Larry
I am retired {FRA) and my wife is planning to retire in a couple of months at FRA. We have an adult disabled son who receives SSDI and works part time. He receives benefits on his account and on mine. Am I correct in saying that our family maximum should include my benefit, my wife's {spousal benefit to be calculated )and only my son's benefits drawn on my account?
Hi. Not necessarily. The calculations involved with family maximum benefit (FMB) distributions can be very complicated. The specific distribution rules that would apply in your family's case would depend in part on whether or not your wife applies just for child in care spousal benefits or if she's insured for her own benefits and she also applies for those benefits.
If your wife qualifies for and applies for her own benefits, then the FMB on her account could likely be combined with your FMB in order to allow more total benefits to be paid to your family. Here's an example: Let's say Jim is drawing his Social Security retirement benefits and his primary insurance amount (PIA) is $2000. A person's PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA), or their full SSDI rate. Jim started drawing his benefits at FRA, so he is paid his full PIA of $2000. Jim's son, Joe, is eligible for disabled adult child's (DAC) benefits and he also receives Social Security disability (SSDI) benefits based on his own earnings history. Joe's PIA and SSDI rate is $400, and his DAC rate is calculated by subtracting his PIA from 50% of Jim's PIA. Thus, Joe's DAC benefit rate is $600 (i.e. $2000/2 - $400).
The FMB on Jim's account is $3500, so Joe can be paid his full DAC benefit without benefits exceeding the FMB. However, now let's say that Jim's wife Joan has reached FRA and she applies for both her own benefits and for spousal benefits. Joan's PIA is $800 and her spousal benefit rate is calculated by subtracting her PIA from 50% of Jim's PIA, which in this case is $200 (i.e. $2000/2 - $800). The FMB on Joan's record is $1200, and since Joe is technically eligible for DAC benefit on Joan's account the FMB's on Joan's & Jim's accounts can be combined. Thus, the combined family maximum benefit (CFMB) in this case is $4700 (i.e. $3500 + $1200).
However, even though Joan and Joe are only eligible for partial auxiliary benefits (i.e. spousal and DAC), Social Security would count their full auxiliary rates of 50% of Jim's PIA (i.e. $1000) when determining whether or not their auxiliary rates would need to be reduced due to the CFMB. In this case, Jim's, Joan's & Joe's original rates total $4000 (i.e. $2000 + $1000 +$1000), which is less than the CFMB of $4700. Therefore, in our example all three family members could be paid their full rates. In other words, Jim would be paid his full $2000, Joan would be paid her full $1000 (i.e. $800 +$200), and Joe would be paid his full $1000 (i.e. $400 + $600).
However, let's see what would happen if Joan decides to apply only for child in care (CIC) spousal benefits while allowing her own benefit rate to grow until age 70. In that case, no CFMB would apply, so Jim's original FMB of $3500 would be used. Jim would be paid his full $2000, leaving up to $1500 to potentially be paid to Joan and Joe from Jim's account. That amount would then be apportioned equally to Joan & Joe, allowing them to be paid up to $750 each. In Joe's case, that means he would then be paid a reduced DAC rate of $350 (i.e. $750 - $400). But, since Joe is only being paid $350 of the $750 apportioned to him, that would free up enough from the FMB to allow Joan to be paid her full $1000.
As the above example illustrates, apportionment of the FMB can be very complex. The last example also shows that the full FMB is not always payable (i.e. only $3350 could actually be paid on Jim's account even though his FMB is $3500). Our software (https://maximizemysocialsecurity.com/purchase) can handle FMB & CFMB distribution calculations, so you should strongly consider using the software to fully analyze your wife's options so that you can determine the best filing strategy for maximizing benefits for your family.
Best, Jerry
