Working on a salary past retirement age has never been so financially beneficial. However, according to a study by the Research Chair in Taxation at the School of Management at the University of Sherbrooke (UDS), there is a way to do it even better.
Posted at 12:00 p.m
“Some persistent assumptions lead many to mistakenly believe that there is little reward in earning extra work income in retirement. However, analysis of several typical cases shows that the retained share of earned income is larger than many expect,” write Luc Godbout and Suzie St-Cerny, professor and researcher in taxation and public finance at UDS, in their analysis report.
” Some [retraités] argue that they have to pay more taxes or contributions if they work, or that work gives them something [fera] lose state pension benefits or other tax measures. While they’re not entirely wrong, they underestimate the fact that governments, both federal and Quebec, have responded in recent years to increase the incentives for experienced workers to work. »
Increase your standard of living by 33%
“The federal government has changed the GIS [supplément de revenu garanti] release a larger part of the earned income. On the Québec side, the addition of labor income has the advantage that the tax credit can be used for career extension as well as the tax deduction for labor income,” emphasize researchers Luc Godbout and Suzie St Cerny.
Consequently, “contrary to popular belief, it is often for older taxpayers on low retirement incomes that extra earned income can have the greatest impact [haussier] on the standard of living”.
Luc Godbout and Suzie St-Cerny cite the example of an older, low-income taxpayer who only receives public pensions (PSV and federal SRG, Quebec RRQ) and has an earned income of $10,000 per year.
“He’s not just going to stay around [des] three-quarters of that labor income, but he will also increase his standard of living by almost 33%, which is no small feat in a low-income situation,” they explain.
However, all is not well with the tax and financial advantages of a senior and pensioner who continues to work, Luc Godbout and Suzie St-Cerny underline in their study.
Strengthening certain tax measures would make it possible to increase the financial attractiveness of working for seniors of retirement age.
Thus, the researchers formulate four proposals to governments in relation to taxation and public finances to enable older workers to “increase the part of their labor income after retirement”.
– Make contributions to the Quebec Pension Plan (QPP) optional after age 65
“Like the Canadian pension plan [RPC, hors Québec], the QPP should allow a contributing worker aged 65 and over the choice to use their earned income to stop or continue contributing to the plan. On the other hand, if there are no more QPP contributions, the gainful employment would no longer justify an entitlement to a pension supplement. »
– Make the Quebec career extension tax credit recoverable
“Since its inception and subsequent improvements, the Quebec Career Extension Tax Credit has helped increase the employment rate for people aged 60 and over. Repaying this loan would create a financial incentive for older, low-income workers who are subject to little or no taxes. »
– Introduction of a federal tax credit for career extension
“In its 2021 election platform, the Liberal Party of Canada committed to introducing a tax credit (Federal CPTC) similar to that in Quebec. Using the same parameters as the Quebec loan, the addition of a federal CPTC would increase the retention rate [de revenu après impôt et cotisations] older workers between 4.8% and 6.9% depending on income level. »
– Exclude employment income when calculating state PSV (Retirement Security) reclaim
“The idea here would be to adjust the OAS clawback rate for Canadians aged 65 and over so that they are less penalized for earning work income after they are eligible for public pensions. For example, if you exclude up to $35,000 of earned income from the OAS claim calculation, you would end up with qualifying earned income that would be similar to the Career Extension Tax Credit. »