Pension Benefits Available to Retiring Canadians

If you are a Canadian approaching retirement, it is a good idea to be fully informed about pension benefits currently available to Canadians. To illustrate: did you know you may be eligible for at least four different pensions? Did you know that one of these is available to those who turn sixty? Did you know that your children might also receive a benefit? This is all good news for those who are approaching retirement.

This article discusses pension benefits available to Canadians who have paid into the Canada Pension Plan or what is known as CPP.

Those who have made at least one contribution into the CPP, may qualify for benefits and may be eligible for monthly benefits as early as 60. Some choose to wait until they are 65 to receive the full benefit amount while others opt for a reduced pension that starts five years earlier.

Depending on people's financial standing, CPP benefits will comprise part, half or most of their income when they retire.

Most Canadians qualify for three main benefits. What are these?

• CPP (Canada Pension Plan)
• OAS (Old Age Security)
• GIS (Guaranteed Income Supplement)
• CPP Disability
• Benefits for your children: if you are disabled, your children under 18 can receive a benefit and if they are between 18-25 and are students, they can also receive a benefit
  

Did you know you can start collecting a pension as early as 60?

If you have made at least one eligible contribution to the Canada Pension Plan, you may qualify for CPP pension plan benefits. This extra income can be a real boon for people as they age. Many can no longer sustain the pace they did when they were younger or health problems impair their ability to earn as much as they previously could. Whatever the reason, retiring five years earlier may be a better fit for someone's circumstances.

Sixty-five years and beyond...

OAS

If you have paid in to CPP, you are also eligible for an Old Age Security Pension or OAS. This is a monthly benefit available to most Canadians upon retirement. You must be living in Canada and be 65 years of age to qualify.

Garanteed Income Supplement (GIS)

GIS is another pension benefit available to Canadians. This is a tax-free supplement for lower-income Canadians who are receiving OAS. In order to qualify, income levels cannot exceed certain limits.

If you are a Canadian, under 65, who has paid into CPP, you may be eligible for CPP Disability Benefits. This is a taxable monthly benefit issued to eligible Canadians.

The first thing to consider is your eligibility.

• Under 65 years of age?
• Stopped working because of medical problems?
• If you've paid into the plan for the last 25 years, you only have to meet the required contribution amount for the last 3 years.
• Or, if you haven't paid into the plan for 25 years, you need to have made eligible contributions for the last 4 years out of 6 years.

Now, here is where things can become sticky. Normally, if you are working, your employer pays into CPP for you at a rate of 4.95.

If you are self-employed, you have to have paid into CPP at a rate of 9.9.

You have to meet the the contribution amount , which is somewhat higher than the minimum earnings amount of $3500.00. To illustrate, you may have made contributions from your self-employment income but if they were on the low -side, you might not have paid enough into CPP to qualify for CPP Disability.

The minimum amount that someone has to earn in one year, to be able to contribute to CPP is $3500.00 but to qualify for CPP Disability benefits, as of 2011, you would have had to have earned at least $4800.00. If your earnings met that amount or were higher, you would have paid enough into the plan to quality for CPP Disability.

Someone who has paid into the plan for the last four years out of 6 years, has to ensure that they met the required contribution amount for the 4 years in order to qualify, as well as meeting the criteria for a severe medical condition.

• Worked for the last 25? You just need 3 years of qualifying contributions to qualify
• Work for the last 6 years? You just need 4 years of qualifying contributions to qualify

• Below $3500.00--No contributions into CPP.

• Over $3500.00 but less than $4800.00--contributions into CPP for CPP Retirement Benefit but not enough for CPP Disability Benefit.
• Contributions of higher than $4800.00--you may have paid enough into the plan @ 9.9%.

If your health is deteriorating and you are working full or part-time, it is a good idea to plan ahead to meet the contribution amounts needed for that four-year period out of six years working so that you qualify and can apply for CPP Disability.

Knowledge is power and knowing how much you have to contribute just might make the difference between receiving a benefit that would help to ease your financial burdens.

If you are self-employed, and if you know your health and strength are diminishing, you may be able to pick up additional work to meet the yearly contribution requirements so that when the time comes and you truly no longer have the wherewithal, you will receive your disability benefit.

As of 2011, each person receives a base amount of $433.37 + an amount calculated on your contributions throughout your working career.

The highest amount one can receive is $1153.37 and average amounts are around $807.81.

It can be seen that for someone who is disabled, it is well worth checking to see if you have made enough contributions to qualify for CPP Disability.

If you have children, because you are disabled, a benefit is available to them, as well. These benefits are issued if your children are under 18 or, if they are between the ages of 18-25 and are attending school full-time, they would qualify for $218. 50. Applications for children's benefits are included in your application kit.

Forms can be printed from the Service Canada website. You can also arrange to have an application kit mailed to you.

There is much paperwork to be completed so the best approach is to do a little each day until you have everything filled out and your forms are completed.

Pension Benefits for Retiring Canadians--find out what other benefits you are eligible for.

It is a good idea to do your homework ahead of time so that you understand these benefits and about one year before you turn 60 or 65, check on when to apply. It's recommended you apply well ahead of time so as to ensure no delay in benefits.