Maximize Your Retirement Benefits: A Step-by-Step Guide to Applying for Canada Pension Plan (CPP)
On December 22, 2020, in a brief three minutes, we'll discuss something that is likely already familiar to you if you work in Canada: CPP deductions. Essentially, every employed and self-employed person must contribute to the CPP, which acts as the Canadian government's retirement income system.
If you work for a company, your contributions are matched by your employer and deducted from your regular pay. However, if you're self-employed (whether you're a sole proprietor or part of a partnership), you'll be responsible for both the employee and employer contributions, which are paid annually when you file your personal T1 General tax return.
It's important to note that applying for CPP benefits isn't automatic. You'll need to contact Service Canada and submit an application in order to start receiving your monthly pension.
What are CPP Retirement Benefits and When Can I Apply?
If you have worked in Canada and made at least one contribution, then you can apply for the Canada Pension Plan (CPP) retirement benefit. This government pension plan pays you a monthly amount upon retirement, with the standard age of 65 being the most common age to start receiving your payments. However, you may choose to start as early as 60 or wait until you turn 70. Keep in mind that CPP benefits are fully taxable and must be reported on your income tax returns. Your T4A(P) tax slip will show the type and amount of benefits that have been received, as well as any taxes that have been withheld.
How Much Will I Receive?
The total amount of CPP you receive depends on the length of time you contributed and either the amount you contributed or the number of years you contributed. Currently, the maximum monthly amount you can receive for a new recipient starting their pension at age 65 is $1,175.83. For March 2020, the average monthly amount given by the CPP was 6.56. Depending on your specific situation you may receive an amount somewhere between the average monthly amount and the maximum monthly amount.
How Do I Apply for the Canada Pension Plan?
Make sure to submit your application to Service Canada if you want to start receiving your CPP benefits. You may apply as early as one month after turning 59, as long as you made one contribution to the CPP and want to start your CPP within 11 months. You must provide your Social Insurance Number and banking information if you want to receive direct deposit payments. You will need to know your spouse or common-law partner’s SIN, and if you plan to use the child-rearing provision, you must provide your children’s SIN or birth certificates.
Canadians Can Apply for the CPP in Two Simple Ways:
The first way to apply is online at the Service Canada website. Applying online requires you to complete and submit the application form and sign the signature page before submitting everything to Service Canada. You will receive a date stamp on the page showing when you submitted it online. The second way to apply is by printing out and completing the CPP retirement pension application form and mailing it to Service Canada or dropping it off at a Service Canada office. TurboTax is Canada’s #1 tax preparation software and has been serving Canadians since 1993. It offers customers a variety of product options to meet all of their personal tax filing needs, including access to tax experts through the LIVE service.
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