Why you should wait until 70 to file for Social Security when you have disabled child

Eric Jorgensen, CFP®
Contributor

Social Security makes up a very large portion of the income most people receive in retirement, and it makes sense why they would want to start collecting it as soon as possible. However, according to the social security administration, if you start collecting it before your full retirement age you could be leaving between 20 - 30% of your benefit on the table - meaning you will forever miss out on this money. However, if you wait until age 70 before collecting benefits you could earn an additional 5.5 - 8% each year you delay past your full retirement age (delayed retirement credits).

        If you're single this may not be a big deal, you only have to provide for yourself and you (should) know how much income you need in retirement. It gets trickier when you're married and/or have a disabled child. If you are married and your spouse files at their full retirement age after you die they will get 100% of your benefit. If you have a disabled child, who meets social security's definition of permanently disabled; he/she could receive up to 75% of your benefits for their lifetime.

             Take a moment and think about that. Do you have life insurance? How long will it be in-force? How much income does your family need if you're not around? From my personal experience I can tell you going from two parents of a disabled child to one can get expensive. SSI is only $735/month, and there are rules to meet to get the full amount. When a parent passes the disabled child will receive SSDI (75% of parent's social security) or SSI - whichever is greater. 

                This is all well and good, but let's use me as an example to illustrate how delaying social security until 70 can impact the benefit my son will receive. For simple math I will assume I receive $1,500/mth (and all subsequent numbers are approximations) at full retirement age (67), and my son's benefit would be $1,125/mth. If I were to start taking benefits at age 62, my benefit would be reduced to $1,000; and when I die my son's benefit would be $750/mth. However, if I were to wait 3 years, until age 70, my benefit would increase to $1,800 and my son would now receive almost $1,400/mth. My son is 25 years younger than me, so assuming we live to the same age I would need ~$100,000 of life insurance to make up the $4,800/year difference in social security - from age 67 to 70. If I took it at 62, I would need ~$200,000 of life insurance to make up the difference in what he would earn in social security.

            Sure, it may not sound like a lot to some people - but there are those who may not be insurable or cannot afford to purchase $100, 000 - $200,000 of insurance (or want to). The other factor to consider is the income the surviving spouse would receive. This can be a game changer, especially if the spouse is still caring for the disabled child. Obviously each person will need to make a determination on when to take social security based upon their own circumstances; but I believe waiting until 70, especially when you have a child with a disability, is generally the best course of action because of the increased income it provides. You don’t need to make this decision on your own, or in vacuum – sit down with a financial planner and ask for an impartial opinion. They’ll factor in your circumstances: average life expectancies of you, your spouse and child; income needed, etc. and give you a recommendation.

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