Hi! I am so happy to have found your articles tonight! I have a question about auxiliary family SSA benefits. I am 54, my spouse is 61, and we have two biological children that are fourteen (twins). My husband is working and his wages were $98,000 last year. We called Social Security to ask whether or not my husband could file for benefits at age 62 and keep working so that I and our children could also file for benefits. I have read everything online and had done ALL of the calculations concerning the earnings test and our family monthly maximum benefit payment. My husband’s benefit at 62 is estimated at $1640 and at PIA is $3363. Our family maximum is estimate at about $3990.
When my husband said he planned to keep receiving that salary, we were told that none of us could receive any benefits because with the RET my husband would not qualify for any payments at all so the auxiliary payments and family maximum would not even be a possibility.
By my calculations, the first 10 of 12 checks would be withheld thus not penalizing him for early filing, the we would all receive 2 checks, and similar for the following 2 years, but with my husband and daughters only receiving 2 or 3 checks (since the girls will turn 16). Even though we would get only a few checks, this is a large sum of money- and the kids’ money is potentially tax free! And with a minimum effect of early filing! If I understand correctly, he could then suspend his benefits until any time between then and age 70.
Am I crazy? Because it seems to me that when he files he could say hypothetically that he was going to stop working, putting all of these formulas into play, then “change his mind,” keep working, and inform SS of this thereby having them withhold 10 of the next 12 checks.
Please tell me what I am missing here because next year’s earnings are not a sure thing- anything could potentially affect his earnings!
Sorry for the long email but please tell me what I am missing! Thank you in advance!
Liz
Hi Liz,
Based on your estimates of your husband's reduced benefit rate and his family maximum benefit (FMB), If your husband continues to work earning $98K per year I believe you're likely overestimating the amount of benefits that the Social Security earnings test would permit your family to be paid.
Here's an example to illustrate. Say Jack (DOB 1/2/1957) has a primary insurance amount (PIA) of $2400 with an FMB of $4200. Jack has 2 children under age 16 who could potentially draw benefits on his record as well as a younger wife who has the children in her care. Jack is still working and will earn $97,640 in 2019, but he and his family members file for benefits effective with January 2019 when Jack is first eligible. Jack's reduced age 62 monthly benefit rate is $1740 (i.e. $2400 x .725). Jack's family members could individually be eligible for up to 50% of his PIA, but due to the FMB their payment rate would be reduced. The maximum amount available to be paid to family members is determined by subtracting Jack's PIA (not his reduced benefit rate) from his FMB, which in this example is $1800. Jack's wife and children would then split that amount evenly, giving them each a benefit rate of $600 per month.
Note in my example that even though Jack's benefit rate is reduced for age, the amount of his reduction is not added to the amount available to be paid to family members. Thus, the actual monthly amount that could be paid to Jack and his family is significantly lower than the FMB. The total amount that could be paid to Jack and his family before considering his earnings is $3540 (i.e. $1740 + $600 + $600 + $600) per month, or $42,480 per year. However, $1 of those benefits would need to be withheld for each $2 that Jack earns in excess of $17,640 in 2019, and since Jack plans to earn $97,640 in 2019 that means that $40,000 (i.e. ($97460 - $17640)/2) of the benefits payable on Jack's record in 2019 would need to be withheld. In Jack's case that means that only $2,480, or less than 1 full month of family benefits, could be paid for the year 2019.
Whether or not your family could be paid any benefits if your husband files at age 62 depends on your exact benefit rates and the precise amount of your husband's earnings. Your husband could still go ahead and apply for benefits at age 62 even if it appears that no benefits would be payable, but I would advise him not to underestimate his earnings and run the risk of receiving an overpayment of benefits that he would later need to pay back. If your family files for benefits and Social Security withholds all of your benefits based on your husband's anticipated earnings, they would go back and pay any underpayment due if it turns out that your husband ends up earning a low enough amount for some benefits to be payable. But, if your family doesn't file for benefits and it ends up that benefits could have been paid, you would not be allowed to go back and claim benefits retroactively.
You are correct that your husband's benefit rate would be recalculated after he reaches his full retirement age (FRA) to remove the age reduction for any months that he wasn't paid benefits due to his earnings. And, he could voluntarily suspend his benefits between FRA and age 70 in order to earn delayed retirement credits (DRC), but no family benefits could be paid for any months that his benefits are suspended.
You and your husband should strongly consider using our software to get an accurate estimate of your potential benefit rates and to compare your various filing options in order to determine the best possible strategy for claiming your benefits.
Best, Jerry
