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How Will My Income Affect My Pension

And Taxes In Canada?

They say that your retirement from a lifetime of hard work is the culmination of efforts; however, there remain those that take this opportunity to venture out into something new even at a later stage in life.

If you are from Canada and is planning to engage in a new work following your retirement, you should know the basics as to how your post-retirement earnings may affect your pension benefits and taxes.

Working even as you receive your Canada Pension Plan (CPP) retirement pension can increase your retirement income. This is called the Post-Retirement Benefit (PRB).

If you are 60 to 70 years of age, working and contributing to the CPP, and is receiving a retirement pension from the CPP or the Quebec Pension Plan (QPP); then you might be eligible for the Post-Retirement Benefit.

In order to avail of this benefit, you and your employer may have to make CPP contributions to accrue to your PRB. For those who are self-employed, you have to pay the CPP portion contribution of both the employer and the employee. As you reach the age of 70 though, you will stop making CPP contributions for your PRB.

In case you choose to work in Quebec after your retirement though and as you receive your CPP retirement pension, you could still receive a retirement pension supplement from the QPP.

A CPP contribution for your PRB is mandatory for those aged 60 to 65 and still working. As you reach the age of 65 though, you can choose to not contribute to your CPP for your PRB. There is the statutory requirement to stop contributing at this age: you must fill out form CPT30 Election to stop contributing to the Canada Pension Plan or revocation of a prior election. A copy of this is to be sent to your employer and the original to the Canada Revenue Agency.

Your PRB will be added to your previously earned CPP benefits and such other benefits to which you are entitled in your retirement. This means that you will continue to receive your CPP benefits even if you choose to work still after your retirement.

As your PRB practically increases your retirement income, it can have an impact to your eligibility or benefit amounts from the Old Age Security pension, the Guaranteed Income Supplement, or other applicable provincial or territorial programs.

On the purview of tax, you should take note that your CPP payments are considered to be taxable income. Depending on the amount of CPP payments you get though, certain tax credits may be applied.