How Many Years Do You Have to Work to Get Maximum CPP?
Every person wonders about their retirement plans, especially as they get closer to hanging up their working boots and enjoying their golden years of leisure and fun.
For instance, “How many years do you have to work to get maximum CPP?” is one of the most common questions working Canadians ask. As of 2023, you must work and contribute for at least 39 years to get the maximum CPP monthly amount.
But there’s more to it! Keep on reading to get all the details.
What Is the Maximum CPP in 2023?
If you start receiving your CPP pension as a new Canadian retiree in 2023 and you are at least 65 years of age, the maximum monthly amount you could receive is $1,306.57.
That said, pensioners receive around $811 per month on average in 2023 since reaching the maximum is not that easy—you must contribute to the CPP for at least 39 years between the ages of 18 and 65. On top of that, you must also pay the maximum amount based on the yearly annual pensionable earnings (YMPE), which are at $66,600 in 2023.
Ways to Increase Your CPP in Canada
Are you looking to get as close to the maximum CPP amount as possible? We got some sound financial strategies you can start employing right away.
1. Enhance Your CPP Base With Additional Contributions
Since 2019, the Canadian government has been slowly increasing the CPP contribution size to help future retirees increase their monthly payments. These additions will top up the base CPP amount only if they have been submitted after 2018.
The CPP enhancement scheme is expected to increase the current pension amounts by 50% for future pensioners with 40 years of enhanced contributions.
2. Delay Your CPP Payments Until 70 Years of Age
As mentioned above, the longer you work, the higher your monthly CPP payments will be. For instance, if you start taking out your CPP five years earlier at 60, your total payout will be 36% lower (0.6% per month). But if you delay your payments until you are 70, your total payout could increase by 42%.
There’s no advantage in working past 70 since your contributions will stop. Also, the government will only consider your 39 years with the highest contributions. So, working until 70 is a good idea if you are replacing low-earning years.
3. Get a Higher Paying Job
The more money you earn while employed, the higher your contributions will be, as you can afford to put more into your CPP fund. High-paying employees can also retire earlier as they would have met their retirement goals sooner than average pensioners.
Getting a good-paying job is easier said than done, though. But even if you are getting a mediocre paycheck, you can supplement your earnings with various side activities. By doing so, you can put more into your pension and live off your side wages.
4. Take Advantage of All CPP Provisions
The Canadian government implements several provisions that assist workers who have gone through periods of low earnings. For example, your CPP base component will exclude your lowest earning years from its final calculations.
Also, if you had spent time taking care of your children while they were younger than 7, you may qualify for certain child-rearing provisions that increase your CPP amounts. The months you received CPP disability payments will also be discounted.
Bottom Line
As you can see, getting the maximum CPP is not that easy since you must have worked for 39 years between the ages of 18 to 65 and contributed the maximum allowable amount. That said, there are ways to boost your CPP retirement amounts, such as working until you are 70, increasing your contribution size, or getting a better job. Remember, the average CPP payment is close to $810, so you could easily get above-average amounts.
