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Ask Larry: Will My Child’s Benefit Be Reduced If I File Early At 62?

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Today’s column addresses questions about whether child benefits will be reduced if the record holder filed early for their own retirement benefit, whether investing in stocks and cryptocurrency count as earnings and whether collecting early divorced spousal benefits reduce later retirement benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.

Will My Child Get 50% Of My FRA Rate Even If I File Early At 62?

Hi Larry, Does my child get 50% of my FRA PIA benefit amount even though I filed for reduced benefit at 62 or does she get 50% of my reduced age 62 amount?

My understanding is that even though I filed early with reduced benefit at 62, she would still get 50% of my FRA amount which is the same as my PIA. She will be in high school and under age 19 from my ages of 62-66. Thanks, Ben

Hi Ben, Yes. The full benefit rate for a child eligible for benefits on the record of a living parent is 50% of the parent’s primary insurance amount (PIA). A person’s PIA as you note is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).

Children can sometimes receive less than their full rate if the family maximum benefit that can be claimed on a single record (FMB)

is involved, but if your daughter is the only person receiving benefits on your account besides yourself, she should be eligible for a full 50% of your PIA even if you start drawing your Social Security retirement benefits at age 62. Best, Larry

Is It True That Social Security Considers You To Be Working If You Place Orders For Stocks And Cryptocurrency?

Hi Larry, My Mother has been receiving SSDI benefits since 2017. She is a member of a social media group that frequently answers questions related to disability. But there were some contradictory posting about investing. She opened an online trading account and bought some stocks and cryptocurrency.

The group answered someone else’s question about this same scenario and the moderator told them it would be considered working if you placed the trades yourself. I have been unable to find anything stating this information online, only that it is okay to invest. Can you advise? Thanks, Shanna

Hi Shanna, There is no truth to what you heard. Income from investments is not considered earned income unless a person is a dealer in stocks and securities.

A dealer is defined as someone who buys stocks and bonds in their own name or brokerage name for resale to others.

Purchasing stocks for personal investment purposes is not considered as a trade or business, and income received on such investments would have no adverse effect on your mother’s Social Security disability (SSDI) benefits. Best, Larry

Would Collecting Benefits From My Deceased Ex’s Record At 62 Reduce My Lifetime Benefit When I Switch To My Own Record At 70?

Hello. I’m currently 60, retired but working part time. I’m thinking of filing on my late ex husband’s record at 62 and then switching to my own Social Security retirement benefit at 70. Will taking my deceased widow’s benefit at 62 reduce my lifetime benefit amount when I switch to my retirement record at 70? Thanks, Nancy

Hi Nancy, Collecting surviving divorced spousal benefits would have no adverse effect on your retirement benefits in the future.

Furthermore, if your retirement benefit rate will be higher than your survivor’s rate, it sounds like it potentially could be more advantageous for you to apply for the survivor benefits now instead of waiting until age 62. This of course depends on your specific circumstances.

Your best filing strategy depends on how much you’re earning, and the comparative amounts of your retirement benefit and your survivor’s benefit. Normally, you would want to start out drawing the lower benefit as soon as your earnings would permit at least some benefits to be paid, and then switch to the higher benefit when it reaches its highest possible rate.

‘My company’s software — Maximize My Social Security or MaxiFi Planner — could help sort all of this out for you so that you can determine the best strategy for maximizing your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

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