Dear Rusty: I am 59. My wife is 48 and has been a stay at home mom for 15 years. We have children aged 13, 10, and 5. I know it makes sense to delay the start of benefits, but I understand that it’s more complicated when small children are involved. Does it make sense for me to begin receiving benefits at 62 so I can also collect more for the children? Signed: Older Father
Dear Older Father: Yes, the issue is more complicated when children are involved. Here’s why: If you claim your own Social Security (SS) at age 62, your minor children would be able to receive child benefits, and your wife would also be able to receive “child-in-care” benefits, even though she is not yet age-eligible for regular spouse benefits. Usually, a minor child is entitled to 50% of the parent’s full retirement age (FRA) SS amount, and a younger care-giving wife is entitled to the same. But when there are multiple dependents collecting on the same worker’s record the Family Maximum applies.
The Family Maximum limits the amount of total benefits which can be received by the family to 150% to 188% of the worker’s FRA benefit amount. Social Security determines the Family Maximum for each individual case with a complex formula that uses your “primary insurance amount” (or “PIA,” the amount you get at your FRA). Your PIA is broken into 4 parts and a different percentage of each part is taken and summed up to arrive at your Family Maximum. Then your PIA is subtracted from the Family Maximum amount and the remainder is equally divided among your minor children and wife. Once a minor child turns 18 (or 19 if still in high school) that child no longer receives benefits and the Family Maximum is recomputed, with the new amount equally divided among the remaining dependents. When your youngest child turns 16, your wife will no longer be eligible for child-in-care benefits. But there’s more to consider.
By taking your benefit at age 62, it will be cut by 30% from what it would be if you waited until your full retirement age to claim, and that reduction is permanent. Plus that reduced benefit will mean your wife’s benefit as your widow, should you pre-decease her, would be less than it might otherwise be if you waited until later to claim.
Until you reach your full retirement age, you will also be subject to Social Security’s “earnings test” which limits the amount of money you can earn before Social Security takes back some of your benefits. The limit for 2020 is $18,240 and if you exceed that amount, SS will take back benefits equal to half of the excess over the limit. They take back those benefits by withholding your SS until they recover what you owe because you exceeded the limit. And, if your benefits are withheld because you exceed the earnings limit, your children and wife will not get their benefits for any month(s) that your benefits are withheld. FYI, the earnings limit increases by about 2.6 times in the year you reach your FRA and no longer applies once you reach your FRA, but any dependent benefits not paid because you exceeded the earnings limit are lost and cannot be recovered.
So, as you can see, there are many things you should consider. If you will be retired from working at age 62 and don’t need to worry about the earnings limit, then claiming then, along with the dependent benefits, could be a prudent choice. But if you will continue to work and earn a significant salary, you might very well find that the benefits you and your dependents lose due to the earnings limit will overshadow any advantage you might gain by filing at that time. And, you might also find that the permanent cut in your own benefit because you claimed early, along with the reduction to your wife’s future survivor benefit amount, will make claiming at age 62 less attractive.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email ssadvisor@amacfoundation.org.
