Social Security Benefits for Children

Posted on April 20, 2023 by Edward Brownlee

In October of 2022, more than 3.8 million children received Social Security benefits because one or both of their parents are disabled, retired, or deceased. These benefit payments to children total more than $2.6 billion every month.

Sadly, many children don’t get the benefits for which they are eligible, writes Devin Carroll. Most people don’t know about the qualifications and rules for this special benefit, so they don’t know to apply for the children in their lives.

Who Is Eligible for Social Security Benefits for Children?

A child who is your biological child, adopted child, or dependent stepchild is eligible for children’s benefits if:

you become disabled
you retire
you die
and, the child is:
- unmarried, and
- under age 18, or
- 18 or 19 if a full-time student in secondary school through grade 12 (see note below), or
- 18 or older and disabled with a disability that started before age 22.
  Note: A 2022 report by the Office of the Inspector General found that the Social Security Administration erroneously terminated the benefits of students who turned 18.

How Much Is The Benefit?

If you become disabled or retire, your qualified child is eligible for up to 50% of your full retirement age benefit.

If you have kids at home, and are thinking about filing for Social Security, filing early before full retirement age (RFA) could make more sense because your children cannot collect a Social Security benefit until you file.

Consider the difference in lifetime benefit amounts for a couple with the following circumstances.

Roger is 62 and his wife is 46. They have two kids at home, ages 8 & 10. Roger is financially well off enough to stop working and can be flexible on what age he begins to collect Social Security.

If Roger waits until his full retirement age, he’ll get $2,000 per month. If he files now, he’ll only get $1,500 per month. He ran the numbers and figured out that if he lived to 90, he’d receive an additional $70,000 in benefits for delaying filing until 66 instead of filing at 62.

For most people, this math shows that it makes sense to delay receiving benefits. However, this does not account for the benefits paid to the children. While the children are eligible for benefits based upon Roger’s retirement, the kids cannot get benefits until he files. Roger’s family would be able to collect thousands of dollars more in lifetime benefits if Roger files early and turns on the benefits for his children.

Here’s how…

If you run Roger’s full retirement age benefit through the family benefit calculator, you’ll arrive at a maximum benefit of approximately $3,500 . If Roger files at 62 he’ll receive $1,500 and each of his children would be eligible for $1,000 in children’s benefits. That additional $2,000 per month ($1,000 for each of the children) is only available if Roger files for Social Security.

Whenever a minor child receives a Social Security benefit, the Social Security Administration pays the benefit to a representative payee or a parent (or legal guardian) who is responsible for managing the benefits on behalf of the child.

Before a recent law change, all representative payees were required to file an annual report. However, due to a recent change in the law, the SSA no longer requires most parents or guardians to complete an annual Representative Payee Report.

Even though the SSA doesn’t require an annual reporting, they do have the following cautioning language. “All payees are responsible for keeping records of how the payments are spent or saved, and making all records available for review if requested by SSA.”

If you haven’t spent all the money, the SSA will require you to send it back to them when your child turns 18. This is because your child is considered an adult in their eyes and they will begin to deal directly with them.

References:

https://www.socialsecurityintelligence.com/social-security-benefits-for-children/#more-2900

Social Security Administration (SSA) Benefits Increase in 2023

Posted on October 26, 2022 by admin

Social Security Administration announced that the COLA will increase Social Security benefits by 8.7% beginning January 2023 — the largest since 1981.

Approximately 70 million Americans will see a 8.7% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2023. On average, Social Security benefits will increase by more than $140 per month starting in January 2023.

A COLA at the this level is almost unprecedented. There were only three other times since the start of automatic inflation adjustments that COLAs were higher (1979-1981)

The Social Security Administration (SSA) will mail COLA notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees.

But if you want to know your new benefit amount as soon as possible, you can securely obtain your Social Security COLA notice online using the Message Center in your personal my Social Security account. Your personal my Social Security account gives you immediate access to important information and tools.

According to The Motley Fool, December 2022, the Social Security Administration estimates monthly payouts for an assortment of beneficiaries will be as follows:

Average retired worker: $1,681/month
Average worker with disabilities: $1,364/month
Average aged couple, both receiving benefits: $2,734/month
Average widowed mother and two children: $3,238/month
Average aged widow(er) with no children: $1,567/month

Here’s what these same monthly Social Security checks will look like once the 2023 COLA takes effect in January:

Average retired worker: $1,827 ($146/month increase)
Average worker with disabilities: $1,483 ($119/month increase)
Average aged couple, both receiving benefits: $2,972 ($238/month increase)
Average widowed mother and two children: $3,520 ($282/month increase)
Average aged widow(er) with no children: $1,704 ($137/month increase)

For a majority of recipients, a triple-digit monthly “raise” is on the way, explains The Motley Fool.

January 2023 marks when other changes will happen based on the increase in the national average wage index. For example, the maximum amount of earnings subject to Social Security payroll tax in 2023 will be higher. The retirement earnings test exempt amount will also change in 2023.

There are few, if any, federal agencies that impact the lives of the American people to the extent that the Social Security Administration (SSA) does. Millions count on SSA—retirees who worked hard their whole lives, people who are no longer able to work due to disability, and many more.

SSA’s programs touch the lives of almost every person in the nation. SSA employees work diligently to ensure that they receive critical benefits and other services, and it is my honor and privilege to lead them in their efforts.

References:

Social Security Trust Fund

Posted on October 15, 2022 by admin

Social Security’s Trustees project that the trust fund will be depleted in 2034. At that point, 71 million beneficiaries could face across-the-board Social Security benefit cuts of 23 percent if elected leaders fail to act.

With the retirement of baby boomers and lengthening life expectancies, programs critical to older Americans, such as Social Security, will come under significant strain in coming decades. Social Security’s Trustees project that the combined Old-Age and Survivors Insurance and Disability Insurance (OASI) trust fund will be depleted in 2034. At that point, 71 million beneficiaries could face across-the-board Social Security benefit cuts of 23 percent if policymakers fail to act.

Social Security is the primary source of retirement income for million of Americans. But without action, it will lack sufficient resources to pay for all of the benefits promised under current law.

Almost every American worker pays a dedicated payroll tax, which entitles them to benefits when they retire or become disabled. But as the population ages, fewer workers will be paying taxes to support each Social Security beneficiary, thereby endangering the program’s finances.

Understanding the importance of the Social Security program for low-income Americans is a critical aspect of reforming the program in a fair and equitable way.

In 2018, Social Security was responsible for lifting almost 22 million Americans out of poverty, nearly 15 million of whom were seniors age 65 and older.

Options for improving the financial outlook of Social Security’s retirement program include:

Increasing payroll taxes. Raise the payroll tax rate from its current level of 12.4 percent (half paid by employees and half by employers) on wage earnings subject to the tax. In 2022, earnings up to $147,000 will be taxed.
Raising the full retirement age. Propose increasing the retirement age above age 67 for younger cohorts to account for future gains in average longevity.
Reducing initial benefits. Change the amount that retirees can receive when they first apply for benefits. Many proposals combine a reduction in benefits for high earners with an increase in benefits for lower earners. (This is known as “progressive price indexing.”)
Adjusting benefits after retirement. Slow the growth of retirees’ benefits over time by changing the cost-of-living index. Many economists believe that Social Security currently uses an index that overstates inflation, so benefits grow faster than the true cost of living. They propose replacing the current index with chained-CPI, which is a more accurate measure of inflation. (That change would also apply to other inflation-indexed federal retirement programs and tax provisions.)

These proposals are intended to put Social Security’s finances on a long-term sustainable footing.

References:

https://www.pgpf.org/finding-solutions/retirement

Social Security cost of living for 2023 could increase 8.7%

Posted on September 17, 2022 by admin

Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. New York Times

More than 70 million Americans receiving Social Security benefits could see the largest annual cost-of-living increase in more than four decades in 2023, considering the government CPI inflation data.

The Social Security Administration will announce the formal 2023 figure around October 13, after the release of September CPI inflation data. However, the August CPI point to a Social Security cost-of-living adjustment, known as the COLA, of 8.7 percent, according to an estimate by the Senior Citizens League that lobbies for seniors and reported by The New York Times.

The COLA is calculated annually using a formula detailed in federal law. It uses one of the broadest government measures of inflation, known as the Consumer Price Index for Urban Wage Earners and Clerical Workers‌, or CPI.‌

Social Security averages together the CPI figures during the third quarter of each year, and compares that with the previous year’s figure. For example, the 2023 COLA will be calculated by averaging together the CPI figures for the third quarter of 2022 and comparing that with the same averaged figures for 2021.

Rapid inflation typically results in trouble for equity stocks and the overall market. Financial risk assets have historically performed badly during periods of inflation, while tangible assets like real estate have held their value better.

References:

Social Security is a program run by the federal government. The program works by using Social Security taxes paid into a trust fund to provide benefits to people who are eligible. Eligibility for Social Security retirement benefits starts at age 62 (the earliest you can receive them) to age 70 (when you hit your greatest amount).

Retirement Benefits

Posted on November 23, 2021 by admin

“Planning is the key to creating your best retirement.”

Social Security is part of the retirement plan for almost every American worker. It provides replacement income for qualified retirees and their families. On average, retirement beneficiaries receive 40% of their pre-retirement income from Social Security. Thus, it’s important to understand when planning for income during retirement, Social Security was designed to replace only a percentage of your pre-retirement income based on your lifetime earnings.

The amount of your average wages that Social Security retirement benefits replaces varies depending on your earnings and when you choose to start benefits. If you start receiving benefits at age 67 (full retirement age), this percentage ranges from as much as 75 percent for very low earners, to about 40 percent for medium earners, and about 27 percent for high earners. If you start benefits earlier than age 67, these percentages would be lower, and after age 67 they’d be higher.

Most financial advisers state that you will need about 70 percent of pre-retirement income to live comfortably in retirement, including your Social Security benefits, investments, and other personal savings and sources of income.

When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits. The number of credits you need to get retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (usually, this is 10 years of work).

If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later, you can add more credits to qualify. Social Security Administration (SSA) can’t pay any retirement benefits until you have the required number of credits.

When you work, you pay taxes into Social Security. SSA use the tax receipts to payout benefits to:

People who have already retired.
People who are disabled.
Survivors of workers who have died.
Dependents of beneficiaries.

The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. SSA uses your taxes to pay people who are currently getting benefits.

Any unused money goes to the Social Security trust fund that pays monthly benefits to you and your family when you start receiving retirement benefits.

Retirement benefit

SSA will base your retirement benefit payment on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years you didn’t work or had low earnings, your benefit amount may be lower than if you had worked steadily.

The age at which you decide to retire will also affect your benefit. If you retire at age 62, the earliest possible Social Security retirement age, your benefit will be lower than if you wait.

Full retirement age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits. If you were born between 1943 and 1954, your full retirement age was 66. If you were born in 1955, it is 66 and 2 months. For those born between 1956 and 1959, it gradually increases, and for those born in 1960 or later, it is 67.

Those dates apply to the retirement benefits you earned from working and to spousal benefits, which your husband or wife can collect on your work record. Keep in mind:

Claiming benefits before full retirement age will lower your monthly payments; the earlier you file — you can start at age 62 — the greater the reduction in benefits.
You can increase your retirement benefits by waiting past your FRA to retire. Each month you put off filing up to age 70 earns you delayed retirement credits that boost your eventual benefit.

Choosing when to start receiving retirement benefits is a personal decision. If you choose to retire and begin receiving benefits when you reach your full retirement age, you’ll receive your full benefit amount. SSA will reduce your benefit amount if you decide to start benefits before reaching full retirement age.

References:

U.S. Middle Class Owns Few Financial Assets

Posted on November 13, 2021 by admin

U.S. Middle Class Households Have Few Financial Assets, According to New Analysis from the National Institute on Retirement Security (NIRS)

New analysis finds that across generations, middle class households in the U.S. own few financial assets and the median amounts held fall far short of the assets needed to fund a secure retirement.

In 2019, middle class Millennials owned only 14 percent of their generation’s financial assets. The numbers are even worse for middle class Gen Xers and Baby Boomers, which owned eight percent and six percent, respectively, of their generation’s financial assets.

“In America, the middle class can no longer afford retirement. Middle class Americans face sharp economic inequality, with ownership of financial assets highly concentrated among the wealthy,” explained Tyler Bond, National Institute on Retirement Security (NIRS) research manager. “Now that we have a retirement system largely built around the individual ownership of financial assets in 401(k) accounts, middle class Americans are struggling to accumulate sufficient financial assets during their working years. This means the retirement outlook for many in the middle class is bleak at best.”

The research also finds low numbers when examining the mean and median financial assets owned.

For middle class Millennial households in 2019, the mean financial assets owned were $17,802, and the median was $7,800.
Middle class Generation X households had mean financial assets of $62,944, and median financial assets of $39,000 in 2019.
For middle class Baby Boomers, the mean amount of financials assets held was $93,298 in 2019, while the median was only $51,700.

Baby Boomer households are retired or near retirement, but their assets fall far short of what’s required to finance a secure retirement,” Bond explained. “A nest egg of $51,700, the median amount middle class Boomers hold, would generate only $2000 of income annually over 30 years. This means that many middle class Boomer households may struggle in retirement and could face a sharp reduction in their standard of living.”

The research indicates that implementing pragmatic fiscal policy solutions can help middle class households get on a better path to saving for retirement including strengthening and expanding Social Security; protecting defined benefit pensions; and ensuring access to a retirement savings plan through an employer.

For this research, the middle class is defined as those between the 30th and 70th percentiles of net worth, or the middle 40 percent. The research is based upon data from the Federal Reserve’s Survey of Consumer Finances (SCF). It examines financial asset ownership, a broader category than retirement assets.

According to the SCF, the category of financial assets consists of liquid assets, certificates of deposit, directly held pooled investment funds, stocks, bonds, quasi-liquid assets, savings bonds, whole life insurance, other managed assets, and other financial assets. It does not include physical assets such as a home or a car.

The data for this research is for households rather than individuals.

References:

https://www.nirsonline.org/2021/10/middle-class-u-s-households-have-few-financial-assets/

Social Security Cost-of-Living Increase

Posted on November 6, 2021 by admin

Social Security Announces 5.9 Percent Benefit Increase for 2022

Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2020 through the third quarter of 2021, 68 million people — including retirees, disabled people and others – who receive Social Security and Supplemental Security Income (SSI) benefits will receive a 5.9% cost-of-living adjustment in 2022, the Social Security Administration announced.

For the average retiree who received a monthly check of $1,559 this year, a 5.9% rise would increase that payment by $91.98, to $1,650.98, in 2022.

The 5.9 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Increased payments to approximately 8 million SSI beneficiaries will begin on December 30, 2021. (Note: some people receive both Social Security and SSI benefits).

The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

The highest COLA increase was 14.3% in 1980. Inflation hit a peak 13.5% in 1980, dropped to 20.3% the following year and 6.1% in 1982, according to the data from the Federal Reserve Bank of St. Louis.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online through their personal my Social Security account.

References:

Advantages to Taking Social Security Benefits at Age 62

Posted on September 2, 2021 by admin

“Social Security’s trust funds will become unable to pay full benefits starting in 2034, one year earlier than estimated last year.” Social Security Administration Trustee Report

Social Security has two programs, one for retirees and another that provides disability benefits. The Old-Age and Survivors Insurance Trust Fund will become unable to pay full benefits starting in 2033, a year earlier than projected in 2020, while the Disability Insurance Trust Fund will become depleted in 2057, or 8 years earlier, according to Social Security Administration.

The U.S. economic recession caused by COVID-19 led to a drop in U.S. employment and a resulting decrease in payroll tax revenue, which accelerates the depletion of Social Security’s reserves.

When to claim benefits

You can start receiving your Social Security retirement benefits as early as age 62. And, there are advantages and disadvantages to taking your benefit before your full retirement age. Matter of fact, 31% of women and 27% of men claim their Social Security benefits as soon as they qualify at age 62 in 2018.

The primary advantage is that you collect benefits for a longer period of time.
The primary disadvantage is your benefit will be reduced. Each person’s situation is different.

The earliest you can apply for Social Security benefits is four months before the month you want your benefits to start, and the earliest your benefits can start is your first full month as a 62-year-old. For example, if you turn 62 in June, your benefits can begin in July, and you can apply as early as March. And, Social Security Benefits are actually paid one month in arrears in August.

There is an exception: If you were born on the first or second day of a month, you can begin collecting your benefits in that month.

You may need your Social Security Benefits as a source of guaranteed income to help pay bills, or if you anticipate not living long enough to reap the rewards of delaying.

If you start taking Social Security at age 62, rather than waiting until your full retirement age (FRA), you can expect up to a 30% reduction in monthly benefits with lesser reductions as you approach FRA.

Social Security replaces a percentage of your pre-retirement income based on their lifetime earnings. The portion of your pre-retirement wages that Social Security replaces is based on your highest 35 years of earnings and varies depending on how much you earn and when you choose to start benefits.

When you work, you pay taxes into Social Security and the Social Security Administration uses the tax money to pay benefits to:

People who have already retired.
People who are disabled.
Survivors of workers who have died.
Dependents of beneficiaries.

The money you pay in taxes isn’t held in a personal account for you to use when you get benefits. We use your taxes to pay people who are getting benefits right now. Any unused money goes to the Social Security trust fund that pays monthly benefits to you and your family when you start receiving retirement benefits.

Living in retirement

You’re officially retired and have worked hard to build up your retirement nest egg. As you transition your mindset from saving to spending, you’ll want to now change your focus: Protect what you have, don’t run out of money, develop a housing strategy for where you’ll live over the next 20–30 years, and hopefully, enjoy life as much as you can with your friends and family.

Claiming Social Security at 62 makes sense in several scenarios. Below are four reasons to consider filing as early as possible.

You’re out of work against non-voluntary – Many people are forced out of a job before they’re ready to retire. If you’ve been downsized and can’t find a new job, Social Security could help replace of your regular paycheck. Furthermore, the coronavirus pandemic has forced a lot of seniors out of the workforce, whether due to layoffs or health concerns. If you’re able to compensate for not working by claiming benefits early, do so since it’s a better bet than racking up debt.
You’re out of work temporarily and need money – Maybe you’re not working right now to address a health issue or lay low until the pandemic is over, but you’re confident you can get back out there in six months. In that case, claiming Social Security at 62 could be a smart move because you can actually use that money as a loan of sorts. One lesser-known Social Security rule is that you’re allowed to undo your filing once in your lifetime. If you claim benefits at 62 but are working again in a few months, you can withdraw your application, repay the SSA the benefits it paid you, and then file again at a later age so you don’t slash your benefits in the process. The only catch is that you must undo your claim and repay your benefits within 12 months. But if you can pull that off, you can collect Social Security on a temporary basis without locking yourself into a lower monthly benefit forever.
You’re tired of working and can get by on your Social Security paycheck – Maybe you have the option to work, but at this point in life, you’re tired of doing it. If your expenses are such that you can get by on your Social Security income, or a combination of Social Security and other income sources, then there comes a point when you should let yourself off the hook after a lifetime of hard work. If you’re going to claim Social Security early for this reason, you should make sure to have a healthy retirement savings balance to compensate for a lower monthly benefit.
You Have Minor or Disabled Children at Home – If you have children, eligible grandchildren, or even a spouse providing care for these children at home, these family members may be eligible for a benefit. There’s a rule that states that before benefits can be paid to anyone off of your work record, you have to be receiving benefits. That means filing early could make more sense than waiting. When combined with your benefits, the benefits to children and your eligible spouse can be up to 180% of your full retirement age benefit. If you have children at home that meet the criteria for eligibility, that’s an obvious reason to consider filing early.

It might seem like it makes sense to wait to file until full retirement age, then, when you’d receive $2,000 (versus filing at 62, when you’d only get $1,500 per month).

If you lived until 90, you’d receive an additional $70,000 in benefits for delaying filing until 66 instead of filing at 62. But this calculation doesn’t take into account the benefits paid to your children. While your children would be eligible for benefits based upon your retirement, the kids cannot get benefits until you file. That means your family would able to collect thousands of dollars more in lifetime benefits if you file early and turn on the benefits for your kids.

For every good reason to claim Social Security at 62, there’s an equally good reason to wait. On average, retirement beneficiaries receive 40% of their pre-retirement income from Social Security.

References:

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