While the Quebec government has announced the launch of a pilot project aimed at encouraging the work of people aged 60 to 69, many retirees are wondering if it is really worth it.
• Read also: Seniors discouraged by taxes: “Give us our clear pay, then we’ll go to work!”
Retirees fear seeing their pensions reduced if they remain in the job market. Hadi Ajab, independent financial planner and financial security advisor, collective savings representative attached to PEAK Investment Services, did some calculations to help them see things more clearly.
The Old Age Security pension
Please note that the federal government’s Old Age Security (OAS) pension is reduced if your net annual income exceeds $86,912 (2023).
This income includes retirement funds (OAS, QPP, employer pension funds, etc.), RRIF withdrawals and salary.
Does your income exceed this ceiling? “Each additional dollar will result in a recovery tax of 15 cents of OAS, and from $141,917 of income, a person between 65 and 74 years old will lose all of their OAS,” warns Hadi Ajab.
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The SRG hit hard
If you receive the federal Guaranteed Income Supplement (GIS), each dollar earned above $5,000 will reduce it by 25 to 75%. With income above $21,624 for a single person, the SRG is lost in full.
Here is a numerical example for a 66-year-old single person:
A person who has no income other than their PSV will receive a maximum monthly SRG of $1,065 (March 2024), a tax-free amount.
With additional employment income of $10,000 per year, the GIS increases to $951 per month.
If the person also receives $10,000 in QPP annually, the GIS will drop to $383. If she has no employment income, but she receives the full PSV and $10,000 of QPP, then the monthly SRG will be $484.
“It’s worth thinking about it and it should encourage you to think before applying for your QPP to assess whether you will lose or not. But it’s not just a question of money, you also have to take into account other aspects related to work, such as staying active and having social contacts,” says Hadi Ajab.
Good to know: if you are between 60 and 64 years old and your spouse receives the maximum GIS, you could be eligible for the Allowance, an amount paid by the federal government of a maximum of $1,354.
The couple’s combined income must not exceed $39,984, and work income could therefore penalize you.
The Quebec Pension Plan
As for the QPP, work income does not reduce the pension.
By continuing to work and contribute, you also become eligible for the retirement pension supplement.
New since January 2024, workers aged 65 or over who are already receiving their retirement pension will be able to stop contributing to the QPP, and their employer contributions will also stop.
Is the game worth it?
“For a work income of $10,000, the employee will have to pay $416 annually, which will generate an additional pension per year for life of $43. This will become profitable from the age of 74. It is worse for self-employed workers who must pay their share of the QPP and that of the employer. For them, it will be necessary to wait until they are 82 years old for it to become profitable,” warns Hadi Ajab.
Consider the tax bill
Also consider the tax consequences, because your marginal tax rate will increase if you move to a higher income bracket.
However, from age 60, you are eligible for the non-refundable tax credit for career extension (Quebec).
“To be eligible, you must have turned 60 before December 31, 2023 and have earned at least $5,000 during the year,” indicates Yannick Lemay, tax expert and spokesperson for H&R Block.
This credit directly reduces the tax bill, which makes it all the more attractive.
Between ages 60 and 64, the maximum credit amount is $1,400 and it rises to $1,540 for those 65 and over.
Please note, these amounts are reduced if work income is above the threshold of $38,945 (2023).
Work income is that earned through employment, but also net business income.
By remaining in the job market, you also have access to other credits, allowances and deductions to which all workers are eligible.
To get a better idea of what will actually remain in your pockets, use the work income retained upon retirement in 2024 calculator, from the Quebec Ministry of Finance.