Pensions for the long lived

What if you don’t live long enough to receive CPP benefits? It may seem morbid, but even with rules changes creating incentives to wait longer to apply for benefits, it’s worth considering.

CPP provides a death benefit to a maximum of $2,500 for eligible pensioners—not even three months’ worth of retirement payments. So, if you choose to delay application for CPP, you take the risk of premature death and the loss of any future payouts.

In 2015, the required annual CPP employee contribution limit for high-income earners was $2,479.95—double that amount for self-employed individuals. Applying for CPP as early as possible is the only way to guarantee that at least some of those contributions will be returned to you.

Unfortunately, longevity is the biggest unknown in this equation.

There is, though some good news for workaholics: you no longer have to provide proof that you have stopped working in order to apply for CPP benefits.

This is particularly helpful for those who, either by choice or circumstance, continue working during retirement. It also reflects the reality for many entrepreneurs and consultants who move in and out of the workforce over time.

The new Post-Retirement Benefit will also be helpful if you work longer, allowing CPP recipients over the age of 65 the option to continue contributing and topping up their retirement income.

Retiring early and living longer are two of the biggest pressures on any retirement plan. While CPP is only a small piece of the retirement planning puzzle, it shouldn’t be ignored.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.