I am contemplating applying for early SS retirement benefits. I am 65. My wife does not work. She cares for our three children under 4 years old and is 38.
I will continue to work for three years or so.
I understand that if I get any of my benefit (after the earnings test reduction), my family will get their benefit.
I would probably get a large reduction in benefit that would leave me with benefits paid for one month.. Dec only.
My question is, will my family get their benefits just for Dec or for each month in the year?
Hi. Your family members couldn't be paid benefits for any month that your benefits are withheld due to the earnings test, but their benefits would count toward the amount required to be withheld.
For example, say Bob files for his benefits when he reaches age 65 in March 2021. Bob won't reach his full retirement age (FRA) of 66 & 4 months until July 2022, so the earnings test exempt amount applicable on Bob's account for 2021 would be $18960. Bob's primary insurance amount (PIA), which would be equal to his monthly benefit rate if he waited until FRA to apply is $2000. Bob also has a spouse 3 children who could qualify for auxiliary benefits when Bob starts drawing his benefits.
The family maximum benefit (FMB) limit on Bob's account is $3500, which would leave up to $1500 that could be paid to family members after deducting Bob's PIA from the FMB. Note than Bob's full PIA is deducted from the FMB, even though his actual monthly benefit rate will be reduced for age. Bob's reduced monthly rate at 65 is $1822. Bob's wife's and 3 children's would have to split the $1500 available from the FMB, making their auxiliary benefit rates $375 each. Thus, before any withholding the amount potentially payable per month on Bob's account is $3322 (i.e. $1822 + (4 x $375)).
Let's go on to assume that Bob will work in all 12 months of 2021 and earn a total of $52180 for the calendar year. As a result, before either Bob or his family members could be paid any benefits Social Security would need to withhold $16610 of benefits, or $1 of benefits for each $2 that Bob's 2021 earnings will exceed $18960. To withhold that amount, Social Security would need withhold Bob and all of his family members benefits for 5 months (i.e. 5 months x $3322 = $16610). In Bob's case, that would mean withholding the family's entire benefits for March through July of 2021, after which they could all be paid their full monthly rates for August through December.
If you do file early, your benefit rate will be permanently reduced by 5/9ths of 1% for each month that you are paid your full reduced benefit payment prior to your FRA. Effective with your FRA, your benefit rate could be adjusted to give you credit for any months that your benefit rate was reduced but that you aren't paid benefits due to your earnings. For example, in Bob's case above, if Bob receives his benefits for all months except for the 5 months withheld due to his 2021 earnings, his benefit rate would be adjusted effective at FRA from $1822 to $1877.
It sounds like you should strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully analyze the options available to you and your family in order to determine your best strategy for maximizing benefits.
Best, Jerry
