How many years do you have to work to get maximum CPP?

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Short Answer

You must have worked for a minimum of 39 years, to receive the maximum CPP benefit. That sound a pretty long period! Lets' see how CPP works and how you can maximize your benefits.

Detailed Answer

Canada Pension Plan or CPP

If you are a Canadian resident and have started earning income, the Canadian Pension Plan is the tool for you to start contributing to for two reasons:

  1. Tax deductions
    1. Retirement Savings.

Both employers and employees contribute 5.7% per annum each of the contributor’s salary. The contributions are capped at $3,499.80 each for the employer and employee.

As in, even if the employee earns $100,000 the employer and employee can contribute only $3,499.80 each and not $5,700 each.

Are CPP contributions compulsory?

  • It is mandatory for you to contribute into CPP, if you tick all these options:
  • You are employed in Canada (exemption: Quebec)
  • You earn more than $3,500 per annum
  • You are 18 years and above

In addition to this, your employer must mandatorily contribute 5.70% per annum of your earnings.

Deciding factors that maximizes CPP benefit?

The number of years does not directly decide how much CPP you receive; however, it indirectly impacts in the following ways:

  • How long you have contributed is one of the deciding factors, if you are employed, then you contribute.
  • If you had worked for a longer period then you and your employer would have contributed for a longer period and the value of contributions is higher than those who worked for a short span.
  • The basic aim of CPP is to replace 25% of your average earnings. If you work for a longer period than your average earnings figure will look solid.

How many years do you have to work to get maximum CPP?

Imagine you start working and contributing from the age 18. The average retirement age of Canadians is 64.5. Out of 47 years, you must have contributed for at least 39 years, in order to receive the maximum contributions.

Like we had discussed earlier, the maximum one can contribute this year is $3,499.80. Similarly, you must have contributed the maximum contribution set for all these years.

Maximize CPP or Canada Pension Plan

Maximizing CPP benefit is not an overnight activity or a quick hack. Nothing comes for free. You must plan early, work longer, plan finances to contribute the maximum amount throughout the 39 years, in order to maximize your CPP entitlement.

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Categories: CPP
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