CPP calculations drop out your eight lowest income years if you retire at 65. But it’s easily possible to have more than eight years where your income was less than the maximum amount on which CPP premiums are paid
in 2023 is $1,306.57 per month and the average is $811.21. Why is the average amount just 62 per cent of the maximum? To answer this question, Mr. Field says we need to delve into the math used to calculate CPP payouts.
CPP calculations drop out your eight lowest income years if you retire at 65. But Mr. Field said it’s easily possible to have more than eight years where your income was less than the maximum amount on which CPP premiums are paid. In pension lingo, this amount is referred to as yearly maximum pensionable earnings, or YMPE.
Want to increase your CPP retirement benefit so it’s closer to or at the maximum? Consider working past age 65 while postponing the start of your CPP as late as the maximum starting age of 70. Adding some higher-income years could knock out some lower-income years from early in your career, Mr. Field said.
“It’s usually the bookends of their career that cause people to not get the maximum CPP,” Mr. Field said.
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