If you don’t pay now, you’ll regret it later
Would you like to take home a paycheck with no deductions? If you’re working “under the table,” as some people call it, you get a bigger paycheck if your employer doesn’t deduct Social Security taxes.
Sound good? Before you answer, think about what this means for your future.
First, it’s illegal for your employer not to report your earnings to the IRS, and it’s illegal for you and your employer not to pay Social Security taxes on your earnings.
Second, while you’re not paying Social Security taxes, you’re also not earning the work credits that will make you eligible for Social Security benefits in the future. So what, you ask? You’re a long way from retirement.
However, Social Security is much more than retirement insurance. There also are disability and survivor benefits. Disability can happen to anyone – at any age – anytime.
When you’re paying into Social Security, you have a cushion of protection that could provide monthly payments for you and your family if you are unable to work. Few people have long-term private disability insurance.
Every worker who pays Social Security taxes has Social Security disability insurance. If you aren’t paying your Social Security taxes, then you won’t have that disability insurance if you need it.
With Social Security survivors benefits, you also have the comfort of knowing your dependents will have financial help when you die. Social Security survivors benefits paid monthly to the dependents of a worker with an average income could have the same value as a $400,000 life insurance policy.
Now, about retirement. My advice to workers of any age is it’s never too early to start planning for retirement. Social Security never was intended to be your sole source of retirement income. While you’ll need to supplement your retirement income with investments and savings, paying Social Security taxes is the first step in preparing for your retirement.
Although you may think you need the money more now, you will need it even more if you become disabled or when you retire. And your family will need it even more if you die. That’s the reason you need to think twice before you decide to work “under the table.”
For information about your Social Security benefits, visit www.ssa.gov/planners.