CPP, Explained - Everything You Need To Know About The Canada Pension Plan (CPP vs OAS)

Summary

This video script delves into the crucial aspects of planning for retirement, emphasizing that it's not just a distant dream but a goal that requires proactive planning and action. It highlights the importance of saving and investing early for retirement, beyond just relying on government programs like the Canada Pension Plan (CPP) and Old Age Security (OAS). The narrative explains how retirement expenses encompass day-to-day living, emergencies, and leisure, underscoring the necessity of having a diversified retirement plan. Additionally, it provides insight into how the CPP works, including contributions, investments by CPP Investments, and the eventual payout structure, aiming to give viewers a comprehensive understanding of their full retirement picture.

Takeaways

• 😀 You need to save and invest for retirement in addition to government programs like CPP
• 💡 CPP takes contributions from your paycheck to fund your retirement income
• 📈 CPP Investments grows the CPP fund by investing contributions
• 💰 You can start taking CPP as early as 60 or as late as 70
• 🤑 The maximum CPP payout per year if you retire at 65 is about $15,700
• 😕 The average CPP payout is around $9,700 per year
• 🤔 CPP is designed to replace 25-33% of your pre-retirement earnings
• 🌄 CPP payments are taxable income
• ⏳ CPP Investments focuses on long-term growth and sustainability
• 💡 The full retirement picture includes your personal savings plus CPP

Q & A

What are the three main types of expenses one should expect during retirement?

The three main types of expenses during retirement are day-to-day expenses, emergency expenses, and money for leisure activities such as vacations or hobbies.

Why is investing important for retirement rather than just saving?

Investing is important for retirement because it helps in growing the saved money at a rate that potentially outpaces inflation, making it difficult to accumulate enough just by saving, especially considering the need for a substantial amount over a 30-year period.

What are the two major components of Canada's government retirement income system?

The two major components are the Canada Pension Plan (CPP) and Old Age Security (OAS), with an additional component being the Guaranteed Income Supplement for low-income retirees.

What are the eligibility requirements for Old Age Security in Canada?

To be eligible for Old Age Security, one must be a Canadian citizen or legal resident at the time of application, aged 65 or older, and have lived in Canada for at least 10 years after turning 18.

What determines the amount of financial return from the Canada Pension Plan?

The amount from the Canada Pension Plan is determined by the length of time and the size of contributions made during the individual’s working years.

What is the role of CPP Investments?

CPP Investments is tasked with managing and investing the funds collected through the Canada Pension Plan contributions to ensure the fund's sustainability and growth, aiming for long-term returns and managing risks through diversification.

What are the benefits of a long-term investing strategy for CPP Investments?

A long-term investing strategy allows CPP Investments to navigate through short-term market volatility, and by diversifying investments, they can achieve more stable and sustainable returns over time, benefiting the retirement funds of Canadians.

When can one start receiving financial benefits from the Canada Pension Plan?

One can start receiving financial benefits from the Canada Pension Plan as early as age 60 and as late as age 70, with the standard benefits given if starting at age 65.

What factors influence the amount received from the Canada Pension Plan upon retirement?

The amount received is influenced by the number of years and the amount contributed to the plan. Maximum benefits are received if one has contributed the maximum amount for at least 40 years.

How does the full retirement plan picture differ from just having savings or government benefits?

The full retirement plan includes not just savings or government benefits but a combination of personal savings, investments, and government programs like CPP and OAS to ensure financial security and cover all expenses during retirement.