You might know that once you reach 62 years of age you’re eligible to collect Social Security retirement benefits, but did you know that if you have young children they can collect benefits too? Your first thought might be that children with disabilities get Social Security benefits. That’s true, but it’s not what we’re talking about in this case.
How It Works
If you’re of retirement age and collecting Social Security benefits, your children may also be eligible for benefits. Those children can be biological, adopted or stepchildren. If you have dependent grandchildren, they may qualify as well.
Social Security sets out a few key rules for eligibility: The child must be unmarried, under the age of 18 or 19 years old, and in school no higher than grade 12. Or he or she must be 18 or older and impaired by a disability that started before age 22. If a child is in school, benefits will cease upon graduation from high school or two months after reaching the age of 19—whichever is first.
Each qualified child in your family may receive a monthly payment of up to one-half of your full retirement benefit. As of 2017 the average monthly Social Security benefit check is $1,368.67. That means that each dependent child in your family who meets the requirements is eligible to receive a monthly check of up to $684.34.
This benefit isn’t totally uncapped. Families with multiple children will likely see a reduction in the per-child payment. The total varies, but in general it is 150 to 180 percent of your full retirement benefit.
What If Your Child Works?
It’s not uncommon for teenage children to have part-time jobs while still in high school. Depending on their earnings, their Social Security benefits might be negatively impacted. The same earnings limits that apply to you as a retiree also apply to them. The limit for 2017 is $16,920, or $1,410 per month. Most likely a part-time job while in high school isn’t going to result in that level of income, but if it does it might lower their benefits.
Filing Earlier May Help
Financial planners normally advise clients to hold off collecting benefits as long as possible because the larger benefit check will come in handy if the person lives longer and runs low on retirement savings later in life. However, if you have young children, that strategy could change. If you start collecting benefits earlier, while a child or children meet the requirements for also collecting a check, the total payout may be higher. As with anything having to do with Social Security, it’s hard to plan with certainty because much depends on how long you live.
Child Benefits Strategy
Some parents use the child benefits as a college savings strategy. For older parents with younger children, investing the child benefits into a 529 college savings plan or other investment vehicle could result in more than $100,000, depending on the age of the child—a healthy savings for a future college-aged student’s education expenses.
A Lesser-Known Rule
Of course a retired parent with a child under the age of 18 or 19 isn’t the norm, so this rule doesn’t apply to the majority of Americans. Nevertheless, if you’re retired or retiring and your children are still minors, this could represent a significant payout.
But don’t automatically go for the child benefits. Talk to a financial advisor before giving up a larger Social Security check later in life. It may not be the best strategy for your individual situation.