Can I Pay My Wife So She Can Get Bigger Social Security Checks?


Dear Penny,

I’ve earned more than the Social Security income limit for more than 35 years. I own my own business with my wife.

She worked for 12 years before we had children and returned to work five years ago, but earns only $40,000. I earn enough in my business to pay both of us more than the income limit.

She’s a 50% owner in the business and helps with random items.

We plan on retiring at 67 or 70 (10 or 13 years from now). We would be well served for Social Security purposes to split the business income between us, which would surpass the $160,200 maximum, correct?

-J.

Dear J.,

Yes, you’d help your wife boost her future Social Security payments. Benefits are based on your 35 top-earning years, so your wife will get larger checks someday if she can boost her income.

But I’m not sure the two of you will come out ahead in retirement if you maximize your wife’s future Social Security payments.In this scenario, you and your wife would pay a lot more in Social Security taxes. The trade-off might not be worth it.

The $160,200 you refer to is Social Security’s maximum taxable amount for 2023. This cap goes up pretty much every year. Any money you earn above this limit isn’t taxed by Social Security. Those taxes are a hefty 12.4% for self-employed like you because you have to kick in 6.2% on both the employer’s and the employee’s side. But you’re currently earning a lot of money that isn’t subject to Social Security taxes.

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