Canada Pension Plan & Old Age Security Retirement Plan

How Canada Pension Plan (CPP) & Old Age Security (OAS) work?

CPP and OAS are very important for Canadians. I hope the Canadian Government doesn't screw them up. You can go on a mind bender trying to figure how these two Canadian pensions work. In this video I will keep things simple and straightforward.

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Canada Pension Plan:
You can receive Canada Pension Plan as early as age 60 with a reduction or as late as age 70 with an increase.

If CPP is taken before the age of 65 then the benefit is reduced by 0.6% every month or 7.2% annually. So if you choose to start taking CPP at age 60, your benefits will be decreased by 36%

The government of Canada gives you an incentive to take CPP after the age of 65, so if you choose to do that the benefit increases by 0.7% every month or 8.4% annually. So if you want to start taking CPP at age 70, your benefit will increase by 42%.

To summarize:
If you choose to take your CPP at the age of 60 instead of 65, the break even age is 74
If you choose to take your CPP at the age of 70 instead of 65, the break even age is 82

If you are healthy, you have good genetics, and a good family health history, wait and take your CPP later, if not take it sooner.

It is very hard to predict the future, and if you want to keep things simple. Do one of the following 2 options:
1- If you need the money don’t wait, take your CPP as soon as you think you need it.
2- If you don’t need the money take it at the full retirement age of 65.

As simple as that.

Old Age Security
Your employment history is not a factor in determining eligibility: you can receive the Old Age Security pension, even if you have never worked or are still working.

To be eligible for Old Age Security, for people living in Canada you must:
1- be 65 years old
2- be a Canadian citizen or a legal resident at the time of approval of your OAS
3- have resided in Canada for at least 10 years since the age of 18

To be eligible for old age security for people living outside Canada, you must:
1- be 65 years old
2- have been a Canadian citizen or a legal resident on the day you left Canada
3- have resided in Canada for at least 20 years since the age of 18

If you want to keep things simple just take it at age 65.

There is a clawback conditions the government calls it pension recovery tax. This means if you are receiving an individual net income of greater than $77,000, you will start receiving a decreased Old Age Security benefit up to the point where you would receive nothing if you are receiving an individual income of $126,000 or greater.

Canada Pension Plan Government of Canada Link:
https://www.canada.ca/en/services/benefits/publicpensions/cpp.html

Old Age Security Government of Canada Link:
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security.html

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