WEBVTT
1
00:00:00.160 --> 00:00:12.800
If you are planning on retiring here in Canada, the maximum CPP retirement pension benefit just crossed over the $1,500 a month mark for the first time ever, but there's very high odds that you're not gonna get that much.
2
00:00:12.960 --> 00:00:24.540
That number doesn't tell you the full story. If you are retired in Canada or if you're getting close, there are three numbers that changed in 2026. Each one of these is misunderstood in a different way.
3
00:00:24.560 --> 00:00:37.000
So I wanna set the stage here so we can all understand how this works. CPP gets an inflation adjustment every single January, and the Old Age Security System, that's adjusted four times a year.
4
00:00:37.040 --> 00:00:48.940
The payment amounts move, the income thresholds move, and this year, on top of the usual adjustments, we're several years into a structural change to how CPP itself works.
5
00:00:49.060 --> 00:00:57.440
So today, I'm gonna walk you through these three things. First, the new CPP maximum, and I wanna explain why that does not apply to most people.
6
00:00:57.500 --> 00:01:05.120
Secondly, the OAS clawback threshold and why crossing into it isn't the disaster that some retirees think it is.
7
00:01:05.500 --> 00:01:18.810
Thirdly, here we'll look at the CPP enhancement, including something called the CPP2, which is gradually, eventually reshaping what future retirees are actually going to receive. Let's start with the CPP.
8
00:01:18.900 --> 00:01:34.320
That's on pretty much everyone's radar. For 2026, the maximum CPP retirement pension at age 65 just crossed over $1,500 a month for the first time, $1,507.65 a month to be exact.
9
00:01:34.640 --> 00:01:43.860
So we're talking about over $18,000 a year. Now, I get it, that's not a ton of money. It's also not, though, an insignificant amount for a lot of retired Canadians.
10
00:01:44.080 --> 00:01:50.840
Now, if you're building your retirement plan, you might see that number, you might assume that it applies to you, but here's the problem.
11
00:01:50.880 --> 00:02:06.920
The average new CPP recipient at age 65 is receiving closer to $877 a month based on Service Canada's own figures, and that is obviously a big gap from the maximum. The reason comes down to how CPP is calculated.
12
00:02:07.080 --> 00:02:20.800
It is not calculated based on your final salary or even those last few years that you work that apply to so many pension plans. It is based on your contribution history across most of your working life.
13
00:02:20.860 --> 00:02:36.560
So if you wanna get anywhere near that maximum, generally speaking, you need to get close to 40 years of earnings at or above what's called the YMPE, the Year's Maximum Pensionable Earnings. That's $74,600 for 2026.
14
00:02:36.960 --> 00:02:47.500
There are some provisions that can drop out some of those lower-earning years, including things like credits for child-rearing, disabilities, that type of thing, a general dropout provision.
15
00:02:47.560 --> 00:02:59.240
I will put a link on the screen here if you wanna dive into that topic a little bit more. But even with those provisions, most Canadians simply don't have that four decades of maximum contributions on the books.
16
00:02:59.540 --> 00:03:08.500
We also need to note that you can decide when to start your CPP. You can take it as early as age 60. Your payment then, though, will drop by 36%.
17
00:03:08.620 --> 00:03:23.540
So for example, if you qualify for that max at age 65, let's call it $1,500 a month, you're going to get $960 at age 60. If you wait until age 70 before you start claiming, it then climbs by 42%.
18
00:03:23.600 --> 00:03:39.120
So that same $1,500 would be worth around 2,130 bucks a month. So that $1,507.65, that number is actually real. It's just not the number that will probably matter for your own personal plan.
19
00:03:39.200 --> 00:03:49.329
Now, on that note, you can log into your My Service Canada account and look at an actual estimate for you. I will put a QR code on the screen here that you can use to check that out.
20
00:03:49.360 --> 00:04:00.380
I'll also put a link in the description. So that number, not the maximum, is the one that you're gonna wanna use for your own plan. Now let's move on to the Old Age Security clawback.
21
00:04:00.680 --> 00:04:13.290
We've all heard of this OAS clawback, as it's called. Lots of misunderstanding about those. Now, for the perfectionists that are watching this video, the official name is the Old Age Security Pension Recovery Tax.
22
00:04:13.740 --> 00:04:27.960
Now, for 2026, the income threshold where the OAS recovery tax kicks in, that's moved above $95,000. It's $95,323. That number increases as the years go by.
23
00:04:28.020 --> 00:04:35.840
This is one of those updates that causes a ton of confusion because a lot of retirees treat that threshold more as a cliff.
24
00:04:36.060 --> 00:04:49.500
You're gonna hear someone at work say something that if you go over that line, you're gonna lose your pension. But going over that line by a buck, by a dollar, does not wipe out your OAS. The recovery tax is gradual.
25
00:04:49.560 --> 00:04:55.400
You repay 15 cents of OAS for every dollar of net income above the threshold.
26
00:04:55.580 --> 00:05:08.620
Depending on your age, you hit the full clawback levels at $155,000 and change if you're 65 to 74, and 161,000 and change if you're aged 75 or older.
27
00:05:08.820 --> 00:05:20.260
And keep in mind, these numbers are net income per person, and the reality is most people don't earn that income in retirement, so it's, uh, easy to see how this issue gets exaggerated.
28
00:05:20.640 --> 00:05:33.220
Let's say your income sits at $10,000 over that line. You're looking at roughly a $1,500 a year recovery tax, let's call it your clawback, but you don't lose your entire benefit.
29
00:05:33.270 --> 00:05:40.039
So that is a very, very different situation from losing everything, and you're gonna hear people say that out there a lot, so be aware of that.
30
00:05:40.060 --> 00:05:50.620
Another twist that we should be aware here when you're planning, the government isn't just counting income like employment or pension. RRSP, RRIF withdrawals, those count towards that as well.
31
00:05:50.770 --> 00:05:53.880
So do capital gains, so does employment income.
32
00:05:54.240 --> 00:06:03.680
So a retiree living modestly, you can still trigger a clawback in a year where you take out a large RRIF with-withdrawal, or maybe you sell an investment that has a big capital gain.
33
00:06:03.949 --> 00:06:13.680
The strategy here, if that's the case with you, you can spread the withdrawals out, let's say, over two or more years if possible. And for couples, you can also split eligible pension income.
34
00:06:14.140 --> 00:06:22.470
That can help keep you under that line. Now, before I move to the third number, I do wanna thank Harvest ETFs for supporting this video.
35
00:06:22.500 --> 00:06:32.600
Now, one of the biggest challenges in retirement is turning your savings into reliable cash flow without giving up all of the growth potential, and that is where Harvest ETFs can help.
36
00:06:32.780 --> 00:06:44.700
Harvest offers a range of income-focused ETFs designed to pay monthly cash distributions using portfolios of established companies and covered call strategies to generate additional income.
37
00:06:45.100 --> 00:06:55.300
For retirees, that can mean another potential source of cash flow to help cover everyday expenses or to supplement your CPP or your OAS benefits, as we just talked about.
38
00:06:55.340 --> 00:07:07.540
At the same time, you can keep part of your portfolio invested for growth. Harvest also offers diversified multi-asset solutions for investors who want equities and fixed income in a single portfolio.
39
00:07:07.560 --> 00:07:19.840
They have options ranging from traditional income strategies to enhanced income funds. So if retirement income is a priority for your personal situation, talk to your advisor about whether Harvest ETFs fits your plan.
40
00:07:19.900 --> 00:07:29.440
You can learn more at harvestetfs.com. Now, I wanna move on to the third topic we're covering here today, and this is a part that I would say most people out there haven't caught up on yet.
41
00:07:29.560 --> 00:07:41.620
This is called the CPP enhancement. This is not new this year. It started actually back in 2019, but we are now far enough into the transition that it's actually starting to change some real numbers.
42
00:07:41.920 --> 00:07:49.900
Historically, CPP was built to replace around 25% of your average earnings over your career, up to a ceiling.
43
00:07:50.060 --> 00:08:04.240
Now, under the enhancement, that's climbing toward a third for anyone who spends most of their career in the new system, and there's a structural change behind that. CPP now runs on two earning ceilings instead of one.
44
00:08:04.420 --> 00:08:21.460
The first one, which I referenced earlier, is the years maximum pensionable earnings, sitting at $74,600 for 2026. The second is the years additional maximum pensionable earnings. That sits at $85,000 for 2026.
45
00:08:21.800 --> 00:08:33.880
Now, the gap between that 74 six and 85, that's where the CPP2 lives. If you earn above that first ceiling, you contribute a bit more income between those two ceilings.
46
00:08:34.100 --> 00:08:45.800
Now, nobody, I'll include myself in this group here, nobody likes sort of watching another deduction come off of your paycheck, but those extra contributions will build extra CPP benefits that will be applicable down the road.
47
00:08:46.020 --> 00:08:57.140
So someone who spends most of their career under the fully enhanced system will end up with a larger CPP pension relative to their earnings than someone who retired, let's say, a decade ago.
48
00:08:57.300 --> 00:09:08.179
We're still in the early days here. We're just starting to see the long-term effect of this program overall. Now, here's what all of this actually means for you.
49
00:09:08.280 --> 00:09:17.260
If you're near retirement, don't plan on that $1,500 maximum. Put your actual numbers from My Service Canada account and build from there.
50
00:09:17.820 --> 00:09:30.310
If you're managing RRIF withdrawals, capital gains, any lump sum income near retirement, keep that 95,000 or so OAS threshold in mind before you decide when you're going to realize that income.
51
00:09:30.680 --> 00:09:37.740
Spreading the withdrawals across a few years rather than taking it in one large hit, that can keep more of your OAS money in your own pocket.
52
00:09:37.960 --> 00:09:48.260
And if you're still working and you're earning above 74,600, understand that CPP2 is building a bigger pension for you when you decide finally to pull the pin.
53
00:09:48.640 --> 00:10:03.660
The big point here is that no one number, no CPP maximum, no OAS threshold, is going to be the one defining number for your retirement. The message is that Canada's retirement system keeps changing. Benefits are indexed.
54
00:10:04.100 --> 00:10:12.320
Income thresholds move. The CPP enhancement is gradually changing what Canadians contribute and what they're eventually going to receive.
55
00:10:12.620 --> 00:10:20.160
So if your retirement plan was built using numbers from five, 10 years ago, don't assume that those numbers are still accurate today.
56
00:10:20.540 --> 00:10:29.280
Remember, retirement planning isn't something yet you calculate just once and put up on a shelf. As the rules and the numbers change, your plan needs to change with them.
57
00:10:29.340 --> 00:10:39.120
Now, we have a full retirement playlist on our channel covering pretty much every topic. I will put a link for that on the screen here. As always, I say thank you for watching, and we'll see you in the next video
1
00:00:00.160 --> 00:00:12.800
If you are planning on retiring here in Canada, the maximum CPP retirement pension benefit just crossed over the $1,500 a month mark for the first time ever, but there's very high odds that you're not gonna get that much.
2
00:00:12.960 --> 00:00:24.540
That number doesn't tell you the full story. If you are retired in Canada or if you're getting close, there are three numbers that changed in 2026. Each one of these is misunderstood in a different way.
3
00:00:24.560 --> 00:00:37.000
So I wanna set the stage here so we can all understand how this works. CPP gets an inflation adjustment every single January, and the Old Age Security System, that's adjusted four times a year.
4
00:00:37.040 --> 00:00:48.940
The payment amounts move, the income thresholds move, and this year, on top of the usual adjustments, we're several years into a structural change to how CPP itself works.
5
00:00:49.060 --> 00:00:57.440
So today, I'm gonna walk you through these three things. First, the new CPP maximum, and I wanna explain why that does not apply to most people.
6
00:00:57.500 --> 00:01:05.120
Secondly, the OAS clawback threshold and why crossing into it isn't the disaster that some retirees think it is.
7
00:01:05.500 --> 00:01:18.810
Thirdly, here we'll look at the CPP enhancement, including something called the CPP2, which is gradually, eventually reshaping what future retirees are actually going to receive. Let's start with the CPP.
8
00:01:18.900 --> 00:01:34.320
That's on pretty much everyone's radar. For 2026, the maximum CPP retirement pension at age 65 just crossed over $1,500 a month for the first time, $1,507.65 a month to be exact.
9
00:01:34.640 --> 00:01:43.860
So we're talking about over $18,000 a year. Now, I get it, that's not a ton of money. It's also not, though, an insignificant amount for a lot of retired Canadians.
10
00:01:44.080 --> 00:01:50.840
Now, if you're building your retirement plan, you might see that number, you might assume that it applies to you, but here's the problem.
11
00:01:50.880 --> 00:02:06.920
The average new CPP recipient at age 65 is receiving closer to $877 a month based on Service Canada's own figures, and that is obviously a big gap from the maximum. The reason comes down to how CPP is calculated.
12
00:02:07.080 --> 00:02:20.800
It is not calculated based on your final salary or even those last few years that you work that apply to so many pension plans. It is based on your contribution history across most of your working life.
13
00:02:20.860 --> 00:02:36.560
So if you wanna get anywhere near that maximum, generally speaking, you need to get close to 40 years of earnings at or above what's called the YMPE, the Year's Maximum Pensionable Earnings. That's $74,600 for 2026.
14
00:02:36.960 --> 00:02:47.500
There are some provisions that can drop out some of those lower-earning years, including things like credits for child-rearing, disabilities, that type of thing, a general dropout provision.
15
00:02:47.560 --> 00:02:59.240
I will put a link on the screen here if you wanna dive into that topic a little bit more. But even with those provisions, most Canadians simply don't have that four decades of maximum contributions on the books.
16
00:02:59.540 --> 00:03:08.500
We also need to note that you can decide when to start your CPP. You can take it as early as age 60. Your payment then, though, will drop by 36%.
17
00:03:08.620 --> 00:03:23.540
So for example, if you qualify for that max at age 65, let's call it $1,500 a month, you're going to get $960 at age 60. If you wait until age 70 before you start claiming, it then climbs by 42%.
18
00:03:23.600 --> 00:03:39.120
So that same $1,500 would be worth around 2,130 bucks a month. So that $1,507.65, that number is actually real. It's just not the number that will probably matter for your own personal plan.
19
00:03:39.200 --> 00:03:49.329
Now, on that note, you can log into your My Service Canada account and look at an actual estimate for you. I will put a QR code on the screen here that you can use to check that out.
20
00:03:49.360 --> 00:04:00.380
I'll also put a link in the description. So that number, not the maximum, is the one that you're gonna wanna use for your own plan. Now let's move on to the Old Age Security clawback.
21
00:04:00.680 --> 00:04:13.290
We've all heard of this OAS clawback, as it's called. Lots of misunderstanding about those. Now, for the perfectionists that are watching this video, the official name is the Old Age Security Pension Recovery Tax.
22
00:04:13.740 --> 00:04:27.960
Now, for 2026, the income threshold where the OAS recovery tax kicks in, that's moved above $95,000. It's $95,323. That number increases as the years go by.
23
00:04:28.020 --> 00:04:35.840
This is one of those updates that causes a ton of confusion because a lot of retirees treat that threshold more as a cliff.
24
00:04:36.060 --> 00:04:49.500
You're gonna hear someone at work say something that if you go over that line, you're gonna lose your pension. But going over that line by a buck, by a dollar, does not wipe out your OAS. The recovery tax is gradual.
25
00:04:49.560 --> 00:04:55.400
You repay 15 cents of OAS for every dollar of net income above the threshold.
26
00:04:55.580 --> 00:05:08.620
Depending on your age, you hit the full clawback levels at $155,000 and change if you're 65 to 74, and 161,000 and change if you're aged 75 or older.
27
00:05:08.820 --> 00:05:20.260
And keep in mind, these numbers are net income per person, and the reality is most people don't earn that income in retirement, so it's, uh, easy to see how this issue gets exaggerated.
28
00:05:20.640 --> 00:05:33.220
Let's say your income sits at $10,000 over that line. You're looking at roughly a $1,500 a year recovery tax, let's call it your clawback, but you don't lose your entire benefit.
29
00:05:33.270 --> 00:05:40.039
So that is a very, very different situation from losing everything, and you're gonna hear people say that out there a lot, so be aware of that.
30
00:05:40.060 --> 00:05:50.620
Another twist that we should be aware here when you're planning, the government isn't just counting income like employment or pension. RRSP, RRIF withdrawals, those count towards that as well.
31
00:05:50.770 --> 00:05:53.880
So do capital gains, so does employment income.
32
00:05:54.240 --> 00:06:03.680
So a retiree living modestly, you can still trigger a clawback in a year where you take out a large RRIF with-withdrawal, or maybe you sell an investment that has a big capital gain.
33
00:06:03.949 --> 00:06:13.680
The strategy here, if that's the case with you, you can spread the withdrawals out, let's say, over two or more years if possible. And for couples, you can also split eligible pension income.
34
00:06:14.140 --> 00:06:22.470
That can help keep you under that line. Now, before I move to the third number, I do wanna thank Harvest ETFs for supporting this video.
35
00:06:22.500 --> 00:06:32.600
Now, one of the biggest challenges in retirement is turning your savings into reliable cash flow without giving up all of the growth potential, and that is where Harvest ETFs can help.
36
00:06:32.780 --> 00:06:44.700
Harvest offers a range of income-focused ETFs designed to pay monthly cash distributions using portfolios of established companies and covered call strategies to generate additional income.
37
00:06:45.100 --> 00:06:55.300
For retirees, that can mean another potential source of cash flow to help cover everyday expenses or to supplement your CPP or your OAS benefits, as we just talked about.
38
00:06:55.340 --> 00:07:07.540
At the same time, you can keep part of your portfolio invested for growth. Harvest also offers diversified multi-asset solutions for investors who want equities and fixed income in a single portfolio.
39
00:07:07.560 --> 00:07:19.840
They have options ranging from traditional income strategies to enhanced income funds. So if retirement income is a priority for your personal situation, talk to your advisor about whether Harvest ETFs fits your plan.
40
00:07:19.900 --> 00:07:29.440
You can learn more at harvestetfs.com. Now, I wanna move on to the third topic we're covering here today, and this is a part that I would say most people out there haven't caught up on yet.
41
00:07:29.560 --> 00:07:41.620
This is called the CPP enhancement. This is not new this year. It started actually back in 2019, but we are now far enough into the transition that it's actually starting to change some real numbers.
42
00:07:41.920 --> 00:07:49.900
Historically, CPP was built to replace around 25% of your average earnings over your career, up to a ceiling.
43
00:07:50.060 --> 00:08:04.240
Now, under the enhancement, that's climbing toward a third for anyone who spends most of their career in the new system, and there's a structural change behind that. CPP now runs on two earning ceilings instead of one.
44
00:08:04.420 --> 00:08:21.460
The first one, which I referenced earlier, is the years maximum pensionable earnings, sitting at $74,600 for 2026. The second is the years additional maximum pensionable earnings. That sits at $85,000 for 2026.
45
00:08:21.800 --> 00:08:33.880
Now, the gap between that 74 six and 85, that's where the CPP2 lives. If you earn above that first ceiling, you contribute a bit more income between those two ceilings.
46
00:08:34.100 --> 00:08:45.800
Now, nobody, I'll include myself in this group here, nobody likes sort of watching another deduction come off of your paycheck, but those extra contributions will build extra CPP benefits that will be applicable down the road.
47
00:08:46.020 --> 00:08:57.140
So someone who spends most of their career under the fully enhanced system will end up with a larger CPP pension relative to their earnings than someone who retired, let's say, a decade ago.
48
00:08:57.300 --> 00:09:08.179
We're still in the early days here. We're just starting to see the long-term effect of this program overall. Now, here's what all of this actually means for you.
49
00:09:08.280 --> 00:09:17.260
If you're near retirement, don't plan on that $1,500 maximum. Put your actual numbers from My Service Canada account and build from there.
50
00:09:17.820 --> 00:09:30.310
If you're managing RRIF withdrawals, capital gains, any lump sum income near retirement, keep that 95,000 or so OAS threshold in mind before you decide when you're going to realize that income.
51
00:09:30.680 --> 00:09:37.740
Spreading the withdrawals across a few years rather than taking it in one large hit, that can keep more of your OAS money in your own pocket.
52
00:09:37.960 --> 00:09:48.260
And if you're still working and you're earning above 74,600, understand that CPP2 is building a bigger pension for you when you decide finally to pull the pin.
53
00:09:48.640 --> 00:10:03.660
The big point here is that no one number, no CPP maximum, no OAS threshold, is going to be the one defining number for your retirement. The message is that Canada's retirement system keeps changing. Benefits are indexed.
54
00:10:04.100 --> 00:10:12.320
Income thresholds move. The CPP enhancement is gradually changing what Canadians contribute and what they're eventually going to receive.
55
00:10:12.620 --> 00:10:20.160
So if your retirement plan was built using numbers from five, 10 years ago, don't assume that those numbers are still accurate today.
56
00:10:20.540 --> 00:10:29.280
Remember, retirement planning isn't something yet you calculate just once and put up on a shelf. As the rules and the numbers change, your plan needs to change with them.
57
00:10:29.340 --> 00:10:39.120
Now, we have a full retirement playlist on our channel covering pretty much every topic. I will put a link for that on the screen here. As always, I say thank you for watching, and we'll see you in the next video
