If you want to continue working full-time after age 70, you have to play your cards carefully to avoid unpleasant surprises, warns a financial planner, but it can be worth it.
The Journal on Saturday told the story of a 70-year-old supermarket cashier who will soon have to give up his full-time job to escape the clutches of taxes.
“I am convinced that many people, even if they are a strong minority, are facing the same problem,” reacted Martin Leduc, financial planner at the asset management company Symbiose, referring to the case of “former civil servants with very high pensions.” ”who want to continue working after leaving public service.
Mr. Leduc believes that this situation is not inevitable, but that good planning is needed “several years before reaching this goal.”
Martin Leduc is a financial planner at asset management and protection company Symbiose. “Photo from the Symbiosis website”
Pay off the RRSP sooner
In general, for a person who wants to continue working 35-hour weeks after a certain age, it may be beneficial to start withdrawing RRSPs a few years earlier and wait as long as possible to receive the Quebec Pension Plan (RRQ) pension and the old-age security pension (PSV).
The idea is to take amounts out of the RRSP that are equivalent to what we would receive from governments for a few years. “This means that the tax amount remains the same, but the PSV has a planned return of 7.2% per year, while investments usually do not achieve such a high return,” explains the financial planner. “And the QPP is even better, at 8.4%!”
Of course, in this scenario we will pay a little more tax while we are still in the labor market, but this could pay off in the longer term due to the good returns on the PSV and the RRQ, which will then be more advantageous later.
“It might be worth doing this,” concludes Mr. Leduc, but emphasizes that this is not a one-size-fits-all solution. “Every case is different, there are always nuances.”
Change the rules
Another way to solve this problem has already been raised by tax expert Luc Godbout, who suggested that the federal government should raise the age at which the use of RRSPs is mandatory to 75 years. He believes this could encourage certain people to extend their careers even as we face a labor shortage.
The office of Federal Finance Minister Chrystia Freeland, interviewed by Le Journal about last Saturday's article, refused to comment on the issue, asserting that they could not “speculate about what”.[il] may or may not be considered”.
When Quebec Labor Minister Kateri Champagne Jourdain was asked about the issue on Monday morning on the sidelines of an announcement, she simply stated that it was a matter “that is before the Federal Court” and that this solution “deserves to be 'investigated'.”
“We looked at what we could do [pour garder les aînés sur le marché du travail]” she said, particularly given the fact that the maximum age for receiving a QPP retirement pension was recently raised to 72 years.
– In collaboration with Francis Halin
Can you share information about this story?
Write to us or call us directly at 1 800-63SCOOP.