Unfortunately, most entrepreneurs do not maximize the potential benefits of social security to improve their financial security and provide the freedom that they need to grow their business.
Instead of looking at social security as a fallback option or safety net, the smart decision is to incorporate social security into an overall financial plan that will set an entrepreneur up for long-term fiscal health.
Here are the most important considerations for entrepreneurs when it comes to how and when to collect social security so that it can provide the greatest upshot.
When you plan correctly as an entrepreneur, you can arrange to receive thousands of dollars each month when you move into retirement age – freeing yourself to focus on growing your business without compromising your personal financial integrity.
Types of Entrepreneurial Taxation Schemes
Tax authorities have two ways that they collect from entrepreneurs:
- Self-Employment Tax (Schedule C).
- LLC Tax (K-1).
As the proprietor, entrepreneurs have more leeway in terms of how and when to pay taxes into social security. With the right strategy, therefore, through the adjustment of payments into the system, an entrepreneur can tweak their tax liability to pay the lowest possible amount into the system while reaping the biggest rewards later in life.
Experienced business consultants are trained to help small business owners maximize their social security benefits while simultaneously reducing the amount they pay in.
Claiming Social Security
One decision that many entrepreneurs, like everyone else, struggle with is when to begin collecting social security. The earliest possible time to claim social security is age 62. Many cash-strapped entrepreneurs quickly grasp at this opportunity to supplement their income, especially in times of economic hardship. However, drawing benefits so early does have its disadvantages. When you elect to begin receiving social security payments as soon as possible, the government substantially reduces the amount that you receive.
To get your maximum payout from the SSA, consider waiting to retire until reaching the Full Retirement Age (FRA). Depending on the year of your birth, social security payments at the FRA level begin at age 66 or 67 typically.
If you are married, you should also factor in your spouse’s social security payments. It is likely that you had different earnings throughout your respective lives, meaning that the amount you are eligible for and when you can collect will vary – important information to factor in financial decision-making.
With the right planning, you can utilize social security as a powerful tool to protect your financial health even when entering the risky world of entrepreneurship.
David A. Noyes and Co. is a DBA of Sanctuary Securities, Inc., Investment products and services are offered through Sanctuary Securities, Inc., Member FINRA and SIPC.