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Advice for working retirees

A surprising number of Canadians continue to work after their "official" retirement. According to Statistics Canada, one out of every six people in the 60 to 64 age bracket return to the paid workforce in some capacity.

If you're among them, you'll appreciate the following money management tips.

Registered plans

Additional work in retirement means additional earned income—and an opportunity to add or to preserve your tax-deferred nest egg:

Contribute to an RRSP. "You can continue to contribute to your own Registered Retirement Savings Plan (RRSP) until the end of the year you turn 71," says Jane Olshewski, Manager, Advanced Financial Planning Support. "If you have a younger spouse, you can contribute to a spousal RRSP until the end of the year in which your spouse turns 71—regardless of your own age."
Delay conversion. You are not required to convert your RRSP to a retirement income option until the end of the year you turn 71. Earning additional income may allow you to defer conversion to the last possible moment.
Preserve your RRIF. Using your earnings to cover your day-to-day living expenses may allow you to make minimum withdrawals from your Registered Retirement Income Fund (RRIF). As long as they're in the plan, your funds continue to compound on a tax-deferred basis.

Allow your savings to continue to grow Tax-Free

Contribute to a TFSA. There is no age limit to your Tax-Free Savings Account so you can continue to use your additional earned income to contribute and allow your money to grow tax free well into your retirement years.

Income splitting opportunities

Many retirees choose to start their own business. "These entrepreneurs can effectively split income from the business by paying a salary to a spouse or other family member if that person assists in the business," advises Olshewski. "If the employee is in a lower tax bracket, as is often the case, this strategy can reduce the family's tax bill significantly."

Remember that the salary must be reasonable for the work performed. This may also help build up RRSP contribution room for the individual.

Government benefits

On the downside, additional income may affect your eligibility for income-linked government benefits like Old Age Security (OAS), as OAS benefits are reduced (and eventually eliminated) based on income.

For more information on financial planning strategies regarding working retirees, call your Investors Group Consultant.

Interesting choices for working retirees

Retirement can often lead to creative work options that either weren't available to you or seemed too risky during your primary career. Here are a few ways you might consider generating additional retirement income:

Working part-time. Sometimes less is more, and many retirees find that doing their old job—or a new one—on a part-time basis gives them the ideal balance between their professional and personal lives.
Consulting. Your years of experience can often be of value to other organizations. Whether freelancing for many organizations or contracting their services to one, many retirees begin their freelance consulting career with the organization they just left, and then take on additional clients.
Opening a business. Whether you turn a hobby into a career, or begin a completely new venture, retirement can often bring out the latent entrepreneur. For more information, ask your Investors Group Consultant for a copy of "The Entrepreneurial Dream."

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This article, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.