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  1. #1

    Default How Can Independent Contractors Maximize Social Security Retirement

    My husband and I both work together and are paid as 1099 workers. We have the employer just split our earnings and they go into separate accounts so that we both have documented income. We receive separate 1099's. We pay our taxes, have our own health insurance with a HSA. We are approaching retirement age and like so many we aren't ready. My husband will be 62 this year and I'll be 56. I am studying the social security situation and trying to learn what would be the most advantage situation for us. These are my thoughts and questions:

    Would it be better to have all of the income showing as paid to my husband to bolster his retirement benefit for the remaining working years that we have? The employer doesn't care- infact that was the way he wanted to pay at first put we made him change it.

    If we did that then would he be able to apply at full retirement age and suspend so that I can apply for spousal benefits? We would simply save that money or invest for later and keep working. We were both looking at working until 70 because we believe we won't be able to afford to do anything else. We wouldn't want to incur any more taxes that's for sure, we pay enough already.

    Any suggestions would be helpful. We are both healthy, work a job that we love with a very good income. We can honestly see ourselves working another 10 years as long as we can keep licensure together. We are near to having the mortgage paid, but due to a myriad of setbacks over the years (I won't bore you) there is just not anything for retirement. So it's not a great situation but I don't think it's quite hopeless yet.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,421

    Default Re: 1099 Paid and Trying to Prepare for Retirement

    First off, when you are an independent contractor, you do not have an "employer."

    We can't tell you what the best answer would be in the long run for you as to whether to apportion the FICA contributions on him or you. You'd need to look at both your SS qualifications (you can request this from the SSA) and see if increasing his would make his quarters look better vs yours. It could go either way.

  3. #3
    Join Date
    Jan 2009
    Location
    California
    Posts
    1,045

    Default Re: 1099 Paid and Trying to Prepare for Retirement

    I have several thoughts on this.

    One is whether or not it is legal or allowable by the IRS for you and your husband to manipulate the self-employment income to indicate that he is the only one doing the work that you are actually are both doing. Perhaps the IRS doesn't really care and it is allowable. There is a lot of wiggle room with self-employment.

    Now, in order to determine what course of action is best, you will need to know several things and some of them are unknowable. You can run the calculator at the link below to see how the benefit amount would change if you changed how the self-employment is reported. Social Security considers your lifetime earnings, not just recent earnings, in making the payment computation so your plan to give him credit for all the work that you both do may or may not make much of a dollar amount difference in the monthly benefit. Impossible to tell without running the numbers.

    Also, how much more is his benefit than yours? When you are age 66, you can choose your spousal or your own benefit. Spousal benefits would be 1/2 of his but how much would your own benefit be?

    The other factor is your life expectancy and your husband's life expectancy. Your date of death and your husband's date of death will determine which decision is the best way to maximize the Social Security benefit. And that is unknowable.

    You can also not plan for disability to strike. If you stop paying FICA taxes for five years, you would no longer qualify for SSDI if you became disabled. That may not matter much if you were over age 62 at your date of onset of disability but not yet age 66, but you would then have a permanent actuarial reduction in your benefits and would no longer be able to choose between your own or spousal benefits.

    The other unknowable is what Congress may do to change Social Security before you reach full retirement age. Another strategy previously encouraged by financial planners was to file the retirement claim early, like age 62; request a withdrawal at age 66 or 70, and pay back all benefits paid (like a no interest loan) and then get a higher benefit the rest of their lives. That is no longer allowed. Withdrawal can only be done within one year of entitlement.

    You have a lot of arithmetic to do.

    http://www.socialsecurity.gov/retire2/estimator.htm

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