Social Security and You: Retirees With 'Disabled Adult Children'

This is going to be a column about DACs. And what's that? It's the abbreviation the Social Security Administration uses to refer to "disabled adult children." Here is some background.

Since almost the beginning of the Social Security program in the 1930s, minor children have qualified for benefits on a retiree's record. A child gets an amount equal to one half of the retiree's full retirement age benefit rate, subject to rules that limit how much a family with children can get in total monthly benefits. (Those rules are too messy to explain in today's column.)

Benefits to kids usually stop once the child turns 18. But those benefits can continue indefinitely if the child is disabled. Let me clarify that a little more: More often than not, once retirees reach Social Security age, they no longer have minor children at home. But they possibly could have a disabled "adult child" still at home or living on their own or in some kind of facility that cares for disabled adults. And the law says if that "child" was disabled before the age of 22, he or she will get DAC benefits. And just like a minor child, that DAC will get an amount equal to 50% of the retiree's FRA benefit rate. (When the retiree dies, that bumps up to a 75% rate.)

That all sounds relatively simple. But now, let me throw in a little twist. Very often, these disabled adult children will be getting Supplemental Security Income (SSI) benefits before mom or dad files for Social Security. SSI is a federal welfare program that pays a small monthly stipend (currently around $940 -- although it can be less) to old folks or disabled people who are poor. While a disabled child is young and living at home, the income and assets of the parents are counted in the SSI calculation and that usually keeps the child from getting SSI. But once the child turns 18, the parents' resources no longer count. So lots of these "disabled adult children" get SSI benefits until one or both parents file for Social Security -- at which point the child is switched from SSI to Social Security DAC benefits.

And that switch must be made. Why? Because SSI is a welfare program, and welfare rules state that if a person is on SSI, he or she must file for any other benefits they might be due.

One other point. SSI benefits almost always come with full Medicaid coverage. (Medicaid is kind of like the welfare version of Medicare.) Although the rules can vary from state to state, they generally say that if someone loses their SSI because they start getting DAC benefits, the Medicaid coverage can continue.

To help clarify things even more, here are answers to questions from folks who have a disabled adult child.

Q: I am 64 and plan on waiting until my full retirement age to file for benefits. I will get $3,700 per month then. My wife is about to turn 62. She'll get $1,400 per month if she files for her own Social Security. We have a 32-year-old developmentally disabled daughter getting $934 in SSI benefits. I don't think my wife should file for Social Security because our daughter will lose her SSI. My wife wants to file anyway. Who is right?

A: I'm not a financial planner. But I think your wife is right. If she files, your daughter will get an amount equal to one-half of your wife's full retirement age benefit rate. If her age 62 benefit is $1,400, her FRA rate must be about $2,000. And half of that, or $1,000, would be your daughter's DAC benefit. And that is more than your daughter's current $934 SSI check. So your wife and daughter are financially ahead to file for Social Security. (And again, your daughter will likely keep her Medicaid coverage.)

Oh -- and when you file for your own benefits down the road, your daughter will be switched to 50% of your much higher monthly benefit.

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