Oh hi, there. The air is getting colder, the days are getting shorter, and the end of the year is creeping up faster than I\u2019d like to admit. But an upside to the calendar racing toward December is that we\u2019re getting a clearer picture of how much government benefits, including Canada Pension Plan payments, could increase next year. And for retirees, there may be some good news. Let\u2019s get into the numbers.<\/p>\n
On the up and up <\/p>\n
I would never claim to be an oracle, but I can tell you with a high degree of confidence how much CPP payments will rise in 2027.<\/p>\n
First, a quick refresher for the uninitiated. CPP payments are adjusted every January to account for inflation. The government looks at how much prices have changed, using Statistics Canada\u2019s Consumer Price Index, over the 12 months ending in October compared with the previous 12-month period. The idea is to help ensure retirees\u2019 pension payments keep pace with the rising cost of living.<\/p>\n
Jason Yee, principal financial analyst at Finepoint Solutions Inc. in Saskatoon, estimates that CPP payments will increase by \u2013 drum roll, please \u2013 2.7 per cent in 2027 for Canadians already receiving benefits.<\/p>\n
That\u2019s a noticeable jump from the 2-per-cent increase in 2026 and slightly higher than the 2.6-per-cent bump in 2025.<\/p>\n
I first spoke with Yee before September\u2019s inflation numbers came out earlier this week<\/a>. At the time, he was forecasting a 2.6-per-cent increase. But after Statistics Canada reported that annual inflation had climbed to 3.1 per cent in September, he nudged his estimate up to 2.7 per cent.<\/p>\n There\u2019s still one more inflation data point to come before the official adjustment can be calculated, but Yee doesn\u2019t expect the final number to change much.<\/p>\n That increase might feel like a nice perk, but it\u2019s just a reflection of higher costs pensioners have already been shouldering for essentials such as groceries or gas.<\/p>\n When he worked as a financial planner, Yee said he told his clients not to think of CPP payments as a boost to their retirement income, since rising prices could eat up much of those gains.<\/p>\n \u201cWhatever you gain here, you might lose there. It just sort of comes out in the wash,\u201d he said.<\/p>\n Subscribe to the Retire Rich newsletter<\/p>\n Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Retire Rich here<\/a>.The Calculator<\/p>\n Canadians are spending fewer years of their retirement in good health,<\/a> reversing a trend of steady improvement, writes Frederick Vettese, former chief actuary at Morneau Shepell.<\/p>\n What\u2019s happening: It\u2019s unclear what\u2019s behind the trend, but there seems to be more at play than the impact of COVID-19. Healthy life expectancy began declining in 2019, before the pandemic. Vettese also finds that wealthier Canadians tend to enjoy more healthy years, although the gap between middle- and high-income earners is small.<\/p>\n The Retirement Receipt Open this photo in gallery:<\/a><\/p>\n Justine Beaulieu-Poudrier\/The Globe and Mail<\/p>\n Herman, 60, has a net worth of more than $3-million. How much can he spend each year in retirement?<\/a><\/p>\n The numbers: Herman is single, recently retired and living in Vancouver. He has a net worth of just over $3-million, including a mortgage-free home worth $500,000, nearly $1.8-million in RRSPs and RRIFs, $297,000 in a TFSA and $454,000 in non-registered investments and cash. His current spending is about $5,000 a month after tax.<\/p>\n The situation: Herman knows he has enough saved for retirement, but wants to figure out how much he can comfortably spend while keeping taxes and future Old Age Security clawbacks to a minimum. He also plans to delay government benefits until age 70 and isn\u2019t particularly concerned about leaving a large estate.<\/p>\n The plan, according to a financial planner: Withdraw $75,000 a year from his RRIF to gradually deplete that account, while delaying CPP and OAS until age 70 to avoid higher income taxes. Herman could also comfortably spend another $20,000 a year from his non-registered investments. With his savings expected to last well beyond his needs, the planner suggests he consider spending more, gifting money to family or thinking about the legacy he wants to leave.<\/p>\n Best of the Rest <\/p>\n \ud83e\udd16 Questrade is offering some Canadian investors a way to buy stakes in OpenAI before its IPO.<\/a> But the opportunity is limited to wealthy investors, and experts warn that getting in early comes with significant risks, including uncertain valuations and limited opportunities to sell.<\/p>\n \ud83c\udfe1 Is 40 too old to buy your first home?<\/a> As more Canadians buy their first homes later in life, mortgage payments are increasingly competing with retirement savings. Check out the latest episode of Stress Test, The Globe\u2019s personal finance podcast, to hear about whether buying later in life is worth the trade-offs.<\/p>\n