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A feature of Social Security that only garners a little attention is the ability of certain dependents to receive benefits based on a worker's earning record. Traditionally, there were not many family situations where a person eligible for retirement benefits also has dependent children at home. But the country's demographics and divorce rates are forcing an increase in situations where dependent benefits are becoming a factor in retirement and college education planning. The second-family phenomenon can significantly impact a parent's retirement-planning strategy beyond increasing life insurance coverage and updating individual retirement account beneficiary designations. It can influence when a parent should claim Social Security benefits.
For a dependent child to be eligible for social security benefits, they must be unmarried and under 18 or 19 if still a full-time high school student. Disabled people over 18 are also eligible for benefits as long as the total disability began before age 22. The child can be your natural child, legally adopted child, stepchild, and, in some cases, a grandchild if the child's parents are dead or disabled and the child is your client's dependent. The child's benefit is based on 50% of the parent's primary insurance amount at full retirement age. The parent may file for their benefits early or delay their benefits past their FRA; the child's benefit is based on the parent's primary insurance amount.
The same calculation applies if there is more than one child. And as the caregiver of a minor child, a spouse — regardless of age — could also receive up to half of the worker's retirement benefit until the youngest child turns 16. But the total amount paid on a worker's record is capped at the family maximum, which is between 150% and 180% of a worker's primary insurance amount. If total family benefits exceed the prescribed family maximum, each dependent's benefit is reduced proportionately, but the worker's benefit is unaffected.
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