Get Smart About Social Security

Maximize your retirement income with these tips.

- Kathy Kristof

GETTING THE MOST out of Social Security is all about waiting as long as possible to start filing for benefits, right?

Not quite—especially if, as a business owner, you get to decide how you are paid.

You can actually live on a lot more money in retirement if you make some changes right now to your salary and take some steps to adjust your current tax bills, says Matthew Allen, a co-founder of New York City–based Social Security Advisors.

“Self-employed people generally have more flexibility in how to structure their income,” he says. “That gives you a lot of good opportunities because of the way Social Security benefits are calculated.” 

The main tactic that Allen lays out below isn’t over whelmingly complex: Start replacing some of your salary with dividends, as long as you have a legitimate business reason to do so. (There’s no required schedule for dividends, but you may wish to take them quarterly, for regular cash flow.) Meanwhile, boost your contributions to retirement savings accounts.

It’s a simple enough change—but it’s not a very obvious strategy until you understand how the Social Security and income tax systems work, and how the two interact.

What Your Current Salary Means 

To survive in retirement, you’ll obviously have to replace some of your current wages with other sources of income, including savings or pensions or government benefits. Social Security, of course, is the nation’s cornerstone retirement safety net; it provided some 50.3 million retirees and survivors, or about 15 percent of Americans, with benefits in 2016.