Grandparents raising grandchildren can get help from Social Security
Eileen St. Pierre, The Everyday Financial Planner
Many grandparents will tell you this is not how they envisioned retirement. According to the Oklahoma Department of Human Services, my home state of Oklahoma ranks in the top ten nationwide for the number of grandparents raising their grandchildren. Talk about a jolt to your retirement plan! Nightly Business Report recently ran a story on a Social Security loophole that can be a real benefit to grandparents in this situation.
If you have custody of your grandchildren, they can receive up to half of your Social Security benefit.
According to Social Security, your grandchild will qualify is he/she is
- Under the age of 18, or age 18-19 and a full-time student still in high school
- Age 18 or older and disabled from a disability that started before age 22
Your Social Security benefit will not be reduced.
Your total family benefit will be 150% to 180% of your benefit depending on how many grandchildren are eligible. There is a maximum family benefit. It may help you decide if it is advantageous to take Social Security early, before your full retirement age.
Grandchildren who work will be subject to the Earnings Test.
They are subject to the same earnings limits that apply to you. If you take Social Security early, your grandchild will lose $1 in benefits for every $2 earned above $15,720 (2015). If you have already reached your full retirement age, your grandchild can work as much as he/she wants and not get benefits reduced. If you think about it, this issue should not be something to worry about – your grandchildren should not be working this much while still in high school.
This benefit is also available to Baby Boomers who had children later in life.
If you are in your mid-60s, collect Social Security, and still have young ones in school, they will qualify for this program. Nightly Business Report called this the Viagra College Fund. If you were to invest their Social Security benefits in a 529 college savings plan, your kids would have a nice chunk of change when they start college.
Visit my Financial Planning for Later in Life page for more information.