Is it worth staying in the labor market after 60? These incentives might encourage you to do so.
If you are still employed, you are eligible for the Nonrefundable Career Extension Tax Credit (Quebec) at age 60. Between the ages of 60 and 64, the maximum loan amount is $1,500, increasing to $1,650 at age 65.
But that’s not all, because it is possible to improve state pensions by staying longer in the labor market. In addition, the state government has included some interesting new things in its latest budget.
Increase your state pension
First, you should know that even if you return to work after claiming your state pension, the amount you receive from the Quebec Pension Plan (QPP) will not be reduced, regardless of your other income. .
On the other hand, there is a clawback threshold for the Old Age Security Pension (AVV) and for the Guaranteed Income Supplement (GIS).
Hadi Ajab, independent financial planner and mutual fund representative at PEAK Investment Services, reminds us that you can apply for the QPP from the age of 60, but if you do, you will be penalized.
“We lose 7.20% of the amount per year before age 65. For example, if you were paid $1000 at age 65, by age 60 you would only be paid $640. Conversely, if you defer after age 65, increase the amount by 0.70% per month of deferral. If you wait until age 70, by age 65 you could be getting $1,420 instead of $1,000,” he explains.
Postponing your old-age pension beyond the age of 65 also has advantages: 0.60% more per month of delay, a total of 36% more if you wait until the age of 70.
Supplement to old-age pension
If you work while receiving the QPP, you can claim the old-age pension supplement.
This means that if you earn $3,500 or more, you will start contributing to the Quebec Pension Plan again.
“In this case, you will receive the old-age pension supplement. It is paid out on January 1st of the year following the year in which you started contributing again. There is no need to make a request, the payment is automatic,” says Hadi Ajab.
For an example in figures of what the pension supplement may represent, see this page: www.rrq.gouv.qc.ca/fr/retraite/rrq/Pages/supplement_rente_retraite.aspx
How much is left in your pockets?
How much extra income stays in your pocket depends in particular on your other income and a few other factors: single or couple, age, spouse’s situation, etc.
Hadi Ajab recommends using the tool that the Ministère du Revenu du Québec makes available to taxpayers, which performs the calculations taking into account provincial and federal taxation and tax credits.
This tool is available at the following address: www.budget.finances.gouv.qc.ca/budget/outils/revenu-travail-retraite-fr.asp
The latest budget presented by the Quebec government also gives veteran workers a new choice.
“A person age 65 or older who is still in the labor force while receiving the QPP or Canada Pension Plan may stop paying QPP contributions for employment income,” says Hadi Ajab.
This blocking of contributions applies to both the employee and the employer.
“This will remain in effect for as long as the worker wishes, as they could also choose to contribute again. However, the obligation to contribute to the QPP no longer applies from the year in which he or she turns 73,” adds the financial planner.
To stop making contributions, workers aged 65 and over must fill out a form they give to their employer. The latter no longer have to withhold their share of the contribution from the employee’s salary.
You can also choose to stop contributing to the QPP if you are self-employed. This must be stated when filing the income tax return.
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