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A reader from Tennessee asks how his adult child's disability benefit and wife's child-in-care benefit will be affected if the earnings test reduces his Social Security benefit to $0.
"I am planning to start retirement benefits later this year. My wife cares for our disabled adult child and will be applying for child-in-care spousal benefits. My question is: if I continue to work and my own benefit is reduced to $0, does that also stop my wife's and child's benefits? The Social Security representative said this was the case. As long as I am getting a benefit payment of greater than $0, my wife's and child's benefits will not be affected. However, when my benefit goes to $0, they are also cut off. Does that sound correct?"
Some elements are correct, and others are not. I need to clarify the setup of the question. Social Security offers a payment system called Social Security Disability (SSDI), which is meant to pay when there's a disability and you have qualified for SSDI payments. However, in your case, even though there's a disabled child involved, it is actually about straight-up child benefits.
Here's why I say that: an adult disabled child can collect a benefit from their parent's record simply because they meet one particular criterion. They have a disability that began before a specific cutoff date, age 22 in this case. For some criteria, the regular cutoff date to collect benefits on a parent's record is age 18 (or 19 if they're still in high school). However, that cutoff is removed for life if the child is deemed disabled before the age of 22.
So, this is all about a child qualifying for benefits once the parent (you, as the father) claims their own benefit. Separately, there's the child-in-care spousal benefit. This is essentially a regular spousal benefit available to the wife for which she might not otherwise qualify, usually because of her age. She can collect spousal benefits when caring for a child of the father claiming Social Security benefits. That's what's opening the door to benefits in your case. That's the basic setup of the situation.
What you were told (or how you interpret what you were told) about the earnings test and how it might affect the benefits is not quite right. Think of it this way: the retirement earnings test applies if you're working while you're below your Full Retirement Age (FRA) and claiming Social Security benefits. The earnings test has an annual limit ($22,320 in 2024, but changing yearly). Social Security will reduce your benefit by $1 for every $2 you earn over the annual limit. That rate applies while you're under your FRA, with a special higher earnings limit and different reduction rate in the year you turn your FRA.
You didn't mention your age, but I suspect you're in your lower 60s. You may be 62 or so and thinking you might want to start claiming soon after becoming eligible for collecting Social Security so you can open the door to the payments to your disabled child and your wife.
When you're all collecting benefits on one earnings record, the earnings test flows down and affects all the benefits claimed on that record. I make that distinction because, for instance, if you and your wife were each collecting your own benefits, your earnings wouldn't affect your wife's ability to collect a benefit because she's collecting on her own record. But in this case, everyone's collecting on your record. So, Social Security will apply that $1 reduction for every $2 above the limit to all the benefits paid. And here's where your statement went a little wrong.
You said that when your benefit goes to $0, your wife and child also wouldn't get anything. That is technically true because they apply the earnings test, or offset, on a pro-rata basis among all three beneficiaries. So, if your earnings are high enough to offset all three benefits, as you earn more and more, it will gradually offset all three simultaneously, and you will all hit $0 at the same time.
So, technically, it's true that if you don't get a benefit, neither do they. But it's not a cliff. That's where the last part of what you said is not correct. Again, I don't know if you were told this incorrectly or if you interpreted it wrong. But it's not that your wife and child would not be affected if your benefit remained anywhere above $0. That's not true at all; they are affected the whole way.
Let's say your offset was $5, so you just barely exceeded the earnings limit. They would pro rata the offset. They would look at your benefit and that of your wife and child. (Your wife and child will likely collect the same amount each.) Social Security will proportionally reduce the benefits to all three, and if your earnings are high enough, the offset could wipe out all three.
One silver lining is that when you collect multiple benefits, there's more benefit to be offset, raising how much you can earn before your reduced benefit hits $0. It sounds like you're most worried about a complete offset. You must earn quite a lot over the earnings limit to wipe out all three. If that's the case, it's likely not worth filing. However, something not obvious to me might create a reason to file despite knowing that you will get a complete offset.
In short, the offset is proportional, and it flows downstream.
On the other hand, it doesn't flow upstream. Let's say your wife is working. You claim your own benefit, thus unlocking the door to the child benefit for your disabled child and the child-in-care spousal benefit for your wife. Your wife's earnings could offset her own benefit, but they're not going to flow back up to your benefit, nor sideways to your child's benefit. Offsets only flow down in the hierarchy of payments. As a result, many working child-in-care spouses do not file because they will completely offset their benefits. But their husband and the child could still collect their own in full.
I think that clears up all the moving parts of your question.
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