More retirees rely on Social Security: AARP
As Social Security turns 90, 65% of retirees now rely on it. A survey reveals public confidence in its future continues to fall.
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Older parents can take advantage of a little-known Social Security benefit that could help them maximize total lifetime benefits, experts said.
If you’re at least age 62, you may be able to claim Social Security and the dependent child benefit that’ll provide your child with a monthly check for half your full retirement age (FRA) benefit even if you’re not yet 67, or FRA.
Only 1% of Social Security beneficiaries in January were children of retired workers, collecting an average $919.20 monthly, the Social Security Administration (SSA) said. However, the number of children born to women age 45 and older has soared 450% since 1990, government data showed. Or an older parent with a young child could be a result of a so-called May-December marriage, experts said.
In any case, more people may soon be eligible for this benefit. There’s much to consider when deciding if such a move is right for you, but it’s an option some families have taken and say has even helped them save for their child’s college education.
“We get more calls on this than any other topic because it’s not advertised by Social Security, so people just stumble upon it,” said Michael Ruger, managing partner and chief investment officer at Greenbush Financial Group. “The dollar amounts can be so large if your kid is young.”
How does the Social Security dependent care benefit work?
You’re eligible if:
You’re 62 years or older and eligible for Social SecurityYour child’s unmarried and under 17 years old or 18-19 and in school full-time or with a disability that began before age 22
If you claim Social Security before FRA, you’ll get less in Social Security for each month you’re less than FRA for the rest of your life, but your child can start receiving half of your FRA amount until age 18 (19 in some cases).
What if I have more than one child?
If the total amount for all children exceeds a family limit, about 150% to 180% of the parent’s FRA amount, SSA will reduce each child’s benefit proportionately until the total equals the maximum allowable amount. The parent’s benefit isn’t reduced because it doesn’t count towards the family limit.
Example:
A parent’s FRA is $1,700 monthly but claiming Social Security at age 62 cuts the benefit to $1,200. Assume the family limit is 150% of FRA, or $2,550, and four children are eligible.
If each child received half the FRA of $850, the parent and children’s monthly total is $4,600, or $2,050 over the limit.
SSA would take the $2,500 family limit and subtract the parent’s FRA of $1,700 for $850. That $850 is then divided by four children for $212.50 monthly per child.
Can I continue working?
You can work but beware of SSA’s work penalty. For 2025, if you’re under FRA, benefits are reduced by $1 for every $2 earned over $23,400. In your FRA year, the reduction is $1 for every $3 earned over $62,160, with reductions ending the month you reach FRA. Reductions are refunded over time with a small increase in monthly benefits once you reach FRA.
“People make the mistake and think they’ll take mine but won’t touch my child’s,” Ruger said. “That’s not correct. They’ll go after the child benefit, too because it’s claimed on your work history. If you earn too much, they’ll take the whole thing back because of the earned income penalty.”
Is the Social Security dependent care benefit worth claiming?
It depends on each person’s situation, advisers said.
“If you have an overfunded retirement plan and have money, the impact of when to take Social Security is not as large,” said Andrew Wood, retirement planning adviser with Daniel A. White & Associates. “But if you’re underfunded, then increasing Social Security improves outcomes. It may be tempting (to claim the benefit), but it could hurt your retirement in 10 to 15 years” because of the lower payments from claiming early.
Other advisers said claiming the move could boost overall savings.
Example:
One parent’s FRA Social Security is $2,500 monthly or 30% less at $1,750 if taken at age 62. There are two children, ages 8 and 5.
If the parent claims at 62, this is what it would look like (excluding annual inflation adjustments):At 62: $1,750 (parent) + $625 (child 1) + $625 (child 2) = $3,00 monthly ($36,000 annually) Note: Because of the family maximum of $3,750 assuming 150% of FRA, each child would receive half of $1,250, which is the $3,750 family cap minus the parent’s $2,500 FRAAt 72, $1750 (parent) + $0 (child 1, drops out at age 18) + $625 (child 2) = $2,375 ($28,500)At 75, $1,750 (parent) +$0 (child 1) +$0 (child 2, drops out at age 18) = $1,750 ($21,000)
Over 13 years, that’s combined Social Security benefits of $445,500 (parent’s $273,000 + child 1’s $75,000 + child 2’s $97,500).
At 90, the parent would’ve received another $315,000 ($21,000 annually) for a combined $760,500 of lifetime Social Security payments for the family.
If the parent waited until FRA of 67, lifetime Social Security totals $690,000 at age 90
Other considerations, Ruger said, include:
Children’s money is tax free. They likely won’t earn enough to pay federal tax and most states don’t tax Social Security.Child can still be claimed as a dependent on your taxes.Second parents can continue to work normally without affecting the family benefit.Parents can save and invest the child benefit. Just make sure accounts are titled solely in the child’s name, so SSA can’t demand leftover money back later. “If you don’t need the money, you can use it to seed the future,” he said.About 20% of a child’s savings count against need-based financial aid. “It’s not the end of the world…it was free money from Social Security that can be used to pay for college,” Ruger said.
(This story was updated to account for the family maximum in the second example.)
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.