Social Security - Dependent Benefits
A feature of Social Security that doesn’t garner much attention is the ability of certain dependents to receive benefits based on a worker’s primary insurance amount (PIA). Traditionally, there were not a large number of family situations where a person who is eligible for retirement benefits also has dependent children at home. But the country’s demographics and divorce rates are forcing an increase in the number of situations where dependent benefits are becoming a factor in retirement and college education planning. The second-family phenomenon can have a huge impact on a parent’s retirement-planning strategy that goes well beyond increasing life insurance coverage and updating individual retirement account beneficiary designations. It can influence when a parent should claim Social Security benefits.
For a dependent child to be eligible for social security benefits, they must be unmarried and under 18, or under 19 if still a full-time high school student. Disabled people over 18 are also eligible for benefits as long as the total disability began prior to age 22. The child can be your natural child, legally adopted child, stepchild and, in some cases, a grandchild if the child’s parents are dead or disabled and the child is your client’s dependent. The child’s benefit is based on 50% of the parent’s primary insurance amount at full retirement age. Even if the parent claims reduced-retirement benefits early or larger benefits by delaying his full retirement age, the child’s benefit is still based on half of the parent’s full retirement benefit.
The same calculation applies if there is more than one child. And as the caregiver of a minor child, a spouse — regardless of age — could also receive up to half of the worker’s retirement benefit until the youngest child turns 16. But the total amount paid on a worker’s record is capped at the family maximum, which falls somewhere between 150% and 180% of a worker’s full retirement benefit. If total family benefits exceed the prescribed family maximum, each dependent’s benefit is reduced proportionately, but the worker’s own benefit is not affected.
At Carr Wealth Management, LLC, we specialize in identifying the optimal claiming strategy tailored to each client’s needs. Please contact us to schedule a no-charge consultation or if you simply have a question about Social Security Benefits or other financially related planning areas.
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