Ministère des Finances
Ministère des Finances
Work income kept on retirement in 2024
The calculator of work income kept on retirement estimates the share of a pensioner’s work income when the pensioner resumes employment.
The calculator facilitates enlightened financial decision‑making. It clearly indicates disposable income before and after the resumption of employment. This overview considers:
- Québec and federal tax rules;
- employment incentive measures to which workers may be entitled, depending on their situation.
Government withholdings and clawback
The calculator can be used to estimate:
- the government withholdings that will apply to the work income of a pensioner;
- the required contributions that will be deducted from such income.
The calculator considers the impact of work income on government assistance (e.g., Guaranteed Income Supplement) which might decrease because of the increase in the taxpayer’s total income.
Employment incentives
The Québec and Canadian taxation systems contain measures that seek to protect from taxation certain work income:
- to recognize employment‑related expenses;
- to encourage taxpayers to return to the labour market or to remain there.
Many of these measures (e.g., deduction for workers) apply to all workers. Other measures (e.g., tax credit for career extension) are specific to experienced workers.
The calculator indicates the impact of such measures on the tax payable of retired taxpayers who are employed.
Example
Let us take the example of a 61‑year‑old pensioner with an annual pension of $30 000 who wants to estimate the net gain that $15 000 in annual work income would provide.
With this additional work income, the worker would pay $4 948 in additional taxes and contributions and lose $198 in reduced government assistance, for a reduction in income of $5 146.
However, this worker benefits from a $1 400 tax cut through the tax credit for career extension. They also benefit from an addition reduction of $329 through:
- the deduction for workers;
- the Canada employment amount.
Accordingly, the employment incentives reduce by $1 729 the tax payable.
The pensioner’s net gain from work income will therefore be $11 583. This corresponds to a work income retention rate of 77.2%.
Work income
$15 000
Net government withholdings and clawback
-$5 146
Employment incentives
+$1 729
Additional disposable income
$11 583
Retention rate of work income
77.2%
Roles and limits of the calculator
The calculator estimates the additional disposable income of a pensioner when the latter’s potential work income is considered. The calculations are based on assumptions that reflect the most common situations. The calculator merely seeks to provide a realistic estimate of this amount. However, the exact amount of the tax payable and various required contributions payable can differ depending on the households and their specific situations.
Assumptions that the calculator uses on work income retained at retirement
The calculator proposes a flexible model adapted to the general situation of some typical households. The results are presented for illustrative purposes.
The calculator does not consider all income, deductions, and tax credits.
The minimum age of household members has been set at 55. Household members can only report work and retirement income, which cannot exceed $250 000. In addition, the maximum Québec Pension Plan (QPP) retirement pension has been set at $25 000.
Other assumptions
No individual is a dependent of another person.
All households contribute to the Québec Prescription Drug Insurance Plan.
The eligible expenses under the refundable and non‑refundable medical expense tax credits include only the annual premium of the public plan.
Updated March 8, 2024