Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Editor’s Note: Boston University economist Larry Kotlikoff has spent every week, for over three years, answering questions about what is likely your largest financial asset — your Social Security benefits. His Social Security original 34 “secrets” and his Social Security gotchas have prompted so many of you to write in that we feature “Ask Larry” every Monday. Find a complete list of his columns here. And keep sending us your Social Security questions.
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Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version. His new book, “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published before the changes from the Bipartisan Budget Act of 2015 went into effect. The three authors are now doing an overhaul of the book. The new version of “Get What’s Yours” should be out this spring.
For more on the following topic of retroactivity and the best way to file for your benefits, check out Paul Solman’s article “The Social Security pitfall we just learned about.”
Here’s my question for today. Should you file for your Social Security benefits a) online, b) over the phone or c) physically in the local office?
My answer is to file online when possible. You can file online for retirement benefits, spousal benefits and divorced spousal benefits. You cannot, unfortunately, file online for widow(er)s or divorced widow(er) benefits, child or child-survivor benefits, parent benefits, child-in-care spousal benefits or mother or father benefits.
Social Security’s online retirement benefit application process is a safe way to file for your retirement benefit, because it asks you this very important question: When do you want your retirement benefit to begin?
You can also enter comments at the end specifying when you want your benefit to begin and why.
The physical application used in the Social Security office, and I presume, by Social Security staff taking applications over the phone, does not ask this simple question. Consequently, the staff are free to give you retroactive benefits you don’t want and thereby, permanently reduce your retirement benefit.
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This happened to my dentist, Alex, who was trying to collect his retirement benefit starting at age 70. Alex went into the local office three months before reaching 70 and told the staff he wanted to start his benefit at 70. But instead of doing what he asked, they set his retirement benefit initial collection date back six months from the date he appeared in the office. This was nine months before Alex’s 70th birthday. As a result, Alex ended up with a retirement benefit that is 6 percent lower for the rest of his life. Alex did receive six months of retroactive benefits, but he had no idea that this was coming at the cost of a permanently reduced monthly benefit.
This just happened to a very prominent economist I know as well. He went to his local office, asked for his age-70 benefit and a check for retroactive benefits showed up. Once he realized he wasn’t getting what he asked for, he went back to the office and returned the check. Then he had to go in a third time to finish straightening everything out.
If Alex and my friend the economist had filed online, they could have specified that they wanted to begin their benefit in the month they turned 70, and presumably, all would have gone well and their wishes would have been followed.
So why doesn’t the physical application form, which can be viewed here, let anyone specify the date the retirement benefit is to begin — in the case of someone filing for retirement benefits after full retirement age?
The issue with the physical application form (which is what you use when you file in person at your local Social Security office) is with the following sentence:
I apply for all insurance benefits for which I am eligible under Title II (Federal Old-Age, Survivors, and Disability Insurance) and Part A of Title XVIII (Health Insurance for the Aged and Disabled) of the Social Security Act, as presently amended.
The form should say no such thing. Widow(er)s can file for their widow(er) benefit before taking their retirement benefit, but a form that begins with the above italicized sentence tells both staff and those filing for their widow(er) benefit that waiting to collect much higher retirement benefits at 70 is not possible, when it is!
Or what if you have reached full retirement age and want to and are legally able to file just for a spousal or divorced spousal benefit? Here again, the top of the relevant form is saying that by filing for that benefit, you are filing for all your benefits.
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So how can you actually specify on the application form that you want to file for one benefit and take another benefit later when you are legally permitted to do so?
If you’re going in person, you need to have the Social Security person with whom you are working enter your request in the remarks section. Apparently, you aren’t permitted to enter anything into the remarks section yourself. Instead, the Social Security staffer has to do this. You’ll want to triple check this to make sure they have filled it out correctly.
But all of this brings me to another question: If this form can be instantly changed by deleting that one line, why hasn’t it been?
On the other hand, you could avoid this entire messy process if you file online and simply enter in the date you want your retirement benefit to begin and specify why.
So again, let me repeat, file for your Social Security benefits online.