Are you working in retirement? That’s why it’s great … and why it’s really not Business news

Retirement work can be a great way to stay active and engaged, filling your hours with structured activities and interacting with your colleagues. And, of course, money does not hurt either. Every little thing helps, and the money you earn from work is the money you get, not counting on social security or your savings. Apart from all this, there is evidence that long work can help people live longer.

All of these reasons – and more – make working in retirement a great option for many people. However, if you are not working because you want tobut rather because you should, then working in retirement may not be as great an idea as it seems on the surface. Here are four main reasons why working in retirement is not the only thing you can think of.

№ 1: You may not receive new Social Security payments

Your Social Security benefits are based on your highest salary in 35 years. If you’re in your mid-60s or older and you’re still working, chances are you already have 35 years in the income record. As a result, at best, you can replace low-income years with higher-income years, but you can also pay these taxes so you don’t see from them an extra net benefit.

Social security taxes can affect up to 12.4% of your salary (half is paid by you, half by your employer). This is a lot of money that can be invested in taxes for a program where you will no longer receive new benefits, but this is exactly what you are likely to face when you retire.

№ 2: Your Social Security check may be reduced

If you have not reached the full retirement age – from 66 to 67 years for those who have not yet reached this age – then work while collecting social insurance can be accompanied by significant fines. You can lose up to $ 1 for every $ 2 you earn above $ 19,560 a year. It’s a pretty harsh punishment – and you shouldn’t usually charge Social Security if you work and are still below your full retirement age.

If you stated early because you lost your job but later found another job, you may be able to reboot. Within one year of applying for Social Security you can withdraw your application and return every penny received, which will allow you to claim again later.

№ 3: Hard to compose to help you all

If you work because you need to, it means your savings are not enough to cover expenses. While you still need to figure out how to maintain your nest egg, you also need to recognize that folding isn’t on your side like it once was after you reached retirement age.

The key problem with compounding is the money you expect to spend over the next five years does not belong to stocks. If you are looking for your nest to cover your short-term expenses, this short-term money will certainly not have the same potential for return as stocks. Also, once you spend that money, they will disappear. At some point you will need to replenish it by turning more of your investment with higher risk into an investment with less risk, which reduces the amount you can put together faster.

As a result, while you still have to withdraw money when you stop, you also need to focus on ways to reduce structural costs. The lower your daily expenses, the easier it is for Social Security and your savings to cover them when needed.

№ 4: Income-based expenses mean your money may not go as far as you think

Even if you are old enough so that you do not face direct punishment for working during the collection, your Social Security benefits may be taxed if your income is high enough. If you are single, a combined income of $ 25,000 can tax your Social Security, and if you are married, filing together, taxes start with an income of $ 32,000.

In addition, your Medicare Part B premiums are also based on your income level. Fees increase for single people with incomes above $ 91,000 or married people who together apply for incomes above $ 182,000. If you work because you want to, these higher costs and taxes may not seem so scary, but if you work because you need money, they just make it harder to achieve financial freedom.

Start now to retire for real

By the time you get there retirement Age, you’ve probably worked for decades to take care of yourself and your loved ones. To get the most out of your golden years, you need a plan that will allow your money to take care of you. This type of planning takes time.

Even if you are past the age when you would like to take off your work boots for the last time, you can still take steps to strengthen your financial future. However, the sooner you start, the more runway you will need to make it a reality and enjoy the fruits of your labor while you are still young and healthy to do so. So start now and improve your chances of reaching a point where retirement work is a choice, not a requirement.

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Chuck Saletta has no position in any of these shares. The motley fool has no position in any of these actions. The motley fool has a disclosure policy.