When You Retire From Your Own Business: 

What You Need To Know 2012

I

f you own and operate a business, are 

younger than full retirement age and are 

getting ready to retire, Social Security needs 

to know whether you will retire completely 

or whether you still plan to work. If you are 

at full retirement age or older, you can get 

all your Social Security benefits whether 

you retire from your business or not.

When you work for someone else, it is easy 

to determine whether you are “retired.” Your 

paycheck tells the whole story. But when you 

work in a business that you (or your family) 

own, or you are an officer in a corporation, it is 

not as simple. Because you may be in a position 

to control your earnings, you may need to give 

Social Security more information—such as 

tax returns or corporate records—when you 

apply for benefits. This will help us determine 

your retirement benefit amount. Your earnings 

must match the work you do. You cannot pay 

yourself a smaller salary to stay under Social 

Security’s earnings limits. 

How earnings reduce your 

Social Security benefit

Earnings limits may change each year. If 

you are younger than your full retirement age 

in 2012, you can earn up to $14,640 without 

affecting your benefits. For every $2 you earn 

over this limit, we will withhold $1 in benefits. 

If you will reach your full retirement age 

in 2012, your benefits will be reduced by $1 

for every $3 you earn over $38,880 until the 

month you reach full retirement age. When 

you reach full retirement age, your Social 

Security benefits will not be reduced no matter 

how much you earn.

Full retirement age was 65 for many years. 

However, beginning with people born in 1938 

or later, that age gradually increases until 

it reaches 67 for people born after 1959. For 

example, the full retirement age for people 

born in 1943 through 1954 is 66.

Are you really retired?

When you apply for Social Security 

benefits, there are several situations requiring 

additional information and evidence to 

determine your level of retirement. For 

example, additional questions would be 

appropriate if you are—

•	 Involved in a family business and 

another family member is assuming 

some, or all, of your duties; 

•	 Continuing to render services for the 

business at a reduced rate of compensation; 

•	 In a position to control your earnings; 

•	 Still the owner or part-owner of a business 

and own stock in the business; or 

•	 Splitting wages with others (dividing 

former salary between you and your 

spouse or children, for example). 

Additional evidence that

may be needed

In addition to the retirement benefit 

application, we will ask you to tell us about 

your retirement plans. We may ask you to 

complete a Self-Employment/Corporate 

Officer Questionnaire (Form SSA-4184) to 

provide us with information we need to 

determine whether you are retired. We also 

may ask for additional documentation such as 

personal and business tax returns, corporate 

resolutions, stock transfer agreements, and 

resignations. We pay special attention to 

situations in which your salary has been 

reduced, but you are compensated through 

another form of payment. These may include 

an increase in dividends, an increase in salary 

to another family member (with no change in 

responsibility), excessive rent or loan payments, 

and unexplained business expenses.

(over)

When You Retire From Your Own Business:

What You Need To Know
What we count as earnings

When you continue receiving compensation, 

we consider the work you performed and 

the amount you earned while working and 

compare it with your work and earnings after 

“retirement.” We determine the reasonable 

value of the services you perform for the 

business, based on the time spent and nature 

of the services, and compare it to the income 

you receive. If we decide the value of your 

services exceeds your income, we must 

determine a dollar amount for those services 

and count it against Social Security’s annual 

earnings limits. 

Also, if we determine you are not retired 

and your earnings have been under-reported, 

we have the right to adjust your Social Security

earnings record. We also may notify the 

Internal Revenue Service so it can determine 

whether your tax liability needs adjustment. 

An example

The following example describes a situation 

requiring an extensive interview and 

documentation, because the person is retiring 

from a family business or corporation: Mr. 

Davenport, who is 63 years old, owns and 

manages a furniture store, and he is about to 

apply for Social Security benefits. He decides 

to name his wife as manager, even though he 

intends to continue to control and manage 

the business. We will need to compare his 

earnings to the level of work he performed 

before he named his wife as manager.

If we learn that his “retirement” is merely 

a paper transaction transferring earnings to 

his wife with no reduction in his services,

we would adjust his earnings record to reflect 

his involvement in the business and pay 

benefits based on that adjusted record. We 

would remind Mr. Davenport that if he wants 

to continue to work and receive his Social 

Security benefits, the amount of his earnings 

must match the amount of work he does. 

Early contact with a Social Security 

office is important

You should check with Social Security 

before applying for benefits to make sure 

you know what documentation you will 

need. Remember, if you are younger than full 

retirement age, you have to “retire” to collect 

“retirement” benefits—or at least significantly 

reduce your involvement in your business and 

keep your earnings within the limits explained 

previously. That will permit us to pay some or 

all of your Social Security benefits.

Contacting Social Security

For more information and to find copies 

of our publications, visit our website at 

www.socialsecurity.gov or call toll-free, 

1-800-772-1213 (for the deaf or hard of hearing, 

call our TTY number, 1-800-325-0778). We 

treat all calls confidentially. We can answer 

specific questions from 7 a.m. to 7 p.m., 

Monday through Friday. We can provide 

information by automated phone service 

24 hours a day.

We also want to make sure you receive 

accurate and courteous service. That is 

why we have a second Social Security 

representative monitor some telephone calls.

Social Security Administration

SSA Publication No. 05-10038

ICN 457503

Unit of Issue - HD (one hundred)

January 2012 (Recycle prior editions) Printed on recycled paper