ 18,321.48|
|2011||$ 960.00||$ 524.23||$ 1,484.23||$ 17,810.76|
|2010||$ 934.17||$ 516.96||$ 1,451.13||$17,413.56|
How can you plan properly to receive the income you need in retirement?
When planned properly we use the benefits provided by the government as a foundation for retirement planning, remember currently the two systems provide income similar to that of a lifetime annuity with indexing to inflation. This means that the current rules will always provide you an income every month of your life, and will even increase on an annual basis to protect your income against the inevitable inflation that will occur. This makes these types of income bases as a very powerful part of your retirement years.
But will it be enough to support you?
Probably not, but if planned properly over the years, the government benefits will be a great start to your income needs. And with the proper planning, you build off those benefits to create an even more powerful retirement income, as shown below.