Social Security retirement at 62 while setting up LLC/S-corp for plant nursery - earnings limit concerns

I did something similar when I retired at 62 with my consulting business. The earnings test applies to wages and net earnings from self-employment. With an S-corp, only your actual salary counts against the earnings limit, not distributions. The LLC taxed as S-corp option is smart because you can pay yourself a "reasonable salary" under the earnings limit, then take additional money as distributions that don't count toward the limit. Just be careful - the salary has to be reasonable for your industry and business size. If the SSA or IRS thinks you're artificially lowering your salary to avoid the earnings limit, you could face penalties. I recommend working with a good accountant who understands both Social Security and small business taxation.

Careful with this!! My brother tried something similar with his woodworking business and got in trouble. The SSA looks at what ur actually DOING in the business not just how u file papers!!! If ur the one running everything and just trying to call it "distributions" instead of earnings they can come after u later!!!!

I've been through this exact situation with my wife's jewelry business when I retired. Here's what you need to know about the earnings test: 1. For 2025, if you're 62, you can earn up to $21,240 without any reduction in benefits 2. For every $2 you earn above that limit, SSA withholds $1 in benefits 3. ONLY earned income counts - this includes wages and net earnings from self-employment The LLC taxed as an S-corporation is definitely the way to go because: - S-corp distributions (profits after your salary) are NOT subject to self-employment tax - Only your W-2 salary from the S-corp counts toward the earnings test - You must pay yourself a "reasonable salary" first before taking distributions I recommend consulting with both a tax professional and a Social Security expert before making your final decision. The structure is perfectly legal as long as you follow all the rules properly.

I set up S-corp for my business when I retired at 62 last year. Trust me, get a GOOD accountant who knows about Social Security rules!!! I almost messed up my benefits because I didn't structure things right at first. Also, the plant nursery business might have some specific tax issues with inventory and agriculture exemptions - make sure your accountant knows about those too. Good luck with your retirement!

Honestly I'm going through the same exact thing with my SS right now and it's driving me INSANE trying to get answers!!! I've called SSA like 20 times and either get disconnected or wait for hours and then get someone who gives me different info each time. One person said my LLC income wouldn't count and another said it would and now I don't know what to believe!!!

I'm a retired accountant who specialized in small businesses. Here's my advice: 1. The LLC taxed as an S-corp is indeed your best option for minimizing the impact of the SS earnings test. 2. For a nursery business with $75K revenue, a reasonable salary might be $15-20K depending on your duties and local market rates. This keeps you under the 2025 earnings limit of $21,240. 3. As the business grows, you may need to increase your salary proportionately to maintain "reasonableness" - there's no fixed percentage, but typical S-corp owners often pay themselves 25-40% of profits as salary. 4. Keep meticulous records separating your personal activities from the business. 5. Consider hiring part-time help, even if just a few hours weekly. This strengthens the case that the business isn't just a shell for your self-employment. 6. Remember that at Full Retirement Age, the earnings limit disappears completely, and any previously withheld benefits get recalculated into your ongoing payment. The key is having the business legitimately structured as an operating entity separate from yourself personally.

My friend tried to do the S-corp thing with his woodworking business and ended up having to pay back a bunch of SS benefits because he didn't take enough salary. Don't get too aggressive with how low you set your salary! The IRS and SSA do talk to each other about this stuff.

One more important point: the month you reach full retirement age (not just the year, but the actual month), the earnings test becomes much more generous. For that partial year, the 2025 limit is around $56,520, and they only withhold $1 for every $3 you earn over that amount. Then the month you hit FRA, the earnings test disappears completely. So your strategy might evolve as you get closer to FRA. You might decide to take a larger salary in the year you reach FRA since the impact will be much less.

my brothers friend got AUDITED when he did this!!!! be careful!!!!!!

As someone who went through a similar transition with my landscaping business at 62, I can confirm that the LLC taxed as S-corp structure works well for managing the earnings limit. The key things I learned: 1. Document EVERYTHING - keep detailed records of business meetings, decisions, and why you set your salary at a specific level 2. Don't go too low on salary - I used industry salary surveys to justify mine 3. Make sure you're actually running it like a corporation (separate bank accounts, proper record keeping, etc.) 4. Consider seasonal variations - nursery businesses often have peak seasons, so you might want to structure your salary to account for that One thing that helped me was joining the local nursery association and getting their salary survey data to support my compensation decisions. Also, since you mentioned your wife retiring in 3 years, think about whether she could become an employee or partner in the business - that might give you more flexibility with compensation strategies. The peace of mind of having everything properly structured is worth the extra accounting costs. Good luck with your retirement and growing the business!

I'm in a very similar situation - turning 62 in a few months and have been running a small retail business on the side while working full-time. The information in this thread has been incredibly helpful! One thing I wanted to add based on my research: make sure you understand the difference between the annual earnings test and the monthly earnings test. In your first year of retirement, Social Security can use a monthly test instead of the annual one, which might give you more flexibility. For 2025, that monthly limit would be around $1,770. This could be helpful if you're planning to retire mid-year and want to take larger distributions later in the year. Also, since you mentioned wanting to grow the business significantly, you might want to plan for how your "reasonable salary" will need to increase as the business grows. The IRS expects S-corp owner salaries to be reasonable compared to what you'd pay someone else to do the same work. As your nursery grows from $75k to $150k in revenue, you'll likely need to justify a higher salary to maintain compliance. Have you considered consulting with a financial planner who specializes in retirement transitions? They can help you model different scenarios and timing strategies to maximize your total retirement income over the long term.

Great thread everyone! As someone who recently went through the SSA application process at 62, I wanted to add a few practical tips that might help: 1. When you file for Social Security, make sure to inform them upfront about your business structure and how you plan to take income. Being transparent from the start helps avoid issues later. 2. Keep quarterly records of your salary vs distributions - SSA may ask for this documentation during their periodic reviews of your earnings. 3. Consider timing your S-corp election carefully. You can elect S-corp tax treatment for an existing LLC retroactively up to 2 months and 15 days after the beginning of the tax year, which gives you some flexibility in planning. 4. Don't forget about state taxes! Some states treat S-corp distributions differently, so factor that into your overall retirement income strategy. The nursery business is perfect for this approach since it's a legitimate operating business with real customers, inventory, and employees. Just make sure you're treating it like a real business in all respects - separate books, business insurance, proper invoicing, etc. The more professional your operation looks, the less likely you'll have any questions from SSA or IRS. Good luck with your retirement and growing the plant business! It sounds like you have a solid plan developing.