Social Security RET planning

[Strongsilence-CPA]

My client is 63 and started Social Security at age 62. He is married. (He is past the deadline for withdrawing his SS claim.) He now realizes his business will boom and wishes to maximize SE earnings while also maximizing/or limiting the reduction resulting from the retirement earnings test.  (His wife currently is employed but is considering giving that up to join him in this self-employment activity.)  What are strategies, if any, to achieve this goal?

[BobKamman]

I doubt his Social Security would go up by that much even if he paid on max earnings for seven years.  Maybe a C corp with low wages and a max contribution to a defined benefit pension plan, for both him and his wife.  

[PhoebeRoberts]

He can't withdraw, but he can suspend. https://www.ssa.gov/benefits/retirement/planner/suspend.html If withdrawing would have been a plan acceptable to him, suspending is pretty darn close to the same results. (Honestly, not suspending and taking the reduction is pretty darn close to the same results.)

@BobKamman I believe the issue is that he's not full retirement age, and will need to repay some or all of his SS benefits if he has significant W-2 or self-employment earnings.

Regarding shenanigans with his spouse, I have an anecdote. I work for my mother's CPA firm. My father, who is not a CPA, worked part-time in the business for 15 years before he started drawing Social Security at 62. During those years, he never had wages in excess of that year's earning limit, and his wages continued at the same level after he started drawing Social Security because he was still working the same amount. Social Security was extremely suspicious of his claim, and attempted multiple times to assign my mom's earnings to my dad only for purposes of the earnings limit.

[BobKamman]

@PhoebeRoberts  Those were the days, when Social Security had enough staff to go after people like that.  Decades ago there were a few poster-child cases where they went after S corp owners who weren't taking enough in wages.  These days, federal law enforcement is an oxymoron when it comes to such issues. 

A couple in their early 60s, with a C corp and defined-benefit pension plan, can make a huge profit and still keep their wages low enough to continue collecting Social Security.

[PhoebeRoberts]

Yeah, this would have been ~15 years ago, which is a whole different world in terms of even perceived enforcement.

[qbteachmt]

One strategy is a business retirement plan, Solo 401(k). There is a limit as the "employee," and as the "employer" he can contribute up to 25% of net self-employment income, putting more as tax deferred: "This limit is adjusted to $77,500 for those 50 and older, and $81,250 for those ages 60 to 63 due to catch-up contributions"

[PhoebeRoberts]

Because it's not an SE-tax deduction, I don't think it solves this particular problem.