Q: I worked outside Canada for nearly 10 years (1992-2002) in the USA. I have two questions in regard to my circumstances:
- How do I calculate the CPP available to me on retirement (I am 56 and am semi-retired making very little contribution to CPP for the past 15 years since returning) and for the next nine years?
- I understand there is some way to have my U.S. Social Security amounts integrated into CPP as I contributed in the USA for less than 10 years (the minimum to receive benefits directly from USA as I understand it) but they were by far my highest earning years.
A: By far the most common destination of choice for Canadian citizens abroad is the United States, which is home to more than one million Canadians. Some Canadians may spend part of their career in the U.S., impacting their Canadian government pensions while possibly contributing to U.S. pensions.
Canada Pension Plan (CPP) is a contributory pension plan, so future entitlement is based on contributions made on employment or self-employment income. You generally need to have 39 years of maximum contributions to receive the maximum CPP retirement pension, so spending 10 years in the U.S. and an early retirement means you’re not likely to be at the maximum, Peter.
You can confirm your CPP entitlement by requesting a Statement of Contributions to the Canada Pension Plan from Service Canada.
There is another government pension, the Old Age Security (OAS), that could be impacted by your time abroad. You need to have 40 years of Canadian residency between the ages of 18 and 65 to qualify for the full OAS pension. Given this is a 47-year period and you spent 10 years abroad, Peter, it sounds like you might only qualify for an OAS pension equal to 92.5% (37 years divided by 40 years) of the maximum.
The good news for Canadian expats who have or are working or living abroad is that Canada has social security agreements with several countries, including our neighbours to the south.
The Agreement on Social Security between Canada and the United States came into force in 1984. The Canadian pensions included in the Agreement are CPP and OAS.
According to the Canadian government:
“If you do not qualify for a Canada Pension Plan benefit, Canada will consider your periods of contribution to the pension program of the United States as periods of contribution to the Canada Pension Plan.
If you do not qualify for an Old Age Security pension based on your years of residence in Canada, Canada will consider your periods of contributions to the pension program of the United States after the age of 18 and after January 1, 1952 as periods of residence in Canada.
If you have not contributed to the pension program of the United States for the minimum period, under the Agreement, the United States will consider periods of contribution to the Canada Pension Plan as periods of contribution under the pension program of the United States.”
So, it seems you will be able to receive some benefit for your time working in the U.S. and contributing to U.S. Social Security, Peter. You typically need to have 10 or more years (40 quarters actually) of contributions to the Social Security to receive a pension in the U.S. But the Canadian government will apply your contributions to the calculation of your CPP and OAS entitlement and increase your Canadian government pensions accordingly.
Since you will be living in Canada when you apply for Canadian and American benefits, contact Service Canada for more information when you apply, Peter. You can start your CPP retirement pension as early as age 60 and your OAS pension as early as age 65. Both pensions can be delayed as late as age 70 and the decision on the best timing to start these pensions depends on several factors.
Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.
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