Muncie Times, Muncie, Delaware County, 18 May 1995 — Page 9

The Muncie Times, Thursday, 18 May 1995, Page 9

Self-employed retirees should watch benefits

by William D. Brown Muncie Social Security manager If you own a business and you’re getting ready to retire, Social Security will need to know whether you’re really retiring. To collect your full Social Security retirement benefits, you have to retire or at least significantly reduce your participation in the business to be eligible for Social Security retirement benefits. Your earnings need to be less than the limits set by law. Otherwise, some or all of your benefits will be withheld. In 1994, to be able to collect your full retirement benefits, your earnings must be: • $8,040 or less if you’re under 65. For every $2 you earn over $8,040, $1 will be withheld from your re-

tirement benefits. • $11,160 or less if you’re 65 through 69. For every $3 you earn over the $11,160, $1 will be withheld from your benefits. These earnings limits apply to everyone under 70 whether they’re working for wages or are self-em-ployed. If you are 70 or over, your benefits are not affected by your earnings, no matter how much you make. When you work for wages. Social Security can easily determine whether you're “retired.” Your earnings record tells the whole story. But when you’re self-employed, it’s not that simple. For example, if you decide to file for Social Security benefits but continue to work part time in the business, you may be able to set your salary.

In this case, Social Security probably will need additional information, such as your tax returns or corporate records, to help decide if you have reduced your services in the business to match the reductions in your income. In other words, the income you receive from the business and the work you do for it must have a direct relationship. When you file for Social Security benefits, in some situations Social Security may have to ask you several specific questions to help determine your level of retirement. Questions would be appropriate if you are: # involved in a family business or another family member is assuming some, or all, of your duties; # continuing to render services for the business at a

reduced rate of compensation; # still the owner, or part-owner, of the business and own stock in the business; or # splitting wages with others (dividing your former salary between you and your spouse or children, for example). Take the example of Mr. Thomas, who is about to celebrate his 65th birthday and plans to file for Social Security benefits. He owns and manages a hardware store. He decides that he’ll name his wife as manager even though he intends to control and continue to manage the business. He makes his arrangements and then contacts Social Security to file for benefits. Social Security will compare his current earnings and the level of work he performs with the

earnings received before he named his wife manager. If his retirement is found to be merely a paper transaction that transfers earnings to his wife, with no reduction in his services to the business. Social Security will adjust his earnings to reflect his ongoing involvement. His retirement benefits will be based on these adjusted earnings. It is to your advantage to check with Social Security before filing for benefits to make sure you know what documents you’ll need to" furnish at the interview. Remember, you have to “retire” to collect “retirement” benefits, or at least significantly reduce your involvement in your business and keep your earnings under the limits. For more information, contact your local Social Security office.

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