When Wade Dalke turned 60, he began collecting his pension while continuing to work. With that extra cash flow came extra spending, but what Dalke didn’t plan for was the added tax obligation. Five years later, he owed the government $18,000 in taxes.
“I would always get my tax bill and I just couldn’t afford to pay for it,” Dalke said.
Randy Kobbert, a licensed insolvency trustee at MNP in Lethbridge, says Dalke’s situation is quite common in his office. He said filings have gone up 11 per cent in his office over the last six months and many are from seniors.
Kobbert says choosing to work while collecting a pension can be a great way to earn extra money if done right.
“Before you make that transition, talk to your advisor – whether it be your accountant, banker or family members. Get an idea of what your cash flow needs will be after retirement, but also talk to your employer. There are certain forms they can complete to increase the tax withholdings to ensure you’re not caught in that trap.”
Kobbert says he also deals with many seniors who are vulnerable to contracts they don’t understand as well as aggressive sales people.
“Again, talk to a family member or trusted advisor before they enter any contracts because there still are many vulnerabilities,” he said. “We see it, whether it’s schemes or bait and switch transactions or things like that, that can trick them into obligations they can’t afford.”
After this experience, Dalke is now preaching to his fellow seniors.
“Have a budget and try to stick to it if you can. Sometimes you have emergencies come up but if you can, stick to your budget, you’ll be better off.”