Second careers can be taxing Whitehorse YT
Second careers can be taxing
Photo courtesy of metrocreativegraphics.com
(NC)-In the span of one generation, our traditional ideas about aging, work and retirement have changed. Older people are staying healthier and living longer, and many have enough financial security to stop working at a relatively young age. It's a trend that's offering new freedoms and opportunities. But there can be challenges and concerns, too.
"Many people see this as a blessing - an opportunity to reinvent themselves," says chartered accountant, Paul Panabaker, a partner with Davis Martindale LLP in London. "Seniors are often continuing to work after retirement, sometimes because the income helps with those little extras, like a golf membership or a vacation. Others are working because they can't afford not to."
Chartered accountant, Joel L. Rubinovich, a partner with Rubinovich Shoib LLP in Toronto, says work can help keep us healthy and mentally fit. "Many people lose interest when they retire," he says, "Hobbies and leisure activities can help fill the time, but they aren't always enough."
With Canada's shrinking birthrate, there are less young people to fill the jobs retirees are vacating. Healthy, willing seniors can play an important part in helping to prop up the workforce, and many employers are happy to have older, responsible employees with good skills and a strong work ethic. But for those over 65, especially, the extra income can have consequences come tax time.
"Canada Pension is yours to keep," says Panabaker. "But after age 65, you may lose the age credit or find your Old Age Security is being clawed back as your income increases." He also cautions that, "The tax deductions withheld by your employer don't consider your pension or other income sources, and so many people are surprised to find they owe taxes the following April."
If loving what you do is more important than a pay cheque, you might consider volunteering some of your time and skills to a charitable or not-for-profit organization.
"There's a satisfaction that comes from knowing you're making a contribution; that you're doing something for others," explains Rubinovich. "A whole new industry is evolving around philanthropy, and the Income Tax Act is changing to accommodate it." Under certain circumstances, capital gains taxes can be completely eliminated on certain gifts of qualifying property made to recognized charitable organizations.
A second, post-retirement career can offer a sense of satisfaction, new social opportunities and even extra income. But make sure that taxes don't take away some of the benefits you've worked your whole life to get.
You can obtain advice that applies to your own situation and specific circumstances from a chartered accountant in your community.