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Social Security Q&A: Is the Family Maximum Really Not Reduced If I Claim Early?

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Question: Larry, thanks for what you do. I am 61, and maybe going to retire at 62 from the Sheriff’s Department. I do not fall into the windfall provision category. I have an estimated full retirement benefit of $2,578, and a reduced rate at 62 of $1,895.

I have done the Primary Insurance Amount calculation formula with a $4,552 number for my Average Indexed Monthly Earnings. Social Security’s estimate is no more than $4,419 in Maximum Family Benefits. Everywhere I read on their site, the children’s benefit is 50 percent of the full retirement number, up to the family max, and divisible by the number of auxiliaries.

I have two small children — seven and 11. Is their benefit really based on the full benefit, even though I am taking the discounted rate? Everywhere on Social Security’s site, it only refers to the full benefit calculation, and even uses an example at the formula page using a 62-year-old retiree. Can you comment?

Answer: Yes, the child benefit equals 50 percent of your full retirement benefit, not your actual benefit. But the family benefit maximum can range from 150 percent to 187 percent of your full retirement benefit depending on the size of your full retirement benefit. So your children may receive only 25 percent each of your full retirement benefit.

Before you do what you intend, you need to compare your proposed strategy (using a very careful commercial Social Security benefit maximization tool) to see if this is your best strategy. It may be better to wait until full retirement age to file for your full retirement benefit and suspend its collection until age 70. This will permit your children to collect their child benefits starting at that point.

If you do as you intend, be aware that you can suspend your retirement benefit at full retirement age and restart it at, say, age 70 at a 32 percent higher level (after inflation) thanks to the delayed retirement credit.

Also bear in mind that when you pass away, each of your children, while still under age 18 or 20, if they are in elementary school or high school, will be able to collect 75 percent of your full retirement benefit. Even if the family benefit maximum is just 150 percent of your full retirement benefit, you’ll be dead. Hence, your own retirement benefit won’t be counted as taking up 100 percent of the 150 percent family benefit maximum. In other words, your death means that your kids won’t have to share your own retirement benefit in using up the family benefit maximum.

You should also be aware that since you married after age 60, you can collect a widow(ers) benefit on your ex-spouse’s work record only if you were married for at least 10 years.

What’s your best strategy? It is very likely to be as follows: A) have your wife wait until full retirement age to file just for her spousal benefit and, thereby collect a full, not an excess spousal benefit — namely 50 percent of your full retirement benefit — and, B) wait until 70 to file for her retirement benefit. And if your ex or current wife dies, you should file for your divorced widowers benefit right away, while still waiting until 70 to restart your own retirement benefit.

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