The Canada Pension Plan (CPP) is a cornerstone of retirement planning for many Canadians. Understanding what benefits one can expect at different retirement ages helps set realistic financial expectations. The standard age for receiving CPP benefits is 65.
However, eligible individuals have the flexibility to start receiving payments as early as age 60 at a reduced rate or delay payments until as late as age 70 for an increased benefit. All working Canadians aged 18 to 65 who earn over $3,500 annually are required to contribute to the CPP. Contributions become voluntary for those who continue working between the ages of 65 and 70.
As of January 2024, the maximum CPP payment at age 65 is $1,364.60 per month. However, the average payment that most pensioners receive is $831.92 monthly. This translates to an annual average benefit of $9,983.04, which is only about 25% of the pre-retirement income for many.
Starting CPP benefits at age 60 comes with a reduction.
Cpp benefit differences and investment options
While specific figures for early retirement reductions vary, early retirees can expect a reduced monthly benefit in comparison to waiting until 65.
Given that CPP payments only replace a fraction of pre-retirement income, exploring additional income sources is crucial. One way to fill the income gap is to invest in dividend stocks. For example, Sienna Senior Living, which provides retirement residences and long-term care services, is popular among income-focused investors for its monthly dividends.
With a current share price of $16.69 and a dividend yield of 5.57%, owning 1,300 shares could generate a monthly passive income of $100.71. Investing through a Tax-Free Savings Account (TFSA) allows you to maximize these benefits without worrying about taxes on the dividends. Sienna Senior Living has shown promise and stability, with net operating income climbing 31.3% year-over-year to $109.5 million in the first half of 2024.
The company’s growth is bolstered by strong long-term fundamentals in the senior living sector and an increasing demand for senior accommodations. As Canadians plan for retirement, understanding the benefits of the CPP at ages 60 and 65 is essential. While the CPP provides a foundational income, additional investment in dividend-paying stocks such as Sienna Senior Living can help bridge the income gap and ensure a more comfortable retirement.
With the right strategy, retirees can achieve financial stability and peace of mind in their golden years.
- Fool.com.”What Canadians Can Expect From CPP Benefits at Ages 60 and 65 in 2024″.
- AIUWeb.”Canada Pension Boost 2024: Increment in the CPP and OAS Pension Amount, Claim New Amount”.
- Fool.com.”Maximized CPP Benefits and TFSA Growth: How Canadians Can Get Both”.