To work or not to work? If you are approaching retirement age, this may be a question you are asking.
Having a job in your senior years has benefits, but it is not a universally good solution.
Retiring is less than ideal if you have a stressful job, you collect Social Security before OFF, or you are in poor health. It is also problematic if the current payslip allows you to ignore your worst financial habits.
The other side is that if you are happy with your job and healthy, you can be a good candidate to continue working in retirement. Use the time to practice living within a budget while strengthening your finances. That way, when you hand in your last pink note, you have more financing for the retirement lifestyle you want.
To help you decide if an occupational pension is right for you, here are two pros and three cons that you should consider.
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Pro: Your health can benefit
Several studies show a connection between working in older ages and improved cognitive function. The basic theory is that work provides mental and social stimulation, and that activity can make you happier and sharper in your senior years.
These health benefits are likely to be more pronounced when you do not have an active group of friends or hobbies that you love. On the other hand, if your current occupation is emotionally demanding and time consuming, the stress of work can outweigh the benefits.
Benefit: Your savings can last longer
Continuing to earn a paycheck should put pressure on your savings. If you can continue to contribute to your retirement account and delay your social security benefits, you will benefit from three ways:
- Several of your savings remain invested and work for you.
- Ongoing contributions increase your percentages and increase your future earning potential.
- When you delay Social Security, your pension benefit increases. This is balancing to waive income in advance.
Disadvantages: Working may not solve a savings shortage
Finances are a common reason seniors continue to work in retirement. Unfortunately, continuing to work for a lack of savings is not a surefire solution.
Continuing to work can even backfire. This can happen if there are unresolved issues that caused you not to save enough. If you spend more than you earn, do not prioritize saving, or have not mastered the art of budgeting, earning a paycheck is only a temporary problem.
When you can no longer work, you probably still have insufficient savings – and no good solution to solve it.
If money is the reason you decide to retire, then be right with yourself about why you are underfunded. Resolve these issues as you continue to work. It gives you a better chance of enjoying a traditional pension without a major lifestyle downgrade.
PRESS YOUR PENSION ACCOUNT: Is that ever a good idea?
Disadvantages: Your social security may be affected
Social security uses two formulas to calculate the fines:
- In the years you have not yet reached FROM, your benefit is reduced by $ 1 for every $ 2 that your income exceeds the limit. The limit may change from year to year, but it is $ 19,560 in 2022.
- In the year you reach OFF, your benefit is reduced by $ 1 for every $ 3 you earn over a higher limit. By 2022, that limit is $ 51,960.
You can avoid the deductions by keeping your income below the limit. Or – this is sometimes the better strategy – get enough to work so you can defer your social security until OFF.
Disadvantages: You delay the full retirement experience
Traditionally, retirement involves doing all the things you could not do in your working life – hanging out with friends, finding new sports and hobbies, and going on trips. Work can provide some funds for these activities, but you give up your free time in the process.
Your time is valuable, especially if your health is in decline. Postponing your bucket-list experiences can be disappointing – possibly more disappointing than reducing your life now so you can live without your paycheck.
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