Sunday, September 7, 2008

CPP and Me

I wanted to know how much money I could expect from my Canada Pension, so I asked for a Statement of Contributions. According to the government, if my earnings continue at this level until I turn 65, I could expect to get $385.91/mo in CPP benefits. It’s nowhere near the current maximum of $884.58 thanks in part to all the years I spent as a SAHM, but I can have those years “dropped out” and have the amount refigured. Or I could apply to split my ex-spouse’s CPP for the duration of our marriage. Now there’s a way to bring your ex back into your life after almost 25 years – just arrange to have the government take half his pension eligibility for a 7 year period!

I also have an annuity that was purchased for me by a previous employer that will pay me $98 or $100/mo, so let’s just say that I can count on $485.00 per month. Next there’s Old Age Pension. How much does that pay? It looks like $505.83. So, that’s a total of $990.83 per month, or $11,880 annually just for me.

My hubby should apply for his Statement of Contributions too, but I know he’ll make more in CPP because he makes more money than I do. However, he doesn’t have that handy dandy little annuity waiting for him. The average amount of CPP is currently $481.46, so let’s use that for him. Combined with OAS that would give him a monthly pension of $987.29 or an annual amount of $11,847.48. That’s a total of $23,727.48, or just a hair under the $24,000 in today’s dollars that I estimate we’ll need to live at a fairly basic level in retirement.

(It should be noted that all the money for CPP and OAS is in today’s dollars and that the amount of our CPP pensions would continue to rise if our incomes continued to rise over the next 15 years. The OAS pension amount is set annually and gets adjusted upwards.)

All of this makes it look as though my fears of us being destitute in our senior years are not based in fact. You can even go back to work after you retire and continue to receive your CPP. You just don’t contribute to CPP anymore and your pension amount doesn’t change. (In contrast, if you put off applying for CPP until your 70th birthday and continue to work in the meantime you’ll be given 30% more than the pension you would have received at 65.) Now, that’s not to say that I want to work until I’m 70, or want to retire and then start working again. I’m just stating the possibilities.

And what about our RRSPs? Well, they would give us money on top of our basic needs to do the kinds of things we want to do in retirement. Right now we have about $13,000 in RRSPs between the 2 of us and will put in another $16,800 over the next 15 years at our current (extremely low) rate of savings, for a total of at least $30,000 (ignoring interest at about 3%). At a 4% withdrawal rate, that would mean we could take out $1,200/year or $100/month. That’s not enough money for much in the way of travel, although it might improve our general standard of living slightly.

So, I’m going to say we still don’t have enough in our RRSPs. We need to improve on our savings in order to live it up just a little in our old age. But we’re unlikely to be fighting Dog for his dinner, which is good news.

5 comments:

Dolly Iris said...

This is a really interesting post! Can a person of any age request their Statement of Contributions? I'm just curious.

dmoms said...

wow, lots of info in this post. useful info for sure.

Shevy said...

@dolly iris
Yes, you can get your Statement of Contributions and it makes a certain amount of sense to look at it, say, every 5 years or so.

But it gets more accurate the closer you get to your retirement date. I remember getting it once a number of years ago and being really depressed because it said I was going to get less than $100/month. I had 7 years of zero income and a few pretty low income years and it was scary. But my pension would only have stayed so low if I'd never gotten any better jobs.

If I go back to working full time for a few years once my granddaughters are in at least kindergarten I'll see a notable increase in my pension.

Dolly Iris said...

Thanks for the info! I learn a lot reading your blog. I have a feeling I will be linking to your posts often!

Anon said...

I was just at the HRDC website, and there are many criteria that must be met to split your ex's credits. I.E.: If you were divorced between 1978 and 1986, you must've applied within three years of ending the marriage. For those interested in reading more (and there is LOTS to read), here is the link:
http://www.hrsdc.gc.ca/en/isp/pub/factsheets/credit.shtml