Contributing to CPP after age 65 - Small businessess from 1 to 80 employees outsource your payroll management to us and let us worry about your payroll processing.
RSS Follow Become a Fan

Delivered by FeedBurner

Recent Posts

Tax changes to expect when you’re expecting
2016 Tax Tips for 2015 Filing Year
From Proprietorship to Corporation - When is the Best Time to Incorporate?
Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams
Bank of Canada cuts rates again

Most Popular Posts

Help your teenager build credit responsibly
Being an Executor of an Estate
Student Line of Credit
Principal Residence Exemption


aliko nutrition store- isotonix
aliko payroll services
canada revenue news and videos
canadian news
Cross border Tax
Disability awareness and Benefits for disabled
estate planning
Home Car Insurance
Income Splitting Strategies in Retirement
kids and money -set your children up for financial success
life insurance
on line safety tips
online safety tips
Real Estate - Investments / Retirement
Retirement planning
Save your money
small business planning
Tax Information for Students
tax news
tax planning
Tech news


January 2016
July 2015
May 2015
April 2015
February 2015
December 2014
November 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013

powered by


Contributing to CPP after age 65

Contributing to CPP after age 65
Contributing to CPP after age 65
Written by Doug Runchey
It used to be that this decision was made for you. Once you started receiving your CPP retirement pension, you could not make further contributions to the CPP. If you weren’t receiving your CPP retirement pension, you had to continue making contributions until age 70.
Since the new changes to CPP were implemented January 2012, you have been able to choose whether to contribute to the CPP after reaching age 65 (up to age 70), but only if you’re receiving your CPP retirement pension. The default, however, is that contributions are mandatory until age 70, unless you “elect not to contribute.” You can find more information about how to make this election on the Canada Revenue Agency website.
If you are over age 65 and receiving your CPP retirement pension, the decision as to whether to contribute to the CPP should be made based on a cost/benefit analysis. The main factors affecting the cost are the amount of your earnings, and whether you’re an employee or self-employed. The main factors affecting the benefit are the amount of your earnings and your age.
Cost/Benefit analysis if receiving CPP retirement pension
The cost of contributing to the CPP is 4.95% of your earnings above the Year’s Basic Exemption ($3,500 for 2013) and up to the Year’s Maximum Pensionable Earnings ($51,100 for 2013). For self-employed people, this cost doubles because they must pay both the employee and the employer share of the contribution. The actual cost of contributing to the CPP is proportionately lower for lower wage earners due to the Year’s Basic Exemption (YBE), but for the purpose of this cost/benefit analysis, let’s just say that the cost is a fixed 4.95% of earnings.
The benefit of contributing beyond age 65 while receiving a CPP retirement pension is that you will become eligible for a new monthly benefit known as a post-retirement benefit or PRB. Each year that you contribute to the CPP after starting your CPP retirement pension will generate an additional PRB, paid monthly for life.
The annual amount of a PRB is equal to 0.625% of the earnings on which you made the contributions, adjusted by the actuarial factor based on your age as of January of the year following the contributions. This means that the annual maximum PRB for a 65-year-old in 2013 would be $319.38 (based on maximum earnings of $51,100 for 2012 x 0.625%) or about $26.62 monthly. You can find more information about the PRB  on the Service Canada’s website.
The cost, benefit and “breakeven period” for deciding whether to elect contributing to CPP are shown in the following table:
Approximate Breakeven Period for PRBs (ages 65 to 70)
Age656667686970“Cost” of contributing4.95%4.95%4.95%4.95%4.95%4.95%“Benefit” of PRB0.625%0.6775%0.7300%0.7825%0.8350%0.8875%Breakeven (years) (age)72.973.373.874.374.975.6
·         “Cost” of contributing to CPP: 4.95% of earnings, ignoring the YBE
·         “Benefit” of PRB: Annual amount of PRB, expressed as a percentage of earnings
·         Breakeven (years): Cost of contributions divided by Benefit of PRB
·         Breakeven (age): Age at which PRB starts, plus number of breakeven years
Case study
Let’s use an example to make sure that the above table makes sense to you.
If Joyce decides to apply for her CPP retirement pension at age 65 in 2012, but she still wants to contribute to CPP in order to receive a PRB, the cost of doing so will be 4.95% of her 2012 earnings. As a result, she will be eligible for a PRB starting in January 2013, at an annual rate equal to 0.625% of her 2012 earnings. This PRB is payable for life, and it would take her 7.9 years until age 72.9 for her total PRB received to equal the cost of her voluntary 2012 contributions to the CPP. If she decided to contribute the following year also, she would qualify for a second PRB which would be 0.6775% of her earnings. For that contribution she would break even in 7.3 years at age 73.3.
Note: As mentioned previously, the “cost” of contributing and therefore the breakeven period would double for a self-employed person.
Cost/Benefit analysis if NOT receiving CPP retirement pension
The only time that there is an easy answer to this question is if you already have 39 or more years of maximum contributions to the CPP. In this case, any additional contributions do not increase your CPP retirement pension at all, so additional contributions are effectively wasted. In this case, you may want to consider whether you would be better off applying for your CPP immediately. This would allow you to either opt out of making additional contributions and save that money, or any further contributions that you made would at least result in PRBs as detailed above, rather than being “wasted”.
In all other situations, I strongly encourage you to get an accurate estimate of your future CPP retirement pension with and without the additional earnings/contributions that you will make if you continue working and don’t apply for your CPP retirement pension. For estimating purposes, you can try calling Service Canada at 1-800-277-9914 or use their online CPP calculator.

1 Comment to Contributing to CPP after age 65 :

Comments RSS
wenger swiss army on January-02-15 6:26 AM
There is noticeably a bundle to know about this. I assume you made certain nice points in options also.
Reply to comment

Add a Comment

Your Name:
Email Address: (Required)
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment