Université de Sherbrooke researchers say it has never been more financially advantageous for retirees to supplement their income by working, but governments can make that option more attractive.
It’s no secret that Quebec needs workers.
It also has more than 1.5 million residents age 60 to 74, most in good health, who could help ease the labour shortage if they were motivated to do so.
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So, what would it take to entice more to return to the workforce, or stay on into their 60s and beyond?
Being able to keep more of the extra dollars earned would be a major consideration, one that governments could help achieve with a half-dozen changes and tweaks to current rules, according to an interesting study of work after retirement produced this summer by Luc Godbout and Suzie St-Cerny of the research chair in taxation and public finance at the Université de Sherbrooke’s school of management.
They argue it has never been more financially advantageous for retirees to supplement their income by working, but governments still can do more to make that option attractive.
One way would be to eliminate the obligation for older workers to pay into the Quebec Pension Plan (QPP) beyond age 70. Current rules make QPP dues obligatory for anyone earning more than $3,500 a year from employment income, regardless of age and whether or not they’re already collecting their pension. The Canada Pension Plan (CPP), which applies in all other provinces, is optional at 65 and the dues stop at 70.
The clawback in federal old age security (OAS) payments, which begins when an individual’s income reaches $81,761, is also a deterrent, the study said. If up to $35,000 in employment income were exempted from the calculation of the OAS clawback, more people 65 and older might keep working.
Another proposal is that Quebec’s tax credit for career extension — available to those who work beyond age 60 — become refundable rather than a straight deduction, because as is, the benefit is limited for those who pay little or no provincial income tax. The federal government could consider adding a similar credit of its own to sweeten the pot.
The researchers also suggest extending to 12 months, from six, the period when QPP recipients are allowed to reverse their decision to start collecting the pension, aligning it with the CPP deadline. Retirees are sometimes unsure of their income needs, and delaying QPP can be an attractive option because the longer you wait, the larger the cheque.
Allowing Canadians to defer converting registered retirement savings plans (RRSPs) into registered retirement income funds (RRIFs) until age 75 rather than 71 would also be advisable, the study said. The deadline has not changed since RRSPs began in 1957, despite a six-year boost to Canadians’ life expectancy in that time, the authors noted.
As things stand, most retired Quebecers who continue to generate employment income can expect to keep anywhere from 53 to 73 per cent of what they make, depending on their situation and how extensively they work. At lower income levels, they retain more of their pay than younger Quebecers do from a second job to help pay the bills.
Part of the extra earnings are eaten away by income tax, deductions for employment insurance, QPP, the Quebec Parental Insurance Plan and higher fees for the Quebec prescription drug plan and provincial Health Services Fund. They also may reduce government payouts such as the GST and solidarity tax credits.
The study says Quebec could have generated 74,700 jobs in 2021 just by matching the employment rate in Ontario for people age 60 to 69. Statistics Canada data for that year showed the employment rate in Ontario for people 60 to 64 at 55.5 per cent, compared to 49.4 per cent in Quebec. For those 65 to 69, the participation rate was 27.4 per cent in Ontario and 20.5 per cent in Quebec.
For an idea of what a retirement job may mean for you financially, Google “Ministère des Finances du Québec — calculator for work income kept on retirement.”
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