You can start a business at any time, whether or not you are collecting Social Security benefits. However, there are certain considerations that older prospective entrepreneurs must consider that do not necessarily apply to younger people. For example, older individuals must consider possible taxes on Social Security benefits that would arise as a result of self-employment income. Older individuals may also wish to consider how owning a company or earning money from it might affect their ability to qualify for Medicaid benefits.
Social Security Taxes
If your income is over a certain amount, you may trigger a special tax on your Social Security benefits. Specifically, the tax becomes effective for single filers who make more than $25,000 per year. Up to 50 percent of your benefits may become taxable. Once you make $34,000 or more, up to 85 percent of your benefits may become taxable. For married taxpayers, those two thresholds are $32,000 and $44,000, respectively.
Medicaid Considerations
Medicare does not generally cover long-term care, such as nursing home care, except in very limited circumstances. In order to pay for this care, you must fund it either out of private savings or through long-term care insurance. If you have neither, or if you exhaust your benefits, you will have to rely on Medicaid to fund long term care. However, owning a company or taking income could put you over the allowable limit to qualify for long-term care benefits through Medicaid.
Medicaid Planning
Rules vary by state, but Medicaid is designed as a last-resort insurer for the poor or indigent. In most cases, you will have to exhaust all significant personally owned assets before you can qualify for Medicaid. However, states provide for exceptions for some kinds of assets such as a limited amount of life insurance, home equity or provision for the maintenance of a spouse. However, closely held businesses do not typically fall under these exemptions. If you own a business with any value, it will likely be counted against you for the purposes of qualifying for Medicaid.
Disability Considerations
If you are receiving Social Security benefits under the SSI program, which provides disability payments to qualified beneficiaries, starting a business could jeopardize your benefits. Generally, you have a nine-month period in which you can earn money without losing benefits. After that, you have a 36-month trial period, during which time, if you take more than $1,000 per month from work, net of expenses, your SSI benefits will cease. Blind workers, however, can earn up to $1,640 per month without jeopardizing their benefits. Outside of those circumstances, the Social Security Administration will reduce your benefits by 50 cents for every dollar you earn over $85 per month.
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