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The Strategic Impact of Employing Your Spouse

Maximizing Retirement Benefits: Why You Should Consider Paying Your Spouse


In the bustling world of financial planning, innovative strategies to maximize retirement savings and tax benefits are always in vogue. Yet, amidst the buzz of hiring one's children to reap tax advantages—a tactic often touted by financial influencers and tax professionals for its potential savings—there lies an alternative that might just revolutionize the way solo business owners approach their retirement planning: paying your spouse.


The Alternative to Child Employment: Employing Your Spouse


Roger Ledbetter recently sparked a conversation on #TaxTwitter, shedding light on this overlooked strategy. The essence of employing your spouse, rather than your children, revolves around securing future Social Security benefits and unlocking additional retirement saving avenues.


Social Security Credits: The Path to Maximizing Benefits


To qualify for Social Security benefits on their own, an individual needs at least 40 quarters of work, equating to 10 years, with a minimum annual earning of $1,730 to earn one credit (a figure that incrementally rises annually, with a maximum of four credits achievable per year).

Paying your spouse not only contributes to meeting this criteria but also opens the door to enhanced retirement contribution options predicated on earned income—options that remain unattainable without an earned wage.


The Solo 401(k) Compatibility and Spousal Benefits


For solo entrepreneurs, incorporating your spouse into your business framework as the sole employee maintains your eligibility for a solo 401(k)—a critical factor for independent business owners. Moreover, if your spouse falls short of the 40 credit benchmark, they may still qualify for spousal Social Security benefits, which can amount to up to 50% of the primary worker's benefits.


Maximizing these benefits entails delaying the collection of Social Security benefits for as long as possible, as benefits experience an approximate 8% annual increase for each year collection is deferred.


Strategic Planning for Retirement


As retirement looms on the horizon, especially for those a decade or more away, engaging in strategic conversations and planning around these topics is indispensable. Understanding and leveraging the financial interplay between spousal wages, Social Security credits, and retirement contributions can significantly impact your retirement readiness.


Begin these crucial discussions today and consider integrating your spouse into your business's financial strategy. For tailored advice and a comprehensive tax planning strategy that aligns with your unique circumstances, contact Verity CPAs at or 808.546.5026. Our team is dedicated to ensuring that your path to retirement is both financially rewarding and strategically sound.



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