Maximize SSI and Social Security benefits for disabled adult children

What advisors need to know

• Families with disabled adult children often do not take full advantage of their federal benefits due to a lack of awareness or misunderstanding of the eligibility rules.
• You don’t have to be an expert to help clients navigate the process to collect Supplemental Security Income (SSI) and maximize their family’s Social Security benefits over time.
• Giving clients peace of mind about the future for their disabled child is a valuable service that can deepen loyalty and earn referrals.

Families of disabled children often miss out on SSI benefits

Many families with disabled children are not taking full advantage of their federal benefits. The complexity of the rules results in families collecting less than they could or missing out on benefits altogether, which is particularly unfortunate given the significant expense of providing care to a disabled child. Advisors can make a big difference in the lives of clients who have a disabled child, which is best explained through the story of the Thompson family.

Philip and Monica Thompson are the parents of Julia, who was born in 2002 with a disability that will require special care throughout her life. As a toddler, Julia required speech therapy and other developmental programs, and when she began elementary school, she needed special educational services. Many of her therapies and services were not covered by health insurance and the costs weighed on Phil and Monica. They applied for Supplemental Security Income (SSI), a federal benefit program administered by the Social Security Administration. But, like many families, the Thompsons did not qualify due to their income exceeding the limit for eligibility. The couple resigned themselves to bearing the cost for Julia’s care on their own.

Fast forward to 2024. The Thompsons meet with a new financial advisor, Caroline. Upon learning of Julia’s disability, Caroline imparts some valuable knowledge to Philip and Monica:

“Federal SSI is a needs-based program. When a disabled child is under the age of 18, a portion of the parents’ income is considered to be income available to the child – a process referred to as ‘deeming’ – and, although the income limit is adjusted annually, it is historically set at a level that is low enough to disqualify most disabled minors.

“However, what many people don’t know is that once the child turns 18, deeming no longer applies and the disabled adult child becomes eligible for federal SSI benefits as long as their own income and assets remain within the program limits. Many families leave that money on the table because they are unaware that they should reapply when their disabled child turns 18. Additionally, some states supplement the federal SSI benefit by an amount that varies based on income, living arrangements and other factors.”

Julia, who is now 22 years old, became eligible for SSI benefits when she turned 18. Thanks to their new advisor, the Thompsons are now collecting SSI on behalf of Julia, but they missed out on four years’ worth of benefits! They are grateful that Caroline prompted them to reapply and only wish they had hired her to be their advisor much sooner.

Benefits for disabled adult children can increase over time

At their next meeting, the first topic on the agenda was Julia’s future. Philip and Monica unloaded their worries to Caroline. They didn’t have a plan. 

Caroline listened attentively as the Thompsons explained that it was unlikely Julia would ever marry or hold a job. Her new SSI benefit is helpful, but it does not offset all of the expenses for her daily care. Philip and Monica, who are both in their 50s and employed, are concerned about the impact those expenses will have on their budget after they retire. Moreover, they worry about having adequate savings to meet Julia’s needs after they pass away. Monica would love to retire early to spend more time with Julia, but she believes it is unrealistic given Julia’s future financial needs.

“The uncertainty about Julia’s future must be stressful for you both,” Caroline begins. “Having a plan can help alleviate some of that stress. Let’s consider what benefits your family may be eligible for in the future.”

Caroline noted that Julia is currently collecting the maximum monthly federal SSI disability benefit, which is $943 in 2024 and adjusts annually to account for increases in the cost of living. But SSI isn’t the only benefit available to disabled children. The Social Security Administration provides that a disabled adult child – who may be an adopted child, and in some cases a stepchild, grandchild or step grandchild, who is unmarried and has a qualified disability that began before age 22 – may be eligible for benefits that are determined based on a parent’s employment earnings record.

Under this Social Security provision, the disabled adult child’s benefit is a monthly payment equal to 50% of the Primary Insurance Amount (PIA) of a parent who is collecting retirement benefits. (The PIA is the amount a worker is projected to receive if they collect benefits starting at full retirement age.) As long as this amount is larger than Julia’s monthly SSI payment, it will make sense to file for the Social Security benefit on her behalf when one of her parents begins collecting retirement benefits (or passes away). The SSI benefit will stop when Julia begins receiving the new benefit.

Monica said, “I plan to retire before Philip, but I don’t know what my PIA will be.”

Caroline showed Monica and Philip how to obtain PIA estimates on the Social Security Administration’s web site. “Monica, assuming you work until your full retirement age of 67, your projected monthly benefit would be $2,300, which would provide Julia with a Child Disability benefit of $1,150. That’s a step up from $943.” 

“That is helpful,” Monica agreed, “but if I work longer, will it increase my retirement benefit?”

“Waiting to collect past your full retirement age may provide you with a monthly payment that is higher than your PIA, but the Child Disability benefit is 50% of the PIA regardless of when the parent files. Keep in mind that Julia’s Child Disability benefit won’t start until you begin collecting retirement benefits, so delaying your filing also delays the ‘step up’ in Julia’s benefit.

“The good news is that if you choose to retire early, only your benefit would be reduced. For example, if you were to start collecting Social Security at age 62, your monthly benefit would be reduced from $2,300 to $1,619, but Julia would still receive $1,150.”

Philip, who intends to work longer than Monica, has a projected PIA of $3,600. Caroline explained that when Philip begins collecting retirement benefits, Julia can instead collect 50% of his PIA, which would amount to $1,800 per month – another step up from the $1,150 she would be collecting on Monica’s PIA.

Now consider a scenario where Philip passes away. Julia’s benefit would increase from 50% to 75% of Philip’s PIA, bringing her monthly payment to $2,700 for the remainder of her life (assuming her disability status remains unchanged).

Disability benefits can change as a family evolves
Changes in Julia’s monthly payments over her lifetime (hypothetical)

While not a concern for the Thompsons, there is a maximum family benefit that can be paid on a worker’s earnings record, which may impact the amount a family receives depending on various factors within the complete family picture.

The Thompson example is a relatively simplistic illustration of the financial impact federal benefits can have for a family of a disabled child. Other scenarios can be much more complex depending on a family’s level of benefits, timeframe for claiming, employment history and life expectancies. But you don’t have to be an expert on Social Security or SSI. Just knowing the basics is enough to make a big difference in your clients’ outcomes. For more complex situations, consider partnering with an attorney who specializes in disability entitlements.

Helping clients maximize their benefits helps you earn referrals

The Thompsons were visibly relieved to see that managing Julia’s care expenses within their retirement budget wouldn’t be so difficult after all, but they still needed to ensure their savings will be adequate to support Julia after they have both passed away.

Philip asked, “How can we make the most of our retirement benefits to help us build a nest egg for Julia?”

Caroline then shared an analysis she produced using an online tool to compare collection strategies. She showed the couple their total projected retirement benefits in various scenarios using different filing dates and longevity assumptions. “This can help you consider your options as we discuss your plans for retirement and your savings goal for Julia,” she said. “Give it some thought and we’ll discuss it further at our next meeting.”

Philip and Monica walked out of Caroline’s office feeling more confident about their family’s future, and they began recommending Caroline to people they know.

Helping clients maximize the benefits available to them can make you stand out from other advisors. If you want to attract clients with disabled children, consider getting involved with organizations who support people with disabilities and post about it on social media. Displaying items on your desk that represent these organizations may prompt clients to tell you about a family member’s disability that they hadn’t previously thought to mention.

Keep in mind that parents of disabled children have extra demands on their time and resources, which can make it challenging for them to prepare for their future. You can help them form a long-term plan for their disabled child by connecting them with local support groups or organizations that can offer insight about the different options for their child’s care.

Incorporate SSI and Social Security to grow your practice

As an advisor, you can offer a tremendous value by helping clients navigate the process for different types of federal benefits and by incorporating Social Security collection strategies into their financial plan.

BlackRock can help you learn the fundamentals and strategies to help your clients make the most of their benefits. Use our online resources and learn more about the BlackRock Business Consulting team.

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