Working in Retirement: What do you Need to Know?

Returning to work once you have retired or continuing to work a little has many advantages, such as filling you with a sense of accomplishment, showcasing your expertise, and building relationships. Work is more than making money, and, with additional income, you could do things you would not otherwise be able to do, such as travelling.

That income, combined with your savings, for example, could also allow you to wait before applying for your pension under the Québec Pension Plan (QPP) and your Old Age Security pension. By waiting, your pensions would be higher for life, which can pay off in the long term and improve your financial security.

Income is always a good thing, but how much stays in your pockets depends on several factors.

Impact on your income tax

If you add employment earnings to your retirement income, the income tax you must pay could increase. The employment earnings could also decrease or increase certain tax credits to which you are entitled to. You can use the Ministère des Finances' Calculation of work income kept on retirement in 2025  tool to assess the impact on your total income after taxes.

According to the calculator, a person aged 62 who lives alone, has a gross retirement income of $26 900, and earns an additional $10 000 from working will not see his or her retirement income decrease. Instead, $6957 from his or her salary will remain in his or her pocket!

You can also consult the list of tax credits you could be entitled to in retirement.

Pension under the QPP

To calculate your pension under the QPP, we use all the income you have earned since you turned 18, except certain earnings that were the lowest or nil. We can remove them to avoid decreasing your pension. Your pension is protected if you work part-time or have a lower-paying job as of age 65 and have not yet applied for your pension.

Pension supplement

If you are working while receiving your pension under the QPP, it will not decrease. On the contrary, your new contributions will increase it because you will receive the pension supplement. You contribute as long as you earn more than $3500 and until the end of the year in which you turn 72.

The pension supplement you receive for a year is equal to 0.66% of the earnings on which you made contributions the previous year. For example, for an income of $10 000, you will receive approximately $43 per year. We subtract $3500 from $10 000, then multiply the result by 0.66%. You do not need to apply for the supplement. You will receive it automatically the following year for the rest of your life, and it will be adjusted to the cost of living.

Cessation of contributions to the QPP

As of age 65, you can choose to stop contributing to the QPP, however, in that case, no supplement will be added to your pension. By choosing to stop making contributions, you will have more money immediately. However, you are missing out on a higher pension for the rest of your life. It is a decision that requires careful consideration. If you want to explore this topic further, you can find information on the Choosing to stop contributing to the Québec Pension Plan web page. Generally, the longer you live, the longer you receive the supplement, and the more profitable your contributions are. However, if you are self-employed, it may be less profitable to contribute because you have to pay both the employee's and the employer's shares.

Old Age Security pension

If you are working while receiving your Old Age Security (OAS) pension, the pension does not change unless your net income reaches a certain threshold, which increases each year. You can find it on the government of Canada's Old Age Security pension recovery tax  web page. If you exceed the threshold, which is $90 997 for 2024, you will need to repay, in whole or in part, the OAS pension you received.

Guaranteed Income Supplement

If you receive the Guaranteed Income Supplement (GIS), you can earn up to $5000 without it being reduced. If you earn between $5000 and $15 000, half of your income will reduce your GIS. For earnings of $15 000 and over, all of your income will reduce it. It is reduced by $0.50 for every dollar of income taken into account.

For example, for an income of $10 000, the first $5000 do not reduce the GIS. For the remaining $5000, only half is taken into account, that is, $2500. Since the GIS is reduced by $0.50 for every dollar, we multiply $2500 by $0.50. To calculate by how much the GIS is reduced each month, we divide the result, $1250, by 12, which is approximately $104.17 per month. Therefore, for a person who lives alone and received the maximum Guaranteed Income Supplement of $1097.75 per month, the amount will decrease to around $993.58 per month.

Above a certain income threshold, you are no longer eligible to receive the Guaranteed Income Supplement. The threshold changes every three months and varies depending on whether you are single or in a relationship and whether your spouse receives the Old Age Security pension or Spouse's Allowance. You can find the various income thresholds on the Guaranteed Income Supplement: How much you could receive  web page on the government of Canada's website.

Contributing to an RRSP

Working can give you new contribution room for a registered retirement savings plan (RRSP) until you turn age 71. After that age, you may even be able to contribute to your spouse's RRSP if your spouse is younger than you. It is advantageous because contributing to an RRSP can reduce the income on which you pay income tax.

Therefore, working in retirement often has its advantages. Take the time to carry out your calculations carefully and adjust your withdrawal plan.