Retirement doesn’t always mean stopping work altogether. Many Canadians continue to work while receiving pension benefits, allowing them to enjoy the financial flexibility of dual income. Here’s a detailed look at what happens when you work while receiving the Canada Pension Plan (CPP), Québec Pension Plan (QPP), or Old Age Security (OAS), and how each impacts your contributions, benefits, and taxes.
Table of Contents
Working While Receiving the Canada Pension Plan (CPP)
The Canada Pension Plan allows recipients to continue working while enjoying their retirement benefits. However, contributions to CPP vary depending on your age.
For Individuals Aged 60 to 65
- Contributions to CPP are mandatory if you are working while receiving CPP benefits.
- These contributions fund post-retirement benefits, which boost your retirement income when you fully stop working.
For Individuals Aged 65 and Older
- At age 65, you can choose whether to continue contributing to CPP or opt out.
- If you continue contributions:
- Your employer must also contribute to your CPP.
- If self-employed, you’ll be responsible for both the employer and employee portions of the contribution.
- Opting out requires submitting a form to your employer or the Canada Revenue Agency (CRA).
Key Takeaway: Continuing CPP contributions can further enhance your retirement benefits through post-retirement income, but it’s entirely your choice once you reach 65.
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Working While Receiving the Québec Pension Plan (QPP)
The Québec Pension Plan operates similarly to CPP but includes specific requirements and benefits for those who continue working.
Retirement Pension Supplement
- Working while receiving QPP benefits requires you to continue contributing to the plan.
- Contributions are used to calculate the retirement pension supplement, which is added to your existing pension income.
Eligibility
- You must meet certain eligibility criteria to draw from the QPP while working.
- Contributions while working ensure that your pension income grows even after retirement.
Key Takeaway: Contributions to QPP while working translate into higher benefits through the retirement pension supplement, providing long-term financial gains.
Working While Receiving the Old Age Security (OAS) Pension
The Old Age Security pension offers flexibility for those who want to continue working, but income thresholds can impact your benefits.
OAS Recovery Tax
- If your income exceeds a specified threshold, you may need to repay part of your OAS through the OAS recovery tax.
- For 2025, the income threshold is $86,912. For every dollar above this limit, 15 cents of your OAS payment is clawed back.
- If your income reaches $141,917, your entire OAS payment may be recovered through the tax.
Strategies to Avoid OAS Clawback
- Utilize income-splitting with your spouse or partner.
- Maximize contributions to RRSPs or other tax-deferred savings plans before withdrawing OAS.
- Adjust your withdrawal strategy from retirement accounts to stay below the income threshold.
Key Takeaway: Working while receiving OAS is entirely possible, but high-income earners should plan carefully to minimize clawback amounts.
Why Continue Working After Retirement?
Continuing to work after retirement can provide:
- Additional Income: Pension benefits combined with earnings offer greater financial stability.
- Enhanced Benefits: Contributions to CPP or QPP while working increase retirement income.
- Social Engagement: Remaining in the workforce keeps retirees active and connected.
Final Thoughts
Working while receiving CPP, QPP, or OAS can be a smart financial decision, but it’s essential to understand how contributions, benefits, and taxes interact with your income. Whether it’s boosting your pension through CPP and QPP contributions or managing your income to avoid the OAS recovery tax, careful planning can help you maximize the benefits of working during retirement.
Stay informed, and enjoy the best of both worlds—steady income and a fulfilling retirement!