With retirement different for everyone, the Canadian Pension Plan has become increasingly flexible, a presentation by consultant Sheila Butt shared.
To highlight recent changes to the CPP, Butt was invited by the local Chamber of Commerce to give a public presentation at Dr. Java’s on Thursday.
“On the last review it was determined that Canadians are living longer and are changing the manner in which they work,” Butt said.
People are working longer, aren’t having as many kids and have changed their overall approach toward retirement — all factoring into a handful of fundamental changes to the CPP, which Butt explained in depth.
A key variable is the ability for CPP recipients to begin accepting payments as early as age 60 and as late as 70.
New factors have been implemented, with those at age 60 receiving a reduced CPP rate, at 36 per cent by 2016, and those at age 70 receiving a CPP rate increase of 42 per cent by 2013. Those at age 65 receive the neutral middle-ground rate, which varies depending on contributions.
This doesn’t mean to say that those receiving CPP payments at age 60 can’t continue working. This is where a new post-retirement benefit program comes into play — payments that can continue past the mandatory CPP contribution age of 65, to 70.
Providing scenarios of three fictional people of varying financial states, Butt showed how these and other variables factor into retirement planning for those 60 years of age or older.
“It’s one of key pillars to retirement planning for Canadians,” Butt said. “We’ve got Canadian Pension Plan, Old Age Security, and mostly private savings.
CPP wasn’t built to replace all my earnings in retirement. It was built to replace about 25 per cent of the average industrial wage. - Sheila Butt
“CPP wasn’t built to replace all my earnings in retirement. It was built to replace about 25 per cent of the average industrial wage.”
Though decision-making regarding whether one begins accepting CPP payments begin at age 60, CPP should be on the minds of Canadians far before then — particularly when it comes to the plan’s disability benefits.
“CPP’s there for us through all these life events, so if you are self-employed and … your expenses or costs matched your income, then you’re not paying into CPP,” Butt said.
“So, now you’re a terrible car crash, and hopefully you have other forms of insurance, because CPP’s not there to cover me because I’ve not paid into it.
“It’s part of your income planning all through life, because it’s such a comprehensive plan. There are survivor’s benefits, child benefits, death benefit, disability — then, of course the retirement benefit.”
Service Canada has a number of resources to help Canadians make decisions when it comes to CPP, including a handful of website.
One of the more useful is www.servicecanada.gc.ca/cric, Butt said, as the page’s retirement income calculator provides users with the number most people seek — how much money they’ll receive per month.
For answers to specific questions, Service Canada can be contacted at 1-800-277-9914 for English service, and the same number but ending in 5 for French.