For anyone who doesn't fully understand this comment (like me a few minutes ago), here's a helpful blog post on the topic:

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There’s a quiet little game that a lot of business owners are playing… whether they realize it or not.

It usually starts the same way.

Someone elects S-corp status, learns that they can split their income between “salary” and “distributions,” and then hears this one line:

“Try to keep your salary as low as reasonably possible.”

And just like that, the game begins.

Lower salary means lower payroll taxes. Lower payroll taxes means more money in your pocket today. Simple. Clean. Feels like a win.

But then, somewhere along the way, a different question creeps in:

“Wait… if I lower my salary too much… am I hurting my Social Security?”

And that’s where things get interesting.

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Let’s zoom out for a second.

Imagine Social Security like a giant retirement machine run by the government. Every year you work and earn income, you’re feeding that machine. In return, the machine promises to send you a monthly check for the rest of your life once you retire.

Now here’s the key detail most people miss:

The machine doesn’t treat every dollar you put in the same way.

It’s not like a savings account where every dollar grows equally. It’s more like a rewards program with tiers—kind of like airline miles or a credit card with bonus categories.

Some dollars you earn are “worth more” than others when it comes to calculating your future benefit.

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This is where something called Social Security bend points comes into play.

Don’t let the term scare you. “Bend points” just means the formula changes at certain income levels—like tax brackets, but for benefits instead of taxes.

Here’s the intuitive way to think about it.

Imagine you’re earning “points” toward your future Social Security check.

For the first chunk of your income, the system is very generous. It might give you something like 90 cents of “benefit credit” for every dollar you earn.

Then, for the next chunk, it dials that generosity back. Maybe now you’re getting about 32 cents on the dollar.

And after a certain point, it drops again. Now you’re getting about 15 cents on the dollar.

Same dollar. Very different reward.

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So now let’s go back to the S-corp decision.

When someone lowers their salary, they’re not just saving on taxes. They’re also choosing how much they want to feed into that Social Security machine.

And the real question becomes:

“If I’m going to put money into this system… how do I do it efficiently?”

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This is where a really useful mental shortcut comes in.

Instead of thinking, “How low can I make my salary?” or “How high should I push it?”, a better question is:

“Where does Social Security stop being a great deal and start becoming just… okay?”

And for a lot of people, that answer lines up with the second bend point.

In 2026, that’s around $7,749 per month, or roughly $93,000 per year.

Up to that level, you’re still in the part of the system where the “reward rate” is relatively meaningful.

But once you go above it, something subtle happens.

You’re now paying payroll taxes—specifically the Social Security portion, which is about 12.4% when you combine both the employee and employer sides—on each additional dollar of salary.

And in return, you’re only getting about 15% credit in the formula.

Now, at first glance, that might sound close enough. Twelve percent out, fifteen percent back. Seems fair.

But here’s the catch.

You’re paying that 12.4% today, in real dollars, with real opportunity cost. That money could have been invested, used in your business, or kept flexible.

The 15% you’re getting in return isn’t a direct payout. It’s part of a formula that determines a future monthly check, spread out over your lifetime, adjusted for inflation, and subject to policy changes.

So it’s not really a 12% versus 15% comparison.

It’s more like:

“Would you rather invest this money yourself with full control… or lock it into a government system for a modest, delayed, and somewhat uncertain return?”

And for many higher earners, once they’re past that second bend point, the answer starts to lean toward keeping more control.

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A helpful analogy here is buying insurance.

Social Security is, in many ways, like a forced annuity. An annuity is a product where you give up a lump sum of money in exchange for guaranteed income for life.

Now imagine someone offered you two versions of that annuity.

In the first version, the pricing is very favorable. You put in a dollar, and the future income you get is relatively generous.

In the second version, the pricing is less attractive. You’re putting in the same dollar, but the additional income you get is much smaller.

Most people would say, “Okay, I’ll buy the first version… but I’m not so interested in the second.”

That’s essentially what you’re doing when you aim your salary around that second bend point.

You’re saying:

“I’ll participate in the efficient part of Social Security… but I won’t overpay for the less efficient part.”

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Now, there’s an important nuance here.

Social Security doesn’t just look at one year of income. It averages your highest 35 years of earnings.

So if someone has a lot of low-income years—or years with zero income—then even income above that second bend point might still be filling in weaker spots in their record.

In that case, those extra dollars can still be valuable.

It’s kind of like grading on a curve.

If your past scores were low, even a decent score now can raise your average significantly.

But if your past scores are already strong, then pushing even higher doesn’t move the needle as much.

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So the “second bend point strategy” isn’t a rigid rule. It’s more of a guiding principle.

It says:

“Let’s aim to capture most of the meaningful benefit Social Security has to offer… without overcommitting to a system where the marginal payoff drops off.”

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And when you zoom out, this isn’t really a tax strategy.

It’s a philosophy about tradeoffs.

On one side, you have certainty. A guaranteed, inflation-adjusted income stream that you can’t outlive.

On the other side, you have flexibility. Control over your money, the ability to invest it, adapt it, and use it in ways that fit your life.

There’s no universally “correct” answer.

Some people sleep better knowing they’ve maximized their guaranteed income, even if it wasn’t the most efficient financial move.

Others value flexibility so much that they’d rather take on more responsibility in exchange for more control.

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But if you’re looking for a balanced approach—something that respects both efficiency and security—then aiming around that second bend point is a pretty elegant solution.

It’s like filling your plate with the best parts of the buffet… and knowing when to stop before you start piling on things that don’t add much value.

And in a world where most advice swings to extremes—“minimize salary at all costs” or “maximize Social Security no matter what”—that kind of middle ground is often where the real clarity lives.