Working Part Time After Retirement

by Achieva Financial
Apr April 23

Many people choose to work part time following their retirement from full time work. There are many reasons for this; some people need to supplement their retirement income with a part time job, other people may choose to work to keep themselves busy. Regardless of the reasons, it is important to take part time work into consideration when planning your finances in retirement.

Contributing to CPP

Even if you’ve already retired, you must still contribute to CPP if you are younger than 65. People who are older than 65 may choose whether or not they contribute, but if they do contribute, your employer will be required to contribute, as well.

Benefit Claw backs

Depending on how much you’re making at your part time job, you may find that some or all of your Old Age Security (OAS) is clawed back.

RRSP Contributions

If you have RRSP contribution room, you can contribute some of your earnings to your RRSP. It’s important to remember that if you anticipate your income being higher once you fully retire than it is now, you are better off contributing to your TFSA.

Making the Conversion to a RRIF

It’s important for people to consider whether they’ve retired for good before converting their RRSP to a RRIF. Remember that you can’t turn back after making the conversion from RRSP to a RRIF so if you are planning to return to work, even part time, you may find yourself with a tax problem if you’re working and taking an income through your RRIF. The taxes you end up paying could easily wipe out any financial gains you would make from working part time, not to mention it would not allow you the option to continue contributing to your RRSP, which will further reduce your taxes – providing of course you are under the age of 72!

Thinking you might like to keep busy with a part time job? Consider supplementing your finances with your tax-free savings account and non-registered investments before touching your RRSP. If you draw these out first while still working, there will be fewer tax consequences. You may also be better off taking money from your RRSP on a short-term basis rather than officially converting to a RRIF right away.

When it comes down to it, don’t collapse your RRSP into a RRIF until you’re fully retired, and have considered all your potential income streams and their potential tax consequences.