Social Security Retirement Planning Considerations for Married Couples in Family-Owned Businesses

Rose, Clarence C.
August 2004
Journal of Financial Planning;Aug2004, Vol. 17 Issue 8, p56
Academic Journal
• Married couples working together in a family business have the opportunity to allocate compensation between them in a way that can maximize Social Security benefits. • The allocation must be within reasonable limits based on each spouse's actual work performed and contributions to the business. • Before determining the income allocation, planners need to be aware of the amount of annual earned income subject to Social Security taxes. Planners also need to know the Social Security regulations regarding a working spouse's choice of taking the greater of retirement benefits based on either their own Social Security benefits or their spouse's entitled benefits. • When income from a family-owned business Is less than $55,000, the eventual retirement income from Social Security can be maximized by distributing 100 percent of income to one spouse and have the other spouse receive spousal benefits. • When the business income is greater than $55,000, the total combined retirement Social Security income for a husband and wife can be maximized by distributing Income equally between the spouses. • If the business income subject to Social Security tax is higher than the maximum, total Social Security traces will increase if the percentage of income distribution between spouses is anything other than 100 percent to one and 0 percent to the other. But total family retirement income will vary depending on the distribution of income. INSET: Executive Summary.


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