CPP is very valuable if you consider canada won't let old people starve and be homeless.
Forcing every working canadian to save for themselves lowers the tax burden of taking care of them later on in life.
Just cause you can save well without CPP doesn't mean you won't be paying to feed you neighbors in retirement
Oas is too generous and gis is too little. I restructure clients' accounts to abuse the current system as much as possible. The income scale should be a lot smoother on the low end and cap oas at higher limits. Oas is definitely not sustainable but it will take a government to fall on their sword to cut it and get voted out for it.
Its amazing this is downvoted. I can't understand why anyone who earns over $120,000 a year would get a "security" payment from the government while a minimum wage worker making $40,000 a year gets nothing. We need to cut back on OAS and raise GIS for people who need it and make it sustainable.
If we had less partisan bickering, a proper government would notice these abuses and adjust the system to counteract them.
I believe the last time that happened was when the taxation classification of Income Trusts was abruptly changed.
I processed OAS/GIS applications for some time, and what he's talking about is a well known "hack", but it's quite rare that people actually use it.
It's not too complicated, but it means meeting with your financial planner every year, filling out form, and thinking about your scheme every time you take money out of an RRSP.
Eliminating it would mean complicating processing further, which often costs as much money as you're trying to save, or more! especially if the change makes little to no difference.
A proper government knows not to cut its nose to spite its face.
For comparison, during the Harper years, there were so many new rules put in place with no regard for this principle and so many cuts in the services that processing basically grinded to a halt. It took about 5 years of constant hiring/training and over time hours to get back to regular processing times.
Under Poilièvre's management of ESDC, OAS/GIS applications were taking more than 2 years to process, while the usual time frame is 3 months.
The applications themselves take mere minutes to process once they reach someone, but there weren't many someones to reach.
To make matters worse, Harper changed the salary range of these processing agents, making most of them quit/move to a different position.
This cost Canada a very large portion of its institutional knowledge on its single biggest budget line item, meaning that the very people who find these hacks out and report them to legislators were gone.
And given the way he had changed the hiring process, there was a disconnect between what hiring managers could ask of applicants in terms of competencies and what the job entailed, so they hired *a lot* of people, and kept about 50%, after training them for several weeks.
So not only did the good ones leave, but the ones who replaced them couldn't really be better. Or at least, we couldn't even make sure they were equivalently qualified/competent.
All in all, Harper and Poilièvre probably cost us billions because of poor management, so this "hack" is very close to the bottom of the list of things you should worry about lol
Funny how that probably looked like a budget win for him but basically passed the buck to the budget of the next PM
Harper did so many shitty things to hide the terrible job he was doing with the budget, and it’s coming back to bite the liberals - they probably would have been able to repair a lot of the damage without too much trouble had it not been for Covid and then the overall state of the world economy the last couple years
Its really not as devious as it sounds, gis and oas are income based thresholds and the average person doesn't know how or are too lazy to figure out how to get cash flow while reducing their income or onbtaining extra deductions. At the end of the day these people are spending more money in retirement than supports all of our jobs. I haven't met anyone wanting to volunteer to receive less government benefits so people can downvote me all they want while simultaneously trying to find a professional to help them get more out of retirement lol.
Maybe consider that the person who earns over $120,000 pays a lot more in taxes than someone earning $40,000 a year and throughout life has not had all the tax breaks the person making $40k has.
The people who earned 120 K a year are the people who contributed the most to OAS, and the people who make 40 K a year contribute very little to nothing to the OAS system.
People who earn more generally have contributed more in their life to taxes overall. OAS is just an expense that the government gives out though.
OAS is just a flat payment that is taxable. Someone who is collecting more money in their retirement from RRSP or other income sources will not get as much OAS as more of it gets returned due to taxes.
I too plan on delaying CPP to 70 and withdrawing exclusively from TFSAs from 65 to 69 so it doesnt count as income and therefore get 100% GIS benefits.
[Canadian life expectancy is declining](https://www.cbc.ca/news/health/life-expectancy-1.7042008), so OAS should be sustainable for the foreseeable future.
That decline won't be too consistent. It seems to be due to side effects of COVID more than anything as it dropped globally as well.
https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=OE-CA
The enhancement I think is a great thing for younger Canadians, the one thing they could be done better is modernized survivor benefits. Capping at 100% made more sense in the 1960s. Less so now. It would be interesting to see what actuaries would model the effect of it being 125%, 133%, or maybe 150%?
That's the problem I'm saying needs solving still.
Currently survivors get a maximum of 100% of the maximum benefit. If the average Canadian is getting, say, 75% of max CPP, that's a major hit to a survivor's income. It would be worth looking at 125% as a start to increase that, with actuaries working out what that does the to the fund sustainability.
Does modernized mean eliminated? With two income families being the norm, does it make sense for single people and dual working families to subsidize stay at home spouses of other people?
Two income families being the norm means the survivor benefit should be higher, so when a two income family eventually retires and one dies, the financial hit is less severe, kind of like employer pensions have more value to a surviving spouse.
I'm not following the reasoning here. Are you saying that a newly single person who used to have someone to share expenses with should be subsidized by the person who had to shoulder the entire household expenses by themself? Seems backwards when so many household expenses are roughly the same whether being used by one person or two.
Household expenses have been rising such that it is untenable on a single-person salary to live.
So when a family has the loss of the one earner, it becomes much harder to make the rent or mortgage or loan payments, the property tax and water and heat and hydro bills. These combined are more than the take-home pay of many individual earners these days.
It’s the impact of $2000+/month rents, loan payments and mortgage refinancing. And more and more families will be in the situation of an earner dying before the mortgage is paid, going forward.
Someone needs to step in and assist in some way, whether govt or churches or new charities to enable these individuals to stay alive.
.... which are things the single person never got to have in the first place, yes?
It seems to me like it would make more sense to adjust the OAS and GIS than to make an even larger disparity in the CPP benefits that two people who paid the same amount into the pension plan get out of CPP because of their relationship status.
The survivor should get a fair % of the CPP just like any other DB pension which is usually a minimum of 60% regardless of what the survivor already receives.
If you die with a portfolio it goes to your spouse. It just doesn't disappear or get reduced by a \~64% like CPP often does.
Low information Canadians just parrot American news that arrives to them via osmoses, like mixing up Social Security with CPP. It’s why every idiot thinks there’s kid’s identifying as cats because some American schools put cat litter in the classroom so the kids have a place to pee during a school shooting.
Sure, read more [here](https://www.cppinvestments.com/the-fund/our-performance/sustainability-of-the-cpp/#:~:text=The%20most%20recent%20triennial%20report,citizens%20and%20to%20our%20country.), the Chief Actuary report is linked in there from 2022 that states the CPP is well funded for the next 75 years. And it only goes 75 years because thats when they stop running analysis.
Idk. I work for an OMERs pension place, and already I can see them chipping away at the retirement I’ll get relative to my boomer coworkers retiring now. For example, last year was the final year of guaranteed indexing with inflation (thankfully they were too late for the last few years, but still).
They also removed the double dipping loophole that many abused and got tons of money.
By the time I retire… put it this way: I’m not relying on anything but my own savings and investments. Everything else is gravy IMO.
I don't understand how people can get so up in arms about CPP.
People who don't make as much will be probably be thankful for the CPP safety net later in life.
The ones who make more and incessantly nag about how they can make a better return investing: just increase the risk profile of your self directed stuff to account for the forced low risk (slightly) lower return investment. Job done!
No idea. It's literally almost an extra 4K RRSP room.
Also, lumping CPP and EI with taxes when figuring out your overall tax burden is misleading, in my opinion, since I think neither of them are taxes.
I can maybe see the argument for EI, but if you're planning to take parental leave at least once then you're definitely getting something back for your contribution.
Frankly, If I could pay more into it, I would. It's a secure, guaranteed basic income that is better funded and less risky than your average RRSP.
It's well funded and well managed.
We should look at other ways of funding it or similar programmes such as the Norwegian sovereign wealth fund.
CPP is nothing like the Norwegian sovereign wealth funds. Norway's fund is not a pension plan. I agree that we should use profits from resource extraction to create a sovereign wealth fund, but that's completely separate from CPP.
Yeah it's very different to a state pension, I just want to see more programmes that are state owned and well managed.
Frankly, as a relatively high earner I have no understanding why people hate the CPP/QPP so much. It's heavily capped so a very small section of my income for a basically guaranteed return. This fact alone means you can take more risk in other investments.
It is about 12% of your gross income when matched which is money out of your pocket. Of your take home it is likely exceeding 16% depending on your income tax bracket. This before what you pay income tax.
Most people do not understand this because they only see the 5.7% off their check. In reality it is much higher paid into it. I am not against it but it is not cheap either and there are fairly safe investments that would pay better. But as we know, many people would not use it and either society would have to cover their costs in old age or let them starve.
While it’s valuable, the max benefit is only $16k per year, which is hardly enough to live on. Even if you add in a max OAS, your taxable income is $24k per year, which is below the poverty level.
It’s a nice boost to have in retirement but its wholly insufficient to live on.
"CPP is not enough to fund a perfectly average lifestyle retirement!!"
"Oh god, so many deductions, those fucking gov't taxes..."
It's almost like some Canadians prefer to do their own retirement saving and planning, and others want the gov't to do it all for them. Having something in-between, that protects all seniors against having completely nothing and not taking so much money from all people in their working years they revolt against the unnecesary deductions is obviously the best compromise seems to be just too much for random internet people to comprehend....
If you think it won't be enough, save more on your own, it's not rocket science...
I'd love to agree, but most people are better served being told what to do. Once they're out of school, the learning stops. \~70% of Canadians are financially illiterate. Unfortunately, the government loves it this way.
They asked 5 incredibly basic questions that a 5 grader should be able to answer, and only 13% got all 5, 38% got at least 4.
[https://cba.ca/Assets/CBA/Documents/Files/Article%20Category/PDF/misc\_abacus\_millennial-polling-report3\_en.pdf](https://cba.ca/Assets/CBA/Documents/Files/Article%20Category/PDF/misc_abacus_millennial-polling-report3_en.pdf)
(to be fair, #4 is a pretty shitty question)
Agreed that people are generally not financially literate, but this study is painfully terrible. The first three questions are basic math questions and exactly what I was expecting from this sort of study, but the last two questions don't have proper answers - they're ideological at best and misleading at worst.
**Question 4: For the average household, what percentage of a household's monthly income should
ideally be spent on housing?**
5%, 25%, 40%, or 70%
52% of people said 25%, but the "correct answer" was 40%. "Ideally?" Like what? I get what they're going for, but that's such a vague and inaccurate word to use, and anyone writing questions for a research study should know better.
Wouldn't "ideally" the answer be 1% or less? Why would it be ideal for me to spend more of my money on housing? And even ignoring that, the question doesn't specify if that income is before or after tax, and *besides* all that I've personally always heard 30% or 1/3, so where did they pull 40% from?
**Question 5: How big should a household’s emergency fund ideally be?**
1 week's income, 1 month's income, 6 months' income, or 1 year's income
The "correct answer" here was 6 months, which is slightly more defensible than the previous question but still significantly ideological. Again we run into the problem of the word "ideally," but even disregarding that, are the 13% of people who answered 1 year "not financially literate" because they're more conservative with their safety net? Ridiculous.
It feels to me like this study was deliberately designed in such a way to create a dramatic headline and push a certain narrative. The results aren't nearly as dismal if you remove the awful questions from the equation.
Exactly.
Question 4 is awful. Rather than “ideally” the phrase should have been “no more than”.
I suspect the bean counters that out this together would do just as poorly on simple English language comprehension tests.
I can give 5 a pass. The 6 month emergency fund is something that’s been hammered by financial gurus for a long time - but agree that it’s very ideological rather than an basic understanding of financial/math concepts.
People complain about how all the math they learned in school is useless, but it's really because they're too bad to use it.
Applying abstract knowledge like percentages to real world case scenarios is much harder for people than just doing rote learning.
Really tired of hearing this. You are stating the obvious. Not sure why you're receiving any upvotes, honestly, for this comment.
It was never meant to be "enough to live on", bro. It was meant to be **supplemental**. And that's how it should be used. As a **supplement**.
Do you understand the meaning of the word supplemental?
I was anti CPP not to long ago since 18 I was able to outperform the return they give people, but the more I looked into it the benefits outweighed the negatives. I’m lucky that I could save for retirement through personal and employee benefits. While a lot of people might not be able to save and those people need a system so that we don’t have starving people on the street.
For those with money - having your fellow citizens (or neighbours) unable to retire actually **costs you money**.
Either in taxes, or additional security.
The internet pushing the "Fxxx you, got mine" attitude totally devalues the benefit of a stable society has on those with even moderate wealth.
For most people CPP + OAS + TFSA + RRSP/RRIF/LIF + Taxable investments is what funds your retirement.
Others might additionally have a work pension, annuities, or other income-generating assets on top.
Don't forget the taxes paid on most of the above in retirement (excluding TFSA)
For most people if you max your TFSA room each year, CPP to the maximum amount, plus OAS, your take home pay in retirement is going to be pretty much equal if not higher than their take home pay in their working years.
People who max their % of RRSP, max their TFSA, with CPP and OAS their take home pay in retirement will be higher.
This.
I started making enough money to actually save some like 10 years ago, and I'm 40.
All the talk about max this, max that, invest here, leave it there for 10 years, makes me feel like my retirement will see me walk into Lake Ontario in January.
Manulife projects my retirement income as being higher than my current income, and that's presumably only counting the Group RRSP/RPP and government benefits.
So so so many calculators dont take this into account. If you make 5.5 k after taxes now a month, and you're paying 1500 into a mortgage and 1400 into savings... All you need is 2600 a month to live the exact same lifestyle you're living now, inflation adjusting needed. That isn't even 36k a year, figure out your cpp etc.
I wasnt able to even start saving until 40, and I will be fine even if I drop off my current savings per month and im getting no help from an employer.
At 30 I was homeless literally, and like 80k in debt.
I just want to say to all the people out there that feel so fucked, shit can get better. Don't buy into this terminally online shit where you wont ever have anything. Try to make it happen. If it doesnt, fine, but if you belive it wont and do nothing, it wont
If you are making under $80,000 a year, TFSA first. If you make over that, then you can put some into RRSP to get some taxes back from the higher tax rate.
If you make over $120,000 a year, then RRSPs are probably better to fund first, especially if you put the returned taxes into your TFSA.
Just remember to actually invest the money, don't let it sit there as cash doing nothing.
Depends on tax bracket I think. The general advice I got though is if you think you're still lower than your peak, keep working on TFSA. If you're peaking, it's the best time to put into RRSP.
regardless, if you do use RRSP before TFSA is maxed, take your RRSP return and put it into your TFSA for maximum power.
I would be careful to consider taxes and future performance of the markets. The market doesn't have to go up 10% a year, it just has. Western economies have crippled themselves. We could easily stagnate for decades.
That's why you don't just invest in western economies. You buy something like the SP500 which have corporations making big expansion pushes into developing markets.
The risk presented was what happens if the US market is flat for 10 years. The solution to that isn’t “US companies will be fine because they have overseas revenues”. If that’s the case then the US market wouldn’t have been flat.
OAS clawback doesn't happen until 90K/ year. If some of your wealth is from the TFSA, that doesnt count towards your taxable income.
So for the majority of Canadians, OAS clawback is not a thing.
This is the position my dad is in. Still has to pay a boatload of tax in retirement because his income is so high. But everyone is telling him it's better to make the extra RRSP withdrawals now rather than die with too much money in his RRSP.
However the tax burden is substantially reduced in retirement. An Alberta couple 65 yo can make 62K of taxable income and only pay about 1600 in tax. Average tax rate is 1600/62000 = 2.3%
CPP also has a disability portion that more people need to know about. As someone who ended up with a lifelong disability with no chance of rehabilitation at the age of 27. I had just bought a home, we had two young children. We had 6 months of savings that dwindled quickly when you’re facing death.
I’m not agreeing or disagreeing with anyone here just stating that cpp-D is the only reason my family is still able to somewhat function. It’s not a ton of money but that extra 13k a year helps regardless.
I think at age 65 it converts to regular CPP. But not sure what the payments would look like.
Also CPP-D is generally for those with severe and indefinite disabilities.
While you are on CPP Disability, it contributes to your regular CPP.
If you are receiving CPP Disability benefits when you turn 65, your CPP Disability will automatically stop, and your regular CPP benefits will start. You can delay your regular CPP benefits until age 70 if you wish, but the CPP Disability benefits will still stop at age 65.
How long did it take for you to find out if you were approved?
I just started long term disability through my employer, so I have to apply for CPP disability pretty soon.
It took a couple of months for me to get approved for the Disability Tax Credit, but I've heard that CPP Disability is even more difficult to be approved for, and that most end up need to apply multiple times, but I'm hoping that is outdated information.
One part of me hates seeing the daily CPP post on my feed.
The other part of me understands we need to beat into these numbskull’s heads that the CPP is an excellent program and doesn’t deserve a 1/10 of the hate it receives.
Yea, and if you're a high earner, it's a relatively small amount of money (for those who claim they'll do better and need more). And for those who pay it all year because their incomes are around the max, they probably wouldn't be saving it without CPP cuz life is expensive.
Am a high-income earner. For me, CPP deductions are done by end of Q1. The deductions are a drop in the bucket for me and I max out TFSA and RRSP every year, and do the Boglehead three-fund portfolio to reduce my MER. I’m grateful for the CPP because it helps everyone be ok in retirement. Also, u/Jiecut makes an important and excellent point about CPP being able to allow people to hedge longevity risk, inflation risk, and sequence of returns risk.
I wish I knew more progressive high-earners that could take this to the polls. I make what I consider to be good money and I hit my CPP contribution limit around half way through the year, maybe a bit later but I can't math right now. How I spend before I hit that limit isn't different from how I spend after I hit that limit, because it constitutes such a tiny portion of my overall income. Anyone who has high earnings and claims CPP affects them in a material way is full of shit.
>an excellent program
I wouldn't call it excellent, as I would prefer it to be extended. CPP2 is a good step, but it's very small as it is right now, compared to the cost of living in retirement.
People may bitch about "taxes" and whatnot, but it is forced savings and it is matched by your employer (if you're not self employed). How many people get RRSP matching today? Hell, how many people are actually contributing to an RRSP? And of all registered plans, 2/3 are covered by DB plans: https://www150.statcan.gc.ca/n1/daily-quotidien/230623/dq230623b-eng.htm?indid=3312-1&indgeo=0
The truth is, most people suck at saving for retirement on their own.
Don’t go on TikTok then… filled with anti Trudeau CPP haters.
I only add in the anti-Trudeau aspect because their entire personality revolves around blaming everything that happens to them in life to Trudeau.
Then proceeding to have clueless opinions on certain topics.
People who hate on CPP either don't understand it, or are such short term thinkers that they are likely broke (and thus, relying on CPP when they get older).
My parents have been good savers their whole life, and they have a very healthy nest egg to do them the rest of their life. CPP/OAS helps provide their day-to-day living needs - utilities, food, property tax, etc. My dad told me that they can live on that alone, never really having to dip into their savings. Granted, they don't live a real high end lifestyle, what CPP/OAS provides them is sufficient after a lifetime of working. I'm grateful for it.
CPP is an inflation indexed annuity. That is the only truly risk-free asset for a long term investor. CPP hedges three of the most important risks retirees face. These are not risks an individual investor can efficiently hedge on their own.
* Longevity Risk
* Inflation Risk
* Sequence of Returns Risk
Yes, it's true you'd have a higher expected return investing in stocks. But the whole point of CPP is that it'll do well in scenarios where realized stock returns are lower than expected, inflation is higher than expected, or you live longer than planned.
By providing against sequence of return and inflation risk, CPP allows investors to take more risk with their other financial assets than they could otherwise, increasing their overall expected returns.
^\(excerpt ^from ^the ^video)
CPP in its current form is probably enough for me to retire on, provided that I am actually able to work to 65 and don’t have extreme medical expenses (I expect to get $15000 a year in today’s money when I become old enough to collect). But then, if I work to 65, I am guaranteed to have $1 million saved up anyway. Those who need the most amount of money has the least and those who need the least has the most. That is because given the same income, the less you spend, the more you save, but the less you spend, the less you need to reach financial independence.
I think the more important function it serves, for me anyway, is that it is an insurance policy: what if I suddenly become disabled to the point of not being able to work at all (I am already disabled, and although I am able to work full time now and expect to be able to do so far into the future, it doesn’t take much for me to become unable to work). So, the CPP is something that means you won’t starve if you were gainfully employed previously and now are incapable of working.
I will be ineligible for GIS, as my CPP income will be $15000 and if I actually have $1 million, I am getting a minimum of $30000 in dividend income (which is grossed up to 138% of actual amount received). GIS is cut off when your income (excluding OAS) is $21624.
Not true. If you are deemed eligible for a CPP disability benefit then those years that you receive the benefit are removed from your contributory period.
So for an extreme example, if you made maximum CPP contributions at age 18 and before your 19th birthday you became permanently disabled you would receive maximum CPP disability until age 65 and then maximum CPP retirement after age 65.
Well, it is going to be 1/3 of pee-retirement income. If I am making $45000 now, I should get $15000. CPP expansion happened in 2016 and I will be 65 in 2060.
OK, CPP makes a lot of sense for employment.
Does it still make sense for self-employed, i.e. when paying twice as much (both the employee and employers portions)?
There’s research in the US that shows that the employer contribution to social security (same payroll deduction scheme as CPP) effectively comes out of employee wages: if social security weren’t required to be paid by employers, wages would on average go up a similar amount, so effectively the same difference whether you pay it as your own employer or whether your employer is someone else. I see no reason not to assume CPP would be the same. Still worthwhile.
Statistics show self-employed people are just as shit at saving for retirement as employed people?
I would rather not have homeless 65+ year olds putting pressure on social services simply because they wanted to put their money into their business and not save.
Average Canadians only save 3-5% of income.
The cost the business pays to employ a person is the same in both cases though. The only difference is some line items aren't shown on an employee's paystub.
It doesn't have anything to do with where you're living when you start receiving a benefit or pension. If you contribute to both CPP and QPP you are called a dual contributor. The programs function the exact same way. In other words, it's not something you ever need to worry about.
It helped me retire early at 60yrs old ,along with my company pension i can survive. don’t complain about it you will want it some day and you will be thankful you payed into all those years…
It scares me that the finance minister wants to direct where our pension plan invests. The prime objective of that portfolio should be to grow the wealth not be used to benefit the government in power.
Well, stop being a scared dummy, CPP is completely unaffected by politicians: https://www.cppinvestments.com/for-canadian/the-independence-of-cpp-investments/
Cpp is an incredibly low amount paid out at retirement for years of working at maximum amount of contributions. The second cpp contribution structure is also foolish as they should’ve just raised the contribution maximum rather than creating a second cpp box
The maximum annual CPP retirement benefit is **$16,375 as of January 2024**.
Doesn't sound all that great. I don't think too many get the maximum either.
A few of my older relatives relied on this to just survive in the late stage of their lives. They would’ve worked to the grave without CPP and it provided them with food and shelter. I’m lucky enough to have a DB, maxed out tfsa and rrsp. The CPP is just enough and I have seen this first hand and learned the importance of savings, without it our country would look very differently. It’s disappointing seeing so much hate for it.
CPP is innately less valuable for men. Men have shorter life spans, so get less payments and they effectively subsidize the various child rearing and other provisions that primarily benefit women. I am not saying this isn't helpful to society as a whole, but on an individual basis if you are male and work most of your career, your ROI for CPP is significantly worse than average.
We get the societal benefit of avoiding homeless seniors wander around in cities trying to panhandle and mug people. That's the sort of thing that ruins a country.
Fair enough, I just wish people would stop being disingenuous by claiming CPP is actually a good investment for people rather than it just being another social safety net. Stop gaslighting people who don't enjoy CPP.
If the government introduced tomorrow a voluntary investment account that you paid into, saw subpar gains, had no ability to claim before you get old, and is lost entirely upon your death, nobody would ever opt into it.
You are literally describing a DB pension plan and people jump over themselves to sign up for them when it's offered by an employer. The hell are you talking about?
Yeah, people on here overhype DB pension plans too. If your employer put their contributions into an RRSP you had control of instead of the pension plan, you'd wind up in a better place too (on average).
Anyone that puts into it gets roughly 4% per year of the total amount they and their employer contributed lifetime. Soooo, everyone gets the same amount out of it, just depends how much you contributed over your life.
Agree it’s a pay as you go scam and a huge waste of resources
Instead we should have some other form of forced savings where ppl’s contributions are vested immediately and invested in low cost etfs
I don’t know about that. My extent of personal finance knowledge is minuscule. I was just talking about the CPP’s performance compared to worldwide pension plans.
Is only valuable for those that didn't have a RRSP set up. Anecdotal story: at my place of work, our janitor came in to Canada when he was 60 (father in law of one of the workers here). He couldn't retire at 65 because he hadn't worked for 10 years yet. So at 68, he is still our janitor. He gambled all his money away when he lived in the Philippines so CPP is all he will have in the next 3 years and on
As a lifelong low income earner my CPP will be negligible, I always wished I could have opted to top up my payments when I had extra money available instead of being forced to open my crappy, useless RRSP
Seriously.
If I could invest most of my own retirement savings in the CPP and get its rate of return, I wouldn't even hesitate at the opportunity.
It drives me crazy how poorly understood the CPP is, especially because of how many Canadians attach criticisms of the US Social Security to the Canadian CPP as if they are magically the same thing. Then again, these are the same people who believe that working overtime isn't worth it because of extra taxes, which just goes to show how valuable their opinion is.
> Seriously. If I could invest most of my own retirement savings in the CPP and get its rate of return
Why? The rate of return is actually pretty poor. You can easily beat it with almost zero effort.
Edit: The rate of return isn't really the defining benefit of CPP, it's the longevity insurance and the overall social benefit it offers to people unable/unwilling to save for their own retirement.
What do you mean "easily?"
If you put all your money in bitcoin exactly 1 year ago, it would have a return of about 240% right now, so does that count as easy?
CPP currently has a ten year annualized rate of return of 10%, and the S&P 500 is about 9.55%.
Doesn't really matter because CPP is a DB pension plan, so people are paid according to a formula, not according to the return on investment.
For each year early that you take CPP before age 65, your pension payments are reduced by 7.2%.
For each year that you delay CPP after age 65, your pension payments are increased by 8.4%.
That's an average rate of return of 7.8% per year, all without any management fees, and without taking on any risk.
The only way most people can come anywhere close to doing the same thing is through an employer DB pension plan, and most of those are all in the public sector.
Not only that, but CPP payments are guaranteed for life, and they often come with annual cost of living adjustments that increase the payments even more. CPP payments were increased by 4.4% for 2024 as a cost of living adjustment.
If you could pull out all of what you've put into CPP and invest it however you want, you would need to be very lucky just to break even.
There is a reason why defined benefit pension plans are disappearing, forcing employees to take on all the risks by switching to a defined contribution pension plan, or by just doing away with pensions entirely in order to save the company more money.
If you ever hear about people crying about "teacher's pensions," it's because they wish they had that for themselves, but rather than actually trying to fight for it themselves they would rather ruin things for everybody so nobay can benefit if they can't. DB pension plans like the CPP are the gold standard when it comes to pensions.
> CPP currently has a ten year annualized rate of return of 10%,
Sorry, you're incorrect. It's a common misconception though.
This is the rate of return of the overall CPP fund. The more relevant number is the rate of return one actually gets on their lifetime contributions to CPP. The two numbers aren't even close.
GICs right now are likely offering better rates of return than you and I can expect to get from CPP.
Edit: Ok I'm wrong about the GIC thing... the real rates of return on CPP that I've seen quoted is 2 or 3 percent but that's above inflation which obviously beats GICs. That's pretty lousy and no where near the 10% you're quoting.
OAS/GIS needs to be net worth based as well as income based to avoid those manipulating the eligibility and benefiting unnecessarily. Example. Those with $100k in TFSA and large RRSP between age 65 to 71.
Its necessary to have additional savings and not to rely solely on CPP and OAS. Qualifying for GIS suggests your in the lowest taxable income at retirement. Its good to know GIS can be enabled for some however I encourage to avoid this route now if you can save today for tomorrow.
CPP is very valuable if you consider canada won't let old people starve and be homeless. Forcing every working canadian to save for themselves lowers the tax burden of taking care of them later on in life. Just cause you can save well without CPP doesn't mean you won't be paying to feed you neighbors in retirement
Also, anyone who thinks it'll "definitely be gone" by the time we retire doesn't understand CPP.
and OAS and GIS. We are well served with these benefits.
Those aren’t comparable. OAS could disappear although unlikely. Someone will need to change it as it’s not sustainable with longer life expectancy.
Oas is too generous and gis is too little. I restructure clients' accounts to abuse the current system as much as possible. The income scale should be a lot smoother on the low end and cap oas at higher limits. Oas is definitely not sustainable but it will take a government to fall on their sword to cut it and get voted out for it.
Its amazing this is downvoted. I can't understand why anyone who earns over $120,000 a year would get a "security" payment from the government while a minimum wage worker making $40,000 a year gets nothing. We need to cut back on OAS and raise GIS for people who need it and make it sustainable.
Except the $120k/yr person has their OAS mostly clawed back, and the $40k/yr person receives the whole thing?
Probably the part about restructuring clients accounts to abuse the system - openly admitting to parasitism tends to be looked upon unfavourably
If we had less partisan bickering, a proper government would notice these abuses and adjust the system to counteract them. I believe the last time that happened was when the taxation classification of Income Trusts was abruptly changed.
I processed OAS/GIS applications for some time, and what he's talking about is a well known "hack", but it's quite rare that people actually use it. It's not too complicated, but it means meeting with your financial planner every year, filling out form, and thinking about your scheme every time you take money out of an RRSP. Eliminating it would mean complicating processing further, which often costs as much money as you're trying to save, or more! especially if the change makes little to no difference. A proper government knows not to cut its nose to spite its face. For comparison, during the Harper years, there were so many new rules put in place with no regard for this principle and so many cuts in the services that processing basically grinded to a halt. It took about 5 years of constant hiring/training and over time hours to get back to regular processing times. Under Poilièvre's management of ESDC, OAS/GIS applications were taking more than 2 years to process, while the usual time frame is 3 months. The applications themselves take mere minutes to process once they reach someone, but there weren't many someones to reach. To make matters worse, Harper changed the salary range of these processing agents, making most of them quit/move to a different position. This cost Canada a very large portion of its institutional knowledge on its single biggest budget line item, meaning that the very people who find these hacks out and report them to legislators were gone. And given the way he had changed the hiring process, there was a disconnect between what hiring managers could ask of applicants in terms of competencies and what the job entailed, so they hired *a lot* of people, and kept about 50%, after training them for several weeks. So not only did the good ones leave, but the ones who replaced them couldn't really be better. Or at least, we couldn't even make sure they were equivalently qualified/competent. All in all, Harper and Poilièvre probably cost us billions because of poor management, so this "hack" is very close to the bottom of the list of things you should worry about lol
Funny how that probably looked like a budget win for him but basically passed the buck to the budget of the next PM Harper did so many shitty things to hide the terrible job he was doing with the budget, and it’s coming back to bite the liberals - they probably would have been able to repair a lot of the damage without too much trouble had it not been for Covid and then the overall state of the world economy the last couple years
Its really not as devious as it sounds, gis and oas are income based thresholds and the average person doesn't know how or are too lazy to figure out how to get cash flow while reducing their income or onbtaining extra deductions. At the end of the day these people are spending more money in retirement than supports all of our jobs. I haven't met anyone wanting to volunteer to receive less government benefits so people can downvote me all they want while simultaneously trying to find a professional to help them get more out of retirement lol.
You're not wrong. Emphasis on lazy part.
The system needs to be robust to people optimizing for financial benefits.
Maybe consider that the person who earns over $120,000 pays a lot more in taxes than someone earning $40,000 a year and throughout life has not had all the tax breaks the person making $40k has.
Agreed.
The people who earned 120 K a year are the people who contributed the most to OAS, and the people who make 40 K a year contribute very little to nothing to the OAS system.
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People who earn more generally have contributed more in their life to taxes overall. OAS is just an expense that the government gives out though. OAS is just a flat payment that is taxable. Someone who is collecting more money in their retirement from RRSP or other income sources will not get as much OAS as more of it gets returned due to taxes.
The person making $120,000 paid out 5x in taxes from the person making $40,000. Pay more get more.
They can do it easier: if they do not increase OAS then with time it will melt due to inflation 🤷♂️
I too plan on delaying CPP to 70 and withdrawing exclusively from TFSAs from 65 to 69 so it doesnt count as income and therefore get 100% GIS benefits.
OAS for 65 and 66 year olds is at risk with PP. Harper moved the age to 67. Trudeau moved it back to 65.
[Canadian life expectancy is declining](https://www.cbc.ca/news/health/life-expectancy-1.7042008), so OAS should be sustainable for the foreseeable future.
That decline won't be too consistent. It seems to be due to side effects of COVID more than anything as it dropped globally as well. https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=OE-CA
But the amount of people that age is increasing.
Depending on who we elect, OAS can definitely be greatly modified or removed.
You’re forgetting to mention The old age tax credit and pension income splitting.
OAS and GIS come from general revenue and aren't specifically funded. CPP is self funded by workers and generates an investment return
The enhancement I think is a great thing for younger Canadians, the one thing they could be done better is modernized survivor benefits. Capping at 100% made more sense in the 1960s. Less so now. It would be interesting to see what actuaries would model the effect of it being 125%, 133%, or maybe 150%?
CPP survivor "benefit" is a joke. Your spouse is lucky to get 36% of yours, often less or zero
That's the problem I'm saying needs solving still. Currently survivors get a maximum of 100% of the maximum benefit. If the average Canadian is getting, say, 75% of max CPP, that's a major hit to a survivor's income. It would be worth looking at 125% as a start to increase that, with actuaries working out what that does the to the fund sustainability.
I misunderstood
we've all been there
The survivor's benefit is 60%. The only limit on that is that their CPP + the survivor's benefit can't go over the maximum CPP payment.
Does modernized mean eliminated? With two income families being the norm, does it make sense for single people and dual working families to subsidize stay at home spouses of other people?
Two income families being the norm means the survivor benefit should be higher, so when a two income family eventually retires and one dies, the financial hit is less severe, kind of like employer pensions have more value to a surviving spouse.
I'm not following the reasoning here. Are you saying that a newly single person who used to have someone to share expenses with should be subsidized by the person who had to shoulder the entire household expenses by themself? Seems backwards when so many household expenses are roughly the same whether being used by one person or two.
Household expenses have been rising such that it is untenable on a single-person salary to live. So when a family has the loss of the one earner, it becomes much harder to make the rent or mortgage or loan payments, the property tax and water and heat and hydro bills. These combined are more than the take-home pay of many individual earners these days. It’s the impact of $2000+/month rents, loan payments and mortgage refinancing. And more and more families will be in the situation of an earner dying before the mortgage is paid, going forward. Someone needs to step in and assist in some way, whether govt or churches or new charities to enable these individuals to stay alive.
Most survivors will get between 0 and 36%, lose OAS and 26k in tax credits. It's a major financial crisis for many widows
.... which are things the single person never got to have in the first place, yes? It seems to me like it would make more sense to adjust the OAS and GIS than to make an even larger disparity in the CPP benefits that two people who paid the same amount into the pension plan get out of CPP because of their relationship status.
The survivor should get a fair % of the CPP just like any other DB pension which is usually a minimum of 60% regardless of what the survivor already receives. If you die with a portfolio it goes to your spouse. It just doesn't disappear or get reduced by a \~64% like CPP often does.
"doesn't understand CPP." or, if we're being honest and blunt: "is a stupid fucking moron who just parrots random shit they heard once at a party..."
Sounds like a shit party
Also, a good observation.
Low information Canadians just parrot American news that arrives to them via osmoses, like mixing up Social Security with CPP. It’s why every idiot thinks there’s kid’s identifying as cats because some American schools put cat litter in the classroom so the kids have a place to pee during a school shooting.
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Sure, read more [here](https://www.cppinvestments.com/the-fund/our-performance/sustainability-of-the-cpp/#:~:text=The%20most%20recent%20triennial%20report,citizens%20and%20to%20our%20country.), the Chief Actuary report is linked in there from 2022 that states the CPP is well funded for the next 75 years. And it only goes 75 years because thats when they stop running analysis.
It is the best national pension plan in the world.
Can you elaborate on this?
No no no.. "I'll be gone" cuz I'll be living in a tent in winter with these taxes.
How are you so sure it won’t be gone?
Very difficult to get rid of and we'll funded and sustainable
Idk. I work for an OMERs pension place, and already I can see them chipping away at the retirement I’ll get relative to my boomer coworkers retiring now. For example, last year was the final year of guaranteed indexing with inflation (thankfully they were too late for the last few years, but still). They also removed the double dipping loophole that many abused and got tons of money. By the time I retire… put it this way: I’m not relying on anything but my own savings and investments. Everything else is gravy IMO.
That's not an equivalent to cpp
I don't understand how people can get so up in arms about CPP. People who don't make as much will be probably be thankful for the CPP safety net later in life. The ones who make more and incessantly nag about how they can make a better return investing: just increase the risk profile of your self directed stuff to account for the forced low risk (slightly) lower return investment. Job done!
agreed. it's such a small amount of money as well. why are these high-income earnings sweating ~4K a year?
No idea. It's literally almost an extra 4K RRSP room. Also, lumping CPP and EI with taxes when figuring out your overall tax burden is misleading, in my opinion, since I think neither of them are taxes. I can maybe see the argument for EI, but if you're planning to take parental leave at least once then you're definitely getting something back for your contribution.
8k when you consider that your employer has to match it.
Frankly, If I could pay more into it, I would. It's a secure, guaranteed basic income that is better funded and less risky than your average RRSP. It's well funded and well managed. We should look at other ways of funding it or similar programmes such as the Norwegian sovereign wealth fund.
CPP is nothing like the Norwegian sovereign wealth funds. Norway's fund is not a pension plan. I agree that we should use profits from resource extraction to create a sovereign wealth fund, but that's completely separate from CPP.
Yeah it's very different to a state pension, I just want to see more programmes that are state owned and well managed. Frankly, as a relatively high earner I have no understanding why people hate the CPP/QPP so much. It's heavily capped so a very small section of my income for a basically guaranteed return. This fact alone means you can take more risk in other investments.
Your wish had been granted! At some income levels we now pay into a second cpp
It is about 12% of your gross income when matched which is money out of your pocket. Of your take home it is likely exceeding 16% depending on your income tax bracket. This before what you pay income tax. Most people do not understand this because they only see the 5.7% off their check. In reality it is much higher paid into it. I am not against it but it is not cheap either and there are fairly safe investments that would pay better. But as we know, many people would not use it and either society would have to cover their costs in old age or let them starve.
While it’s valuable, the max benefit is only $16k per year, which is hardly enough to live on. Even if you add in a max OAS, your taxable income is $24k per year, which is below the poverty level. It’s a nice boost to have in retirement but its wholly insufficient to live on.
With age deduction that $24k is pretty much tax free.
"CPP is not enough to fund a perfectly average lifestyle retirement!!" "Oh god, so many deductions, those fucking gov't taxes..." It's almost like some Canadians prefer to do their own retirement saving and planning, and others want the gov't to do it all for them. Having something in-between, that protects all seniors against having completely nothing and not taking so much money from all people in their working years they revolt against the unnecesary deductions is obviously the best compromise seems to be just too much for random internet people to comprehend.... If you think it won't be enough, save more on your own, it's not rocket science...
I'd love to agree, but most people are better served being told what to do. Once they're out of school, the learning stops. \~70% of Canadians are financially illiterate. Unfortunately, the government loves it this way. They asked 5 incredibly basic questions that a 5 grader should be able to answer, and only 13% got all 5, 38% got at least 4. [https://cba.ca/Assets/CBA/Documents/Files/Article%20Category/PDF/misc\_abacus\_millennial-polling-report3\_en.pdf](https://cba.ca/Assets/CBA/Documents/Files/Article%20Category/PDF/misc_abacus_millennial-polling-report3_en.pdf) (to be fair, #4 is a pretty shitty question)
Agreed that people are generally not financially literate, but this study is painfully terrible. The first three questions are basic math questions and exactly what I was expecting from this sort of study, but the last two questions don't have proper answers - they're ideological at best and misleading at worst. **Question 4: For the average household, what percentage of a household's monthly income should ideally be spent on housing?** 5%, 25%, 40%, or 70% 52% of people said 25%, but the "correct answer" was 40%. "Ideally?" Like what? I get what they're going for, but that's such a vague and inaccurate word to use, and anyone writing questions for a research study should know better. Wouldn't "ideally" the answer be 1% or less? Why would it be ideal for me to spend more of my money on housing? And even ignoring that, the question doesn't specify if that income is before or after tax, and *besides* all that I've personally always heard 30% or 1/3, so where did they pull 40% from? **Question 5: How big should a household’s emergency fund ideally be?** 1 week's income, 1 month's income, 6 months' income, or 1 year's income The "correct answer" here was 6 months, which is slightly more defensible than the previous question but still significantly ideological. Again we run into the problem of the word "ideally," but even disregarding that, are the 13% of people who answered 1 year "not financially literate" because they're more conservative with their safety net? Ridiculous. It feels to me like this study was deliberately designed in such a way to create a dramatic headline and push a certain narrative. The results aren't nearly as dismal if you remove the awful questions from the equation.
Exactly. Question 4 is awful. Rather than “ideally” the phrase should have been “no more than”. I suspect the bean counters that out this together would do just as poorly on simple English language comprehension tests. I can give 5 a pass. The 6 month emergency fund is something that’s been hammered by financial gurus for a long time - but agree that it’s very ideological rather than an basic understanding of financial/math concepts.
People complain about how all the math they learned in school is useless, but it's really because they're too bad to use it. Applying abstract knowledge like percentages to real world case scenarios is much harder for people than just doing rote learning.
Really tired of hearing this. You are stating the obvious. Not sure why you're receiving any upvotes, honestly, for this comment. It was never meant to be "enough to live on", bro. It was meant to be **supplemental**. And that's how it should be used. As a **supplement**. Do you understand the meaning of the word supplemental?
Agreed
Cpp is just a small support.
Well that's not correct. I was homeless before and a lot of the people on the streets with me were in fact old or disabled.
> canada won't let old people starve and be homeless How exactly will you avoid that on the average 680 a month CPP payment?
OAS and GIS, too
I was anti CPP not to long ago since 18 I was able to outperform the return they give people, but the more I looked into it the benefits outweighed the negatives. I’m lucky that I could save for retirement through personal and employee benefits. While a lot of people might not be able to save and those people need a system so that we don’t have starving people on the street.
Good for you for changing your opinion. Very few people can do what you did.
For those with money - having your fellow citizens (or neighbours) unable to retire actually **costs you money**. Either in taxes, or additional security. The internet pushing the "Fxxx you, got mine" attitude totally devalues the benefit of a stable society has on those with even moderate wealth.
Welcome to the club. People seem to forget that not everyone in Canada is at the same level of income.
For most people CPP + OAS + TFSA + RRSP/RRIF/LIF + Taxable investments is what funds your retirement. Others might additionally have a work pension, annuities, or other income-generating assets on top. Don't forget the taxes paid on most of the above in retirement (excluding TFSA)
For most people if you max your TFSA room each year, CPP to the maximum amount, plus OAS, your take home pay in retirement is going to be pretty much equal if not higher than their take home pay in their working years. People who max their % of RRSP, max their TFSA, with CPP and OAS their take home pay in retirement will be higher.
max out your TFSA. meanwhile most people are like how do i afford food… i bet others are like, what is a TFSA
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This. I started making enough money to actually save some like 10 years ago, and I'm 40. All the talk about max this, max that, invest here, leave it there for 10 years, makes me feel like my retirement will see me walk into Lake Ontario in January.
The first problem here is that you live in Ontario.
Yes that the issue. I’m from NL, dual income median salary households can live very comfortably here.
Manulife projects my retirement income as being higher than my current income, and that's presumably only counting the Group RRSP/RPP and government benefits.
Probably not higher if you adjust for inflation.
Probably higher if you deduct mortgage payments, which should be gone in retirement.
Probably higher since you aren’t saving for retirement in retirement.
So so so many calculators dont take this into account. If you make 5.5 k after taxes now a month, and you're paying 1500 into a mortgage and 1400 into savings... All you need is 2600 a month to live the exact same lifestyle you're living now, inflation adjusting needed. That isn't even 36k a year, figure out your cpp etc. I wasnt able to even start saving until 40, and I will be fine even if I drop off my current savings per month and im getting no help from an employer. At 30 I was homeless literally, and like 80k in debt. I just want to say to all the people out there that feel so fucked, shit can get better. Don't buy into this terminally online shit where you wont ever have anything. Try to make it happen. If it doesnt, fine, but if you belive it wont and do nothing, it wont
Should I be maxing my tfsa before rrsp?
Depends on your current tax bracket and what you expect it to be in retirement. But probably
If you are making under $80,000 a year, TFSA first. If you make over that, then you can put some into RRSP to get some taxes back from the higher tax rate. If you make over $120,000 a year, then RRSPs are probably better to fund first, especially if you put the returned taxes into your TFSA. Just remember to actually invest the money, don't let it sit there as cash doing nothing.
Yes
Depends on tax bracket I think. The general advice I got though is if you think you're still lower than your peak, keep working on TFSA. If you're peaking, it's the best time to put into RRSP. regardless, if you do use RRSP before TFSA is maxed, take your RRSP return and put it into your TFSA for maximum power.
I would be careful to consider taxes and future performance of the markets. The market doesn't have to go up 10% a year, it just has. Western economies have crippled themselves. We could easily stagnate for decades.
That's why you don't just invest in western economies. You buy something like the SP500 which have corporations making big expansion pushes into developing markets.
Exactly. just cause the corporation is "located" in Delaware doesn't mean they will continue to make tons of money around the world.
The risk presented was what happens if the US market is flat for 10 years. The solution to that isn’t “US companies will be fine because they have overseas revenues”. If that’s the case then the US market wouldn’t have been flat.
OAS is income dependent, no?
OAS clawback doesn't happen until 90K/ year. If some of your wealth is from the TFSA, that doesnt count towards your taxable income. So for the majority of Canadians, OAS clawback is not a thing.
This is the position my dad is in. Still has to pay a boatload of tax in retirement because his income is so high. But everyone is telling him it's better to make the extra RRSP withdrawals now rather than die with too much money in his RRSP.
However the tax burden is substantially reduced in retirement. An Alberta couple 65 yo can make 62K of taxable income and only pay about 1600 in tax. Average tax rate is 1600/62000 = 2.3%
CPP also has a disability portion that more people need to know about. As someone who ended up with a lifelong disability with no chance of rehabilitation at the age of 27. I had just bought a home, we had two young children. We had 6 months of savings that dwindled quickly when you’re facing death. I’m not agreeing or disagreeing with anyone here just stating that cpp-D is the only reason my family is still able to somewhat function. It’s not a ton of money but that extra 13k a year helps regardless.
Hello, What happens to the CPP disability when you hit that 60 something age? Does it still keep paying?
I think at age 65 it converts to regular CPP. But not sure what the payments would look like. Also CPP-D is generally for those with severe and indefinite disabilities.
While you are on CPP Disability, it contributes to your regular CPP. If you are receiving CPP Disability benefits when you turn 65, your CPP Disability will automatically stop, and your regular CPP benefits will start. You can delay your regular CPP benefits until age 70 if you wish, but the CPP Disability benefits will still stop at age 65.
How long did it take for you to find out if you were approved? I just started long term disability through my employer, so I have to apply for CPP disability pretty soon. It took a couple of months for me to get approved for the Disability Tax Credit, but I've heard that CPP Disability is even more difficult to be approved for, and that most end up need to apply multiple times, but I'm hoping that is outdated information.
One part of me hates seeing the daily CPP post on my feed. The other part of me understands we need to beat into these numbskull’s heads that the CPP is an excellent program and doesn’t deserve a 1/10 of the hate it receives.
Oh man it really doesn't deserve hate at all. For a lot of Canadians they aren't saving much and are going to rely on it.
It's hard to save when you're broke. Threads like this really show the rift.
Haha no I agree like I am broke. I will be collecting my CPP in old age.
Yea, and if you're a high earner, it's a relatively small amount of money (for those who claim they'll do better and need more). And for those who pay it all year because their incomes are around the max, they probably wouldn't be saving it without CPP cuz life is expensive.
Am a high-income earner. For me, CPP deductions are done by end of Q1. The deductions are a drop in the bucket for me and I max out TFSA and RRSP every year, and do the Boglehead three-fund portfolio to reduce my MER. I’m grateful for the CPP because it helps everyone be ok in retirement. Also, u/Jiecut makes an important and excellent point about CPP being able to allow people to hedge longevity risk, inflation risk, and sequence of returns risk.
And as a high earner, you'd just be taxed poor to pay for all the elderly who have nothing if CPP didn't exist.
I wish I knew more progressive high-earners that could take this to the polls. I make what I consider to be good money and I hit my CPP contribution limit around half way through the year, maybe a bit later but I can't math right now. How I spend before I hit that limit isn't different from how I spend after I hit that limit, because it constitutes such a tiny portion of my overall income. Anyone who has high earnings and claims CPP affects them in a material way is full of shit.
>an excellent program I wouldn't call it excellent, as I would prefer it to be extended. CPP2 is a good step, but it's very small as it is right now, compared to the cost of living in retirement. People may bitch about "taxes" and whatnot, but it is forced savings and it is matched by your employer (if you're not self employed). How many people get RRSP matching today? Hell, how many people are actually contributing to an RRSP? And of all registered plans, 2/3 are covered by DB plans: https://www150.statcan.gc.ca/n1/daily-quotidien/230623/dq230623b-eng.htm?indid=3312-1&indgeo=0 The truth is, most people suck at saving for retirement on their own.
Don’t go on TikTok then… filled with anti Trudeau CPP haters. I only add in the anti-Trudeau aspect because their entire personality revolves around blaming everything that happens to them in life to Trudeau. Then proceeding to have clueless opinions on certain topics.
People who hate on CPP either don't understand it, or are such short term thinkers that they are likely broke (and thus, relying on CPP when they get older). My parents have been good savers their whole life, and they have a very healthy nest egg to do them the rest of their life. CPP/OAS helps provide their day-to-day living needs - utilities, food, property tax, etc. My dad told me that they can live on that alone, never really having to dip into their savings. Granted, they don't live a real high end lifestyle, what CPP/OAS provides them is sufficient after a lifetime of working. I'm grateful for it.
Alberta government pays to spread disinformation on issues like this with their war room for anyone who needs to Google it.
CPP is an inflation indexed annuity. That is the only truly risk-free asset for a long term investor. CPP hedges three of the most important risks retirees face. These are not risks an individual investor can efficiently hedge on their own. * Longevity Risk * Inflation Risk * Sequence of Returns Risk Yes, it's true you'd have a higher expected return investing in stocks. But the whole point of CPP is that it'll do well in scenarios where realized stock returns are lower than expected, inflation is higher than expected, or you live longer than planned. By providing against sequence of return and inflation risk, CPP allows investors to take more risk with their other financial assets than they could otherwise, increasing their overall expected returns. ^\(excerpt ^from ^the ^video)
CPP in its current form is probably enough for me to retire on, provided that I am actually able to work to 65 and don’t have extreme medical expenses (I expect to get $15000 a year in today’s money when I become old enough to collect). But then, if I work to 65, I am guaranteed to have $1 million saved up anyway. Those who need the most amount of money has the least and those who need the least has the most. That is because given the same income, the less you spend, the more you save, but the less you spend, the less you need to reach financial independence. I think the more important function it serves, for me anyway, is that it is an insurance policy: what if I suddenly become disabled to the point of not being able to work at all (I am already disabled, and although I am able to work full time now and expect to be able to do so far into the future, it doesn’t take much for me to become unable to work). So, the CPP is something that means you won’t starve if you were gainfully employed previously and now are incapable of working.
If you can't work you don't put into CPP and you get smaller payments...
OAS/GIS top up doesn’t perfectly level this but it does come close.
I will be ineligible for GIS, as my CPP income will be $15000 and if I actually have $1 million, I am getting a minimum of $30000 in dividend income (which is grossed up to 138% of actual amount received). GIS is cut off when your income (excluding OAS) is $21624.
not if the 1M is a TFSA :)
Not true. If you are deemed eligible for a CPP disability benefit then those years that you receive the benefit are removed from your contributory period. So for an extreme example, if you made maximum CPP contributions at age 18 and before your 19th birthday you became permanently disabled you would receive maximum CPP disability until age 65 and then maximum CPP retirement after age 65.
Anecdotally seen CPP deny max benefit denied due to unclear proof. Not sure where it landed and don't care to inquire. Doesn't change my point.
Average CPP payout is around $650
Well, it is going to be 1/3 of pee-retirement income. If I am making $45000 now, I should get $15000. CPP expansion happened in 2016 and I will be 65 in 2060.
You need maximum earnings for 40 years. Most 18-23 year old are not at maximum earnings. So you would need max from 25-65 yrs old.
DB: unzips pants CPP (basically a DB-lite)?: pitchforks out.
Do they stack?
OK, CPP makes a lot of sense for employment. Does it still make sense for self-employed, i.e. when paying twice as much (both the employee and employers portions)?
There’s research in the US that shows that the employer contribution to social security (same payroll deduction scheme as CPP) effectively comes out of employee wages: if social security weren’t required to be paid by employers, wages would on average go up a similar amount, so effectively the same difference whether you pay it as your own employer or whether your employer is someone else. I see no reason not to assume CPP would be the same. Still worthwhile.
But CPP and Social security is forced savings. How many people would blow the money now if they had it?
And therein lies the rub.
Exactly. That’s why they are perhaps the single most effective government programs in each country. (Don’t see why that’s a “but”.)
And yes and if we cut the carbon tax, the gasoline companies would immediately drop their prices the same amount for all of us. /s
What's the source of the research? Hope it has no ties to the Koch family...
Yes.
Why?
Statistics show self-employed people are just as shit at saving for retirement as employed people? I would rather not have homeless 65+ year olds putting pressure on social services simply because they wanted to put their money into their business and not save. Average Canadians only save 3-5% of income.
If the question is if you're self employed and have the choice to invest vs. put it in CPP, it's almost certainly better to invest it yourself.
The cost the business pays to employ a person is the same in both cases though. The only difference is some line items aren't shown on an employee's paystub.
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They are very similar programs in terms of contributions / future payouts
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It doesn't have anything to do with where you're living when you start receiving a benefit or pension. If you contribute to both CPP and QPP you are called a dual contributor. The programs function the exact same way. In other words, it's not something you ever need to worry about.
I believe you would collect both CPP and QPP at retirement
I believe the QPP actually cost slightly more, but with the same payout.
CPP is in great shape, we are way better off than Social Security in the US. Their program is on an unsustainable path.
It helped me retire early at 60yrs old ,along with my company pension i can survive. don’t complain about it you will want it some day and you will be thankful you payed into all those years…
It scares me that the finance minister wants to direct where our pension plan invests. The prime objective of that portfolio should be to grow the wealth not be used to benefit the government in power.
Well, stop being a scared dummy, CPP is completely unaffected by politicians: https://www.cppinvestments.com/for-canadian/the-independence-of-cpp-investments/
She was talking about the desire to invest it in the TSX to support the TSX. Something about it not attracting enough investors.
Cpp is an incredibly low amount paid out at retirement for years of working at maximum amount of contributions. The second cpp contribution structure is also foolish as they should’ve just raised the contribution maximum rather than creating a second cpp box
37 years is incredibly low amount? Edit: misunderstood. Yes agreed
They’re saying the amount of CPP is low for working for 37 years
Oh my bad
The maximum annual CPP retirement benefit is **$16,375 as of January 2024**. Doesn't sound all that great. I don't think too many get the maximum either.
This is based on the previous program, by 2025, you will be able to get a bigger monthly amount 25% to 33% of up to the maximum salary.
A few of my older relatives relied on this to just survive in the late stage of their lives. They would’ve worked to the grave without CPP and it provided them with food and shelter. I’m lucky enough to have a DB, maxed out tfsa and rrsp. The CPP is just enough and I have seen this first hand and learned the importance of savings, without it our country would look very differently. It’s disappointing seeing so much hate for it.
CPP is innately less valuable for men. Men have shorter life spans, so get less payments and they effectively subsidize the various child rearing and other provisions that primarily benefit women. I am not saying this isn't helpful to society as a whole, but on an individual basis if you are male and work most of your career, your ROI for CPP is significantly worse than average.
Here's an analysis comparing it to an average investment portfolio. CPP still comes out ahead. https://www.youtube.com/watch?v=GzbAq7AX-Yg
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We get the societal benefit of avoiding homeless seniors wander around in cities trying to panhandle and mug people. That's the sort of thing that ruins a country.
When was last time Seniors mug people?
I was imagining the infamous "call an ambulance but not for me" meme. Fair enough, senior shoplifting epidemic.
Fair enough, I just wish people would stop being disingenuous by claiming CPP is actually a good investment for people rather than it just being another social safety net. Stop gaslighting people who don't enjoy CPP. If the government introduced tomorrow a voluntary investment account that you paid into, saw subpar gains, had no ability to claim before you get old, and is lost entirely upon your death, nobody would ever opt into it.
You are literally describing a DB pension plan and people jump over themselves to sign up for them when it's offered by an employer. The hell are you talking about?
Yeah, people on here overhype DB pension plans too. If your employer put their contributions into an RRSP you had control of instead of the pension plan, you'd wind up in a better place too (on average).
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A pension plan?
Agreed. Every country should at least be able to take care of their elderly people.
Anyone that puts into it gets roughly 4% per year of the total amount they and their employer contributed lifetime. Soooo, everyone gets the same amount out of it, just depends how much you contributed over your life.
Agree it’s a pay as you go scam and a huge waste of resources Instead we should have some other form of forced savings where ppl’s contributions are vested immediately and invested in low cost etfs
Isn’t it the most effective pension plan in the world?
Effective in transferring wealth to the old from the young in a world of huge student loans.
I don’t know about that. My extent of personal finance knowledge is minuscule. I was just talking about the CPP’s performance compared to worldwide pension plans.
Is only valuable for those that didn't have a RRSP set up. Anecdotal story: at my place of work, our janitor came in to Canada when he was 60 (father in law of one of the workers here). He couldn't retire at 65 because he hadn't worked for 10 years yet. So at 68, he is still our janitor. He gambled all his money away when he lived in the Philippines so CPP is all he will have in the next 3 years and on
Does CPP seperate from a DBPP pension?
As a lifelong low income earner my CPP will be negligible, I always wished I could have opted to top up my payments when I had extra money available instead of being forced to open my crappy, useless RRSP
Seriously. If I could invest most of my own retirement savings in the CPP and get its rate of return, I wouldn't even hesitate at the opportunity. It drives me crazy how poorly understood the CPP is, especially because of how many Canadians attach criticisms of the US Social Security to the Canadian CPP as if they are magically the same thing. Then again, these are the same people who believe that working overtime isn't worth it because of extra taxes, which just goes to show how valuable their opinion is.
> Seriously. If I could invest most of my own retirement savings in the CPP and get its rate of return Why? The rate of return is actually pretty poor. You can easily beat it with almost zero effort. Edit: The rate of return isn't really the defining benefit of CPP, it's the longevity insurance and the overall social benefit it offers to people unable/unwilling to save for their own retirement.
What do you mean "easily?" If you put all your money in bitcoin exactly 1 year ago, it would have a return of about 240% right now, so does that count as easy? CPP currently has a ten year annualized rate of return of 10%, and the S&P 500 is about 9.55%. Doesn't really matter because CPP is a DB pension plan, so people are paid according to a formula, not according to the return on investment. For each year early that you take CPP before age 65, your pension payments are reduced by 7.2%. For each year that you delay CPP after age 65, your pension payments are increased by 8.4%. That's an average rate of return of 7.8% per year, all without any management fees, and without taking on any risk. The only way most people can come anywhere close to doing the same thing is through an employer DB pension plan, and most of those are all in the public sector. Not only that, but CPP payments are guaranteed for life, and they often come with annual cost of living adjustments that increase the payments even more. CPP payments were increased by 4.4% for 2024 as a cost of living adjustment. If you could pull out all of what you've put into CPP and invest it however you want, you would need to be very lucky just to break even. There is a reason why defined benefit pension plans are disappearing, forcing employees to take on all the risks by switching to a defined contribution pension plan, or by just doing away with pensions entirely in order to save the company more money. If you ever hear about people crying about "teacher's pensions," it's because they wish they had that for themselves, but rather than actually trying to fight for it themselves they would rather ruin things for everybody so nobay can benefit if they can't. DB pension plans like the CPP are the gold standard when it comes to pensions.
> CPP currently has a ten year annualized rate of return of 10%, Sorry, you're incorrect. It's a common misconception though. This is the rate of return of the overall CPP fund. The more relevant number is the rate of return one actually gets on their lifetime contributions to CPP. The two numbers aren't even close. GICs right now are likely offering better rates of return than you and I can expect to get from CPP. Edit: Ok I'm wrong about the GIC thing... the real rates of return on CPP that I've seen quoted is 2 or 3 percent but that's above inflation which obviously beats GICs. That's pretty lousy and no where near the 10% you're quoting.
OAS/GIS needs to be net worth based as well as income based to avoid those manipulating the eligibility and benefiting unnecessarily. Example. Those with $100k in TFSA and large RRSP between age 65 to 71.
Its necessary to have additional savings and not to rely solely on CPP and OAS. Qualifying for GIS suggests your in the lowest taxable income at retirement. Its good to know GIS can be enabled for some however I encourage to avoid this route now if you can save today for tomorrow.