CPP disability benefits are a crucial lifeline for many Canadians. Allowing you to tap a portion of your accumulated CPP money before you retire, they can help you if you’re suffering from illness or a disability. You do not need to initiate the withdrawal of regular benefits to receive CPP disability benefits. You can receive the benefits before you turn 60. So, CPP disability benefits are a lifeline you can draw on even if you aren’t entitled to employment insurance (EI), workers’ compensation, or similar schemes.
Recently, the Canadian government published the updated CPP numbers for 2024. These included the average amount earned in 2023, and the maximum amount that can be earned this year. In this article, I will attempt to determine the average amount being earned in 2024, going off of these official figures.
Between $1,170 and $1,606
The average CPP disability benefit for 2024 is between $1,170 and $1,606 monthly. This range of estimates comes directly from the Federal Government, which publishes CPP statistics on an annual basis. Specifically, $1,170 is the 2023 average, and $1,606 is the 2024 maximum.
We know what the average range of CPP benefits is for 2024. Estimating a specific average is harder to get at. The government usually publishes the average CPP disability benefit earned in a given year after that year is over. That helps with ensuring that the published figure represents the entire year. The maximum amount can be published the same year, because that comes from a formula, not empirical data.
What’s this year’s average? In addition to knowing the range of values it can fall between, we also know that it’s likely to be closer to last year’s average than to the maximum. The reason we know this is because the incremental annual increases are influenced by inflation. Last year’s December inflation rate (year over year) was 3.12%. So, a rough estimate for this year’s average is $1,206 – which is last year’s average times 1.0312.
Eligibility requirements
To be eligible for CPP disability benefits you need to be younger than 65 and have an “eligible disability.” Not every disability counts, so check the Federal government’s website to see if you qualify.
What if you’re not eligible?
If you’re not eligible for CPP disability benefits, you can use your TFSA to come up with some money to cover your expenses.
If you’re like most Canadian investors, you’ve probably held dividend stocks like Fortis Inc (TSX:FTS) in your TFSA for many years. Such stocks pay dividend income and often offer capital gains. As the income and gains accrue in your account, they increase the cash available to you. You can transfer money you’ve made from your investments out of your TFSA without a tax penalty. This makes the TFSA ideal for “rainy day savings,” as it lacks the RRSP’s “taxable on withdrawal” feature.
If you’d held $10,000 worth of Fortis stock from October 19, 2022 to today, you’d have gotten a 7.5% capital gain in addition to an 8.4% dividend return. The capital gain would be worth $750 and the dividends would be worth $840. Since you’re using a TFSA in this hypothetical example, you pay no taxes when you earn these sums, nor when you withdraw them. So you could simply cash out the “capital gain” portion of your Fortis position, withdraw that plus your dividends, and have $1,590 to cover you in your time of need – while leaving most of your investment intact!
