How Much Should You Really Expect to Receive from the Canada Pension Plan in Retirement?

The Canada Pension Plan (CPP) shouldn’t be your only income for retirement. Here’s why it’s important to build your own savings.

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Contrary to what many Canadians may think, CPP was not designed to replace all of your income when you retire — even when combined with Old Age Security (OAS). In reality, CPP is intended to provide a base amount of income, replacing just 25 percent of an average income.

The actual amount you’ll receive depends on various factors, such as the age you start receiving the CPP, how much and for how long you contributed to the CPP and your average earnings throughout your working life.[1]

What you can count on is that the CPP benefits you’re entitled to will be there for you when you need them. The CPP Fund is managed by CPP Investments, an organization with the mandate to invest the assets of the CPP Fund for maximum return without undue risk of loss.

At present, the CPP Fund is valued at more than $400 billion and should be sustainable for the next 75 years. CPP Investments is working to help ensure your CPP benefit is secure, but it shouldn’t be your only source of financial support in retirement.

CPP - saving for retirementPhoto: Shutterstock

It’s safer to think of CPP as a supplement that will pay for some basic needs. Your other retirement savings should cover the rest. There are a few ways you can save for retirement on your own, including RRSPs, Tax-Free Savings Accounts (TFSAs), and personal savings. You may also have a pension plan with your employer.

So, how much should you save? That depends on your personal circumstances, such as how much you can afford to put aside at present and how much you expect to need in order to maintain a certain lifestyle in retirement (for example, do you want to travel or will you need to help support children or grandchildren?).[2]

CPP - Family enjoying great outdoorsPhoto: Shutterstock

Regardless of how you personally save for retirement, the CPP is one benefit you don’t have to worry about. Your CPP benefits are designed to be secure. Instead, focus on regularly contributing to an RRSP, TFSA, or another personal savings account. It’s the best way to ensure you enjoy retirement the way you want and deserve.

Learn more about CPP Investments.

This content is provided for information purposes only. CPP Investments is not a financial advisor and does not provide financial advice. Every person’s financial planning needs are different. For advice on how you should prepare financially for retirement, please consult a credentialed professional financial advisor.