Social Security decisions for business owners

Benefits are based on your highest years of earnings subject to Social Security tax. Owners who paid themselves modest wages, took most income as distributions, or had uneven years may have a different record than they expect. Reviewing your statement at ssa.gov is a practical first step.

Sale proceeds generally are not wages or self-employment earnings and do not add to your Social Security record.

Claiming before full retirement age permanently reduces the monthly benefit. Delaying past full retirement age increases it up to a maximum age. The benefit is adjusted for inflation each year, which makes a larger benefit a form of inflation-adjusted income for life.

The right age depends on health, other income, spending needs, and for married couples, survivor benefits. When the higher earner delays, the survivor benefit may be larger.

If you claim before full retirement age and keep working, for example under a consulting or transition agreement with the buyer, an earnings test may temporarily withhold some benefits. Limits change each year, and withheld amounts are generally accounted for later. Check the current SSA rules.

Part of your benefit may be taxable depending on your other income, including tax-exempt interest. A large gain in the year of sale may increase how much of that year’s benefit is taxed and may affect income-based Medicare premiums in a later year.