August 13, 2019

Why the 17% drop-out rule is key to your CPP entitlement

Many Canadians depend on the Canadian Pension Plan as a source of income during retirement. However, there is often confusion around the 17 percent drop-out rule. Basically, this rule excludes 17 percent of months when you earned the least amount, which means the calculation of your monthly benefits will increase when these lower-income months are taken out of the equation. This could be as a result of time in school, lower career income, and caring for children. Depending on how long you work, your CCP could drop between 86-96 months based on the 17 rule.

Key Takeaways:

  • When calculating retirement benefits, CPP relies on drop-out provisions, the process of removing 0 to low income months from the overall equation.
  • Your CPP retirement benefit could be affected by the provision related to child-rearing which permits the dropping of years with low-income or any periods when you were receiving a CPP disability pension.
  • Requesting a statement of contributions can help you determine your CCP amount in retirement.

“Someone could retire at any point between ages 60 and 65, giving a range of contributory periods and corresponding maximum low-income drop-out months.”

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