“Several tenacious received ideas lead many to mistakenly believe that it pays little to earn additional work income once retired. However, the analysis of several typical cases shows that the retained share of the work income earned is greater than many anticipate”, specifies an analysis report.
Source: MARTIN VALLIÈRES | La Presse
Working with salary after retirement age has never been so financially advantageous. But there is a way to do even better, according to a study by the Chaire de recherche en fiscalité de l’École de gestion de l’Université de Sherbrooke (UDS).
“Several tenacious received ideas lead many to mistakenly believe that it pays little to earn additional work income once retired. However, the analysis of several typical cases shows that the retained share of earned work income is greater than many anticipate,” write Luc Godbout and Suzie St-Cerny, professor and researcher in taxation and public finance at UDS. , in their analysis report.
“Some [retirees] argue that they will have to pay more tax or contributions if they work, or that work will make them lose public pension benefits or other tax measures. Even if they are not entirely wrong, they underestimate the fact that governments, both federal and Québec, have reacted in recent years to increase the incentive to work for experienced workers. »
Increase your living standard by 33%
“The federal government has changed the GIS [Guaranteed Income Supplement] to exempt a larger portion of earned work income. On the Québec side, the addition of work income has the advantage of allowing the use of the tax credit for career extension as well as the tax deduction for work income", point out researchers Luc Godbout and Suzie St Cerny.
Consequently, “despite popular belief, it is often for senior taxpayers with low retirement income that the additional work income can have the most [upward] impact on the living standard”.
Luc Godbout and Suzie St-Cerny cite the example of a low-income senior taxpayer who receives only public pensions (PSV and federal SRG, Québec RRQ), and who earns a work income of $10,000 per year.
"He will not only keep nearly three quarters of this work income, but he will also see his living standard increase by nearly 33%, which is not nothing in a low-income situation," they explain. .
That said, all is not at best when it comes to the tax and financial benefits of a senior and retiree who remains in paid employment, underline Luc Godbout and Suzie St-Cerny in their study.
The improvement of certain tax measures would make it possible to enhance the financial attractiveness of continued paid employment among seniors at retirement age.
Winning proposals
The researchers then formulate four proposals to governments in terms of taxation and public finance in order to allow older workers to “increase the portion retained from their work income after retirement”.
– Make optional contributions to the Québec Pension Plan (QPP) after age 65
“Like the Canada Pension Plan [CPP, outside Quebec], the QPP should offer a contributing worker aged 65 and over, the choice of stopping or continuing to contribute to the plan on his work income. On the other hand, if there are no more QPP contributions, paid work would no longer give rise to the right to a pension supplement. »
– Make the Québec tax credit for career extension refundable
“Since its introduction, and the subsequent improvements, the Quebec tax credit for career extension has contributed to the increase in the employment rate of people aged 60 and over. Making this credit refundable would add a financial incentive to low-income senior workers who are subject to little or no tax. »
– Introduction of a federal tax credit for career extension
“In its 2021 election platform, the Liberal Party of Canada has committed to implementing a similar tax credit (federal CPTC) to that of Québec. According to these same parameters as the Québec credit, the addition of a federal CPTC would increase the retention rate [of income after taxes and contributions] of older workers by about 4.8% to 6.9%, depending on their level of income. »
– Exclude work income in the calculation of the recovery of the federal PSV (Old Age Security Pension)
“The idea here would be to adjust the OAS clawback rate for Canadians aged 65 and older so that they are less penalized when they earn employment income after qualifying for public pensions. For example, excluding from the calculation of the OAS clawback up to $35,000 of work income, one would end up with a level of eligible work income that would be similar to that of the tax credit on career extension . »
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