“Can I Just Raise My Salary at 60 to Max Out Social Security?” A Closer Look at S-Corp Wages and Retirement Strategy
A client recently asked whether their CPA was right:
They’ve been taking low wages from their S-Corp for years to reduce payroll taxes. Now that they’re turning 60, they want to increase their salary to maximize their Social Security benefit. The idea is simple: pay more into the system at the end to get more out in retirement.
It’s a clever thought—but does it work?
The Basics: How Social Security Benefits Are Calculated
Social Security benefits are based on your highest 35 years of indexed earnings. These earnings are adjusted for inflation using the Average Wage Index, and then plugged into a formula to determine your Primary Insurance Amount (PIA).
If you have fewer than 35 years of earnings, the Social Security Administration adds zeros to your record, which pulls down your average. So yes, even a few extra high-earning years can move the needle—especially if they replace zeros or low-earning years.
But here’s the catch:
Just boosting wages for a few years in your 60s won’t override decades of low wages.
S-Corp Wages: Playing It Too Low for Too Long
It’s common for S-Corp owners to keep wages low and take the rest of their compensation through distributions. This minimizes payroll taxes, including Social Security and Medicare.
But long-term, it may come at a cost:
- Lower lifetime Social Security income
- Lower eligibility for disability or survivor benefits
- Less room for wage-based retirement contributions (like cash balance plans)
Can You “Catch Up” at 60?
You can increase your salary at age 60+ and it may help—but it depends on:
- How many years of low wages or zeros are in your record
- How high your new wages are (up to the annual Social Security wage base: $168,600 in 2024)
- Whether those high years replace earlier low ones in your 35-year average
The Social Security benefit formula is progressive, meaning the first dollars count more than the last. So a single $168K wage at 60 won’t increase benefits nearly as much as a decade of moderate wages in your 40s would have.
Better Planning: Integrated Compensation + Retirement Strategy
Rather than waiting until 60, we work with clients earlier to:
- Optimize wages to balance tax savings and long-term benefits
- Layer in retirement strategies like cash balance plans that boost deductions and save for retirement
- Evaluate the long-term income impact of Social Security planning
- Coordinate with your CPA so wage decisions support both tax and retirement goals
Bottom Line
Yes, increasing wages in your 60s may help your Social Security benefit—but it’s not a silver bullet. The best results come from integrated planning done years earlier.
If you’re a business owner drawing a low S-Corp salary, now is the time to talk. Whether you’re in your 40s, 50s, or just hitting 60—we’ll help you design a compensation strategy that supports both your current tax picture and your future retirement income.
Here’s a visual comparing two Social Security earnings strategies:
- Dashed Line: Consistently low wages ($20K/year for 30 years, with 5 zero years)
- Solid Line: Low wages for 25 years, followed by high wages ($168,600/year) in the last 5 years before retirement
It shows how trying to “catch up” late can help slightly, but has a limited effect if it only replaces a few low years—especially compared to building higher earnings consistently throughout your career.
In Part 2, we’ll discuss whether we should try to maximize Social Security contributions, or invest the savings, and which one has a bigger impact on retirement income.
In Part 3 (coming soon), we’ll look at strategies that can help you get ready for retirement that require high wages.
