An Obscure Social Security Claiming Strategy? Not So Fast.

"Claiming at 62 may provide valuable years of additional income for a dependent but may produce significant and permanently reduced benefits for the parent versus claiming at full retirement age (FRA) or age 70," he wrote.

Robinson stated that he "may have stumbled upon a nuance that merits consideration": What if the parent files at age 62 but continues to work and earns enough income to eliminate all benefits?

"It is my understanding that the unpaid benefits will be paid back to the claimant in the form of a recalculated monthly benefit at FRA," he wrote.

Would an FRA benefit be paid to the parent in this scenario?

"If so, then this claim-early-and-keep-working strategy would seem to be a no-brainer for Social Security-age taxpayers with dependent children under 18," he wrote. "It seems too good to be true, and I suspect that I may be missing something."

Too Good to Be True?

This is one of those Social Security scenarios that sounds too good to be true because, in some ways, it is, said Steven Crane, founder of Financial Legacy Builders in Dayton, Ohio. However, he added, "there is legitimate nuance here."

"My understanding is that if someone files early and continues working above the earnings limit, withheld benefits can increase their future benefit amount at FRA through recalculation," he said. "A lot of people do not realize Social Security is not always a simple 'you lose it forever' equation when benefits are withheld due to earnings."

Where this gets interesting, said Crane, is the dependent child benefit angle. He said he has seen situations with parents who had children later in life, where filing early created meaningful household cash flow because the dependent benefits were substantial.

"In some cases, the family benefit outweighed part of the long-term reduction concern, at least temporarily," he said.

That said, Crane said he would caution people against viewing this as a "free money hack" as Social Security optimization is fact-specific: Earnings history, age gaps, family size, taxes, longevity expectations and survivor benefits all matter, he said.

"One of the biggest mistakes I see is people oversimplifying claiming strategies based on internet discussions without understanding the second- and third-order consequences," he said. "I also think advisors need to pay closer attention to dependent and survivor benefit provisions in general because they are massively under-discussed relative to traditional retirement claiming strategies."

Gabe Hamideh, wealth manager at Axex Financial in Salt Lake City, said advisors need to factor in that the Social Security earnings test can apply to the entire family benefit, not just the retiree's individual benefit. So, he said, while withheld retirement benefits are later recalculated at FRA, dependent child benefits may also be reduced or withheld if the parent continues earning above the annual threshold.

In practice, Hamideh said he also doesn't see this as a simple "free money" strategy.

"It can create a valuable planning opportunity for certain high-income households with young children, but the outcome becomes highly fact-specific depending on earnings, family maximum rules, longevity assumptions and how much of the family benefit is actually withheld," he said.

This is also one of the most common misunderstandings that Hamideh said he runs into with Social Security: Many retirees don't realize there's an income limitation before FRA, so they assume they can continue working while taking Social Security without issue.

"Then they end up earning too much and are surprised when benefits are reduced or withheld under the earnings test," he said.

Hamideh said he also thinks many people underestimate the tradeoff of filing at 62, even if some withheld benefits are credited back through the FRA recalculation process.

"While benefits withheld under the earnings test are generally recalculated into future benefits at FRA, I would hesitate to frame this as a no-brainer strategy because excess earnings can also reduce dependent benefits and create unintended trade-offs," he said.