How Does Social Security's Family Maximum Apply to a Worker and Spouse on Spousal Benefits?
Understanding the Family Maximum Social Security Benefit
Social Security is an important office of retirement planning both for the parents and the individual with a inability. Family members tin claim benefits tied to the master household earner one time he or she begins receiving Social Security retirement benefits; however, there are limits how much the family in full can collect. This article discusses the family maximum benefit, how it works, and how to plan for these limits in retirement.
What is the family maximum social security benefit?
The family maximum social security do good is the maximum corporeality that can exist paid on a worker'due south earnings record. If the primary household earner begins receiving Social Security benefits at retirement, the spouse, the individual with disability, and others may qualify for so-called "Social Security auxiliary benefits" based on the primary workers earnings. (For the adult child who qualifies to receive Social Security benefits based on the parent's work record these benefits are referred to equally SSDI benefits.)
In most cases, spouses are entitled to receive up to 50% of the master earner's do good at their retirement historic period or receive their ain SS benefit, whichever is higher. Likewise, an adult child with a inability tin can receive up to 50% of the primary earner'due south do good under the SSDI benefit. The limit comes into play when 2 or more than auxiliary beneficiaries draw benefits off the primary earner'due south SS earnings at the same time. The family maximum limit is 150% to 188% of the primary earner'due south chief benefit amount (PIA). The verbal per centum formula can be institute on the SSA website.
To illustrate how the formula works, let's say at that place is a family of three: a main breadwinner, a spouse, and an adult child with a disability. The spouse and the kid have no Social Security work earnings. The primary household earner has a PIA of $2000. Using the Social Security family maximum formula, the family maximum is determined to exist approximately $3600 per month or 180% of the primary earner's PIA.
Past themselves, the not-working spouse and the kid with a inability could receive $1000 per calendar month in SS benefits; however, considering of the family maximum benefit, the family can simply receive an additional $1600 above the chief earner's benefit. In this example, the spouse's and the individual's SS benefits are limited to $800 per calendar month each.
Importantly, Social Security applies any SS work earnings of the spouse towards the 50% spousal do good, and then let'south amend our case to say the "lesser earning" spouse based on their work earnings alone would receive $400 per month from Social Security. Because the lesser earning spouse is receiving $400 on their ain tape, they but can claim $600 per month more from the primary earner'southward benefit to heighten their total SS benefit up to the l% threshold ($yard – $400).
In this new example the spouse by themselves could claim $600 additionally from the primary earner's benefit. Combining this amount with the individual with a disability's benefit yields a combined benefit for the spouse and adult child of $1,600, which is the same as the family maximum benefit. In this case, there is no penalty imposed on each casher's income. To the extent that both spouses take Social Security piece of work earnings, the family maximum may only have a limited or no affect on the total Social Security benefits received by the family.
Notation that the family maximum does not apply if the individual with a disability is receiving SSI benefits just, since those benefits are not based on the work earnings of the parent. Too, importantly the family maximum does not apply to ex-spouses who may be drawing off the principal earner's do good.
Finally, the family maximum formula is much tighter in cases where the primary earners themselves are receiving SSDI benefits. In these cases, the formula restricts the additional family benefit to 100 to 150% of the principal earner's do good [i]
Planning around the family maximum
Since special needs families are more likely to exist impacted past the family maximum benefit, the key planning tool is to know in accelerate what the estimated Social Security benefits are for each household fellow member and and so decide if the family maximum applies. The PIA for both spouses and individual with a inability tin be estimated from the Social Security website.
Later on the PIAs are known, the family unit maximum can be calculated. If the combined SS benefit of each household member is less than the family maximum benefit, no penalty is applied. If the total is greater, than the amount of the penalisation can be determined, and the adjusted Social Security benefits can be estimated for each beneficiary.
The Social Security benefit maximum just applies in situations where 2 or more beneficiaries are drawing benefits off the master earner's do good. In many instances, special needs families will have two or more beneficiaries that could exist receiving SS benefits from the chief earner's benefit. These families should plan by estimating what the likely Social Security benefits are for each person to decide if the family maximum applies.
References
- AARP: What is the Family Maximum for Social Security Benefits.
- Social Security: Formula for Family Maximum Do good
- Social Security: Benefits for Your Family
[i] The formula for disabled workers is 85% of the workers' Average Indexed Month Earnings (AIME) not less than 100% of their PIA or greater than 150% of the PIA. See https://www.ssa.gov/OACT/COLA/dibfamilymax.html
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Source: https://cmpfinancial.com/understanding-the-family-maximum-social-security-benefit/