CPP Bump? Increase Your Benefits by $10,298 Every Single Year

The Canada Pension Plan (CPP) is an excellent addition to anyone’s retirement income. But it can seem as though you get what you get, and can’t get upset. Yet that’s simply not the case.

There are multiple ways to increase your annual CPP amount. So let’s get into some of those ways, and how much you could turn that income into over the course of just a year.

Increasing your benefits

To increase CPP benefits, there are several ways to do so right away. First, consider working longer and contributing more throughout your career. The CPP rewards higher lifetime contributions and longer periods of work, leading to higher benefits. Delaying your CPP benefits past the age of 65 can also significantly increase your monthly payments. Each month of delay up to age 70 results in a 0.7% increase, potentially boosting your benefits by up to 42%!

Maximizing your earnings during your working years is also crucial since CPP benefits are calculated based on your average earnings. Ensuring you have many high-earning years will raise your average earnings and, consequently, your benefits. Additionally, take advantage of dropout provisions that allow you to exclude certain low-earning periods, such as years spent raising young children or the 17% of your lowest-earning years, from the CPP calculation.

How much you could get

Combining these strategies with additional voluntary contributions to retirement savings plans can further enhance your overall retirement income. And that could lead to you gaining the full amount!

As of 2024, the maximum Canada Pension Plan (CPP) benefit amount for new beneficiaries starting at age 65 is $1,306.57 per month. This figure represents the highest possible monthly payment you can receive if you begin collecting CPP at the standard retirement age and have contributed the maximum amount to the plan for at least 39 years. The annual maximum amount would thus be approximately $15,679.

However, If you delay receiving your Canada Pension Plan (CPP) benefits until age 70, you can significantly increase your monthly payments. By delaying until age 70, this amount increases by 42%, resulting in a maximum monthly benefit of approximately $1,855.33. This delay strategy can thus enhance your annual CPP benefits to around $22,264, providing a substantial boost to your retirement income.

Make it even more

Investing in dividend stocks can be a strategic way to enhance your CPP benefits from here, especially if other options aren’t applicable. Gibson Energy (TSX:GEI) offers a strong financial foundation. The stock’s trailing price-to-earnings (P/E) of 20.6 and forward P/E of 15.3 indicate potential for earnings growth, making it an attractive investment. Additionally, the company has shown a positive 52-week change of 9%, demonstrating resilience and growth potential in the market.

One of the main attractions of Gibson Energy is its strong dividend yield. With a forward annual dividend rate of $1.64 and a yield of 7.5%, it offers a reliable income stream for investors. The company has maintained a solid five-year average dividend yield of 6.4%, which is a testament to its consistent performance. Even though the payout ratio is high at 150.9%, the company’s ability to generate operating cash flow of $472 million and levered free cash flow (cash after paying all financial obligations) of $137.4 million supports its dividend payments.

Bottom line

Altogether, let’s say you were already maxing out at $1,306.57 each month. From there, you increase it 42% higher or $1,855.33 monthly, or $22.264 annually from $15,679. Already, you’re earning another $6,585 by waiting until 70. Then, you reinvest that amount into Gibson Energy. Here is what that would look like over just the next year, with Gibson growing another 9%.

You’ve now achieved returns of $1,991, and dividends of $1,722. That’s total passive income of $3,713. Add it onto the $6,585, and you’ve gained $10,298! So put those CPP benefits to work.