Social Security Benefits: Don’t Forget The Kids
Tom R. Hager
Who thinks of children when talking about Social Security? It may not be a common word association, but perhaps it should be.
The Social Security Administration (SSA) reported that, in 2017, it distributed $2.6 billion dollars each month to benefit 4.2 million children because one or both parents are disabled, retired or deceased. I have been seeing more situations where mature people have younger children, whether because they married a younger spouse or because they adopted.
Benefits for children are one of the family benefits paid by the SSA, the others being spousal and ex-spousal. Survivor benefits, while thought of as a family benefit, are considered a separate benefit. As with all family benefits, one spouse needs to be receiving benefits for other family members to qualify, unless you are considered an independently entitled divorced spouse.
Today’s conventional wisdom encourages you to delay taking your Social Security benefits as long as possible. Having young children may be one reason to take benefits early.
There are two benefits from a worker’s benefit available to a family member relating to children:
- “Child-in-care” benefits. This is where things get somewhat convoluted, due to nomenclature. This benefit also is referred to as “child-in-care” spousal benefits. It is no different than the normal spousal benefit except that it is available to an adult spouse of any age. Normally to receive spousal benefits you must be at least 62 years old, but not in this case. You must have a child younger than 16 years old and your spouse must be receiving benefits. Child-in-care benefits are paid to spouses who are not eligible for normal spousal benefits. To meet the requirement for these benefits, you must exercise parental control and responsibilities for a child under 16 years of age or a disabled child before the age of 22.
- Children’s benefits are paid to a child’s representative for a child up to age 18, age 19 if still in high school or disabled before age 22. In certain cases, benefits can be paid to a stepchild, grandchild, step-grandchild or adopted child.As with all other benefits, there is no reduction in benefits for claiming early, and no deeming rules applied to these two benefits. Both benefits are equal to 50% of the worker’s primary insurance amount. The only reduction to these benefits is the family maximum calculation, which is discussed later.
So now that you know what benefits are available, let’s look at different marital situations.
- Must be receiving benefits.
- Not eligible to receive a “child-in-care” benefit because there is no spouse.
- Children’s benefits are 50% of your primary insurance amount.
- Must be married at least one year.
- Spouse no. 1 must be receiving benefits.
- Spouse no. 2 must be the parent taking care of the child under 16 years old or the disabled child.
- Can only receive one “child-in-care” benefit, no matter how many children under 16 years old are parented.
- This benefit stops when the child reaches 16 years old. If there is more than one child under age 16, the benefit stops when the last child reaches 16 years old.
- Child-in-care benefits to spouse no. 2 equals 50% of spouse no. 1’s primary insurance amount.
- Children’s benefits are 50% of spouse no. 1’s primary insurance amount.
The Child-in-care provision that allows a spouse under age 62 to collect this benefit is not applicable to a divorced spouse. A divorced spouse must be at least 62 years old to claim benefits on their ex-spouse’s record, including the child-in-care benefit.
This is the same as Married/Spouse above, except the benefit equals 75% of the deceased spouse’s primary insurance amount.
You also need to keep in mind that there are additional limitations on each of the previously mentioned benefits:
- The first is the annual earnings limitation. All beneficiaries receiving child-in-care or children’s benefits are subject to the annual earnings limitation. For 2018, if earnings of a beneficiary exceed $17,040, there will be a $1 reduction for every $2 in excess earnings.
- The second is the family maximum. This is a somewhat complicated calculation, but it basically limits the total benefits being paid on one worker’s benefit to between 150%-180% of their primary insurance amount. For example, if spouse no. 1’s primary insurance amount is $2,000, and the family maximum calculation limits the total benefits to 170%, the total benefit allowed to be paid is $3,400. Spouse no. 1 always will receive their worker benefit first. In this case, that would be $2,000. That leaves a maximum of $1,400 to be distributed to all beneficiaries. If there are multiple beneficiaries, and one becomes ineligible (e.g., graduates from high school), the $1,400 may be reallocated among the remaining beneficiaries. The family maximum always is calculated on the worker’s primary insurance amount, regardless of when the worker claims their benefits. If spouse no. 2 qualifies for spousal benefits, and that amount is greater than the child-in-care benefit, the spouse will receive the higher of the two. The spousal benefit, if applicable, also will be used in determining the allocation of the remaining $1,400. The $1,400 will be distributed proportionally.
Perhaps these benefits can help offset those trying times that children provide. Knowing the ins and outs of Social Security will maximize your overall wealth.