Social Security has rules in place that limits the maximum amount of benefits that can be paid to a beneficiary’s family. There are different rules depending on retirement and survivor’s benefits as compared to disability benefits.
The rule for retirement and survivor’s benefits is that the maximum family benefit is limited to 175 percent of the worker’s Primary Insurance Amount (PIA) that exceeds $1,987. The PIA is the benefit amount a person receives when they reach their normal retirement age.
Many people may be unaware that there is a family maximum on benefits, especially if they believe they are not receiving all the benefits they have coming to them. Below is Social Security’s explanation of how they arrive at the family maximum amount.
The formula used to compute the family maximum is similar to that used to compute the Primary Insurance Amount (PIA). The formula sums four separate percentages of portions of the worker’s PIA. For 2020 these portions are the first $1,226, the amount between $1,226 and $1,770, the amount between $1,770 and $2,309, and the amount over $2,309. These dollar amounts are the “bend points” of the family-maximum formula. Thus, the family-maximum bend points for 2020 are $1,226, $1,770, and $2,309. See table showing bend points for years beginning with 1979 (table also shows PIA formula bend points).
For the family of a worker who becomes age 62 or dies in 2020 before attaining age 62, the total amount of benefits payable will be computed so that it does not exceed:
(a) 150 percent of the first $1,226 of the worker’s PIA, plus
(b) 272 percent of the worker’s PIA over $1,226 through $1,770, plus
(c) 134 percent of the worker’s PIA over $1,770 through $2,309, plus
(d) 175 percent of the worker’s PIA over $2,309.
We then round this total amount to the next lower multiple of $.10 if it is not already a multiple of $.10.
Why The Family Maximum May Matter
The Social Security family maximum amount may not impact everyone, but when it does it is important to know how Social Security calculates the benefits you receive. Below is a description from The Motley Fool about when this may matter for a family.
In many situations, the family maximum never comes up in the retirement context. That’s because there are few opportunities for children of retirees to be eligible for Social Security benefits, and the situations in which they are eligible are rare in practice. When there’s only a worker and spouse eligible for benefits, the amount of total benefits doesn’t exceed the family maximum. The most common situation where family maximums do apply is in the survivor context. In a family with multiple children, a surviving spouse can receive a benefit of as much as 100% of the deceased worker’s benefit, and eligible children will get up to 75% of the worker’s benefit. Therefore, when there’s more than one eligible child, then the family maximum kicks in.
Interestingly, benefits paid to a divorced spouse do not count toward the family maximum. They’re also not subject to reduction even if a current spouse and family do end up having to accept reduced benefits because of the provision.
