Note: this tool was last updated on March 1st, 2024, to reflect the latest 2024 figures for max pensionable earnings (for CPP), and max benefit (for OAS)

Download the Excel version here (recommended!)

Download the Google Sheets version here

 

Retirement Benefits for Canadians (CPP and OAS)

The Canadian government operates two main programs to provide financial assistance to Canadians who have reached retirement age. These programs are the Canada Pension Plan (CPP) program and the Old Age Security (OAS) program.

Let’s be clear – the CPP and OAS retirement programs will likely not be able to fund your living expenses in their entirety.

However, they do provide a great safety net. Canadians receiving benefits from these programs today are able to receive a maximum payment of over $20,000 per year.

Getting a good grasp on what these government benefits are and how they are calculated will help us get an accurate assessment of how prepared we are for retirement.

 

Overview of the Canada Pension Plan (CPP) Benefit

The Canada Pension Plan (CPP) is a program that working Canadians pay into during their career, and receive benefits from when they reach retirement age. Money is deducted directly from each paycheck, and the government in turn provides payments back to you when you reach retirement age.

Nearly all Canadians who work in the country contribute to this program (or the Quebec Pension Plan – QPP – if you work in Quebec).

The main features of the CPP program are:

• You can begin receiving CPP payments from the government starting at age 60, and you can delay the start of your benefits up until age 70
• The amount of your monthly benefit depends on how much money you contributed towards the CPP program during your working career (which is dependent on your income), the length of your working career, and the age at which you start receiving CPP payments
• The longer you delay the start of your CPP payments, the bigger your ongoing monthly payments would be
• Your contribution period to the CPP program begins when you turn 18, and ends on the date that is the earlier of (i) when you turn 70, or (ii) when you begin receiving your CPP payments
• As of 2024, the maximum monthly CPP payment that you can receive is $1,377 (or $16,531 per year), for people starting to receive their CPP payment at age 65
• However, the average amount received by new beneficiaries in October 2022 was $717.15 (or 55% of the maximum); you would receive less than the maximum if you did not contribute enough during your working career, or you did not work in certain years

Starting in 2019, the CPP program will begin to be ‘enhanced’. Working Canadians will begin to contribute a higher percentage of their income towards the CPP, and in exchange they will receive a higher CPP payment during retirement age.

The Canadian government also has a CPP calculator on their website; however, the advantages of using my calculator are:

• My calculator has been updated to reflect the “enhanced” CPP changes that will start in 2019, whereas the government calculator has not yet been updated; the enhancement changes mean that you could receive a maximum increased pension of 50% compared to the old rules, therefore making the government calculator quite inaccurate
• Spreadsheet tools are more flexible than web-based tools (like the government calculator), so you will be able to run what-if scenarios more easily and integrate these calculations into your other spreadsheets if you’d like

This calculator does not currently include QPP calculations for those who work in Quebec; however, the CPP and QPP programs provide similar benefits, so the CPP calculations can be used as a proxy for what you’d receive from the QPP.

 

How to Calculate Your CPP Benefit

If you haven’t done so already, please download the tool. Links for the Excel / Google Sheets versions are at the top of this post; I’d recommend using Excel if possible. Navigate to the “CPP” tab of the spreadsheet. You’ll need to fill in a few assumptions, and the spreadsheet will then spit out the answer. Input your assumptions in any cell which is highlighted in yellow.

You will also need to input your income earned from age 18 up until the current year, starting on cell D34 of the spreadsheet.

The calculator will then forecast your future income based on the assumptions you entered earlier. As an optional feature, if you want to manually ‘override’ your forecasted income in a particular year, you can do that in column F (e.g., you can enter $0 for years in which you don’t plan on working).

You can also use the “Child-Rearing” drop out (CRDO) in column G. The CRDO allows Canadians to exclude certain low-earning years from their CPP calculation as long as the following rules are met:

• you have children born after December 31, 1958;
• your earnings were lower because you either stopped working, worked fewer hours or took a lesser paying job to be the primary caregiver of a dependent child under the age of seven; and
• you or your spouse or common-law partner received Family Allowance payments or were eligible for the Canada Child Tax Benefit (even if you did not receive the benefit)

The “Results” section of the spreadsheet will now give you your estimated CPP payment results. There is detail on the CPP amount you’d receive annually / monthly, your payment as a % of the max payment you could receive, how your payment would change based on if you started receiving it at age 60 up until 70, and the “optimal” age to start receiving your payment.

The optimal age shows you what age would maximize the present value of your future CPP payments, based on your assumed life expectancy and discount rate. Your ‘discount rate’ assumption represents how much less you value money in the future compared to money today. A 5% discount rate means that one dollar next year is worth 5% less to you than one dollar this year. I’d suggest using a discount rate of 3% to 7%, reflecting the annual investment return that could be earned on your money.

Overview of the Old Age Security (OAS) Benefit

The OAS program is much simpler, and it is also much easier for Canadians to get the maximum benefit. The amount of money that you will earn from the OAS program in retirement age is based purely on the number of years in which you’ve lived in Canada. There is no requirement that you were earning income in any of those years.

The main features of the OAS program are:

• You can start receiving OAS payments from the government at age 65, and can delay your starting date until age 70 (in which case you’d receive a higher ongoing monthly payment)
• As of 2024, the maximum monthly OAS payment that you can receive is $713.34 (or $8,560 per year), for those that start taking their OAS payment at age 65
• You will receive the maximum OAS payment if you have lived in Canada for at least 40 years from the age of 18 until the age in which you apply to receive OAS
• If you have not lived in Canada for 40 years, your monthly payment will be pro-rated based on the years that you have lived in Canada (e.g., living in Canada for 30 years would allow you to receive 75% of the maximum payment) – this is subject to the rules below as well
• For people living in Canada, you will not be eligible to receive an OAS payment unless you’ve lived in Canada for at least 10 years (from the age of 18)
• For people living outside of Canada, you will not be eligible to receive an OAS payment unless you’ve in Canada for at least 20 years (from the age of 18)

How to Calculate Your OAS Benefit

Navigate to the “OAS” tab of the spreadsheet. Once again, fill in the assumptions in the cells which are highlighted in yellow.

After this, your OAS payment results will be shown in the “Results” section.

Final Thoughts

For further reading on these retirement benefit programs and instructions on how to apply (note that you need to apply to actually get your payments!), see these links for the CPP program and for the OAS program.

 

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Many thanks and credits given to Doug Runchey, whose articles on the CPP program were an immense help in building this calculator.

Header image credit: Canada Currency