Important CPP Changes Coming
Proposed changes to the Canada Pension Plan (CPP) may affect your decision on when to retire and begin drawing benefits.
The changes, to be phased in starting in 2011, would mean higher payouts for those who wait beyond age 65 and less for those who collect earlier.
In 2010, the maximum CPP retirement benefit is $934 monthly at age 65. Under the proposals, those who defer their pension would see benefits increased by $78 each year to reach $1,326 monthly by age 70. Those who start early would lose $67 each year and receive only $598 monthly if they collect at the first opportunity at age 60.
Actual benefits will depend on individual contribution history and are adjusted for inflation every January. A second significant change affects those opting to take benefits early. Currently, in order to qualify for CPP you must stop work or reduce earnings for at least two months.
That test will be dropped in 2012. Instead, those who collect early and continue working will be required to contribute to CPP at the same time, as will their employers. This will mean a higher pension the following year. Contributions will be optional for those aged 65 and older.
Tags: Retirement Planning
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