When does the family maximum apply to Social Security?

Dad and child

Social Security does have a maximum payout called the Family Maximum. It may apply to families who are retired, family survivors, and families of a disabled person receiving benefits.

There is a formula for the benefit which is complicated. Your Social Security statement specifies what the maximum benefit may be. The values the formula uses to compute the benefit also changes every year.

For most people, understanding how the formula is calculated is less important than knowing that, in some cases, adding each individual’s (spouse + child 1 + child 2 + etc.) benefit amounts together is not how much the family would receive if the total of those benefits exceed the family maximum stated on your statement.

WHEN may this become a problem?

  • When the person dies from which the benefits would be calculated and they have a family with enough survivors (spouse + children + YES, dependent parentsmany don’t realize this last one!).
  • Because dependent parents are also eligible, and/or the older worker over the age of 62 receiving the benefits may also have dependent children, along with a spouse (and/or dependent parents), the total of those benefits while the person is still alive may also exceed the family maximum.

When does the family maximum NOT apply?

  • Do you need to worry about the family maximum if you want to wait until age 70 to earn all of your Delayed Retirement Credits (DRCs)? No, because the family maximum is calculated based on the Primary Insurance Amount (PIA) which is one set number calculated each year. DRCs are also calculated based on that same PIA, but don’t apply to the family maximum.
  • Family maximum also typically does not apply to divorced spouses divorced for at least two years.
  • Lastly, the family maximum also does not apply for two earner couples who are receiving benefits based on their own earnings history (each qualifies for a benefit larger than 50% of the other spouse’s benefit) because the benefits are based on different earnings records. Note that a dependent might qualify on both records which brings a different set of rules to compute the family maximum.

Photo by Luis Llerena  at StockSnap.

 

One Response to When does the family maximum apply to Social Security?

  1. Larry Frank, Sr. November 16, 2016 at 1:49 pm #

    Note that whom ever receives a Social Security benefit, and is working (prior to Full Retirement Age (FRA)), is subject to the Earnings Limit rules

    https://www.ssa.gov/planners/retire/whileworking.html

    “Only the benefit of the working beneficiary will be affected. Let’s say you have a widow and two children collecting off a deceased worker’s record. Each of them would be entitled to 75% of the deceased worker’s PIA, limited by the family maximum. If the mother is working, her benefit will be reduced for the earnings test. Under a “deduction before reduction” rule, they would first take her full benefit amount (75% of the deceased’s PIA) and withhold for the earnings test (the “deduction”). Then if the amount that remains for the mother, plus the benefits for the two kids, exceeds the family maximum, they would reduce for the family max. However, I am not sure if all benefits would be reduced proportionately. See these links:

    https://secure.ssa.gov/apps10/poms.nsf/lnx/0302501155

    https://secure.ssa.gov/apps10/poms.nsf/lnx/0202603040

    Answer by Elaine Floyd – 11/21/2016″

    Other references I found
    https://www.ssa.gov/OACT/COLA/familymax.html

    https://www.ssa.gov/OP_Home/handbook/handbook.07/handbook-0732.html

    In summary: a working survivor over the earnings limit should not expect any survivor benefits and children would receive benefits up to the family max.

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