I never thought early retirement was an option for older parents like my husband. I never knew that he would be able to collect social security benefits early for himself and for our children thanks to the additional Social Security benefits available.
You can currently start collecting social security benefits at age 62 even though full retirement age (FRA) is currently 66 years and 2 months for people born in 1955. FRA gradually rises to 67 for those born in 1960 or later.
Collect Up To Half For Each Child
You or your spouse can collect up to half of your retirement benefits for each child when you become eligible for Social Security benefits. I was super excited when I first heard about this and started adding up the numbers in my head.
Notice that I said up to half? That’s because there’s a family maximum that you can collect for yourself and your kids.
Family Maximum Benefit
The rules for calculating the family maximum benefit is complicated, so you should invest your time into going to your local Social Security Office and have them calculate it for you. In the meantime you can check out Understanding the Social Security Family Maximum.
It worked for our family because my husband reached the family maximum amount prior to reaching full retirement age (FRA). If you wait until FRA to collect Social Security benefits you get 7%-8% more for each year that you wait. But, in his case he gets the same amount now as he would years from now because of the extra benefits for the kids.
The Money’s For The Kids
But isn’t this always the case? Saying that having kids is expensive is an understatement. So using the money for food, clothes, shelter and the million of other things they need is acceptable.
Maybe you’re still working because you want to save money for their college education. This may be a source of money that you can put away for their college. Giving you the opportunity to move forward with the next chapter of your life.
You can also save it for them for when they’re older.
As long as you spend it on the kids you’re within the law.
Do You Or Your Kids Have to Be Sick or Disabled?
That’s a big fat no. As long as you are the currently over 62 you can collect social security benefits for children as long as they’re unmarried and in school.
What About Medicare?
You currently have to be 65 to be covered by Medicare. So this could be a road block to collecting social security early if you don’t have another source of health insurance.
Do I Have To Pay Taxes On My Social Security Benefits?
You have to pay taxes if you have to file a federal tax return and earn over a certain amount of money. Currently it’s $25,000.00 for an individual and $32,000.00 filing jointly.
They say the two things inevitable in this world are death and taxes. So it doesn’t surprise me that this wonderful early retirement option for older parents may be taxed.
Cost of Living Adjustments
Your Social Security benefits will increase over the years as the cost of living adjustment (COLA) increases.
Of course when the COLA goes up so do all of your other expenditures, so it probably won’t make an impact. But those collecting social security benefits should be grateful that the government takes this into account (I know some people who don’t get a raise ever year).
You Can Still Work, But Be Careful
If you retire before you reach full retirement age you can still earn money, but only a certain amount. The current annual limit is $17,640.00. If you earn more than this they will deduct $1.00 for each $2.00 that you go over.
In the year you reach your full retirement age your benefits can be reduced $1.00 for every $3.00 your earn over $46,920.00. But when you actually turn full retirement age (Happy Birthday To You) you get the full Social Security benefit. In other words you can earn as much money as you want (or can) once you reach full retirement age.
Big Decision
I don’t know about you, but I didn’t know that early retirement was an option for older parents. I was unaware that you could collect Social Security benefits for your children when they’re healthy.
It is however a big decision so do all of your “homework” if you choose this route.
You also need to take into account the current age of your children and how many years you will be able to collect for them. Calculate that total amount and compare it how much more money you will get by waiting until full retirement age.
Also take into account that once they turn 18 or 19 (if they’re still in school) that the additional money you’re collecting for them will cease. You will now only be collecting money for yourself and it will be 7%-8% less for each year you retired earlier than full retirement age.
My husband would have been able to collect Social Security benefits a couple of years earlier if we new about this additional benefit. Fortunately we found out while it was still beneficial for us.
If collecting benefits early works for you, great. And if it doesn’t work for you, at least now you’re aware of it unlike a lot of other Americans.
Please share below your feelings and/or experiences about collecting social security benefits prior to reaching full retirement age in the comments below.
References: Money What You Need to Know When You Get Retirement or Survivors Benefits National Academy of Social Insurance
Disclaimer: This content is for informational purposes only. You should do your own due diligence or contact a financial advisor to determine what’s best for your financial needs.
