Will business sale income affect my Social Security benefits? Considering delaying until FRA

Good news - the proceeds from selling your business are NOT counted as earnings for Social Security's earnings test. The earnings test only applies to wages from employment or net earnings from self-employment. A one-time capital gain from selling your business is not considered earnings for this purpose. What matters is whether you have actual wages or self-employment income for 2025. If you're truly retired with no other income from working, you can claim at 63 without worrying about the earnings limit reducing your benefits. That said, waiting until your FRA would still give you a substantially higher monthly benefit for life - about $850 more per month in your case. Whether to take reduced benefits now or wait depends on your health, financial needs, and life expectancy.

u might want 2 check with an accountant because i think some of the business sale could be ordinary income not capital gains depending on how the deal was structured!! my brother sold his auto shop and some of what he got counted as income somehow

Whether to start SS now or wait until your FRA involves a lot more than just the earnings test. Let me break this down: 1) If you start at 63, you're locking in a permanent ~27% reduction in benefits compared to FRA 2) If you live past around 80, you'll collect more overall by waiting until FRA 3) COLA increases are applied to your base benefit, so starting with a higher amount means bigger dollar increases each year 4) If you're married, your decision affects potential survivor benefits for your spouse With $875K from your business sale, do you actually need SS income right now? If you can afford to wait, the 8% per year increase between now and FRA is basically a guaranteed return you can't match in the market with the same safety.

I sold MY business in 2022 and took SS right after. WORST MISTAKE EVER!!! Nobody told me about the TAXES on Social Security when combined with other income!!! If your "combined income" (AGI + nontaxable interest + 1/2 of SS benefits) exceeds $25,000 (single) or $32,000 (married), up to 85% of your benefits become TAXABLE!!! With investment income from your $875K, you'll definitely hit those thresholds, and you'll lose a big chunk to taxes. I'm PAYING THROUGH THE NOSE now and it's TOO LATE to change my decision!!!

Congrats on selling your business! I was in a similar boat last year. The business sale itself won't count for the earnings test, but have you considered the health insurance aspect? If you're not 65 yet, you'll need insurance before Medicare kicks in. That was my biggest expense after retiring at 62.

Just want to chime in - I tried calling Social Security directly about a similar question (mine was about rental income, not a business sale) and spent DAYS trying to get through. Kept getting disconnected or waiting for hours. I finally used a service called Claimyr (claimyr.com) that got me connected to an actual SSA agent in about 15 minutes. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU The agent confirmed that only wages and self-employment earnings count for the earnings test, not passive income or one-time sales. Definitely worth getting this confirmed directly from SSA for your specific situation.

My sister took SS at 62 and my brother waited till 70. Sister regrets it now at 85 cuz her checks are so much smaller than his even though they had similar careers. Just another perspective to consider.

One more critical point: Since you mentioned your wife was a teacher, she may be affected by the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) if she receives a pension from employment not covered by Social Security. This could potentially reduce her own benefit or any spousal benefits. This is a complicated area of Social Security that many financial advisors miss.

one more thing i forgot to mention, didnt u pay yourself a salary from your business? that last salary from 2024 will count for 2024 earnings test if you already filed for benefits in 2024

Based on everything in this discussion, here's a summary that might help you decide: 1. The business sale proceeds won't count toward the earnings test 2. With your assets, you don't immediately need the income 3. Waiting until FRA gives you about $850 more per month for life 4. Your wife's teacher pension may complicate your overall strategy due to WEP/GPO 5. Either way, you'll need to plan for taxes on your SS benefits due to your investment income If I were in your position with substantial assets and no immediate need for cash flow, I'd seriously consider waiting until FRA for the higher benefit, especially considering potential longevity and survivor benefits.

Smart move getting specialized advice! One additional consideration I didn't see mentioned - if you do decide to wait until FRA, make sure you understand the Medicare enrollment timeline. You'll want to sign up for Medicare Part A and B during your Initial Enrollment Period (3 months before turning 65 through 3 months after), even if you're not taking Social Security yet. Since you mentioned having health insurance through the business sale for 3 years, you should be covered, but there can be late enrollment penalties if you miss the Medicare window. Medicare enrollment is separate from Social Security claiming, so don't let one decision accidentally affect the other. Also, consider doing some Roth conversions during these pre-Medicare years while you have more control over your tax situation - it could help reduce future required minimum distributions and potentially lower the taxation of your Social Security benefits down the road.

Just wanted to add one more perspective as someone who also sold a business recently. While everyone's correctly pointing out that the business sale won't affect the earnings test, don't forget to consider how this impacts your overall retirement income strategy. With $875K from the sale plus your 401(k), you're in a pretty strong financial position. One thing to think about is whether you want to use some of those proceeds to bridge the gap until FRA rather than taking reduced benefits now. You could essentially "pay yourself" from the business sale money for the next 2-3 years, then start with the full benefit amount. Also, since you mentioned you're done working, make sure you've properly closed out your business for tax purposes - cancelled any business licenses, closed business bank accounts, etc. The IRS will want to see a clear end date for your self-employment to avoid any confusion about ongoing earnings. Sounds like you're getting great advice here about waiting until FRA. With your asset level, the patience will likely pay off in the long run!

As someone who went through a similar decision after selling my consulting firm a few years ago, I wanted to share a perspective that might be helpful. The mental aspect of this decision is just as important as the financial calculations. I was 64 when I sold and initially felt this strong urge to "get something back" from Social Security after decades of paying in. But I realized that feeling was really about wanting validation that I'd made the right choice to retire, not about actual financial need. What helped me was reframing it: those business sale proceeds aren't just sitting there - they're actively working for you, giving you the luxury of time to make the optimal Social Security decision. Not everyone gets that gift of choice. Also, one practical tip: if you do decide to wait until FRA, consider setting up automatic transfers from your investment account to checking to mimic what your Social Security payments would have been. This helps you get comfortable with your retirement cash flow and makes the waiting period feel less abstract. You can always adjust the amount if needed. The peace of mind from knowing you'll have that higher monthly benefit for life (and the larger survivor benefit for your wife) might be worth more than the immediate gratification of starting benefits now.

One thing I haven't seen mentioned yet is the impact of Required Minimum Distributions (RMDs) on your decision. At 73, you'll be required to start taking distributions from your 401(k), which will increase your taxable income significantly. If you wait until FRA to start Social Security, you'll have about 6-7 years before RMDs kick in. During this time, you could potentially do strategic Roth conversions using some of your business sale proceeds to pay the taxes, which would reduce your future RMD amounts and potentially lower the taxation of your Social Security benefits later. Also, since you have substantial assets, consider whether you really need to tap into your 401(k) at all right now. You could potentially live off the business sale proceeds and let that 401(k) continue growing tax-deferred until you're required to take distributions. The combination of waiting for higher Social Security benefits AND managing your tax-deferred accounts strategically could save you tens of thousands in taxes over your retirement. Definitely worth running some scenarios with a tax-savvy financial planner who understands the interactions between Social Security timing, retirement account distributions, and tax planning.

Congratulations on successfully selling your business! As someone who works in Social Security policy analysis, I want to emphasize a few key points that haven't been fully addressed yet. First, you're absolutely correct that the business sale proceeds won't count toward the earnings test - this only applies to wages and net self-employment earnings. However, I'd strongly recommend getting written confirmation from SSA about your specific situation, especially given the complexity of business sales and how they're structured. Second, consider the "break-even" analysis more carefully. With your numbers ($2,250 at 63 vs $3,100 at FRA), you'd need to live to approximately age 79-80 for waiting to pay off financially. Given that you're in good health (presumably, since you're considering early retirement), the odds favor waiting. Third, there's something called the "do-over" option that few people know about: if you claim benefits and change your mind within 12 months, you can withdraw your application, pay back all benefits received (with no interest), and restart later as if you never filed. This might give you some peace of mind if you're on the fence. Finally, with your asset level, you might want to consider tax-loss harvesting in your investment accounts to offset some of the capital gains from the business sale, potentially lowering your overall tax burden in retirement. The bottom line: waiting until FRA appears to be the optimal financial choice given your circumstances, but only you can decide if the guaranteed income now outweighs the higher future benefits.

I want to add one more important consideration that could significantly impact your decision: the potential changes to Social Security that may be coming in the next few years. With the trust fund projected to face challenges around 2034, there's ongoing discussion about potential reforms. While no one can predict exactly what changes might occur, historically when Social Security has faced financial pressures, reforms have often included things like raising the full retirement age or adjusting benefit formulas. However, these changes typically include "grandfather" provisions that protect people already receiving benefits. This means there could be some advantage to locking in your benefit amount before any potential changes take effect, though this is speculative. On the flip side, waiting until FRA still gives you several years of higher benefits before any potential reforms would likely be implemented. Given your strong financial position with the business sale proceeds, you have the luxury of making this decision based on what's best for your specific situation rather than being forced by financial necessity. The consensus in this thread seems to favor waiting for FRA, and based on your responses, it sounds like you're comfortable with that approach. Just wanted to add this policy uncertainty angle to your considerations, though I still think the fundamentals favor waiting in your case.

This is such a comprehensive discussion! As someone who went through a similar business sale decision at 62, I wanted to add one practical consideration that helped me: create a detailed cash flow projection for both scenarios. Map out your monthly expenses, investment income from the $875K, any other income sources, and see exactly how the numbers work with and without Social Security. Sometimes seeing the actual dollar flows makes the decision clearer than just looking at the benefit amounts. Also, don't underestimate the value of having a "guaranteed" income stream later. Markets can be volatile, but Social Security provides that inflation-adjusted baseline that gives peace of mind. With your substantial assets, you can afford to wait for that higher guaranteed amount. One small detail: make sure you understand how your state taxes Social Security benefits too. Some states don't tax SS at all, which could factor into your overall tax planning strategy. Sounds like you're getting excellent advice here and thinking through all the angles. The fact that you have the time and resources to make this decision deliberately rather than out of financial pressure is a real gift!

Reading through this entire discussion has been incredibly valuable! As someone new to this community but facing retirement decisions myself, I wanted to thank everyone for such a thorough exploration of the issues. What strikes me most is how this started as a simple question about whether a business sale affects the earnings test, but evolved into a masterclass on comprehensive retirement planning. The interconnections between Social Security timing, tax planning, Medicare enrollment, RMDs, and overall income strategy are fascinating and something I never would have considered on my own. For anyone else following this thread who might be in a similar situation, the key takeaways seem to be: - Business sale proceeds don't count for SS earnings test - The "luxury of choice" when you have substantial assets changes the entire decision framework - Waiting until FRA provides guaranteed returns that are hard to beat elsewhere - The decision impacts not just monthly benefits but lifetime tax planning - Professional advice from someone who understands all these intersections is crucial @CosmosCaptain - it sounds like you've gotten some excellent guidance here and are thinking through this decision very methodically. Best of luck with whatever you decide, and congratulations on a successful business sale and well-planned retirement!

As a fellow retiree who faced a similar decision after selling my small manufacturing business, I can't stress enough how important it is to get the Medicare timeline right alongside your Social Security decision. One thing I learned the hard way: even though you have health insurance covered through your business sale for 3 years, you still need to be strategic about Medicare enrollment. If your current coverage is considered "creditable coverage" (which it likely is), you can delay Medicare Part B without penalty, but you need to understand the rules. Also, regarding the taxation issue that @Diego Mendoza mentioned - it's worth noting that you can potentially manage this through tax-loss harvesting in your investment accounts or even municipal bonds for part of your portfolio to reduce taxable income. With $875K to invest, you have options to optimize your tax situation. The break-even analysis everyone's discussing is important, but don't forget about inflation protection. Those annual COLA adjustments are applied to your base benefit amount, so starting with a higher base at FRA means larger dollar increases over time. With current inflation concerns, that's not trivial. Sounds like you're leaning toward the right decision with waiting until FRA. The peace of mind from that higher guaranteed income stream is worth a lot when you're living off investments.