A 70-year-old cashier who works full-time at a supermarket will soon have to reduce her hours to escape the clutches of taxes when it comes time to withdraw her RRSPs.
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“I'm going to have to work fewer hours, it's going to hurt me,” admits Carole Cadorette before taking a sip of black coffee in a Quebec restaurant.
“Perhaps more taxes will be deducted from my salary to compensate,” she adds, putting down her cup thoughtfully. “It’s the organization, you have to think about it.”
Ms. Cadorette is a rare bird. At 70, she still works seven days a week in a supermarket in Limoilou. “That gives me 35 hours,” she explains. I do it every morning, it's my social gathering, then I have time for my activities. I shouldn’t have to do it, but I enjoy it and I’m healthy.”
Since she turns 71 in the coming weeks, she will need to start withdrawing from her RRSPs next January, which will increase her taxable income. If she does not reduce her income from work, she will also lose part of her retirement pension.
- Listen to the personal finance discussion with Jean-Sébastien Jutras, financial planner at Jutras Gestion de Patrimoine QUB :
“They say they want to keep us in the job market and there is a labor shortage. “Why don’t you let us decide when we want to use our RRSPs?” she said, gesturing. “Or at least leave us a tax-free $10,000!”
“What the hell?”
Chair of Taxation and Public Finance at the University of Sherbrooke, Luc Godbout, believes Carole Cadorette is right to be outraged by the situation she finds herself in. “She sees all this and says to herself: What the hell is this? […]? And she’s not wrong,” he said in an interview.
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“The requirement to stop contributing to the RRSP and begin withdrawals at age 71 was OK in 1957 when this plan was created,” the tax expert explains. “But 67 years later, being 71 is no longer the same: life expectancy has increased significantly, we no longer have the same state of health and the same ability to work at this age as before.”
A question of will
“That is why we have been proposing to the federal government for several years to raise the age limit for contributions to an RRSP to 75,” adds Luc Godbout, who believes that it would also be possible to relax the rules on the security pension for those who continue to work until the age of wisdom.
“These are not major changes and could have a positive impact on promoting career extension,” he notes.
However, there is currently no indication that Ottawa will make these changes in the short term. In response to questions from the Journal, the office of Federal Finance Minister Chrystia Freeland said it could not “speculate about what.”[il] may or may not be considered – especially in pre-budgeting times.”
Seniors who become poorer while working: “That’s a myth!” introduces the Minister of Labor
Although seniors of a certain age are forced to reduce their working hours to avoid losing money, for the vast majority of people this situation is a “myth,” argues CAQ Minister Kateri Champagne Jourdain.
“I definitely want to counter this myth!” says the Labor Minister in an interview. “There are numerous financial and social benefits to remaining in the labor market.”
Ms Champagne-Jourdain points out, among other things, that since January 1st, contributions to the Quebec Pension Plan (QPP) have been optional from the age of 65, allowing those already receiving their pension to have more money at their disposal in the short term than to benefit from nutritional supplements in the longer term.
Swearing-in of the Council of Ministers in the National Assembly of Quebec, Thursday October 20, 2022. Kateri Champagne Jourdain Minister of Employment Minister responsible for the Côte-Nord region. STEVENS LEBLANC/JOURNAL DE QUEBEC/AGENCE QMI) Stevens LeBlanc / Journal de Québec
The maximum age at which a person can receive a QPP pension has also been increased to 72 years. “Quebecers can therefore further increase their income through work,” she explains.
When pointed out that the current measures mainly target workers aged 60 to 69, the minister agreed that a “small” proportion of workers over 70 are currently disadvantaged by regulations that fall under the responsibility of the federal government .
Tax expert Luc Godbout shares the minister's opinion. “People who have too high an income and lose part of their pension still make up a relatively small part of the population,” he notes.
After the age of 70, most people who are still working barely have enough income to continue receiving the various federal loans such as the PSV and the Guaranteed Income Supplement, adds Mr Godbout.
Even though few people are losing money at the moment if they continue to work, Minister Champagne Jourdain believes that increased life expectancy will make it necessary to examine their situation “in the future”.
But in the meantime, the minister is working on measures to help companies take on what she very politely calls “experienced workers”. A corresponding announcement will be made on Monday.
Retirement…not yet!
228,700: This is the number of workers aged 65 and over in Quebec.
Of these, 84,600 are over 70 years old.
40% of septuagenarians still on the labor market work full time, i.e. around 34,100 people.
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