There’s few things quite as exciting as seeing an automatic payroll deposit in your account that’s higher than you expected. I haven’t been on a traditional payroll for a few years so had forgotten how awesome it is to get a ~ 7% raise mid-year.
If you’re wondering when you’ll reach the the max annual employee contributions – on CPP the max is $2,306.70 and the max on EI is $839.97 in 2012.
OUCH! The American maximum SSI tax is a little more painful than Canada’s with the maximum calculated on up to $110,100 in salary. Much harder to get a mid-year raise there!
Anyway, there’s an extra $1,000+ a month to go into savings – apart from last month where I spent most of it on a couple of weeks of sleep-over camp for the little guy this summer (he thought it was too pricy but I insisted - I’ll just work more those weeks that he’s gone – and as a contractor, I get paid 1.5 OT – woot! Or bank it…) It’s just nice that it didn’t affect the regular “pay yourself first” savings.
A few interesting tidbits about CPP:
- the maximum payout (in 2012) is $986.67
- you have to work 40 YEARS to get the max payout (oops, guess I won’t get there)
- the average payout is about 50% of the maximum or $527.96 (maybe get there)
Here’s a couple of good articles on retirement and savings and why you don’t have to save as much as you think:
Early retirement: 55 and clout
Retirement: A number you’ll love
So what do you do with your “raise”? Spend it? Save it? Pay off debt? Or a bit of everything?
congrats on the mid year ‘raise’ that’s really cool!
Definitely pay off debt and save are the two that are on the top of my list when extra comes in. At least for the time being.
david recently posted..Become Debt Free NOW!
David, definitely I used to put bonuses or whatnot directly into savings. Now that I’m more comfy, I do spend a bit of the unexpected gravy with no remorse.
Woot!
I didn’t even know last year about the Social Security max until just before my last paycheck when I realized I would get an extra $300 or so. It all went to savings. I should reach the max a bit earlier this year and that will go to savings as well. I may not even notice the increase either since I have my paycheck set up to direct deposit the money for my month’s spending plan to my checking account, a specific dollar amount to my taxable investment account, and then the rest to my savings account. So no SS taxes just means more money goes to savings automatically.
Leigh recently posted..What does it matter if I’m a “first-time home buyer”?
That’s wonderful! You know you’re doing pretty darn good when you’ve hit a government maximum threshold.
I love topping out on EI and CPP. In Ottawa, if you pay your property tax in monthly installments, you only pay it from January – October. I usually top out on EI & CPP, then stop paying property tax, so there’s progressively more discretionary money as the year goes on. The key is to remember that it all starts again in January. (I’ll spend it if there’s something I want to spend it on, but I’m not really an impulsive spender, and I have no debt.)
Colette recently posted..And that will be $0
Yeah Colette, I remember how that goes. You get all comfy with that higher amount in December and then they hit you with the taxes in January again. Ouch!
A slight correction. You don’t have to work for 40 years to get OAS, you just have to live in Canada that long. So don’t worry, you will get paid, and likely a lot of OAS.
The exact quote is “A person who has lived in Canada, after reaching age 18, for periods that total at least 40 years, may qualify for a full Old Age Security pension”
Tim
Canadian Dream recently posted..The Guilty Shoes
Tim, not for CPP – that’s based on what you’ve paid in, not how long you’ve lived here. Not arguing the OAS – will probably see that depending on, you know – if it’s there or not or means tested to a greater degree.
I usually top out on EI & CPP, then stop paying property tax, so there’s progressively more discretionary money as the year goes on. The key is to remember that it all starts again in January. Thanks for letting me join the conversation.
Claire recently posted..Why Cant I Conceive
Claire, I think it’s actually a good government strategy. Get all topped out during the year and then Xmas and big bills aren’t such a big deal. I usually pre-pay my utility bills for the summer and December just to fool myself too.
Well, I think it’s because tratdiional retirement used to mean that you stop working completely and just hang around playing golf or something. So technically , at almost 92 y.o., my dad is not retired since he still works in what he did for money for years. Financially independent is probably going to mean different things to different people too. For me, it’s that necessities are covered by an income stream, for someone else it means 100% of anything they would ever want is covered. Since probably more than half of people are going to have to or want to work past 65, it should be interesting to see what happens as the baby boomers age.