CPP is More Valuable than Most People Realize 

From a behavioral standpoint, it's easier to tolerate a 100% equities portfolio like XEQT when you have CPP and OAS to compliment your retirement portfolio.

Ben Felix with the back-to-back. No wonder he was a baller.

Such a good video, holy moly. Can't believe how hyper partisan the world is, that even the friggin' CPP is being attacked like it's some MLM scam. This video is practically a public service announcement

I'm a US bro, so this is all news to me. Let me get this straight: It's like an annuity, so lifetime income with survivor benefits. It's inflation indexed, so unlike any annuity I could buy in the US. It's payroll contribution funded with employer matching, like a US 401k, but with a single "investment option" with a good track record. And it's mandated, so everyone (excluding Quebec on QPP) gets the benefit and there's less of an age demographic funding problem like SS has. And all this is ON TOP OF OAS?? I think this is the first time I've ever been envious of Canadian investors.

At a time where most social insurnace porgrams are running out of money CPP is consistently growing assets at a faster rate than their drawdown, they are fully funded for at least thr next 75 years

This video does a great deal of public service - it helps countering Brandolini's law. There is so much disinformation on CPP.

We're getting a lot of good content, thank-you !

Another Ben Felix Banger

There is another benefit to deferring CPP that is poorly understood, underappreciated, and seldom gets mentioned. Knowing that you have a larger CPP starting sometime in the future allows the retiree to "safely spend more" now. This is because the "nest egg" required to fund future spending no longer needs to be nearly as large. Would love for you to do a deep dive on this aspect in future videos. Thanks Ben for all your hard work.

Excellent advice. Maximizing CPP should be ONE of the pillars of your investments

Thank goodness for the CPP. Think of how screwed so many retirees would be if required to live on what they saved/invested voluntarily. Having so many seniors in such deep poverty would be bad for everyone.

Felix is cooking this week! Let’s go!

Hey Ben, great video. I've watched all of your videos and love the insights you provide. I know you're Canadian-focused with your content, but I'm a US investor and would find it fascinating to see a comparison of the CPP with US social security. When I run numbers against our pension program, they do not come out quite as favorably as the Canadian investor's CPP does, but I'd love to see a video on your analysis of it.

Great video，Ben!

Thank you. This was an eye opener, even for someone living in Germany.

Brilliantly explained. You da man. Thanks Ben.

CPP was not well planned originally (to the benefit of current retirees). But going forward it is. Current investment performance is also helping build the cushion reqd for future pensions.

Could you analyse the QPP? I'd be interested to know if it's similar to the CPP... Are the advantages mentioned also valid for QPP?

Great information as always. For people in the US, most of this applies just as well to Social Security. And I'm a strong proponent of waiting to collect. Yes, you'll lose money if you die young, but you are less likely to need it in that circumstance. What you want is extra protection in case you outlive your savings.

I was a CPP hater for the longest time but after this video i have changed my ways..

Ben, what is your opinion of the Vanguard wellington fund? It's had 100 years of quite good risk adjusted returns. Even the champion of index investing, Jack Bogle, said he has money in there.

Is this the "1st pillar", i.e. old age / disability insurance by the state, or an extra layer on top of it? (Not a Canadian here)

this is an excellent video.

hey man, thanks a ton for this clear explainer. Lots of negative talk about CPP not keeping up and likely to dry out - Similar to China. Also hearing that the is hiding the weak performance using more immigrants paying into it. Like real GDP not falling even if GDP per capita is. This makes me put all that noise aside. Can continue paying in knowing that it will be there and what benefits it brings.

it should also be noted that there is a tax risk with CPP. it defers tax to when you're older but there is no guarantee that the lower tax brackets will decrease in the future. in fact, they can increase reducing discretionary income at retirement.

Love these shorter videos that give great info!

What are your thoughts on buying LEAPS in market index funds for the purpose of acquiring leverage for a young investor? All the evidence I've seen suggests that buying them can increase my EV over a very long period but it's not a free lunch due to the volatility.

I like this video because I already got from the other Ben Felix videos that we just need to invest in a globally diversified low-cost portfolio. But because there's so much more than just picking the right stock and bond allocations, videos like this I find very educational

I like the upload frequency

@Ben -- Does all of this apply to US Social Security also? I mean, it is mandatory for all and inflation adjusted annuity also.

Although OAS is less of a guaranteed benefit, of you look at the combined amount a couple can receive, it’s amazing. Especially if you wait until 70 to start your CPP. Indexed and guaranteed.

Excellent video and Cpp a great public policy success. 🇨🇦

Can you do this for U.S. Social Security? Especially analyzing high income earners who must contribute much more and receive much less (proportionally) compared to lower income earners?

The goat of personal finance

CPP is a great idea and I am grateful for it, even if others collect more as a result of living longer. There seems to be a persistent misunderstanding of how pooled arrangements like this work, including EI and OAS. While not insurance, the popularity of ETFs suggests that more and more people are under no illusion that they will outperform, so maybe they kind of appreciate CPP but wish for the upside because they paid into it, without the downside of course.

I think a video on what kind of safeguards protect the CPP would be comforting for people too (or perhaps alarming). Basically what protects from interference, raiding or mismanagement from any future sitting governments, especially if they have a majority, and what the investment leadership of the CPP looks like and why it is good (or bad) compared to private sector funds and other alternatives. It may seem kind of off topic since it could be kind of legal in nature but its not so much different than the due diligence we would do on a fund or other investment.

What's the difference between CPP and RRSP?

A debate that will last. Personal choice. Husb is older and chose early but at times wonders. Still worked out. But taking CPP/OAS early may make sense if low income/avail savings and or medical issue at 55+. Our CA agrees. CPPD helpful as bridge for any who qualify even if perhaps too stringent def’n and process. Thx Ben.

Appreciate you making this video, despite some financial advisors expressing the wish they could replace CPP in some form. Our politicians (of all stripes) can and will make stupid short sighted decisions to please boomers and win elections by selling out the futures of younger generation: a good example is how we are currently living through these policies as it relates to housing. So for me this is the risk you do not address which is the risk that the government will change policy and start dictating how the pension plan invests or otherwise raids the piggy bank. I can't help but think about Paul Martin and EI when I think about what could happen to CPP between now and when I retire. I would link some articles about that but I dont want this comment flagged as spam.

Hey Ben, good video. Have you done the comparison for newer people paying the full contribution to those who paid much lower CPP contributions in the past but get the same benefits? I'm excluding the expansion of the CPP in this scenario. Also the CPP claims to be hedged against inflation but did you have any real data that that is actually the case?

Would love to see a similar video evaluating Social Security in the USA.

I was shocked by how the Alberta government characterized CPP as a money grab when I moved here lol. Having spent more than a decade in the US, the CPP is a welcome change for me. The number of people I worked with who had zero contributions in their 401k when they were well into their 40s always scared me

"Its not theft, its insurance!" lol indeed.

Can we get a video on how CPP funds are managed, fees and whether there is evidence that they are keeping up with benchmarks.

You're so lucky Canadians.

It isn't just the government holding people's savings that people don't like. It's the Canadian government's inability to communicate with text, in a way average people will understand clearly. I should not be referring to Wealthsimple's explainer pages to understand Canadian personal financial accounts.

I always tell people that mock the state pension plans that if such a system were to go bust, they'd have bigger problems to face, such as how to put food on their plate, as that would mean the country's entire economy likely collapsed.

As an American, I'm so jelly of Canadian retirement stuff. Be it the CPP here vs American Social Security, or Canadian's equivalent of Trad and Roth IRA accounts rolling over unused contributions to the next every year. You guys got it good

Cpp and along comes maid. Works a treat.

There is also a disability component to it. Not a lot, but it is built in.

When can I sign up to the BF fund?

Super video. In total agreement with you…keep up the excellent work!

As usual, a phenomenal video but I somehow still despise CPP, especially since I am an employer. I may need a year to digest this 😅

I’d rather put that money in to a special untouchable account for 40 years personally. But since we can’t. Here we are.

Every country that has a system like this, has to deal with the same dumb criticism. You could translate this video into multiple languages and without changing your arguments, it would apply to other countries.

One big missed item. CPP is taxed at the marginal rate. Most investment vehicles are currently more favorably taxed, whether dividends or capital gains. Very important when speaking about retirement income ...

If you only pay 1/2, it's an OK deal. If you are self employed and pay both halves, it is not a good deal. That's why I switched to paying myself dividends, and self invest.

I don’t get why the CPP fund needs to have so much management though. They are doing active investing!

Its only going to be valuable if its going to be there when you need it. Most people will never put enough in to make it worth it.

American here, is CPP the Canadian social security?🤔

CPP is great but the only problem I have is that the government may be investing your cash into things that one might find unethical.

Ben, what about MPP?

stock market gains + define benefit pension + cpp + rental income = goals

Please make a similar video on Social Security for US citizens.

CPP is much less valuable for single Canadians. As a single, If you pass away early there are no survivor benefits or a guarantee payout like many insurance annuities would offer. Whereas married pensioners have the significant benefit of a robust survivor payout to a spouse for the rest of that persons' life. Highly inequitable for a plan that requires mandatory participation.

For self-employed people, who has to pay both employer and employee premiums, is the CPP still worthy?

No idea what CPP is, I think a lot of people here are not Canadians..

What if you are self employed and have to pay both employer and employee contribution? Is CPP it still worth it ?

I see your argument, but it would still be nice to opt out of. Unfortunate it’s unrealistic given an average persons lack of ability to save

Or you *could* spend $8,848 on smoking as a statistically significant reducer of surplus life expectancy.

Ben.... what you are saying here is very important and very well considered. However, you need to slow down and speak at a slower pace so that you provide time for the listener to consider a point that you are expressing and be ready to integrate the next point. (1/3 your current speed of delivery) Your language is too domain specific for those (that do not already know what you are saying) to understand easily. Speak to those that don't know what you are trying to say. Quality of information is being drown in quantity of information. Help others to learn and understand. This could be broken into a series of videos that build on the information that you present in the ones before. At the end summarize "Why?" someone who hates the idea of CPP should rethink their position. There are many reasons for this argument. Max

What do you think about CPP from the perspective of an employer, or self-employed person who has to pay both portions?

Sorry Ben, while I do think CPP is a valuable and necessary program, i think the death benefit needs to be redesigned. There has to be a way to return more back to unlucky contributors while still funding people who live to 100.

fun fact: 8848 meters is the height of Mount Everest.

Mortality credit.... Nice lol

Obviously CPP is an excellent hedge against longevity but I'm curious if you could get a similar benefit from taking a low draw down. Obviously it wont be as good as CPP but I feel like your risk will be fairly low if your drawdown is 2% - 3% I found all three arguments to be fairly convincing as someone who felt that I wouldn't strongly benefit from the CPP but the risk hedging around inflation and sequence of return were the ones I found most convincing.

This guy Vancouvers.

I assume the discussion was for a regular employee paying into CPP. Self-employed people pay into CPP twice as much, so get half the benefit/returns. It is a forced-savings plan, I suppose, which is another "benefit". People who wouldn't otherwise save are forced to.

I was quite neutral/indifferent on the CPP - too far out for me to worry about it - but your posts have highlighted how it's actually an amazing safety net come old age. And the fact one can remain in an all-equity index portfolio knowing even if the market tanks in the later years, that person won't have to resort to eating cat food and can wait out until the markets turn around. Really solid product.

C Plus Plus is definitely a valuable asset to have. 😂

CPP should be calculated more individually, If someone has a lower life expectancy they should get higher benefits for example. There should also be a bigger payout for people who die early. And there should be the ability to exempt yourself from it if you can show you don't need it. These are my only problems with the otherwise good program. We are a two pension household with lower than average life expectancy, I don't like this idea of us being forced to subsidize others for simple factors that are considered and held against us in some situations (like purchasing health and life insurance) But not others like the CPP. I just think that for every actuarily significant factor either every product and program should take it into account or none should be allowed to. I understand it's insurance but it should be actuarily set so that the expected value each person receives from it is roughly equivalent. Maybe slightly redistributional but the person who collects the least CPP should still collect at least half as much as the person who collects the most. Otherwise it is just a tax and not savings because it's forced redistribution.

You might make the same arguments for SS in the US as you can for CPP in Canada except SS is not really a pension. Rather, it is an insurance policy against poverty in old age and thus acts as a wealth transfer from the affluent to the poor. That's a great deal for low income earners but a bad one for high earners. For those at the top, they will not do as well as if they invested the money themselves even with the inflation protection, etc. But investment return is not the only metric that matters. Who wants to live in a society where destitute seniors are homeless and starving? It's one of the prices we pay to live in civil society. Is CPP designed the same way as SS in the US? As an American, I'm curious.

To put into context for non-Canadians, is this basically their version of the U.S.' social security?

CPP is great for a few nights out.

6m27. Exactly!

Yeah but they take my money right now and I don't like that

Someone please send this to Danielle Smith.

People in the US don't realize how much social security is OP. If you study it. Bend points The only inflation adjusted annuity you can get Borderline incredible spouse benefit or widow benefit.. In addition, the inflation adjustment can be beneficial because the average retiree is not exposed to inflation the same way the CPI computes it. Typically a paid off home hedges against the CPI housing component. In that case, a social security adjustment can be beneficial.

This video really opened up my eyes to how poor the return on CPP is. Looking to leave the country asap.

*is this REALLY an investment though? a mandatory deduction from your wages...*

But I don’t get who’s paying for it long term? If fully inflation indexed annuities are not even available in Canada because of high risk to the insurer, doesn’t this kinda point to high risk to the government (future taxpayer). Unless I’m missing something here, it seems like another unsustainable thing boomers have voted in for themselves while forgetting to pay for it and us younger people will be the ones to get screwed in the future.

The CPP would likely have less controversy if you could opt out of the contribution requirement AND the Canadian government could effectively financially cut off those who opt out. Problems arise when people refuse to pay premiums yet still find ways to access publicly funded welfare benefits. But coersing everybody into a pooled insurance plan is anti-libertarian, which probably runs counter to many peoples' sense of freedom and autonomy. Like any forced government insurance program, it's a conflict between individualism versus collectivism.

I think the real issue with CPP is that there can be an imbalance with how many people are contributing to it versus how many people are receiving benefits from it. Also, I do not understand how paying to prolong peoples' lives in retirement benefits the economy or society in general. Not that it matters; my prediction is that most millennials will work until well into their 70s, and then get euthanized. There will be no retirement.

Well it’s only good if you don’t die early or stay as a citizen forever. Also, you have to take into account if a person runs into a tight spot. They can’t just withdraw money from the CPP. Without the CPP it could’ve been a potential emergency fund.

For a second I thought this was about the CCP... Didn't know you could invest in communism 😂

what if CPI is manipulated

The utility you gain from the money when you are old is nowhere near the value you gain from it when you are young imo. Money will be totally worthless to me beyond keeping myself barely alive when I'm that age. I wish there was a way to opt out of CPP.

So just to make it clear, you are saying that making an annual contribution of $8800 per year for 45 years in order to receive $14k per year for 15 years on average is a fantastic deal that is too good to opt out?😂

The key number is 4.71%. I can invest in dividend stocks and get that level of return today and all of the capital goes to my estate. A lot of the CPP return is simply return of capital. CPP is a one size fits all plan. My risk profile is not the same as an average Canadian. My income comes from patent royalties as a percentage of corporate revenue. As prices charged by manufactures tend to track inflation, my inflation risk is mitigated. I am further mitigating risk by re-investing royalties into dividend paying stocks. Secondly, I don't need to sell any assets to maintain a good standard of living so timing risk is not relevant. Third, since I am not selling assets my longevity risk is mitigated. CPP should be a voluntary plan where people are free to opt in or opt out.

Drinking game: take a shot for every derisive comment from an Albertan