Working into your golden years

Andy Rooney was 92 when he died; a mere six weeks after retiring from his stellar career as a broadcast journalist and 60 Minutes commentator. Stories like these -- people who kick the bucket shortly after finally leaving work -- have helped Vancouver-based Edward Jones financial advisor Eric Liu come to a solid conclusion.

“You hear about people who are really excited about retirement, then a few months later they get serious illness or have a heart attack,” Liu says. “That scares me. I have decided I will not ever stop working.”

He’s not the only one. The employment rate of Canadians aged 55 and up has increased substantially in recent years. Between 1997 and 2010, the rate went from 30.5 per cent to 39 per cent for men and from nearly 16 per cent to close to 29 per cent for women, according to Statistics Canada.

But does working well into retirement impact the financial benefits that older Canadians typically receive?

That depends.

“It will affect OAS [Old Age Security],” Liu says. “OAS always has a clawback, and you need to be aware of that.” (The government uses the term OAS Recovery Tax to describe that clawback.)

Here’s how it works: For every dollar of income above the threshold, the amount of the basic OAS pension drops by 15 cents.

For income earned in 2012, the threshold was $69,562. So if you earned $80,000 last year, you’re $10,438 over the threshold. That amount is subject to 15 per cent tax, which comes to $1,565. That’s $130 per month that the OAS pension would be reduced.

The 2013 threshold is $70,954.

There are changes to OAS working seniors need to be aware of, too.

Effective July 1, you can opt to delay receiving your OAS pension for up to five years. You will receive an increased amount of 0.6 per cent to your OAS pension for every month you delay receipt, up to a maximum of 36 per cent at age 70.

However, if you delay your pension you won’t be eligible to receive the Guaranteed Income Supplement nor will your spouse or common-law partner be able to receive the Allowance (for low-income seniors) until you start your OAS pension.

The Canadian Retirement Income Calculator can help you estimate how delaying your OAS will affect your personal circumstances.

Plus, the age of eligibility for the OAS pension is changing from 65 to 67. This change will be implemented between the years 2023 and 2029. Anyone aged 54 or older as of March 31, 2012 (born before April 1, 1958) will not be affected.

Changes regarding Canada Pension Plan contributions have occurred too. As of Jan. 1, 2012, all workers 65 and under have to make CPP contributions, while the government also introduced the Post-Retirement Benefit (PRB).

In the past, you had to stop working for a certain period of time before you could begin to collect your CPP benefits, and you couldn’t collect CPP and pay into it at the same time. The PRB allows people who are working to collect CPP and make contributions towards the PRB. Doing so is mandatory until age 60, in fact. Employees will contribute 4.95 per cent of any income above $3,500 up to a maximum income prescribed by the government, and the employer contributes 4.95 per cent as well. Those who are self-employed must pay both portions.

If you reach 65 and are still working, you can choose whether you wish to contribute. If you opt to contribute, your employer must match your contributions.

Then there’s the need to see if the PRB will affect your eligibility or benefit amounts for Old Age Security (OAS), the Guaranteed Income Supplement (GIS), or other provincial or territorial programs. Service Canada recommends visiting its Retirement Planning page to find out.

Regardless of how old you are now and how old you want to be when you retire, Liu says the time to start preparing for the so-called golden years is now.

“It’s important for you to plan ahead,” Liu says. “What kind of lifestyle do you want? There are a few questions you need to ask yourself. Where am I today? What do I have? What kind of resources do I have? Are the resources I have sufficient to carry me forward? Where would I like to be? How do I get there and how can I say on track?”

But then, maybe you’ll want work longer anyway.

A 2005 British Medical Journal study of Shell Oil employees found that people who retire at age 55 and live to be at least 65 die sooner than people who retire at 65. After age 65, the early retirees have a 37 per cent higher risk of death than counterparts that retired at 65.

That’s not all. People who retire at 55 are 89 per cent more likely to die in the 10 years after retirement than those who retire at 65.