Thinking About Future As A Senior
What You Need To Know About The Bridge Benefit
A Bridge Benefit is explained as a “temporary pension” that you can use if you decide to retire early (before the age of 65). Once you have retired your Bridge Benefit is indexed similarly to your Lifetime Pension.
It is important to note that bridge benefit components of a pension benefit will only pay out up until the age of 65. These plans are made to supplement the income of the retired person until the unreduced benefits become payable from CPP from the age of 65 onwards. If you decide to retire before you turn 65 and you start receiving a “reduced” CPP benefit, you can still receive your bridge benefit, which will continue to pay out until you reach the age of 65.
Calculating Your Bridge Benefit
If you have decided to retire early (before turning 65), your pension is going to include monthly payments (temporary) known as your bridge benefit.
These benefits are used for bridging the gap that occurs between early-retirement income from the income you will start receiving once you have turned 65. Bridge benefits come to an end once you have turned 65 or you die (whichever comes first).
The Bridge Benefit is calculated in the following way:
0.7% x (lesser of highest average salary or previous year’s maximum pensionable earnings) x pensionable service.
Here is an example: if you decided to retire in 2016 at the age of 60, with 25 years of an earning average of $67,000 and pensionable service (in your 5 highest salary years), the Bridge Benefit will be calculated as follows:
0.7% x (YMPE for 2015 of $53,600) x 25 = $9,380
This will mean that your bridge benefit will pay you out $9,380 annually along with your “basic pension” until you die or turn 65. Bridge benefits can increase due to annual cost-of-living adjustments. You can enjoy being a senior once your financial plan is resolved!