Do I have to take Social Security retirement benefits to get Child Benefit?

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Today’s Social Security column tackles questions about child benefits and income testing, the effects of not working for a certain number of years before filing and how deferred retirement credits are applied to benefit rates. Larry Kotlikoff is a professor of economics at Boston University and founder and president of Economic Security Planning, Inc.

See more Ask Larry to answer here.

Do you have questions about social security that you would like answered? Ask Larry about Social Security here.


Do I have to take Social Security retirement benefits to get Child Benefit?

Hi Larry, I’m almost 60 with two minor children. I still make $100,000 but I max out a 401k. I wanted to apply for family allowances at 62 years old. Do I also have to apply for retirement benefits or can I only apply for them? I will continue to work for at least five years after I turn 62. I know that social security will be reduced due to my income.

Are these lost benefits reimbursed? Also, since I continue to work, am I increasing the benefit rates? My wife is still working and is 8 years younger than me, earns a decently high income. Thank you Ethan

Hi Ethan, Yes. Child benefit can only be paid to children whose parent a) is in receipt of social security retirement or invalidity benefits, or b) is deceased. In addition, the social security income test applies not only to the worker’s benefits, but also to all ancillary benefits (eg, spouse, children) payable on the worker’s account. Therefore, there is no way your children can receive benefits from your file for the months your benefits are withheld due to the means test.

Until the year in which you reach full retirement age (FRA), Social Security will have to withhold $1 of benefits payable from your file for every $2 you earn over the amount exempt from the income test. The exempt amount is $19,560 in 2022.

Whether or not you or your children can receive benefits before your FRA depends on your annual earnings and your PIA.

Benefits withheld due to means testing are not refunded to the worker or his/her children at any time. However, the worker’s monthly benefit rate is adjusted once they reach the FRA to remove any age reduction applied during the months the worker was not paid due to earnings testing.

Thus, if the means test resulted in no benefits being paid before a worker’s FRA, their benefit rate would be increased to their FRA up to their unreduced rate. But neither the worker nor their children would be reimbursed for withheld benefits before the month the worker reached FRA.

And, finally, yes, your future earnings could potentially increase your monthly benefit rate, regardless of when you apply for benefits. Social Security retirement benefits are based on an average of the best 35 years of earnings indexed to a person’s Social Security-covered earnings, so a person can continue to increase their benefit rate as long as she continues to work as long as she earns more in a year than they did in any of their 35 highest earning years.

It looks like you might want to consider using my company’s software – xxxxx – to ensure your household receives the highest benefits for life. Social Security calculators provided by other companies or nonprofits may provide appropriate suggestions if constructed with extreme care. Best, Larry


Will my benefit be reduced if I do not return to work?

Hi Larry, I’m retired and can’t earn more than the annual earnings limit until I’m over 62 (for internal pension rules with my ex-employer; I get a monthly social security benefit as part of my pension until age 62 and I will lose this if I earn more than the annual SSA income limit until I reach age 63.

I retired at 59 and now my SSA earnings will show $0 unless I go back to work and get a dollar figure to replace the zeros – earnings I would cap at the annual earnings limit up to 62 years old. My highest earning years were my last five years of employment. Will my benefit be reduced if I don’t return to work and continue to have zeros on my income statement until I reach full retirement age? I don’t plan to get benefits before FRA (67) or 70.

Also, will the family maximum limit what my spouse and I can receive? Thank you, Ashley

Hello Ashleigh, Your benefit rate will not go down if you don’t return to work, it just won’t go up. Social Security retirement benefits are based on an average of the best 35 years of earnings indexed to a person’s Social Security-covered earnings, so if you don’t return to work, your benefit rate will be based on your 35 best years to date. If you have less than 35 years of income covered by Social Security, the years without income will be included and will lower your average.

For example, a person may qualify for Social Security retirement benefits with the equivalent of as little as 10 years of covered earnings. But, if the person only worked for 10 years, their earnings during those years would still average over 35 years. Averaging over 25 years of zero earnings obviously reduces the annual average and the resulting benefit rate. Additional years of covered earnings would eliminate some of those zero years and increase the person’s benefit rate, but not returning to work would not lower their benefit rate.

The maximum family benefit (FMB
FMB
) will not limit your or your husband’s benefit rates assuming no children are receiving benefits from your accounts. The FMB simply limits the amount that can be paid into an individual’s account when it comes to ancillary or survivor benefits. There is no set limit on the amount a couple can receive when they each receive benefits based on their own work history. Best, Larry


Wouldn’t I multiply my previous year’s rate by 1.08 to calculate my benefit rate if I delay my benefits between FRA and 70?

Hi Larry, I am currently 62 years old. I thought the amount increased by 8% each year, so shouldn’t it be 1.08 times the amount of the previous year? Thanks Tom

Hi Tom, Not exactly. Deferred Retirement Credits (DRCs) add 2/3 of 1% to your Full Retirement Age (FRA) rate for each month you delay the start of your benefits between FRA and age 70.

In other words, the 8% increase per year caused by ROCs is calculated based on your FRA rate, or principal amount of insurance (PIA), not the previous year’s rate. Multiplying your rate from the previous year after reaching FRA by 1.08 would have the effect of compounding increases in DRC. Best, Larry



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