Happy Tuesday Morning Green Panda Friends.  I hope that Monday wasn’t too hard on everybody; I know it was a holiday for some!  I am personally not a big fan of Monday mornings. Almost every single Monday morning when my alarm goes off I think to myself… When can I retire?

Our Canada Pension Plan will be a major source of income when we are ready to retire.  If you regularly monitor your weekly, biweekly, or monthly paycheque you may notice an amount that is being withdrawn from your gross income for the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP).

According to Service Canada  the Canada Pension Plan will provide us “with a stable and dependable pension (we) can build on for retirement.  (Our) contributions also provide (us) and (our) dependents with basic financial protection if (we) become disabled or die.”

Who can receive Canada Pension Plan Benefits?

There are conditions and restrictions regarding who can benefit from the Canada Pension Plan. According to the Retirement Income Options resource center from TD Canada Trust, only people who have contributed into the CPP/QPP during their years of employment can benefit from the CPP/QPP during retirement.  The amount that we will receive depends on the number of years we worked, as well as the amount of money that we contributed into the CPP/QPP over those years. The current maximum CPP/QPP benefit is $863.75 per month.

When can I start receiving the Canada Pension Plan Benefits?

If we are eligible, we (or our parents) can start receiving full Canada Pension Plan Benefits at the age of 65. Alternatively we can start receiving Canada Pension Plan Benefits starting at the age of 60, although a penalty will apply.  If we decide to start receiving Canada Pension Plan Benefits early we will have a penalty of 6% annually, which equals a 0.5% reduction for every month that we choose to receive our benefits before the age of 65.  In a nutshell, we will lose 30% of our total Canada Pension Plan Benefit if we start to receive the money at age 60 instead of 65.

Will the Canada Pension Plan be available when I retire?

In recent years as the baby boomer generation retires and starts to collect their benefits there has been some controversy over the sustainability of the Canada Pension Plan.  People are questioning whether or not there will be any money left in the Canada Pension Plan for the younger generations to benefit from in our retirement.   Recent changes to the Canada Pension Plan “will ensure that the CPP remains fair and sustainable.”

The benefits of the Canada Pension Plan are usually not a sufficient source of income during retirement.  As young investors we should also save for retirement through our personal Retirement Savings Plan (RRSP,) as well as in a private pension plan with our employer.  These savings combined with the benefits of the Canada Pension Plan will create a stable income for investors during retirement.

This is the 6th and last post in our My First Portfolio series, I hope you enjoyed it.  Other topics that we have discussed during this series are Stocks, Dividends, Exchange Traded Funds, It’s Time To Start Investing, and 5 Steps To Create Your Investment Portfolio .  Please contact Green Panda anytime with questions about your retirement and/or investments.