Learn how the Canada Pension Plan (CPP) Is Affected by Early Retirement Age 55
Guest Speaker: Scott Edgington
In this video, we examine the impact of early retirement on your CPP benefit.
Many Canadians are faced with the decision of retiring early, at age 55 for instance. If you are a teacher, government employee, or a member of a Defined Benefit Plan (DB) then you can relate. Also, as a result of #covid19 people were faced with unemployment and forced into early retirement.
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Learn How the Canada Pension Plan (CPP) Is Affected by Early Retirement Age 55
The Canada Pension Plan (CPP) is a government-administered pension plan that provides financial support to eligible individuals during their retirement. While the standard age to start receiving CPP benefits is 65, it is possible to retire early and begin receiving CPP payments as early as age 60. However, if you choose to retire at age 55, there are certain considerations and implications for your CPP benefits.
Firstly, it is important to note that retiring early at age 55 does not automatically make you eligible for CPP benefits. To be eligible for CPP payments, you must first have made contributions to the plan for at least one contributory year. A contributory year is defined as a year in which you earn a certain minimum income and contribute to the CPP. Additionally, you must have contributed to the CPP for at least three contributory years to be eligible for early retirement benefits.
If you meet the eligibility criteria, there are a few factors to consider regarding the payment amount. The standard age for CPP benefits is 65, and if you retire before this age, your benefits will be reduced. In fact, retiring at age 55 can result in a substantial reduction in your CPP payments. For each month you retire before turning 65, your CPP payment will be reduced by 0.6%. This means that if you retire at age 55, your CPP benefits will be reduced by 36%.
For example, if your estimated CPP payment at age 65 is $1,000 per month, retiring at age 55 would result in a reduced payment of $640 per month. It is crucial to consider this reduction when planning your retirement income, as it may significantly impact your financial situation.
Another important aspect to consider is the impact of early retirement on your CPP contributions. If you retire at age 55 but continue to work and earn an income, you may still be required to make CPP contributions. This is because you are only exempt from CPP contributions after you reach the age of 65 and start receiving CPP benefits.
However, it is worth noting that while you may be required to contribute to the CPP, it can also increase your CPP benefits in the future. Contributing to the CPP after retiring early at age 55 can still provide additional pensionable earnings, which can increase your average CPP earnings over time. Therefore, if you continue to work and contribute, it may result in a higher CPP payment when you reach the standard retirement age of 65.
In summary, retiring early at age 55 can have significant implications for your CPP benefits. Your CPP payments will be reduced by 0.6% for each month you retire before turning 65, resulting in a substantial decrease in your monthly pension. Furthermore, if you continue to work after retiring early, you may still be required to make CPP contributions, which could impact your overall retirement income and potentially increase your CPP benefits in the long run.
It is crucial to carefully consider these factors when planning for early retirement and to consult with a financial advisor to determine the best course of action for your specific situation. Understanding how your CPP benefits are affected by early retirement can help ensure you make informed decisions to secure a comfortable retirement.
If you only contribute for 30 years in CPP how much do you think we can get included AOS?
After death why does not rest of money’s go to families
Hi thanks. My English little.l’m 60 year on October, my income ODSP ,before I called want applying for CPP ,but they told me, l not 60 years old can’t
Hi David. Great video. Where can I find the link re. Scenario of the couple that you mentioned at 30.29. Thanks
If i put over 40 years into CPP, (16-62years old), and i start to collect at 63, will i get the max. amount as if applying at 65 (66 now)? About $1,200.00/month. Or do i still have to wait to turn 66 years old?
Re CPP – I am 61 and divorced, I have already accumulated enough credits to receive the maximum monthly benefit at 65 (approx. $1,250 at 65) minus the credits I will need to give to my ex wife which may bring me down to say $900 month. If I continue to work and pay CPP can I accumulate additional credits so I could possibly get the $1,250/mth even after giving my ex some of the credits?
Sorry, I got confused with the comment that years 56-65 will be zero income and affect your calculation. Does any of the 75 mths of lowest income to be dropped off get used by the zero income mths between yrs 56-65? Thxs for this video! So helpful..just this last question.
Hi, if I take CCP early at 60, and lose 36 percent. From 60-65, do I then get full CCP at 65, or continue to lose 36 percent onwards? Thanks Leslie
Thank you for addressing this topic…much needed! What would ice the cake is comparing the max benefit at 65 to the same benefit if one were to stop work at 55.
The comments at 19:44 was great. Thank you. Also, time to do the Service Canada call. Thanks again. I was looking for the livestream at 10, but I think we are in different time zones! I am glad to have watched this for the detailed personal advice on the subject that I brought up in that last video. Many thanks again
Thank you David! Nice to see you both and for the information