Working past retirement may be good for your morale ... but is it good for your finances?

For years, Marie-Andrée Boucher worked at a stressful job. She had to go into the office every day and sometimes travelled out of the country. When the pandemic hit, she realized she no longer wanted that kind of lifestyle. She decided to retire at 65, right in the middle of lockdown. 

Once she retired, however, she found she missed the social interaction. “I was still in great health, so I started looking at job postings,” she says. She found a stimulating job opportunity that dovetailed with her skills. She applied, with low expectations, and landed the job. "It was very validating to have been chosen. It shows that just because you’re older doesn't mean you can't do it," she says. 

Since then, she’s been working full-time, mainly from home. She loves her new social life and the challenges of her work. She also appreciates the financial security that comes from having an additional source of income. “My situation was a bit ‘borderline’ before. But not anymore. Returning to work put an end to my financial anxiety. I’ll keep on working as long as I can,” she adds.

Why keep working past retirement?

As Sun Life advisors have observed, retired people are increasingly returning to the work force. Just like Marie-Andrée Boucher.

Reasons for going back to work include: 

• Being less isolated
• Socializing more
• Feeling less bored
• Working at a less stressful job
• Having a purpose
• Filling the need for workers in a tight labour market 
• Improving their financial situation

Are there any advantages to working past retirement?

A good number of retirees who get back in the saddle are looking to improve their financial situation. 

But does it actually pay to keep working after retirement? Most people don’t think so. They think all the extra income will taxed by governments. But that’s completely false. "It definitely pays to work after retirement. There’s no such thing as an income level that’s taxed at 100%,” says Christine Drolet, a financial planner based in Quebec City.

In fact, this myth was debunked by a recent report by the Research Chair in Taxation and Public Finance (RCTPF) at the Université de Sherbrooke. What may have been partly true before is no longer the case.

Why does it pay to work past retirement?

 In recent years, governments have made several tax changes to benefit experienced workers:

• The Tax Credit for Career Extension, introduced in 2012, is increased on a regular basis. 
• The Guaranteed Income Supplement (GIS) is no longer reduced when you declare employment income up to $5,000. 
• You can defer your Quebec Pension Plan (QPP) and Old Age Security (OAS) benefits in order to increase them. Both benefits increase by 0.6% for every month you delay taking them. 

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Here’s an example

A study by the RCTPF looked at a single, 62-year-old retired female with $32,500 in income. The income came from a retirement fund and QPP benefits.

• Her after-tax disposable income was $29,921.
• Adding $7,500 in employment income, her after-tax disposable income increased to $35,386.
• She therefore keeps 72.2% of her employment income.

And the study describes many other examples. They all show that working after retirement doesn’t mean working “for the government.” You can calculate how much stays in your pocket using this tool from the Quebec Ministry of Finance.

If you’re working past retirement, what about your financial strategy?

Earning more income during retirement can have financial consequences. It’s a good time to:

• Do a financial check-up
• Review your strategy with your Sun Life advisor.

Book an appointment now and get the most out of an active retirement.