If you own a business and are ready to retire, your business may affect your eligibility for certain social security benefits. When you retire from a business that you or your family own and then seek to apply for retirement benefits, the Social Security Administration (“SSA”) is the federal program that will decide if you are eligible for full or partial benefits.
As a business owner, it may be more difficult for the SSA to determine whether or not you qualify for full or partial benefits.
Social security is the term that refers to the federal government-operated program that provides financial support for the elderly, disabled, and retired. Throughout an individual’s working life, they pay a portion or percentage of their regular income to the social security program. Both employees and employers are required to make such payments to the federal program.
These payments are known as social security taxes and are intended to provide some degree of economic security to qualified individuals. Another reason for social security payments is to ensure that everyone who is no longer earning an income still has some funds to put back into the economy to keep the economy flowing.
Once a person reaches retirement age or becomes disabled, the government issues individual monthly payment checks based on the amount the person paid during their life. Payments made during an individual’s work life are referred to as work credits. An individual will need a certain amount of work credits in order to receive social security benefits. As such, not every person is eligible to receive social security benefits.
The Social Security Administration classifies retirement benefits into one of three general categories:
In order to find out the amount of social security payments that an individual may be entitled to receive when they retire, the Social Security Administration will send everyone an annual earnings statement. The SSA sends this statement to every worker aged 25 or older and calculates their expected retirement benefits. Additionally, an individual may also create a Social Security account if they are:
When an individual creates a Social Security account, they will be able to view their Social Security Statements and receive an estimate of their retirement benefits.
In order for a business owner that has reached the minimum age of retirement to get full retirement benefits, they must do one of the following:
It is important to note that the above applies only to individuals below their full retirement age. For individuals that have reached their full retirement age, there is no reduction in social security benefits regardless of income level. Additionally, in the calendar year an individual reaches their full retirement age, the earnings limit increases to $51,960 annually without reducing social security benefits. Then, for every $3 earned past that stated limit, $1 will be withheld in social security benefits.
Because of the nature of owning a business and being self-employed, the SSA may request additional documents from business owners to help determine their eligibility to receive social security payments. Once again, this will depend on each individual’s specific situation.
Examples of considerations that the SSA will make before asking for additional documents include the following:
If you are a business owner that falls into one of the above categories, the SSA will likely want additional information in order to make a proper determination as to the amount of social security payments you may receive. For example, the SSA may request any of the following:
As noted above, yes a business owner may continue working after they reach the age of retirement. Additionally, the business owner may continue to collect benefits, so long as they meet the above earnings requirements. In fact, many business owners continue working even after their full retirement age to increase their social security retirement benefits.
If you have any questions regarding how continued self-employment and operation of a business will affect future social security benefits, then you should contact your local Social Security office for answers. Local Social Security offices can provide further information on how an individual’s continued involvement in a business will affect their future or current social security retirement benefit payments.
As a business owner, before applying for Social Security retirement benefits, you may consult with an experienced Social Security lawyer specializing in Social Security. An experienced government lawyer can help guide you through the retirement application process and answer any questions regarding how continued business operations may affect your benefits.
Additionally, if you have been denied benefits or are not at the level you expected, an attorney can help you prepare and submit an appeal. Finally, an experienced attorney can also represent you at any administrative or court hearing.
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