(Montreal) Working at retirement age would pay more than many retirees believe, who fear paying more taxes and losing their retirement benefits.
Posted at 2:10 p.m.
This is the conclusion of a recent report by the Chair in Taxation and Public Finance (CFFP) at the University of Sherbrooke, written by Luc Godbout, full professor, and Suzie St-Cerny, research professional.
“A number of rather tenacious received ideas lead many to mistakenly believe that it hardly pays to go and earn additional work income once you retire,” write the authors. However, the analysis of several typical cases shows that the retained share of the work income earned is greater than what many anticipate. »
The federal government and Quebec have made several changes recently to make taxation more attractive for experienced workers, which means that the perceptions of many seniors in this regard no longer correspond to reality, adds Mr. Godbout in an interview. “Governments have acted in recent years. There have been changes. »
He gives the example of the Guaranteed Income Supplement (GIS), certain conditions of which have changed since 2020. Remember that the first $5,000 of work income is not considered in the amount to which recipients are entitled. For the bracket between $5,000 and $10,000, only half of the income is considered. “Previously, we lost the Guaranteed Income Supplement much more quickly, as soon as we earned work income exceeding $3,500. »
More money in the pockets
The report presents different scenarios that show that low-income workers keep more money in their pockets when they seek extra income, taking into account pension benefits, employee contributions and taxes.
“Whatever we say, there’s a lot left in the pockets of those who make the effort to work and it materially increases the standard of living, so what they will be able to afford in terms of goods and services”, comments Mr Godbout.
The study offers the example of a 67-year-old single person, whose only retirement income would be federal retirement benefits and the QPP. Outside the labor market, this person would have an annual disposable income of $22,648.
If she earned employment income of $10,000, she would have an annual income of $29,964. She would therefore retain 73.2% of her employment income.
Even with an income of $20,000, this person would greatly improve his lot. She would have an annual disposable income of $34,517. This person would recover only 59.3% of his employment income, but he would still have increased his disposable income by $11,869 by earning employment income.
Returning to work is not only advantageous for low-income people. A person with a retirement income of $62,666 would have a disposable income of $49,205. If this person returned to the labor market to earn a salary of $40,000, they would keep 53.2% of the income earned. Ultimately, she would have more purchasing power with a disposable income of $70,502.
Additional incentives
Governments could do even more to make work fiscally more attractive to experienced workers. The report proposes in particular to make the contribution to the QPP optional for workers over 65 years of age.
The two tax experts also suggest that the career extension credit be refundable. “It’s a credit [dont on profite] as long as there is tax to pay. When you have no tax to pay, for people with low incomes, the tax credit loses its interest. »
Increasing work incentives for retirees is all the more important in a context of aging of the population and scarcity of labour, adds Mr. Godbout. “There are 1.2 million people who are between 60 and 69 years old. It is addressed [les recommandations] to a large pool of the population to encourage them to stay or return to the labor market. »