Working After Retirement: Pros and Cons

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Working after retirement age is something that’s currently becoming increasingly popular. Indeed, when you weigh up working part time after retirement advantages and disadvantages, working after retirement is actually often a pretty good idea. 

There are some working after retirement rules, however, and some other aspects of working after retirement that you should be aware of. Therefore, in this article, we’re going to lay out some of the most important working part time after retirement advantages and disadvantages.

You could maximise your current savings instead

The main reason you’re considering working after retirement age is probably because you need a bit more money. If this is the case, before you look for a job, why not take a look at some of the ways you can optimize your existing retirement income?

One great way you could maximize your existing retirement income is to delay your government pension. Or, if you have a spouse, why not check out splitting your income with them? As well as this, another way to maximise your current savings before your retirement is to take a look at the rate at which you withdraw from your savings. 

Whichever one you choose, you’ll be able to retire more comfortably, benefit from various optimization strategies, and minimize retirement’s negative effects on your savings.

Individual pension planning

Another option to enhance your retirement benefits is to take out an individual pension plan, or IPP. An IPP is an employer-sponsored defined benefit pension plan, for providing tax advantages and enhanced retirement benefits.

If you are between the ages of 40 and 71 with an annual T4 income that’s over $100000, or if you are an incorporated self-employed business owner or professional, or an employer who is looking to enhance a key employee’s retirement benefits, an IPP might be right for you.

If you’re beginning your financial retirement plan, take a look at wealthinsurance.com to find out more about IPPs.

Working after retirement age may change your tax bracket

When it comes to working part time after retirement advantages and disadvantages, a change in your tax bracket can definitely be one of the disadvantages. 

Did you know that any additional income you get after your retirement could change your tax bracket? What’s more is, if your tax bracket changes, your overall income could be affected. So, if you do decide to start working after retirement age, be sure to keep a look out for the effect this sudden income could have on your total post-tax income.

If you are worried about this effect, talk to your accountant, who can better help you to make the right decisions about your finances.

You could delay your retirement

Have you already started to receive your pension? If not, think about delaying your retirement. Delaying your retirement can mean that you receive better pension benefits further down the line. Indeed, delaying your retirement is often financially superior to the typical method of retiring from your job, then getting another job, and suddenly needing to declare another source of income.

But why is it so profitable to delay your retirement? Well, this effect was actually originally part of a system designed by the government, in a bid to decrease labour shortages by tempting people to push their retirement back. In fact, your pension may even double if you hold off on retirement until you are 70! This only benefits you if you stay in good health and live long enough to benefit!

Do you have other possible sources of income?

With the potential effect of changes to your tax bracket that may come from working after retirement, it’s worth checking that you don’t have any other more profitable sources of income, besides working after retirement age.

If you have a rental property, chalet, or other taxable assets, you could turn something like this into a source of recurring revenue with a progressive withdrawal strategy.

What about RRSPs, RRIFs and TFSAs?

If you have an RRSP, you are able to contribute to it until you turn 71. However, on the year you reach 71, on the 31st of December, you will have to transfer your RRSP into an RRIF if you want to get your retirement income.

Whereas if you use a TFSA, you will not face any age limits when it comes to making contributions. Therefore, if you can no longer contribute to your RRSP, getting a TFSA is a great solution. If you have plentiful savings in your RRIF, why not transfer it to a TFSA and take advantage of the tax benefits?

You can get a job that suits your schedule

If you do decide to start working after retirement age, thankfully there are plenty of jobs out there today that you can easily fit into your schedule, to develop a good lifestyle. Whatever sector you want to go into, you should find it easy to get a job that suits you and fits around your life.

This way, you can have a good income while also enjoying all of the new free time that retirement will offer you.

You can have a fun and profitable retirement

Figuring out the best thing to do about your retirement can be tough, even for people who are not contemplating working after retirement age. But with good planning and clearly defined goals, working after retirement can be a great thing that allows you to enjoy your retirement to the full.

Therefore, as long as you plan what you are going to do, there should be no problem with working after retirement age.

So, should I work after retirement?

Working after retirement age can be a great thing, but it does come with some financial risks that can make it less profitable, and sometimes not worth doing at all! So should you work after retirement?

The truth is, working after retirement poses a unique set of benefits and challenges for every individual. So, while working after retirement suits some people, it may not work at all for other people. Now that you are well-informed, however, you have all the information to make a decision about whether it is right for you.