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       Covering your spouse and children with retirement benefits

      Social Security benefits for spouses are part of the economic foundation of older households. Under the rules, a spouse may get up to half the full benefit given to the retired breadwinner.

      

The spouse may qualify at 62, but benefits are reduced for every month they’re claimed before the spouse reaches full retirement age. If a spouse takes spousal benefits at 62, and the full retirement age is 67, the amount comes to 32.5 percent of the breadwinner’s full retirement payment. If the spouse waits until full retirement age, the amount comes to 50 percent of the breadwinner’s full payment.

      A noteworthy exception is when the spouse is caring for a child who also qualifies. In this case, the spouse gets 50 percent of the breadwinner’s full payment regardless of the spouse’s age. (For a deeper exploration of spousal benefits, including issues for spouses who qualify based on their own working records, see Chapter 9.)

      

The reduction for early collections of the spousal benefit works like this: Benefits are reduced by

of 1 percent for each month the benefit is claimed before full retirement age – up to 36 months before full retirement age. If a spouse claims the benefit earlier than 36 months ahead of full retirement age, the benefit is further cut by a factor of

of 1 percent per month.

      Here’s an example: Max has just retired at 66 and begun collecting a full retirement benefit of $1,600 per month. Olivia, his wife, who is 63, qualifies for a spousal benefit of half that amount – $800 – if she waits until her full retirement age of 66 to claim it. But that’s three years away. If Olivia collects the spousal benefit now, Social Security reduces her benefit by 25 percent, to $600. (Unlike the basic retirement benefit, which continues to increase up to age 70 if you don’t claim it at full retirement age, spousal benefits don’t grow after the spouse reaches full retirement age.)

      

Social Security offers an online calculator that can tell spouses what percentage of the breadwinner’s full retirement they’ll get, depending on the age at which they begin collecting a spousal benefit. Go to www.ssa.gov/oact/quickcalc/spouse.html to use this handy tool.

      You may also earn benefits that cover your dependent children if you die, retire, or become disabled. Suppose an older dad has a child. If the father begins to collect Social Security retirement benefits while his young child still lives at home, the child may qualify for as much as half the father’s benefit (75 percent of the benefit if the father dies).

      Social Security may make no distinction among biological children, adopted children, and stepchildren. For that matter, a dependent grandchild may also qualify. (See Chapter 10 for more details on child and family benefits.)

      Say Johnny is a securities lawyer married to a much younger woman. When Johnny hits 60, his 30-year-old wife, Larissa, gives birth to a daughter, Janniva. Johnny plugs away at the law firm for six more years and then retires at 66, claiming a Social Security retirement benefit of $2,466. Janniva qualifies for a child benefit of $1,233 (half her father’s full retirement benefit), and she gets that benefit as a dependent child until she turns 18. If Johnny dies at age 66, Larissa can also get a benefit, even though she’s only 36 years old. As a young surviving spouse who is caring for the deceased worker’s dependent child, she gets a monthly payment of $1,233. The SSA applies different time limits to some of the family benefits that involve children. In the preceding example, the money Larissa gets as Janniva’s mother ends when her daughter turns 16.

      Surviving the Loss of a Breadwinner

      Social Security isn’t just about retirement – it also protects Americans when a family breadwinner dies. You can think of these protections as life insurance that helps families carry on when their livelihood has been shattered. Social Security pays benefits to almost 2 million children whose parents have died. Survivor benefits also go to more than 6 million widows, widowers, and elderly parents who had depended on the deceased worker for financial support.

      Benefits may be higher for survivors than for those who depend on a living retiree. In cases of multiple beneficiaries, the family maximum may kick in, limiting payments to about 150 percent to 180 percent of the late worker’s primary insurance amount (see the nearby sidebar “Social Security’s benchmark for benefits: The primary insurance amount”). When that happens, benefits going to dependents are reduced proportionately.

      In this section, I fill you in on who qualifies for survivor benefits and how the breadwinner may earn those benefits before he or she dies.

      

Besides the regular, recurring benefit payments (discussed in this section), Social Security pays a one-time lump-sum death benefit of $255. This payment typically goes to the surviving spouse after the death is reported to the SSA. If the survivor wasn’t living with the deceased spouse, the survivor must still be eligible for benefits on the late spouse’s earnings record in order to receive the death payment. In cases where there is no surviving spouse, payments may go to a child. The key for a child’s eligibility is that the surviving child qualifies for benefits based on the deceased parent’s record at the time of death.

SOCIAL SECURITY’S BENCHMARK FOR BENEFITS: THE PRIMARY INSURANCE AMOUNT

      The primary insurance amount (PIA) is a dollar figure that becomes the basis for benefits that go to you and your family members. The PIA is what you get if you begin collecting Social Security at your full retirement age (currently 66, and gradually increasing to 67 for workers born in 1960 or later). To determine your PIA, the SSA looks at your past earnings and adjusts them upward to reflect today’s wage levels. The SSA then goes through a series of mathematical steps and arrives at your PIA.

      For an average wage earner, a PIA is around $1,636 per month (as of 2016), although it can be significantly more for high wage earners. You can get a rough idea of your PIA – and get an idea of other potential benefits – by using Social Security’s online tools and projecting benefits at your full retirement age: Check out the Social Security Quick Calculator (www.ssa.gov/oact/quickcalc) and the Retirement Estimator (www.ssa.gov/estimator).

      Your actual Social Security benefits may be lower or higher than the PIA for various reasons, but they will be based on it. Here are some examples of benefits and their link to the PIA:

      ● Retired worker: You get 100 percent of your PIA if you retire at the full retirement age. You can start collecting as early as age 62, but the amount you receive per month is reduced if you collect before the full retirement age and increased if you delay collecting until after the full retirement age (up to age 70).

      ● Disabled worker: You get 100 percent of your PIA. The benefit isn’t reduced for age and automatically switches to a retirement benefit when you reach full retirement age.

      ● Spouse of retiree or disabled worker: You get up to 50 percent of the covered worker’s PIA. You can start collecting at age 62, but the amount you receive is reduced if you collect before reaching full retirement age.

      ● Spouse with child: You get 50 percent of the covered worker’s PIA if the child is under 16 or disabled. You may be any age, and the benefit isn’t reduced if you collect before you reach full retirement age.

      ● Divorced spouse: You get

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