Social Security Won't Cut It For Most

Today, there are people who opt to [tag]retire at an early age[/tag], usually those who belong to the age interval of 51 to 59 and continue to work in their "[tag]retirement businesses[/tag]". This growing trend of "[tag]retired[/tag]" entrepreneurs is gradually prevailing in elderly people. However, the main reason is not as much on the financial status but more on their intention to assist their respective community and share what they know. In fact, surveys show that almost 58% of those who are at an [tag]early retirement[/tag] stage and are engaged in [tag]retirement jobs[/tag] and have their own business. They contend that the reason they still want to work is that they still want to serve their community as well as teach others what they know.

Most financial advisors say you'll need about 70 percent of your pre-retirement earnings to comfortably maintain your pre-retirement standard of living. If you have average earnings, your Social Security retirement benefits will replace only about 40 percent. Your benefit amount is based on your earnings averaged over most of your working career. Higher lifetime earnings result in higher benefits. If you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily. Your benefit amount also is affected by your age at the time you start receiving benefits. If you start your retirement benefits at age 62 (the earliest possible retirement age) your benefit will be lower than if you wait until your full retirement age.

The percentage is lower for people in the upper income brackets and higher for people with low incomes. You'll need to supplement your benefits with a pension, savings or investments or your own business or job.

The fact is that you're self-employed if you operate a trade, business or profession, either by yourself or as a partner. In this case you report your earnings for Social Security when you file your federal income tax return. If your net earnings are $400 or more in any year, you must report your earnings on Schedule SE for Social Security purposes, in addition to the other tax forms you must file. Net earnings for Social Security are your gross earnings from your trade or business, minus all of your allowable business deductions and depreciation. You pay your Social Security and Medicare taxes along with your income tax. But remember, MANY of your expenses for normal living may fall under business expenses with your own business thus reducing the "net income" and providing you with additional tax deductions.

Some income doesn't count for Social Security. For example income doesn't include the following in figuring your net earnings:

Income received from a limited partnership.

Dividends from shares of stock and interest on bonds, unless you get them as a dealer in stocks and securities.

Rentals from real estate, unless you are classified as a real estate dealer.
Interest from loans, unless your business is itself, in fact, a money lending business.

You must complete the following federal tax forms by April 15 following any year in which you have net earnings of $400 or more. A 1040
Form for U.S. Individual Income Tax Return and a Schedule C (Profit or Loss from Business) or Schedule F (Profit or Loss from Farming) as appropriate and the Schedule SE (Self-Employment Tax)

These forms can be obtained from the IRS website and most banks and post offices. Send the tax return and schedules along with your self-employment tax to the IRS. Now remember, even if you don't owe any income tax, you must complete Form 1040 and Schedule SE to pay self-employment Social Security tax. This is true even if you already get Social Security benefits. Keep in mind that your Social Security benefits are the foundation on which you can build a secure retirement and are not going to be enough by themselves to insure a comfortable retirement. This is the reason you should build a business of your own now. The easy way to do this is Automatic Authority Site Builder which will enable you to have a comfortable retirement income sharing the knowledge you have accumulated over the years.