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 columns 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.
Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version. His book, “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published before the changes from the Bipartisan Budget Act of 2015 went into effect. The three authors are now doing an overhaul of the book. The new version of “Get What’s Yours” should be out this spring.
Kotlikoff has been keeping readers updated on how the budget act changes a number of Social Security rules with “This is not how you fix Social Security,” “Congress is pulling the rug out from people’s retirement decisions” and “12 secrets to maximizing your Social Security benefits under the new rules,” as well as his answers to viewer questions. We’ll continue publishing updates on what this new law means for you. Stay tuned.
Last week, I wrote about a couple who was told by Social Security that they could not file and suspend when in fact they could. In the past few weeks, I have been regularly notified of such cases.
Recall Sarah, the subject of last week’s column. She is now over 66, and her husband Bill will turn 66 in August of this year. As a result, they can legally follow the file and suspend strategy, provided Sarah suspends by April 29, 2016. Under this strategy, her husband files just for his spousal benefit when he reaches 66. Sarah went into the local Social Security office in Riverhead, New York and was told by a staffer and a supervisor that her husband could not collect a spousal benefit on her record, because he wasn’t going to be 66 by April 29.
This was wrong on several counts. I notified top officials at Social Security Administration, and to their credit, they called the Riverhead office, which then addressed the situation immediately. But then I started getting emails from others in Sarah’s situation. They had used my company’s Maximize My Social Security software, learned they should use the file and suspend strategy, called or went into the local office in order to do so and were treated like Sarah and told they could not.
MORE FROM MAKING SEN$E
One gentleman, William, who is 69, went to the local Fountainhead, California office and was told that not only could he not suspend now, but that he could never suspend. This is after the staffer at the window spoke to his supervisor. This was flat-out wrong. William was also told that his 65-year-old wife couldn’t collect a spousal benefit, because she wouldn’t be 66 by the end of April.
Since so many cases were popping up with the same mistake, I sensed that the staff had been systematically told to do the wrong thing. I had a one-hour phone call with Social Security staff last week in which they assured me that they were issuing new regulations on suspending benefits. In fact, they did this within a few hours of our getting off the phone. What they didn’t tell me is that they had posted on their site the misinformation about who could and couldn’t take advantage of the file and suspend option.
How did I learn this? William was given a printout from Social Security Administration’s website as it existed on Feb. 8. It stated the following:
If you and your current spouse are full retirement age, one of you can apply for retirement benefits now and have the payments suspended, while the other applies only for spouse’s benefits. This strategy allows both of you to delay receiving retirement benefits on your own records so you can get delayed retirement credits.
It did not state that if you file and suspend before the April 29 deadline and if your spouse is not yet full retirement age on April 29, but reached age 62 by or on Jan. 1, 2016, the younger spouse could file just for a spousal benefit.
This statement gave the Social Security Administration staff the impression that married couples could only pursue the file and suspend strategy if both were at full retirement age before May 1. This is why the Social Security Administration staff was telling people all over the country the wrong things in such cases up until the end of last week.
I’m not going to beat up on the Social Security Administration staff, most of whom are not only extremely competent, but lovely people too. But whoever at Social Security Administration was responsible for this post should be kept miles away from the Social Security Administration website until the end of time.
MORE FROM MAKING SEN$E
Furthermore, the urgent clarification sent out at the end of last week to all Social Security Administration staff is written in a manner that is hard to follow and does not include an example situation like that of Sarah and Bill.
As you can see from my email below, which I sent the Social Security Administration staff after I spoke with them, I am extremely concerned that the Social Security Administration, however innocently, has already hurt many people’s benefits and is not going far enough and is not moving fast enough to sort things out. My guess is that I will continue to hear from the Sarahs and Bills who have been told they can’t file and suspend when they can.
Indeed, on Friday, after the Social Security Administration had sent out its cryptic urgent message, I received this email from a gentleman named Tim:
I called the Social Security Administration today thinking I could verify the results of a what-if scenario provided by one of your reports. After waiting on hold for 45 minutes, a lady answered. I told her my goal, and she immediately turned cold and said file and suspend is illegal and will cease to be available to everyone as of April 1. I replied, “Well, I’m getting ready to apply now,” and she hung up on me.
Maybe I missed it while reading your site and the text at the end of each report, but I had no idea that what I’m trying to do is “illegal” and that the Social Security Administration won’t help applicants in any way when applying with this goal in mind.
To be clear, the Social Security Administration’s staff is engaging in a systematic violation of the law in denying people their legal benefits. The Social Security Administration needs to make sure everyone understands the new law backward and forward.
The screw ups extend beyond the Sarah and Bill scenario. I received the following email from a gentleman named Ernie.
I purchased a household license for Maximize My Social Security and was going to apply for Social Security in accordance with the program’s recommendations, but I was given information by the Social Security Administration that conflicts with those recommendations. I am 67 years old, my wife is 62 and a half and I have a permanently disabled, 30-year-old daughter currently receiving Social Security Income. (Disability was established well before she was 22.) The program recommends that I file for my benefits now and suspend when I’m 70 and that my wife file for child-in-care spousal benefits (plus my daughter’s benefits and other future actions). In speaking with three Social Security Administration representatives, I was told that we aren’t qualified for child-in-care, because my daughter is more than 16 years old. One of these representatives I met with in their St. Paul office also told us that child-in-care benefits only applies if one of the parents is deceased. Clearly, this information conflicts with what Maximize My Social Security is telling me. Since I may be making an expensive error in following the wrong advice here, I am looking for some assurance from you folks that the program is not misinterpreting some obscure Social Security Administration rule that the Social Security Administration folks are aware of and the rest of us are not.
It’s possible that we don’t have the full picture here, but from what we do know, it seems like we have four Social Security Administration representatives who don’t know the basics.
Let me make this offer to all Social Security Administration representatives who are telling people they can’t do what both our software and the law says they can: Call me, and I will set you straight.
I’ll also get you a free copy of the revised version of “Get What’s Yours,” which is coming out on May 3.
Here is my email to the Social Security Administration:
Thank you for holding our exchange today. I’m relieved to hear about the steps you are taking to clarify the new law.
I just took a call from a certified financial planner in Florida whose client is a 63-year-old qualified divorcee (her husband turns 62 shortly). She has been told by several different Social Security Administration staff that she needs to file by April 30 in order to collect on her ex. This, of course, is completely wrong and is also the last thing she should do. I’m getting calls or emails like this, not every minute, but every couple of days.
I want to reiterate my main messages and responses to the information you provided:
1. The physical application needs to be substantially revamped to ensure people aren’t being kept from filing restricted applications or from getting their full completement of delayed retirement credits due to the retroactive benefits provision. I’m glad to hear so few people are using the physical application, but still…
2. The process by which staff in the office and over the phone are soliciting retirement benefit start dates for those past full retirement age should be reviewed to make sure claimants aren’t being induced to give up delayed retirement credits in exchange for immediate cash (six months of retroactive benefits).
3. The process by which staff in the office and over the phone are processing requests for restricted widow(er) and spousal (and their divorced counterparts) benefits should be reviewed to make sure claimants aren’t effectively deemed when they don’t need to be and when doing so costs the claimants money.
4. There are possibly tens of thousands of widows who were filed for their survivor benefits and retirement benefits simultaneously when they should have been filed for just their survivor benefits and permitted or instructed to take a much higher retirement benefit at 70. John McAdams has been trying to get senior officials at the Social Security Administration to do a full computerized search for these cases and have the claimants who were misadvised or mistreated informed and compensated.
5. I’d love to see the guidance on suspending, which you issued in December, and the materials you are transmitting to the staff in the short term.
6. A major concern I have is that staff won’t become sufficiently educated about the new law before it’s too late and that staff — even as I type — are handing out wrong information, which is a) not being documented and b) will permanently reduce the lifetime benefits of claimants by what could be tens of thousands of dollars. There have been four cases in which Social Security told couples — in which one spouse is 66 and the other turned 62 before Jan. 2, 2016 — that the younger spouse couldn’t collect just a spousal benefit, because he or she wouldn’t be 66 by April 30. These four cases are, I think, indicative of the depth of misunderstanding by your 40,000 staff members about what the new law does and doesn’t imply. If I was in your shoes, I would send out an email today to all 40,000 staff members with the example of Sarah (now 66 with a spouse who will be 66 in August). I think it is very hard for the staff to absorb so many cases, and it’s almost impossible for most of them to absorb technical POMS-type language. So if you sent one email a day with that day’s example, I think that would help enormously. (You could also send out this column to everyone on the staff, but I also understand that this might not be appropriate.)
7. I remain extremely concerned with the Social Security Administration’s focus (on its website and in its other communication with the public) on life expectancy. The Social Security Administration should remove its life expectancy calculator and tell staff that their focus needs to be on maximum age of life, not on life expectancy. None of us can count on dying on time. Unfortunately, the new law is going to induce even more people to take their benefits early at a time when baby boomers are woefully ill-prepared financially to make it to their life-expectancy age, let alone to their maximum ages of life.
8. My concern that the Social Security Administration still has not shed the actuarial view — that it doesn’t matter when you take your benefits — connects to my concern about the staff subtly inducing people with delayed retirement credits to file retroactively when they do file. This is akin to the homeowner’s insurance company telling people, “Here’s a deal: We’ll reduce your coverage by 10 percent, and you’ll get a big premium rebate. How does that sound?” Any insurance executive who permitted his staff to utter such words would be out of a job in no time. And, frankly, anyone inside the Social Security Administration who is promoting life expectancy and taking retroactive benefits (and, thereby, losing delayed retirement credits) is undermining the Social Security Administration’s main objective — providing insurance against old age.
OK, that’s it for now from me. Again, I deeply appreciate the opportunity to speak with you. I’m encouraged by the steps you are taking to work with the staff to educate them on the new law. Yet, I remain very worried about the education arriving too late or not being correctly absorbed by the staff before it’s too late. You might consider recording all calls so that people would have a basis for having their claims adjudicated if they were misfiled or misinformed. The person who is told the wrong thing this minute and has no written record to appeal later is the person the system has badly served forever.
I recognize that my tone on the phone and in this email have been pushy. I hope you will forgive me for this. The issues here are so important to so many people that I feel the need to push hard, but while listening to you very carefully as well.
All the best and let’s stay in touch,
The above emails have been edited for clarity and length.