Stay-at-home parents know that it’s a full-time job, and then some! Taking time to care for young children can include leaving the workforce or reducing your hours. Naturally, this impacts your earnings and how much you contribute to the Canada Pension Plan (CPP), called the QPP in Quebec, as a result. But it shouldn’t impact the quality of your retirement.
You may not know about a special CPP provision called the “Child Rearing Benefit” that allows you to exclude years of low (or no) income from your benefits calculation. This accounts for periods when you were the primary caregiver raising your children under the age of seven and can put more money in your pocket to fund your later years.
However, the benefit isn’t automatic – you have to apply for it. The application form for the CPP retirement pension includes a section on child-rearing (section 11A). If you’re already receiving a CPP benefit, you’ll need to complete the Child-Rearing Provision (CPP) Request Form. Doing so ensures you’ll receive the highest possible benefit by compensating for periods when you were paid less. Even better news: The benefit is fully retroactive and could also help you meet the eligibility requirements for a CPP disability benefit, should you need it, as well as contributory requirements to pass along benefits to your estate and survivors in the event of your death.
- You must have not worked or had low earnings while being the primary caregiver of a child under the age of seven born after December 1958 (either parent can claim this benefit).
- You must have been eligible to receive the family allowance or child tax benefit.
How to apply
You must provide one of the following for each child: The child’s name, date of birth and SIN number, or an original or certified true copy of the child’s birth certificate.
When to apply
At the same time as you apply for any CPP benefit.
Other provisions that protect benefits include the disability exclusion and over-65 dropout. Knowing the factors that impact your monthly CPP payment and what you can expect to receive is key to retirement income planning. You should also look beyond government income sources to fund your later years. Starting as early as possible with tax-efficient savings, like a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) can help to provide the income you need to maintain your lifestyle.
Note to Quebec residents
The CPP operates throughout Canada, except in Quebec, where the QPP provides similar benefits. The CPP and QPP work together to ensure that all contributors are protected, no matter where they live. QPP application form.
Your partners in retirement income planning
Caring for young children is hard work – and truly a full-time job. With so much to think about, you may feel overwhelmed, but we’re here to help. Learn more about managing your retirement income sources and getting the most out of CPP by contacting us today.
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