Maximizing Your Canada Pension Plan
As Canadians who are employed or self-employed we have no choice but to pay into the Canada Pension Plan. But the CPP is not a tax: we are paying into it so that we can receive money out of it after we stop working. It is a forced savings mechanism, and for many people that is a good thing because they don't have the discipline to do it themselves. The CPP is therefore a cash pig when we are working and a cash cow after we stop.
For many Canadians, the Canada Pension Plan will be a vital source of cash in retirement—a valuable component of the Cash Cow Strategy. But you need to know the new details to make sure you get what you deserve out of it.
What new details?
Well, the government has recently changed many of the rules concerning the Canada Pension Plan (CPP). These changes are already coming into effect. It has also proposed changes to the Old Age Security (OAS) pension in the federal budget of March 29, 2012, that have yet to be implemented. These changes are likely to have a significant impact on your retirement plans and your cash flow in retirement. This chapter and the next will give you the information you need.
CPP and OAS Overview
The CPP is a government-guaranteed defined benefit pension plan that we pay into during our working years. When we retire it will pay us cash for life. The OAS pension is also paid for life once you start to receive it.
The difference between the two pension plans is that you don't pay into the OAS directly ...