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Continuing to Work After CPP

March 2006

Retirees who have started receiving their Canada Pension Plan (CPP) benefits sometimes ask "Can I return to work and earn income?"

 Once you start receiving your CPP pension, you can work as much as you want without affecting your pension amount. However, you cannot contribute to the pension plan on any future earnings from employment. Another very important consideration is your tax position. CPP payments and other sources of retirement income are taxable and, of course, your employment income above the basic exemption is also taxable. 

Starting CPP Early

While CPP benefits are designed to be paid starting at age 65, if you are not working or have a low income, you can apply for a retirement pension as early as age 60. Keep in mind, however, that if you apply for your retirement pension before age 65, the payments are reduced by 0.5 percent for each month that you are under age 65. This adjustment is permanent; that is, if you choose to start your pension early, the payment does not increase when you reach 65. 

If, however, you change your mind about receiving your retirement pension, you can cancel up to six months after it starts, but you must request the cancellation in writing. You must also pay back all the benefits that you received and pay CPP contributions on any earnings while you were receiving the pension.

 Working Age 65 to 70

 If you wish to continue working past age 65, you can apply for the pension and continue to work without affecting your pension amount, provided you have not already started receiving the pension. You are no longer required to contribute to CPP.

 However, it may be advantageous to defer your retirement benefits and elect to continue to make contributions while you continue to work. You are allowed to contribute to CPP until you are age 70, at which time you will start receiving your pension. In this case, your benefits are increased by 0.5 percent for each month after age 65.

 In Quebec 

While the CPP operates throughout most of Canada, the province of Quebec has its own similar program, the Quebec Pension Plan (QPP). However, there are minor differences that you should review.

 Plan Carefully

Be sure to consult with your chartered accountant before making decisions about receiving employment income after you have started receiving your CPP benefits to determine the impact on your tax position. 

If you have sufficient income to support your retirement, why not consider doing volunteer work? Many retirees find volunteering is a fulfilling way to use their valuable skills, give back to their communities and mentor others. As a starting point, visit Canada's site for information on volunteering at www.volunteer.ca.