The Canada Pension Plan Mystery

Let’s face the facts estimating your CPP pension when you retire early is very hard to do.  For a lot of people doing it yourself is a bit of mystery.  So today is the step by step guide to doing your own estimate. Actually in all my calculations or looking for it I’ve only found one site that works: from the government of Canada.

The calculator lets you do a few interesting things.  First it let’s you see what you get if you start collecting the money between 60 and 70.  Also it allows you to change your average earnings at some point during your life which you can use to simulate an early retirement.

So here is the procedure to get your estimate:

  1. Get a statement of contributions with a current estimate of your CPP benefits. You can either get a copy from online or request a paper copy to be mailed to you.  Or if you have the paperwork average your income from the year you turned 18 to now.  If you don’t have it you can still use the calculator, but the estimate is rough.
  2. Got to this calculator at first you will deal with entering your date and month of birth and then do your OAS estimate.   We you get to the section about your CPP benefits do the following.
  3. It will ask you if you have an estimate.  If so, select Yes.  Then enter in your estimate of your pension and the month and date of the estimate.
  4. If you don’t have an estimate do the following.  Select No.  Then it will let you select your average earnings from when you turned 18 till now in $5000 intervals up to  $46,300 (the max).  I highly caution you to choose a lower number.  Most people forget how little they earned back between 18 and 25 and it will really drag down your average.  For example in my case if I didn’t have an estimate I would likely guess my current average is $35,000.
  5. Then at the bottom of either page it will ask if you want to see what happens if you take your CPP between 60 and 64.  I selected Yes.
  6. Then pick your start age.  I took 60.
  7. Then it will give you an estimate of your pension at 60. Hit Next.
  8. Then it will ask do you want to estimate what happens if your future earnings change.  Here is where you can simulate an early retirement.  Select Yes.
  9. Now you can pick two income estimates and an age when the first will stop and the second will start.  So if you expect to fully retire early choose the second estimate at zero.  If you plan to do some work till your 65 enter a very low number.  In my case I choose $35,000 till age 45 and $5000 from that point onwards.
  10. Then it will provide a modified pension amount.  Again you can choose to take it early.  I selected Yes.
  11. I picked 60.  Then I got my pension estimate of $338 per month starting at age 60.

So there is your step by step guide the the wonder world of CPP estimates.  Oh, a point of caution.  The calculator may get buggy if you keep shifting back and fowards changing numbers.  So do one estimate stop and then restart the calculator if you want to try something else.  Enjoy.

9 thoughts on “The Canada Pension Plan Mystery”

  1. I like this calculator. It’s actually pretty straightforward, even if you don’t have a pension statement.

  2. This sounds useful but a bit complicated. Have you tried starting at a later age and calculating the return from waiting?

    Overall I don’t plan for/around CPP at all at this point – I just pay what I have to and make my own investments. If it stays at the same level it might be a nice little bonus someday, although it sounds like it could be smaller than the uncertainty in my plans (so not that noticeable).

  3. The calculator doesn’t seem to like early retirees much.
    It expects you to earn at least $5000 every year.
    Entering a value of zero as one of the estimates of future earnings can produce a odd result.

  4. SP,

    I’ve haven’t play with that feature myself. I might take it later, but right now I’m planning on 60.


    Actually that is one of the major pit falls of early retirement. A long string of zero incomes can kill off a lot of your CPP earnings. It’s not an odd result.

    Hope that helps,

  5. What I find odd is that using zero future earnings instead of $5000 per year actually increases my CPP estimate…That doesn’t seem right to me.

  6. If I retire at age 40 for example but still earn dividend and rental income, will those factor in? IE: do you make contributions to CPP for these types of income?

  7. Warren,

    I’m not sure on the dividend income, but I know if you treat your rental income as a small business you can elect to pay into CPP on that.

    Hope that helps,

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