Self Employment & Social Security 07/12/2011

If you are self employed, here is a tip.

The kids are working hard to help us poor elderly folk and we should show our appreciation by making the most of it.

First of all, incorporate.

When you reach the age of 62, reduce your wages to the Social Security maximum (currently $1180/month) and make up the difference with corporate officer draws (not subject to payroll taxes and not subject to Social Security maximum wage calculations for early benefits).

Start taking your early retirement Social Security benefits at the reduced (75%) rate.

Use the Social Security money to ladder purchase bonds (yields are running from 2.85% for short-term corporate to 6.0% for high yield corporate mutual funds) - or any other investment you find attractive - growing your business, for example.

When you reach full retirement age, cash in your investments, keep the earnings and pay back your original Social Security payments to the government - in a four-year example this would be around $80,000.

Then reapply for benefits at 100%.  You can do that if you pay back the early retirement benefits.
In four years you can make between $5000 and $10,000 with the kids’ money on the least risky of investments.

Plus at full retirement age, if you want to continue working, you can make as much as you want and still get 100% of the benefits.  The monthly Social Security benefits will easily be enough to pay for a condo in Naples plus a new boat.