Planning on the Canada Pension Plan

[Cowperson]

Those Canadians under 50 years old figure the Canada Pension Plan, which they pay into with every paycheque, will be long broke and dead and buried by the time they retire, giving them zero benefit.

Not so says this article.

An impending funding crisis has been diverted and younger Canadians will not only get their promised pension but, barring calamity, will not have to pay more than the current contribution level.

Bold changes to the national plan started seven years ago, including a near doubling of compulsory contribution rates to 9.9 per cent of the average industrial wage, have defused a demographic time bomb still ticking in many western countries with aging populations.

Woohoo!!

http://www.canada.com/ottawa/ottawacitizen...7d-5be82d7fc879

Cowperson

[Mean Mr. Mustard]

Yikes. Although people shouldn't merely rely on the pension plan in order to get them through old age, and the problem is a lot of people really don't put much thought into the matter until they are in their late 40s and getting into their fifties (at least from individuals I have talked to). So then they really haven't invested much into an RESP or anything along those lines.

[Crazy Flamer]

Maybe someone can give me insight as to how the CPP works, as I am not nearly old enough to retire and don't really pay attention to it. Does everyone get it, regarless of income levels? And at what age do you start getting it? 65 I'm assuming...

[albertGQ]

Originally posted by Mean Mr. Mustard@Sep 26 2004, 10:31 AM
Yikes. Although people shouldn't merely rely on the pension plan in order to get them through old age, and the problem is a lot of people really don't put much thought into the matter until they are in their late 40s and getting into their fifties (at least from individuals I have talked to). So then they really haven't invested much into an RESP or anything along those lines.

You mean RRSP right? RESP stands for registered education savings plans. RESPs is not a pension plan.

[peter12]

My parents just sunk everything they had into property for their retirement. Kind of risky, but it paid off pretty well for them.

[Mean Mr. Mustard]

Originally posted by albertGQ+Sep 26 2004, 04:44 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (albertGQ @ Sep 26 2004, 04:44 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-Mean Mr. Mustard@Sep 26 2004, 10:31 AM
Yikes. Although people shouldn't merely rely on the pension plan in order to get them through old age, and the problem is a lot of people really don't put much thought into the matter until they are in their late 40s and getting into their fifties (at least from individuals I have talked to). So then they really haven't invested much into an RESP or anything along those lines.

You mean RRSP right? RESP stands for registered education savings plans. RESPs is not a pension plan. [/b][/quote]
Yeah I don't know what happened there. But as a rule people don't invest for their retirement and then some pretty sad things happen/

[Cowperson]

Originally posted by Mean Mr. Mustard@Sep 26 2004, 05:10 PM

But as a rule people don't invest for their retirement and then some pretty sad things happen/

In my comparative youth, working for peanuts in Grande Prairie, I went to look for a small place to live on a peanut worthy budget.

I came across this ex-Army guy, retired, in a tiny basement suite, renting, who wanted to sub-rent a bedroom. What a terrible situation. I decided right then and there that in my old age, I would never be in the same position as that guy. I've never forgotten it and its been a good impetus for me.

Maybe someone can give me insight as to how the CPP works, as I am not nearly old enough to retire and don't really pay attention to it. Does everyone get it, regarless of income levels? And at what age do you start getting it? 65 I'm assuming...

CPP is something most, but not all, Canadians contribute to. As an example, a housewife likely doesn't.

Payments can start at a reduced rate at age 60 or at the full rate at age 65 I believe.

Many Canadians remember the news one day when it became known Pierre Trudeau began receiving his CPP.

Cowperson

[CaramonLS]

Maybe they can tell us how the Youth of Society are going to get their pensions? The generation just about ready to turn 50 is the baby boomer generation... I know when I am 35+, I am going to be pouring my money into their wallets, so will there be any left for me?

Seriously though.. we are going to have a record number of senior citizens...

[Cowperson]

Originally posted by CaramonLS@Sep 26 2004, 08:45 PM
Maybe they can tell us how the Youth of Society are going to get their pensions? The generation just about ready to turn 50 is the baby boomer generation... I know when I am 35+, I am going to be pouring my money into their wallets, so will there be any left for me?

Seriously though.. we are going to have a record number of senior citizens...

The article is precisely about yourself, indicating changes in the last seven years have essentially removed the demographic time bomb.

Cowperson

[Crazy Flamer]

So after age 65, does every Canadian qualify to receive CPP benefits regardlesss of how much they have intvested elsewhere?

[Cowperson]

Originally posted by Crazy Flamer@Sep 26 2004, 09:51 PM
So after age 65, does every Canadian qualify to receive CPP benefits regardlesss of how much they have intvested elsewhere?

Not every Canadian. Only those who contributed.

It doesn't matter how much money you have elsewhere. As i said, PET got a CPP pension just like the rest of the schmucks.

The site:

http://www.sdc.gc.ca/asp/gateway.asp?hr=/e...re.shtml&hs=cpr

Cowperson

[albertGQ]

Originally posted by Crazy Flamer@Sep 26 2004, 03:51 PM
So after age 65, does every Canadian qualify to receive CPP benefits regardlesss of how much they have intvested elsewhere?

The CPP is a different pension plan then most other pension plans out there. Most other pension plans take the money you contribute and invest in markets (stock market, bond market, money market, etc.). How it does affects what you get for your retirement.

The CPP is on a pay as you go basis. This means that the CPP deductions you see off your cheques are used to pay for the CPP beneficiaries. And when you retire, the current workforce contributes to their CPP. But their contributions are used to pay you (the beneficiary). And the cylce continues.

[Cheese]

Originally posted by CaramonLS@Sep 26 2004, 03:45 PM
Maybe they can tell us how the Youth of Society are going to get their pensions? The generation just about ready to turn 50 is the baby boomer generation... I know when I am 35+, I am going to be pouring my money into their wallets, so will there be any left for me?

Seriously though.. we are going to have a record number of senior citizens...

Its quite simple...by the time todays overweight generation reaches their 40s most will start dying off at a young age....no worries you cant collect if your dead!

[jonesy]

But do you think they will pay people who are chryogenically frozen? You could offer a freezing service and collect their monthly CPP as payment. If you could get 20 or so clients you'd be set.

[Sylvanfan]

I wouldn't get too excited, I think CPP currently pays out like less than $1000 a month to people who receive it. All I know is my dad paid top level contributions to the plan for like 45 years, and his pension he collects is laughable. If the CPP is around when it's my turn to collect some 37 years down the road, that will be nice. Maybe it'll be enough money to pay utilities and property taxes which are rising out of control. I still think the best retirement option is to find a career with a company that provides you with a pension at a certain age like the government. In fact the best gig out there is being MLA, or MP for like 10 years, than you're set for life. Than again that is a difficult gig to land.

[Cowperson]

Originally posted by Sylvanfan@Sep 27 2004, 05:53 PM
I wouldn't get too excited, I think CPP currently pays out like less than $1000 a month to people who receive it. All I know is my dad paid top level contributions to the plan for like 45 years, and his pension he collects is laughable. If the CPP is around when it's my turn to collect some 37 years down the road, that will be nice. Maybe it'll be enough money to pay utilities and property taxes which are rising out of control. I still think the best retirement option is to find a career with a company that provides you with a pension at a certain age like the government. In fact the best gig out there is being MLA, or MP for like 10 years, than you're set for life. Than again that is a difficult gig to land.

In 2004, the maximum monthly cheques would be:

$669.92 if starting at age 60
$814.17 if starting at age 65
$1058.42 if starting at age 70

So . . . . if you had two people in a household who worked most of the time and qualified for the max and both started at age 65, that's an extra $19,540.08 to their annual household income.

To put that in perspective, if an interest rate at the bank was 4%, they would need $488,500 in savings to produce the same income from the bank deposit.

Is that significant? You can judge.

Cowperson

[Cowperson]

Originally posted by fotze+Sep 27 2004, 06:16 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (fotze @ Sep 27 2004, 06:16 PM)</td></tr><tr><td id='QUOTE'>

In 2004, the maximum monthly cheques would be:

$669.92 if starting at age 60
$814.17 if starting at age 65
$1058.42 if starting at age 70

So . . . . if you had two people in a household who worked most of the time and qualified for the max and both started at age 65, that's an extra $19,540.08 to their annual household income.

To put that in perspective, if an interest rate at the bank was 4%, they would need $488,500 in savings to produce the same income from the bank deposit.

Is that significant? You can judge.

Cowperson

I wonder how the the economic's would work out if you took all the money contributed and put it in a asavings account compunded over all those years.

Also if you die at 66, do the checks keep rolling in? I doubt it, whereas a savings plan you still have that moeny plus the interest. [/b][/quote]
There are different survivor benefits and disability benefits associated with CPP. When my father passed away at age 69, we applied for and received a survivor benefit, a lump sum cheque.

However, there are plenty of people out there who say you should take the lower cheque at 60 years of age rather than wait, essentially saying get your money out of it because you don't know how soon you might die.

Secondly, on the issue of comparative investments, I'm not going to do the math, but it seems to me just on the fly that, in typical Canadian fashion, the highest contributors probably support the lowest contributors to some extent.

Cowperson

[nfotiu]

Originally posted by Cowperson+Sep 27 2004, 06:39 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (Cowperson @ Sep 27 2004, 06:39 PM)</td></tr><tr><td id='QUOTE'>

I wonder how the the economic's would work out if you took all the money contributed and put it in a asavings account compunded over all those years.

Also if you die at 66, do the checks keep rolling in? I doubt it, whereas a savings plan you still have that moeny plus the interest.

There are different survivor benefits and disability benefits associated with CPP. When my father passed away at age 69, we applied for and received a survivor benefit, a lump sum cheque.

However, there are plenty of people out there who say you should take the lower cheque at 60 years of age rather than wait, essentially saying get your money out of it because you don't know how soon you might die.

Secondly, on the issue of comparative investments, I'm not going to do the math, but it seems to me just on the fly that, in typical Canadian fashion, the highest contributors probably support the lowest contributors to some extent.

Cowperson [/b][/quote]
I don't know about that. The contributions cap at a pretty low rate. Actually, it is probably one tax that places a much heavier burden on someone making in the 40s than someone making a six figure income. They both end up paying the same dollar amounts.

[Cowperson]

Originally posted by nfotiu@Sep 27 2004, 06:53 PM

Secondly, on the issue of comparative investments, I'm not going to do the math, but it seems to me just on the fly that, in typical Canadian fashion, the highest contributors probably support the lowest contributors to some extent.

Cowperson

I don't know about that. The contributions cap at a pretty low rate. Actually, it is probably one tax that places a much heavier burden on someone making in the 40s than someone making a six figure income. They both end up paying the same dollar amounts. [/quote]
I wasn't comparing contributors in the $40,000 area versus someone in the six figure area.

I said the highest contributors - which could be someone $40,000 and up, their total contributions capped at the highest level - versus the lowest - someone near zero.

Otherwise, I haven't put much thought into it. You might still be right but that wasn't the comparison I was making.

Cowperson

[Flame Of Liberty]

Originally posted by Cowperson@Sep 26 2004, 04:48 PM
Those Canadians under 50 years old figure the Canada Pension Plan, which they pay into with every paycheque, will be long broke and dead and buried by the time they retire, giving them zero benefit.

Not so says this article.

An impending funding crisis has been diverted and younger Canadians will not only get their promised pension but, barring calamity, will not have to pay more than the current contribution level.

Bold changes to the national plan started seven years ago, including a near doubling of compulsory contribution rates to 9.9 per cent of the average industrial wage, have defused a demographic time bomb still ticking in many western countries with aging populations.

Woohoo!!

http://www.canada.com/ottawa/ottawacitizen...7d-5be82d7fc879

Cowperson

Bold changes - that’s priceless. When you finally figure out your pyramid scheme doesn’t work, what do you do? You increase contributions. If this was a private scheme, owners will be locked up for a long time. But hey this is social democracy and if things will go really, really wrong and there will not be enough contributors to sqeeze, you can tripple contribution rate, or wait why not quadruple it? Or even better, contributors should hand out all their income to this `pension plan` and they absolutely positively without any doubt will receive their payments when they retire. Hooray!