Family Maximum Benefits for Disability, Made Easy: DAG Radio, Episode 5

Family Maximum Benefits article image

Have you ever tried to calculate your family maximum benefits from the Social Security Administration? It’s pretty tough. This episode breaks down the formula to define each part and show you how your benefits get calculated. Here’s the no-bones explanation—feel free to scroll down and follow along with quotes from the SSA, calculation tables, and my own input.



Inflation, Price Adjustment, and Meeting Needs

The formula for calculating family maximum benefits is really complicated. When you first look at it, you find yourself asking, “Where did they come up with that number? Why are there caps? Is this all just arbitrary math to keep average people out?”

I digged deep to find the answers. This podcast will go over a lot of material cobbled together from several SSA web pages plus some more research.

Buckle up—we’re about to make something very complex much more accessible.

Maximum Family Benefits for Disabled Workers

Benefits are payable to spouses and children of disabled workers, but such benefits are limited. The family maximum for the family of a disabled worker is 85 percent of the worker’s Average Indexed Monthly Earnings (AIME). However, it cannot be less than the worker’s Primary Insurance Amounts (PIA) nor more than 150 percent of the PIA.

Family maximum benefits (FMB) are calculated the same for retirees as well as for the disabled. The amount you receive is then adjusted to meet the 85 percent requirement for disability applicants. So we’re going to look at how the SSA generally calculates family maximum benefits, and then apply it to disability.

Let’s define a few key factors in calculating the benefits you and your family can receive:

Average Wage Indices (AWI)

From the SSA:

We use the national average wage indexing series to index the earnings of individuals for benefit computation purposes. We also use the series to index several amounts that are important to the operation of Social Security’s Old-Age, Survivors, and Disability program.”

Average Indexed Monthly Earnings (AIME)

From the SSA (mostly):

When we compute an insured worker’s benefit, we first adjust or “index” his or her earnings to reflect the change in general wage levels that occurred during the worker’s years of employment. Such indexation ensures that a worker’s future benefits reflect the general rise in the standard of living that occurred during his or her working lifetime.

“Up to 35 years of earnings are needed to compute average indexed monthly earnings. After we determine the number of years, we choose those years with the highest indexed earnings, sum such indexed earnings, and divide the total amount by the total number of months in those years. We then round the resulting average amount down to the next lower dollar amount. The result is the AIME.

“An insured worker becomes eligible for retirement benefits when he or she reaches age 62. If 2016 were the year of eligibility, we would divide the national average wage index for 2014 (46,481.52) by the national average wage index for each year prior to 2014 in which the worker had earnings and multiply each such ratio by the worker’s earnings. This would give the indexed earnings for each year prior to 2014. We would consider any earnings in or after 2014 at face value, without indexing. Then we would compute the AIME and use this amount in computing the worker’s primary insurance amount for 2016.”

Primary Insurance Amounts (PIA)

From the SSA:

The PIA is the sum of three separate percentages of portions of the AIME. While the percentages of this PIA formula are fixed by law, the dollar amounts in the formula change annually with changes in the national average wage index. These dollar amounts, called “bend points,” govern the portions of the AIME. (The dollar amounts in the formula are sometimes called “bend points” because a formula, when graphed, appears as a series of line segments joined at these amounts.)

“The bend points in the year 2016 PIA formula, $856 and $5,157, apply for workers becoming eligible in 2016. See the table of bend points for the bend points applicable in past years.

“For example, a person who had maximum-taxable earnings in each year since age 22, and who retires at age 62 in 2016, would have an AIME equal to $9,431. Based on this AIME amount and the bend points $856 and $5,157, the PIA would equal $2,787.80. This person would receive a reduced benefit based on the $2,787.80 PIA. The first COLA this individual could receive is the one effective for December 2016. See the monthly benefit amount for this example and other examples with maximum-taxable earnings.”

SSA Cost of Living Adjustments (COLA) Bend Points – Table

As seen here:

Year of Eligibility

Dollar amounts in PIA formula

Dollar amounts in maximum family benefit formula

First

Second

First

Second

Third

2010

$761

$4,586

$972

$1,403

$1,830

2011

$749

$4,517

$957

$1,382

$1,803

2012

$767

$4,624

$980

$1,415

$1,845

2013

$791

$4,768

$1,011

$1,459

$1,903

2014

$816

$4,917

$1,042

$1,505

$1,962

2015

$826

$4,980

$1,056

$1,524

$1,987

2016

$856

$5,157

$1,093

$1,578

$2,058

Calculating Bend Points for Family Maximum Benefits

Similarly seen here:

Computation of bend points for 2016

First bend point

$230 [bend point for 1979] times 46,481.52 [average wage index for 2014] divided by $9,779.44 [average wage index for 1977] equals $1,093.19, which rounds to $1,093

Second bend point

$332 times 46,481.52 divided by $9,779.44 equals $1,577.99, which rounds to $1,578

Third bend point

$433 times 46,481.52 divided by $9,779.44 equals $2,058.04, which rounds to $2,058

Dates in Calculating Family Maximum Benefits

AWI for 2 years prior: In 2016, we’re using the AWI for 2014, because that’s the latest data. Clearly we don’t have 2016’s data, and we don’t have 2015’s exact information before December 31. So we have to go with 2 years prior.

Bend points for the current year: The current year’s bend points are already calculated based on previous years’ AWI.

Putting All the Numbers Together

For the family of a worker who becomes age 62 or dies in 2016 before attaining age 62, the total amount of benefits payable will be computed so that it does not exceed:

(a) 150% of the first $1,093 of the worker’s PIA, plus
(b) 272% of the worker’s PIA over $1,093 through $1,578, plus
(c) 134% of the worker’s PIA over $1,578 through $2,058, plus
(d) 175% of the worker’s PIA over $2,058.

When the Formula Exceeds the Maximum

If the sum of the benefits payable on your account is greater than maximum family benefits, payments to the family members will be reduced proportionately. Your benefit will not be affected.

As a disabled worker, your benefits will either be the end result of that calculation, or they will be your PIA x 1.5—whichever is less.

[Note: If you have a divorced spouse who qualifies for benefits, it will not affect the amount of benefits you or your family may receive.]

A Disability Lawyer Can Help This Make Sense to You

Disability benefits are part of Social Security. Not to overstate the obvious, but when you get frustrated with all the bend points and percentage limits, remember that Social Security is a social program. And like all social programs, it limits how much you can make so that there will be enough to go around. It can be frustrating and confusing and covered in red tape, but there is at least the opportunity to get some help.

If you need help in determining your family maximum benefits, don’t hesitate to get a free evaluation here on disabilityapprovalguide.com. You may be able to have a one-on-one conversation with a disability lawyer who can explain everything as well as take away the frustration and headache.

Get Your Free Benefits Evaluation