A Canadian argues CPP contributions waste money. Contributing $171,000 over 30 years yields a maximum $1,507.65 monthly pension, but the same amount invested at 7% annually grows to $604,000. The average Canadian gets only $925.35 per month from CPP.
Stop contributing to CPP today. If you are just like most Canadian, you are thinking that if I am putting more money into my CPP, I'm saving for retirement. No, it's even costing you more money. Let me show you. Here is the crazy maths. Let's say you are at the age 30 and you are going to work for the next 30 years and your average salary is $50,000. Now, as an employee and as an employer, you are going to contribute 5.533 as a CPP this year and all the next 30 years. So total, you, you would be contributing $171,000. Now, when you retire, you can withdraw maximum CPP 1507.65 per month. That is ₹18,000. ₹18,000 would be like, just like, you might be able to pay property tax at that point. That, that's one thing, but ignore that. Let's say you live up to next 20 years, then ₹18,000 multiplied by 20 years, you're going to withdraw ₹360,000 in installment. Now, here is the crazy part. Instead of paying to the government, if you just invested this money at a 7% interest or income rate, this portfolio after 30 years becomes $604,000. $604,360. It is the half money. And you also don't control this. Why? Because your maximum CPP depends on a lot of other factors. Basically, average Canadian gets $925.35 per month. So stop paying to CPP today.
Ask yourself 3 questions:1. At what age you want to retire? 2. how much money do you need ?
