Next, consider an unmarried senior with income of $20,000. Assuming $13,000 of government pension income and $7,000 of private investment income, his tax bill is $459, or 2.3 per cent of total income.
Had he drawn an additional $5,000 of investment income, his tax bill increases to $1,891, meaning that 28.6 per cent of the additional investment income is taxed. This claw back of investment income can act as a disincentive to save for retirement.
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