The CPP and You: Why Facebook is A Bloody Horrible Place to Get Your Facts

Posted on August 8, 2013. Filed under: Canadian Politics, Personal, Politics, Social Justice |

BREAKING NEWS:  The sky is not falling.

Vaccines don’t cause autism, your brain is not being fried by radio waves from nearby power lines, and contrary to the message you might have received in your Facebook feed recently- your Canada Pension Plan (CPP) is not a Ponzi scheme that is stealing money from you to fund government waste and possibly leave you broke and penniless (the government left us penniless already) by the time you retire.

This message showed up in my Facebook feed today, shared by a friend who I love dearly and respect immensely.  I think it was posted with the best of intentions, but the effect was to spread a pernicious fiction about the collection, use and solvency of the CPP.

Who died before they collected Canadian Pension Plan? (CPP) old

KEEP PASSING THIS AROUND UNTIL EVERY ONE HAS HAD THE OPPORTUNITY TO READ IT… THIS IS SURE SOMETHING TO THINK ABOUT!!!!

THE ONLY THING WRONG WITH THE GOVERNMENT’S CALCULATION OF AVAILABLE CPP IS THAT THEY FORGOT TO FIGURE IN THE PEOPLE WHO DIED BEFORE THEY EVER COLLECTED A CPP CHEQUE!!!

WHERE DID THAT MONEY GO?

Remember, not only did you and I contribute to CPP but your employer did, too. It totalled 15% of your income before taxes. If you averaged only $30K over your working life, that’s close to $220,500. Read that again. Did you see where the Government paid in one single penny? 

We are talking about the money you and your employer put in a Government bank to insure you and I that we would have a retirement cheque from the money we put in, not the Government. Now they are calling the money we put in an entitlement when we reach the age to take it back. If you calculate the future invested value of $4,500 per year (yours & your employer’s contribution) at a simple 5% interest (less than what the govt. pays on the money that it borrows), after 49 years of working you’d have $892,919.98.

If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.

Another thing with me…. I have two deceased husbands who died in their 50’s, (one was 51 and the other one was 59 before one percent of their CPP could be drawn). I worked all my life and am drawing 100% from my own CPP so I am receiving the maximum allowable payment per month. My two deceased husband’s CPP money will never have one cent drawn from what they paid into the CPP plan all their lives.

THE FOLKS IN OTTAWA HAVE PULLED OFF A BIGGER PONZI SCHEME THAN BERNIE MADOFF EVER DID.

Entitlement my foot, I paid cash for my CPP! Just because they borrowed the money for other government spending, doesn’t make my benefits some kind of charity or handout!!

Remember Senator’s benefits? — free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days. Now that’s welfare, and they have the nerve to call my CPP retirement payments entitlements?

We’re “broke” and the government can’t help our own Seniors, Veterans, Orphans, or Homeless. Yet in the past few years we have provided aid to Haiti , Chile, Turkey, Pakistan, etc., etc., etc. Literally, BILLIONS of DOLLARS!!! And they can’t help our own citizens ! 

Our retired seniors living on a ‘fixed income’ (CPP and OAS) receive no additional federal aid nor do they get any financial breaks, while our government and religious organizations pour hundreds of billions of $$$ and tons of food to foreign countries!

They call CPP an entitlement even though most of us have been paying for it all our working lives, and now, when it’s time for us to collect, the government is running out of money. Why did the government borrow from it in the first place? It was supposed to be in a locked box, not part of the general fund.

Sad isn’t it? 99% of people won’t have the guts to forward this. 

I’m in the 1% and I just did.

Holy Penniless Pensioners Batman!

We’re going to run out of money because the government is using our hard earned CPP to pay for foreign aid!  We should be making thousands of dollars per month in pension income and instead seniors are starving on a pittance! The government has been stealing money from all those people who died before collecting CPP!  The government is perpetuating the greatest financial fraud in the history of forever and ever!!!

The problem is, of course, that none of that is true.  Very little in that sad excuse for information is even remotely accurate. ( In the author’s defense- we do give foreign aid to other countries and there is a program known as CPP that many Canadians depend on upon retirement- the rest is pretty much bunk, as I’m about to demonstrate)

Let’s look at each premise in this fiction in the order that they occur…..

Unlike That Kid From The Sixth Sense,The Government Doesn’t See Dead People

THE ONLY THING WRONG WITH THE GOVERNMENT’S CALCULATION OF AVAILABLE CPP IS THAT THEY FORGOT TO FIGURE IN THE PEOPLE WHO DIED BEFORE THEY EVER COLLECTED A CPP CHEQUE!!!

First, stop yelling at me.  Please.

Second, CPP is not just a retirement pension for living people.  It has what are called “Survivor Benefits”.  As the name implies- they exist for people who “survive”.     “Survive what?”, you might ask.  Great Question!  It is for people who survive longer than their CPP contributing partner.  So dead people still get benefits, they just go to the qualifying spouse of the deceased.  Looks almost like the government thought of everything!

WHERE DID THAT MONEY GO?

Turns out it went to the surviving spouse.  Also, stop yelling.

Why I Want This Author To Measure My Penis Size

Remember, not only did you and I contribute to CPP but your employer did, too. It totalled 15% of your income before taxes. 

Where on earth did you get a figure like 15%?  The amount that comes off of an employee’s paycheque for 2013 is 4.95% to a maximum of $2356.20 per year.  This is in addition to the employer portion which is equal to the employee portion- which means that the effective maximum percentage that a working Canadian can pay is 9.9%  That, if you are keeping track of the math, is 5.1% lower than what you are claiming it is.  This of course assumes that the employee doesn’t make more than the maximum contributory earnings of $47,600. Let’s break it down so it is easier to understand:

Example 1- Joe works for Walmart. He makes $1500 gross biweekly because he is a high level manager. He will contribute $67.59 from every paycheque for a total of $1757.25 per year. This amounts to 4.95% of his gross pay.  His employer contributes an equal portion, totaling $1757.25.  This is not 15% of his earnings.  Not even close.  That amount (15%) would be $5850, which appears to be less than $3514.50 (9.9% of 39,000 less the basic exemption of $3500).  Maybe I’m wrong.

Example 2- Cindy works for the Toronto Dominion Bank.  She makes $2350 gross biweekly.  Since she makes $61,000 per year, and the maximum contributory amount is $2356.20, she will contribute $90.62 per paycheque, or just 3.9% of her gross earnings.  Her employer contributes the same, meaning she contributes $4712.41 per year- just 7.7% of her gross earnings.  This is less than 15% as well.  It is actually even less than the previous example.

There is no scenario where anybody in Canada pays 15% of their income into CPP.  None.  Doesn’t exist.

What makes things worse is that I (nor you) haven’t even paid 4.95% every year we have been working.  We have only done this since 2003.  Prior to that we paid less and the maximum contributory earnings were less.  So we paid waaaay less than 9.9% in the past- which gets you further away from that claimed 15% from the author.

Heck, before 1987 you and I only paid 1.8%, which when doubled by your employer is 3.6%  Don’t believe me?  Here is a chart from a reputable source.  That reputable source is called “The Government of Canada”, and they kind of know what they are talking about.

If you averaged only $30K over your working life, that’s close to $220,500. Read that again. Did you see where the old3Government paid in one single penny? 

Let’s frame this claim a little bit.  

First, when did you start working?  If you started working at 18 and retired at 65- and you paid the claimed 15% you would have stashed away $211,500.  That, as the author says, is close to $220,500!   That is a lot of money! 

Here is the thing though- you couldn’t have possibly made $30,000 when you started working.  Especially if you retired today.  Why, you ask?  Well, if you made $30,000 per year when you started working in 1966 then you were pretty friggin’ rich.  That is the equivalent of $216,200 in 2013 dollars- and you have been getting a pretty horrible pay cut every year since then.  Nobody averages $30,000 per year- because of this thing called “inflation”.

So let’s talk about a hypothetical guy- let’s call him “George”.  George makes $30,000 in a magical parallel universe where inflation does not exist, and he makes the exact same amount every year for his 47 year working life.  Even if he paid the maximum contributory amount for 2013 (because there is no inflation and no Consumer Price Index, remember?) he would pay a total of $221,482.80 in the 47 years he was employed.  That number looks even closer to $220,500!  But he wouldn’t do that.  Why? Because he only made $30,000 per year, and he didn’t cap out his contribution.  He actually paid $139,590 (9.9% of $1,410,000).

BTW- the government didn’t pay a penny.  You are right about that.

Entitlement is a Word.  With a Definition.  Look it Up.

We are talking about the money you and your employer put in a Government bank to insure you and I that we would have a retirement cheque from the money we put in, not the Government. Now they are calling the money we put in an entitlement when we reach the age to take it back.

Do you know the definition of an “entitlement”?  It is something you are entitled to.  Like money you contributed to your CPP!  They call it an “entitlement” because you are entitled to it- because that is what the word means.  Look it up. I’m totally not lying to you.

If “Ifs” and “buts” Were Candy and Nuts…

 If you calculate the future invested value of $4,500 per year (yours & your employer’s contribution) at a simple 5% interest (less than what the govt. pays on the money that it borrows), after 49 years of working you’d have $892,919.98.  If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.

IF you paid $4500 per year (hint: you don’t)

IF you got 5% interest on your money (hint: you won’t)

you will have lots of money.  Got that?  “Ifs” are awesome!!!!

What you end up with instead is this:

You started working in 1966 at the age of 18.  Let’s say you contributed the maximum amount to CPP every year you were working……

you should end up contributing (with your employer’s contribution) around $89,800 by your retirement in 2013.  $89,800!

But you only paid half that!  Remember that you were matched dollar for dollar by your employer.  So you paid $44,900!

Surprised?

Now let’s say you live to be 85….

If you take your $89,800 and divide it by 20 that is $4490 per year, so you are getting a pension cheque of $375 per month just to equal the total contribution amount. What if you only live to the age of 78?  Then you need to get paid $575 to equal all the money you and your employer contributed together.

Remember though, this includes the employer co-pay that you must insist is your money for this to work.

So the question is this: What is the maximum CPP benefit cheque available to a retiree 65 years old in 2013, since this amount was calculated on a maximum contribution to CPP every year since 1966?

Do you want to guess?

C’mon, guess……

$1012.50

So you need to live for 7 and a half years to just break even assuming your employers contribution was your money!

The average CPP pensioner gets a cheque for $596.66, and in a world where everyone paid in the maximum contribution and drew the average amount of CPP- it would take 12 years to break even.

So let’s think about that for a second.  In this world where we get ripped of by CPP, everyone pays the maximum amount and nobody survives past the age of 77.

That would be a truly shitty place to live.  Good thing nobody lives in that world.

So what would happen if you took just your contribution ($44,900) and invested it for 47 years at a compound interest rate of 5%?  Well, I’m not going to make a long table with differing yearly contributions, so let’s just take the average yearly personal contribution ($955.31-but remember that in 1966 your actual yearly contribution was $180!) and invest $79.60(the average monthly contribution) per month for 47 years and see what we get.

It turns out that you get $190,204.89.

Again, if you paid in the maximum contribution and drew just the average CPP cheque, it will take you 26 and a half years to be better off with CPP.  You will be 91 years old.  Which is pretty old, but remember that nobody pays the maximum and draws the average. Nobody.  Not you, not me.

I Should Be Making $3000 A Month Because I Am Attracted To Sickly People

Another thing with me…. I have two deceased husbands who died in their 50’s, (one was 51 and the other one was old259 before one percent of their CPP could be drawn). I worked all my life and am drawing 100% from my own CPP so I am receiving the maximum allowable payment per month. My two deceased husband’s CPP money will never have one cent drawn from what they paid into the CPP plan all their lives.

What is that you say?  You are drawing the maximum amount of CPP by yourself?  So you are getting $1012.50 per month.  Is it possible that you might live for four years after you start cashing in CPP?  Good.  Then you will be getting 100% of the money you personally paid into CPP.  Every month after that is gravy.

Calculate it with me.  I’m going to assume that you paid the maximum amount into CPP from 1966 till now, and that you retired this year at the age of 65.  This would give you the maximum amount of your own money invested into CPP.  You paid about $44,900 of your own money and if you draw $1012.50 per month it will take you 45 months to recoup your investment, or just shy of 4 years.  If you live for 7 years you got back every penny of you and your employer’s contribution.  If you live 12 years you got all the money you and your two husbands put into CPP and more!

So maybe you are just thinking about this the wrong way.

Everybody Else Is Getting Rich And I Get Nothing (Except $1000/Month)

THE FOLKS IN OTTAWA HAVE PULLED OFF A BIGGER PONZI SCHEME THAN BERNIE MADOFF EVER DID.

No. No they didn’t.  I don’t think that word means what you think it means. Also, stop yelling at me.

Entitlement my foot, I paid cash for my CPP! Just because they borrowed the money for other government spending, doesn’t make my benefits some kind of charity or handout!!

If you don’t think you are entitled to it, that is your issue- not mine.  Your money goes into a trust that the government can draw from, yes, but they have to pay you a retirement dividend with it.  They don’t get to keep the money.  For example, I donated $1200 last year to various charities and as far as I know none of them are cutting me a moonthly stipend when I retire.  If you think CPP is a charity- I don’t think that word means what you think it means.

Remember Senator’s benefits? — free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days. Now that’s welfare, and they have the nerve to call my CPP retirement payments entitlements?

First, you get free healthcare, a retirement package, and two weeks paid vacation while you are working.  You are entitled to those things by virtue of being a Canadian citizen.  Also, they call your CPP an entitlement because, again, you are “entitled” to it.  

We’re “broke” and the government can’t help our own Seniors, Veterans, Orphans, or Homeless. Yet in the past few years we have provided aid to Haiti , Chile, Turkey, Pakistan, etc., etc., etc. Literally, BILLIONS of DOLLARS!!! And they can’t help our own citizens ! 

ZOMG!  We’re broke?  Oh noes! 

The government doesn’t help seniors?  Really?  Were you not just whining about how the government is giving money to….wait for it…seniors? Veterans?  We don’t help veterans?  Really? One of my best friends was disabled as a paratrooper, and he might beg to differ on your definition of “help”.  Orphans and the homeless are helped by specific programs, too.  We give foreign aid, and we give domestic aid.  Take your xenophobic bullshit elsewhere.

The rest of the post is stuff we have already been over, so I won’t bother rehashing it over again.

Turns out on further investigation that this post is an adaptation of a Letter to The Editor which is an adaptation of a rant about U.S. Social Security.  There is a more parsimonious knockdown of the original at Snopes.com which makes many of the same points I made here.

References and further reading:

Average and maximum CPP payments

Compound Interest Calculator 

History of CPP- Wikipedia

Inflation Calculator

CPP contributions, maximums and exemptions

Contribution rates 1985-2006

Contribution rates 1966-1984

Will Canada Pension Plan Be There When You Retire?

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13 Responses to “The CPP and You: Why Facebook is A Bloody Horrible Place to Get Your Facts”

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Awesome! Well said. As a person who works in payroll, the 15% number originally claimed is completely false—you are correct. This is a really great description of the multiple ways that the original Facebook post is wrong. If people don’t work in HR or payroll, or if they don’t understand what a pension is, they can be fooled into thinking that the government has stolen a bunch of money. But it is not true. Really well written, thanks!

Thank you. I appreciate positive feedback from somebody “in the know”.
I am constantly amazed at how little people understand about where their deductions go and how they benefit them.

Am on CPP disability with a supplement from Provincial Social Assistance. I pay 70%+ of my benefits for my rent and utilities. This leaves me about $300 a month for food, cleaning products, clothing, toiletries, medications that aren’t covered, transportation and entertainment. I do not own a vehicle (can’t afford insurance, maintenance and gasoline). I do not smoke cigarettes. I do not drink alcohol. I do not use recreational drugs (just the 2 prescription drugs my doctor prescribes for me). I buy all of my clothing and household items that I need from thrift shops, yard sales, and discount stores. I buy food sparingly watching out for sales and discontinued and/or clearance items. I do not go out to eat ever. My only entertainment is what I get from basic cablevision and basic internet. A movie at the theatre or a night out on the town is completely out of the question. And two days ago my upper denture broke in half. No wonder they are almost ten years old. Have needed new ones for years now. Talked with my denturists office today. The ministry will cover $1000 of the $2200 it is going to cost to get a new set of dentures. The other $1200 I have to pay myself. Can anyone out there see how I might be able to do that?

And does anyone have a blender for sale cheap?

[…] I won’t go into why the numbers in the rant are all wrong. Another blogger has done a good job dissecting them and recalculating the math. See Misplaced Grace’s analysis: The CPP and You: Why Facebook is A Bloody Horrible Place to Get Your Facts. […]

[…] I won’t go into why the numbers in the rant are all wrong. Another blogger has done a good job dissecting them and recalculating the math. See Misplaced Grace’s analysis: The CPP and You: Why Facebook is A Bloody Horrible Place to Get Your Facts. […]

Some parts were erroneous, but – there IS this quote from the Govt. of Canada website that makes it sound like she IS out of luck since her husbands died in their 50’s.
“If you die before applying for your CPP retirement pension, we cannot pay your retirement pension to anyone else unless you were over 70 when you died and your estate submits a CPP retirement pension application no later than one year after your death.”

[…] pension fund scheme, despite enormous fraud, corruption and thieving of pension funds, including governments in the western world. Of course, as always with corporations, the masterminds and architects of […]

I am glad I found this. I was getting sick and tired of getting that message and was thinking I needed to get the facts together to rebut the BS. Glad you did it for me!

My colleagues were searching for IRS 940 some time ago and were made aware of an online service that has a searchable forms database . If you need to fill out IRS 940 too , here’s https://goo.gl/Pu288O


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