Page 113 - A Canuck's Guide to Financial Literacy 2020

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Have you thought about how much money you need to save for retirement? If so, what are
some ways you can save for retirement. We know that you can take advantage of various
government programs such as Canada Pension Plan (CPP), Old Age Security (OAS) and
Guaranteed Income Supplement (GIS), but will they be enough? What about your work
pension? That’s what Retirement Planning is all about.

Canada Pension Plan

Canada Pension Plan is a monthly retirement taxable benefit that replaces part of your
income when you retire. It was created in 1965 by the Liberal government of Lester B.
Pearson. Besides the province of Quebec, it's mandatory that employers and employees
must contribution to the pension plan. Quebec has its own version of the plan called the
Quebec Pension Plan.

To qualify for Canada Pension Plan, an individual must be:

• be at least 60 years old
• have made at least one valid contribution to the CPP

Canada Pension Plan will pay monthly benefits to qualified contributors:

• in retirement,
• to disabled contributors and their children,
• to widows, widowers and orphaned children of deceased contributors

As well, a lump sum death benefit is payable to the estate of the deceased contributor.

Contributory Period

Anyone over 18 who earns more than the minimum amount of $3,500 per year is eligible to
contribute to the plan, with the exception of Quebec.

• Basic Exemption Amount: The $3,500 per year is known as the basic exemption
amount and it's the amount you'd have to be earning before you're eligible to
contribute to the CPP. Anything below that is not subject to CPP Contributions.
Since 1998, the YBE has been frozen at $3,500.

As well, if you have contributed to the CPP through employer/employee premiums on your
pensionable employment income, you're eligible to receive Canada Pension Plan benefits.

The contribution period commences on the individual's 18th birthday and extends to age 60
or 70 if the individual continues to work and does not enroll to receive a retirement pension.

• Standard Contributory Period: The standard contributory period is 47 years with
the max being 52 years. If you subtract 65-18, you arrive at 47 years.