Early Retirement And Child Benefits

The previous two posts were about starting Social Security retirement when younger than full retirement age (FRA). FRA ranges from 65 – 67 and is 66 for people born in 1943 – 1954.

Deciding to retire is a major decision and Social Security benefits are just one part of that decision. Some of the many items to consider are in SSA publication When to Start Receiving Retirement Benefits. The “best time” to start Social Security retirement depends on your plans. A one size fits all best time to retire does not exist.

Today’s post is to help you consider early retirement when a child will be eligible on your record.

The Benefits For Your Family portion of the online Retirement Planner includes potential benefits to children when you receive retirement.

In summary, to receive benefits, the child must:

  • be unmarried; and
  • be under age 18; or
  • be 18-19 years old and a full-time student (no higher than grade 12); or
  • be 18 or older and disabled from a disability that started before age 22.

Additional child benefit information is here.

Benefits paid for your child will not decrease your retirement benefit. Your personal benefit is the same with or without eligible family members but the value of child benefits, added to your own, may help you decide if taking your benefits early is advantageous.

The amount paid to your child is up to one-half of your full retirement age (FRA) amount, not the amount that you are receiving. There is a maximum amount payable to family members, also based on your FRA amount. While this varies, it usually takes more than two eligible children or other family member to reach this maximum. Again, your personal retirement amount is the same with or without eligible family members.

To illustrate this, assume someone with a full retirement age of 66 has an unreduced retirement amount at FRA of $1,000 per month. Using the Retirement Planner tools mentioned in preceding posts, starting benefits at age 62 would permanently reduce this benefit to 75 percent, a permanent loss of 25 percent compared to the full FRA amount.

In this example, the FRA amount of $1,000 becomes $750 per month at age 62, a permanent reduction of $250.

For one eligible child, monthly benefits would be one-half of the parents full retirement age (FRA) amount or $500 per month.

Now total Social Security benefits received per month are the $750 retirement plus $500 for the child or $1,250 per month.

Is permanently reducing your own retirement to obtain a benefit for your child worth it? You decide. How does this fit into your overall planning?

Consider how long the child will be eligible. If he or she is 12 years old, benefits are payable for much longer than if the child is already age 17. If your child is severely disabled before age 22, benefits might be payable for many years.

As with the earlier posts about early retirement, this provides more information for you to consider. The decision is yours.