Part 2: What If I Just Invest the Payroll Tax Savings Instead?
In Part 1 of this series, we tackled a common question from S-Corp owners:
“Can I just raise my salary at age 60 to max out my Social Security benefits?”
Short answer: It might help—but not as much as you’d think. The Social Security formula is based on your highest 35 years of earnings, so a few high-earning years late in the game won’t move the needle much if they’re replacing decades of low wages.
So what’s the alternative?
Invest the Payroll Tax Savings Yourself
Let’s run the numbers. Say you’re taking $60,000 in S-Corp wages instead of the maximum Social Security wage base ($168,600 in 2024). That lower wage saves you and your company 12.4% in combined Social Security tax, or about:
$13,422 per year
$1,118 per month
Now imagine you invest that savings every month from age 50 to 65, earning a modest 6% annual return.
Here’s what that looks like:
By age 65, you’ve accumulated nearly $300,000.
Which Strategy Wins?
That depends on your goals.
- Maxing out wages gives you a slightly higher Social Security benefit, but only if you live long enough to break even—and it locks up your money.
- Investing the tax savings gives you control, flexibility, and liquidity. You keep your money, grow it tax-efficiently, and can use it however and whenever you want.
The Real Win: Integrated Planning
None of this is one-size-fits-all. The best results come from looking at:
- Your existing Social Security earnings history
- Your desired retirement age and income goals
- Other assets and income streams
- Opportunities to layer in retirement plans (like a 401(k) or cash balance plan) to make your wages work even harder
If you’re a business owner paying yourself an S-Corp wage, now is the time to plan ahead—not just for taxes, but for long-term retirement income. We’ll help you find the right balance between saving today and building security for tomorrow.
In Part 3, we’ll look at strategies that can help you get ready for retirement that require high wages.
