New CPP Rules
Here’s a reminder about some good news about Canada Pension Plan benefits. As of January 1, 2012, you no longer have to stop working to draw CPP. You can simultaneously receive and accrue CPP benefits between the ages of 60 and 70, which means you have increased potential to improve your retirement finances.
The old rules stipulated that you had to stop working in order to collect early CPP benefits. As of January 1 of 2012, that condition no longer applies.
If you’re between 60 and 65, both you and your employer will be required to continue contributing to CPP. If you are self-employed, you must make the entire contribution yourself. If you choose to continue working between the ages of 65 and 70, CPP contributions will be optional. If you want to continue to contribute to CPP as an employee, your employer must also continue to contribute.
The amounts by which benefits are reduced for taking early retirement and increased for delaying retirement (currently 0.5% per month) are also changing. From 2012 to 2016, the reduction for retiring early will gradually increase to 0.6% per month. The increase for delaying CPP will rise to 0.7% per month by 2013. Once the changes are fully implemented, taking CPP at age 60 will reduce your pension by 36% from the amount it would have been at age 65; delaying until age 70 will increase it by 42%.
Talk to us before making any decisions about early retirement and collecting CPP benefits. We can help you make the choices that will work best for your financial future.
Elaine Kautz, CFP