Who wouldn’t want to take the Canada Pension Plan (CPP) benefits before age 60?
We spend our entire careers paying into the CPP program; then we have to wait until well after retirement before we can pull money out of it. What a drag!
Unfortunately, there is no way for the average person to take CPP benefits before age 60. However, if you’re, for whatever reason, unable to work, there is one way you may be able to draw on your CPP pension before 60…
CPP disability benefits
The CPP disability benefit is a monthly payment you can get if you have a disability. You do not need to be in any specific age range to get it, but you do need to be disabled. The Canadian government has a list of “eligible disabilities” that can qualify a person for the CPP disability pension. The list is pretty long; the criteria for the disabilities include length and severity of impairment. Some examples of conditions that pass the test are Alzheimer’s, cancer, and heart disease. Basically, to get the benefit, your condition has to be fairly “serious.” You can’t get the CPP disability benefit with a case of the common cold.
Are you actually disabled?
When we look at the criteria you need to meet in order to receive CPP disability benefits, it becomes clear that you do, in fact, need to be “disabled” to get the benefits, if only temporarily. Everyday diseases don’t make the cut. In some cases, even severe ones don’t — the key is that the disease or condition actually has to deprive you of the ability to work.
What this all boils down to is that going for the CPP disability benefit isn’t going to work if you aren’t truly disabled. Applications for the benefit aren’t approved automatically; you have to qualify before you get anything. If you try to apply without proof of a condition, your application will be rejected. If you do supply proof, you may still get rejected for the condition not being serious enough.
How to get some passive income going
As we’ve seen, getting CPP disability benefits is not a realistic way to make money for most people. If you aren’t actually disabled, you aren’t getting them — case closed!
That doesn’t mean that you can’t get passive income, though. By investing diligently in dividend-paying stocks, you can establish a cash flow that gets paid to your Tax-Free Savings Account or Registered Retirement Savings Plan every quarter.
Consider Royal Bank of Canada (TSX:RY) stock, for example. Canada’s biggest bank by market cap, it is one of the nation’s most important financial institutions. Bank stocks can be risky, but with its high capital adequacy and status as a “systemically important bank,” RY is less risky than most of them.
Royal Bank of Canada has a 170-year history. In that long period of time, the bank has never been at serious risk of failing. Nevertheless, it has grown over the years. In the last five years, its revenue has grown by 5.3% per year, and its earnings have grown by 5.1% per year. The bank’s profit margin is 29%. So, despite being a very mature company, Royal Bank doesn’t want for growth or profitability. Overall, it’s worth owning if you’d like to add some passive income to your portfolio.
