Author Topic: Voluntary CPP top-up and FIRE  (Read 1613 times)

Goldielocks

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Voluntary CPP top-up and FIRE
« on: February 28, 2015, 02:35:36 PM »
Hey Canadians!  I need your two cents umm.  nickels?.

As FIRE candidates, it is unlikely that we will get full CPP benefits.   I recently calculated mine at only 60% of the maximum available.
Completing my taxes today, I then saw that we can voluntarily top-up the CPP contributions, and I started to wonder if this makes sense in FIRE.

So, I tried to figure out what an annuity that provides the same income increase at age 60 as a full CPP benefit would be, and the annuity cost.   So far, it appears that the CPP top-up option may be far better than an annuity, at today's rates.

Has anyone else looked into this?  When does the voluntary CPP top-up make sense?  e.g., only in your last 10 years before retirement (otherwise straight up direct investments are likely better) or ???

Also -- I am trying to figure out if you need to cover the employer CPP portion as well as the employee CPP portion to get credit for a full top-up.  I assume so, but let me know if it is otherwise.

Goldielocks

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Re: Voluntary CPP top-up and FIRE
« Reply #1 on: February 28, 2015, 06:57:34 PM »
You cannot just arbitrarily contribute any amount to the Canada Pension Plan. If you were an ordinary wage worker for the entire calendar year, you likely do not have any income eligible for additional contributions.

See Form CPT20 to figure the maximum amount of voluntary contributions you can make to CPP (which will quite possibly be zero).

Hey Cathy, your knowledge and advice are usually top notch, but your written condescending tone usually makes my stomach churn.  Can you lighten up a bit, pretty please? 

Joan-eh?

  • Bristles
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Re: Voluntary CPP top-up and FIRE
« Reply #2 on: February 28, 2015, 07:19:27 PM »
To clarify--- We need income in order to contribute, right? And it takes about 51,000 to be able to contribute the maximum amount.