CPP and life expectancy

The longevity factor

What if you don’t live long enough to receive CPP benefits?

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

In 2012, the required annual CPP employee contribution limit for high-income earners is $2,306—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.

Non-traditional careers

One good news item for the 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 in their 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, even for the wealthy individuals. While CPP is only a small piece of the retirement planning puzzle, it should not be ignored as the plan provides some flexibility in choices available.

This article was originally published on capitalmagazine.ca.

Maureen Glenn, B.A. CFP, FLMI, is Manager of Tax & Estate Planning at Richardson GMP Limited. This team of in-house experts collaborates with investment advisors to deliver customized wealth management solutions designed to address tax, estate, insurance, philanthropic and succession needs.