I'm 62, my wife is 53, and we have 14-year-old twins. My income has dropped precipitously, and I'm looking for a way to fill in the gap. Could applying now for Social Security benefits make sense?
I'm glad you raised this question because it touches on a widely misunderstood component of the Social Security system: family benefits. Unlike survivor benefits—which are paid to eligible beneficiaries upon your passing—family benefits are paid to eligible family members during your lifetime. Even better, family benefits don't eat into your benefit; on the contrary, they can significantly boost your family's total payout.
While it generally makes the most sense to delay claiming Social Security benefits if you can afford to wait and are in good health, family benefits can make claiming early an attractive option. That said, the rules regarding family benefits are complex—but understanding the basics can help you and your family capture all available benefits.
Who's eligible—and when
First things first: You have to file for your own benefit before your family members can collect against it. From there, your family members can collect against your Primary Insurance Amount (PIA)—or what your Social Security benefit would be at full retirement age (between 66 and 67 for today’s retirees)—provided they fall into one of three categories:
- Spouses age 62 or older, who can collect from 32.5% to 50% of your PIA based on when they file (see "Patience pays" below).
- Spouses of any age, who can collect 50% of your PIA, provided you’ve been married at least one year and have a child under the age of 16 (or a child of any age in your care who was disabled before age 22).
- Children—including adopted, biological, and stepchildren, as well as grandchildren for whom you’re the legal guardian—who can collect 50% of either parent’s PIA, provided they're unmarried and:
- Younger than 18.
- Younger than 19 and a full-time K–12 student.
- Any age, if disabled before age 22.
The longer your spouse waits to collect either 50% of your benefit or 100% of her own, the bigger her benefit will be.
Source: Social Security Administration.
The example is hypothetical and provided for illustrative purposes only. Assumes a PIA of $2,000 for the higher-earning spouse and a PIA of $900 for his wife based on her own work record. Note: Unlike benefits earned against an individual’s own work record, spousal benefits do not increase past full retirement age. Figures are in today’s dollars and assume no future increases in prices or earnings.
So, assuming you filed for Social Security at age 62, your spouse at age 53 would be eligible to receive 50% of your PIA until your twins turn 16. At that point, her benefit would stop.
If your wife is eligible for her own Social Security benefit and waits until her full retirement age, she would receive either 100% of her benefit or 50% of yours—whichever is larger. If she claims either her or your Social Security benefit before her full retirement age, her benefit would be reduced accordingly.
Maximum family benefit
While the numbers may look good so far, there's a limit on the total benefit your family can collect. This family maximum benefit is between 150% and 188% of the primary earner's PIA (the Social Security Administration uses a complex formula to determine the final amount).
If the sum of your benefit and your family’s benefits exceeds this amount, their payments—though not yours—would be uniformly reduced to meet the cap. For example, if the benefit for your wife and your twins exceeds the maximum by $1,200, each of their monthly payments would be cut by $400, while yours would remain the same.
As you can see, the family benefit rules within Social Security are complex but worth understanding. Your Social Security Statement can tell you how much you and your family would receive, or you can call the Social Security Administration at 800-772-1213.
You can also call 800-355-2162 to talk to a Schwab financial consultant about how Social Security fits into your financial plan.
What about ex-spouses?
An ex-spouse who was married to you for at least 10 years, is 62 or older, and is currently unmarried is also eligible to collect up to 50% of what your Social Security benefit would be at full retirement age. Rest assured, however, that your ex-spouse's payouts have absolutely no impact on your—or your family's—benefits.
Have a personal finance question? Email us at email@example.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.