• Chris Stein, CFP®

RMDs, Social Security, Annuities, and Pension Survivor Benefits

A Florida reader wrote a while back wanting to know about his wife's potential to claim a Social Security spousal benefit based on the rules surrounding caring for underage children.


"Hi, I just came across your podcast, and I'd like your assessment regarding the timing of starting my SS benefit. Here's my situation: I'll be 66 in January, and I'm on track to retire in November 2020. I have a defined benefit pension and decent deferred savings and investments. I remarried in April 2019, and my wife is immigrating here from India. She's quite a bit younger than me – at 44 – and I now have three step-daughters ages 10-17. I just became aware that she may be eligible for a spousal benefit, not by age but by virtue of caring for a child under age 16. I'd like to verify that and see if it would make sense for me to start drawing my SS benefit as soon as I turn 66 so she can draw benefits for a full six years. I also need to understand how drawing the spousal benefit now may affect her survivor benefit in the future."

We have several things going on here.

First, the fact that you marry someone makes that person entitled to benefits as long as you meet the regular rules. And that applies even if that person is from another country: being foreign is not an issue. As for the rest of the general rules, you two have to be married an entire year before spousal benefits are available, and your spouse must have reached age 62 to claim her spousal benefit. Lastly, you must have filed for your own retirement benefit to unlock the door for the spousal benefit.

The twist is that certain people can file for a spousal benefit ignoring the "age 62" part of the rules, although all the other rules apply. The age requirement is waived if that spouse is caring for a child of the "number-holder" on whom these benefits are being claimed. That number-holder is you.

It turns out that step-children qualify. Some people think it has to be a blood relative to be considered a child-in-care, but that's not true. As long as you're married and they are dependents, they count. And there is no requirement that you legally adopt them.

The 17-year-old child is not going to help out for long. All the children could qualify for dependent benefits as long as they are under 18 (or age 19 and still attending high school).

And while those younger than age 16 would qualify for dependent benefits, they also trigger the child-in-care status.

To clarify, we have three different benefits going on here.

First, there is your benefit. Then, the auxiliary benefits would be those directly for the children. Third, if any child is under the age of 16, the mother can claim a spousal benefit, although she hasn't turned 62 yet.

That's what the child-in-care benefit is all about. It's a way to get around the age 62 issue.

In summary, someone marries a younger spouse. They claim their own benefit, thus unlocking the door to further benefits. The kids are young enough to get a dependent benefit, and the mother claims a spousal benefit for a while – despite her young age – until the youngest turns 16. Once the children have all aged out, the mother's spousal benefit would turn off, but the kids would continue collecting a benefit until they turn 18 (or 19 and still going to high school).

Then, when the mother turns 62, the door would open back up again for her spousal benefit to restart. However, if she claims it at age 62, the benefit would be reduced because she hasn't reached her full retirement age yet.

You might have had a couple of questions in your specific case: whether your wife coming from another country would affect her (it doesn't) and whether there's an issue because the children are step-children and not your blood relatives (there's not).

What needs to come into the discussion is the fact that there will be a cap – the family maximum. In this scenario, you will likely only collect about 182% of your benefit in total for the family. So, it's not going to matter that there are so many people involved. With a couple of kids under 16 (qualifying the mother under child-in-care) and three under 18 (as dependents), you will reach the family maximum long before your wife even claims.

All these different people have status, but the 182% family maximum will cap the benefits. If your monthly benefit is $2,000, for example, the most you could get for your spouse and kids combined would be another $1,600 a month.

As for whether you should file early so your new wife can claim, we don't have enough numbers to crunch to know the pros and cons. It would seem to make sense to take some money now, but it will flow for a limited period (say six years) while the children act as triggers for benefits. Your wife is only 44, so there will be a very big gap before she can claim spousal benefits again at age 62.

As you decide what to do, consider some other factors. At least statistically, you're likely to predecease your wife, based on the age and gender differences. Whatever benefit you are receiving at that time will be the survivor benefit payable to her. By claiming early (before your full age of 70), you are locking your spouse into a lower survivor benefit later. And because of the considerable age difference, your spouse could receive that benefit for 30 years or more.

In short, yes, a logical first reaction might be to get the money now. But if your benefit amount is permanently reduced because you claimed early to get this little 6-year benefit, there might be some larger long-term consequences.

Many variables could affect how you'd answer that timing question. Just as a hypothetical, what if your wife has a health condition despite her young age and may not live long herself. Or what if you have ample accumulated assets or a significant life insurance policy on yourself that goes to your wife? In that case, there might be plenty of money to make up the difference.

Again, we know you have other resources, but we don't know all the details about the rest of your story, including how Social Security would fit in.

Jim's best friend Mosby

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