Family Maximum and File & Suspend

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Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details.

I recently received the following email from a reader:

I am 66 and my wife is 45, and our son is 12.  I intend to delay my filing for Social Security benefits until age 70 in order to provide the highest survivor benefit for my wife since I’m so much older than her.  But I also realize that my wife and son may be eligible for benefits now if I file and suspend.  According to my SSA statement my benefit now at age 66 is $2,576.  Since my wife and young son are eligible for 50% of my benefit (after I file and suspend), each should receive $1,288, right?  When I talked to the SSA office, they told me that their benefits would be limited by the family maximum benefit, which is $4,323, and they would only receive $873.70 each.  I can’t make the numbers work out, are they telling me wrong?

Unfortunately for the above situation, SSA was correct in the calculations – because of how the family maximum benefit and file & suspend work together.

Recall that the family maximum benefit limits all other dependent benefits paid on an individual’s record after the individual’s own PIA is subtracted from the family max figure.  Regardless of whether the worker is currently receiving his or her own benefit, the PIA is subtracted from the family maximum benefit amount before calculating all other benefits on that record.

So in the case of the reader who emailed me, when his PIA of $2,576 is subtracted from his family maximum benefit of $4,323, there is a remainder of $1,747.  This is all that’s left for dependent benefits, and it’s split evenly among the wife caring for the child under age 16, and the child who is under age 18.  In this case, when the child reaches age 16, his mother’s benefit will go away, and he will be eligible for the full $1,288 (adjusted for COLAs and any changes to the father’s PIA from additional work on his record).  The child will receive that benefit until he reaches age 18.

It’s important to note that if the father passes away before the child reaches age 18, the family maximum benefit will still apply, but there will be changes to the benefits received.  First of all, if the father died before the child reached age 16, the mother and child would each be eligible for a 75% benefit based on the father’s projected benefit at his attained age as of his death.  This benefit would be subject to family maximum benefit rules, but since there are only two of them, their combined benefit is still less than the max, so there is no limit and each would receive $1,932 (adjusted for COLAs and delay credits).

After the son reaches age 16, again his mom’s benefit would be eliminated and he would continue to receive the full 75% benefit.

If the original emailer from above had an ex-spouse who would be eligible for benefits (either spousal or survivor’s, depending on the situation) these benefits would NOT reduce the family maximum benefit available to the emailer’s current spouse and child.  Plus, the family max calculation does not apply in any way to the ex-spouse’s benefits.