Still, working into retirement pays off, Report finds

(Montreal) Working into retirement would pay more than many retirees fearful of paying more taxes and losing their pension entitlements realize.

Posted at 2:10 p.m

Stephane Rolland
The Canadian Press

This is the conclusion of a recent report from the Chair of Taxation and Public Finance (CFFP) at the University of Sherbrooke, authored by Luc Godbout, Associate Professor, and Suzie St-Cerny, Research Expert.

“Some fairly persistent assumptions lead many to mistakenly believe that earning extra work income after retirement is unlikely to be worthwhile,” the authors write. However, analysis of some typical cases shows that the retained share of earned income is larger than many expected. »

The federal government and Quebec have recently made several changes to make taxation more attractive to experienced workers, resulting in many seniors’ perceptions of this no longer reflecting reality, adds Mr. Godbout in an interview. “Governments have acted in recent years. There have been changes. »

He cites the example of the Guaranteed Income Supplement (GIS), the terms of which have changed since 2020. Keep in mind that the first $5,000 of earned income does not count towards the amount to which recipients are entitled. For the $5,000 to $10,000 range, only half of the income is considered. “We used to lose the Guaranteed Income Subsidy much faster once we earned more than $3,500 in earned income. »

More money in your pockets

The report presents various scenarios that show that low-income workers keep more money in their pockets when looking for additional income, taking into account pension benefits, employee contributions and taxes.

“Whatever we say leaves a lot in the pockets of those who bother to work, and it greatly increases living standards, which is what they can afford in terms of goods and services,” Herr comments god bout

The study provides the example of a 67-year-old single person whose only retirement income would be the federal pension and the QPP. Outside of the labor market, this person would have an annual disposable income of $22,648.

If she earns $10,000 in earned income, her annual income would be $29,964. She would therefore keep 73.2% of her earned income.

Even with an income of $20,000, this person would greatly improve their fortunes. She would have an annual disposable income of $34,517. This person would only get back 59.3% of their earned income, but they would still have increased their disposable income by $11,869 by earning earned income.

Returning to work is not only beneficial for people on low incomes. A person with a retirement income of $62,666 would have a disposable income of $49,205. If that person returned to the labor market to earn a salary of $40,000, they would keep 53.2% of the income earned. Ultimately, with a disposable income of $70,502, she would have more purchasing power.

Additional Incentives

Governments could do more to make work more tax-friendly for experienced workers. In particular, the report proposes making the contribution to the QPP optional for workers over 65 years of age.

The two tax experts also suggest that the career extension loan is repayable. “It’s a loan [dont on profite] as long as there are taxes to pay. If there are no taxes to pay, the low-income tax credit loses its interest. »

With an aging population and labor shortages, it is all the more important to increase work incentives for pensioners, adds Mr Godbout. “There are 1.2 million people aged between 60 and 69. It is addressed [les recommandations] to a large section of the population to encourage them to remain or return to the labor market. »

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