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Column: Widows lose thousands in Social Security benefits due to misinformation

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,” his additional secrets, his Social Security “mistakes” 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.

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 in February before the changes from the Bipartisan Budget Act of 2015 went into effect.

For the past few weeks, Social Security expert Larry Kotlikoff has been keeping readers updated on how the budget act changes a number of Social Security rules. We’ll continue publishing updates on what this new law means for your Social Security benefits. Stay tuned.

Back in July, I wrote about John McAdams, a Social Security claims authorizer in Philadelphia who has worked for Social Security for a decade. John continues to risk his job by writing about Social Security’s ongoing policy of denying widows tens of thousands of dollars over time by not taking steps to fix mistakes that can cost them.

I’ll give an extreme example of a hypothetical 62-year-old widow, let’s call her Sarah, who comes to Social Security to file for a survivor benefit on her deceased husband or ex-husband’s work record. (In the case of a deceased ex, she had to be married to him for a decade or more). Let’s assume Sarah’s widow benefit is $2,001 per month and her own age-62 early retirement benefit is $2,000 per month.

Sarah is under no requirement to file for her retirement benefit at age 62. Indeed, she can wait until age 70 to file for it. At 70, it will start at a 76 percent higher level.

But the Social Security staffer files Sarah for both benefits. In doing so, he leaves Sarah with just her $2,001 widows benefit, because you can only collect the larger of the two benefits if you have filed (or been filed) for both.

In filing for her retirement benefit, the Social Security staffer produces not a single penny more in benefits for Sarah. But by so doing, he winds up preventing Sarah from filing for her own retirement benefit when she reaches age 70 and thereby, prevents her from collecting $3,520 per month in retirement benefits instead of the $2,001 per month in widow’s benefits. (Her own full retirement benefit, if it were allowed to grow until age 70, would be 1.76 times the $2,000: $3,520 a month; $42,240 a year.)

So the staffer would have deprived Sarah of the ability to collect $18,240 more per year from age 70 through 100, should she live that long. This would obviously be unfair, if not a disgrace. John McAdams has been trying to make sure such mistakes are rectified.

Yesterday, John wrote me about another case of Social Security unfairness he’s been trying to fix. Remember, John works for Social Security. Here’s what he wrote:

John: In August 2015, I came across another claimant who was simultaneously entitled to both retirement and survivor benefits. At the time, I was allowed to send the case to the field office that set up the claim and ask them to rule it a case of misinformation. (What I’m to do with future cases is a mystery to me as nobody will give me an official response to my repeated questions about these cases.)

Here’s what I sent to the field office:

In December 2009, your field office processed both retirement and survivor applications for this claimant — both with month of entitlement January 2010. The survivor rate exceeded the retirement rate, and the claimant was dually entitled. Had she filed for survivor benefits only, her rate would have been the same — she gained nothing by filing for both. She remains dually entitled through today. Had the claimant filed for survivor benefits only and delayed her retirement benefits, her retirement rate would have eventually surpassed the survivor rate because of delayed retirement credits. By dually entitling her, we removed this possibility. We are requesting a misinformation determination on processing the retirement application since doing so gave the claimant no benefit and in fact deprived her of the opportunity to take advantage of delayed retirement credits later on.

Please call me with any questions,
John McAdams
Claims Authorizer

Here’s a spreadsheet that shows how much she’s lost:

social security

And she will continue to lose $357 per month for the rest of her life.

In September 2015, the Philadelphia Operations Manager asked to speak with me about these widows. She asked for an example case, and I sent her this one as the “poster child.” She promised to look into it. I don’ know if it was a direct result of her efforts or not, but I finally got a response from the field office:


So now Social Security is officially, knowingly, intentionally cheating elderly widows — how much lower can you get?

Larry Kotlikoff: I’m hoping some enterprising lawyer starts a class action suit. There are, presumably, millions of widows in the country that have been similarly treated by Social Security and have no knowledge that they could be receiving much higher benefits had they been properly treated by the Social Security staff. Perhaps some lawyer can get a federal judge to enjoin Social Security from filing widows for their retirement benefits when doing so will gain them nothing financially, but rather, cost them money — potentially tens of thousands of dollars. If you multiply Sarah’s $18,240 by 30 years, that’s over a half million dollars!

Here is yet another Social Security disconcerting story apparently involving two separate local Social Security offices — one in Tucson and one in Huntsville. It’s high time that Social Security taught its staff the Social Security benefit rules they are supposed to follow. Suspending your retirement benefit any time between full retirement age and age 70 and then stopping the suspension before age 70 is perfectly legal.

James: I recently spoke with Social Security Administration, and they told me that since I started collecting prior to full retirement age, I could not suspend at age 66 and then collect again at age 70. What Social Security Administration policy or regulation provides this option? The calculations from your revised online software show that this is possible.

Larry Kotlikoff: The representative you spoke to is mistaken. Please see Section GN 02409.110 of the Social Security’s Program Operations Manual System (POMS) copied below:

GN 02409.110 Conditions for Voluntary Suspension
A. When voluntary suspension is possible
1. Requesting voluntary suspension
Any primary retirement insurance benefit (RIB) applicant or beneficiary, whether reduced or unreduced, who has reached full retirement age (FRA) may voluntarily ask that we suspend his or her benefits to earn voluntary delayed retirement credits (VOLDRC). This request may be either written or oral, and we do not need a signature. A representative payee can make the request on behalf of the beneficiary.

Allan: My wife is 74 and has been collecting her Social Security benefits for the last nine years. Her monthly benefit is now $1,800. I will turn 66 in March of 2016 and plan to continue working until I am 70. I am eligible for the maximum benefit. When I turn 66 in March, can I file and suspend and get paid spousal benefit until I am 70?

Larry Kotlikoff: Do not file and suspend. If you do, you will transform your full spousal benefit into an excess spousal benefit, which will likely be zero. Instead, file for just your spousal benefit. Go into the local office a couple months before you reach 66 and make them sign that they have received a written request by you to file an application restricted to collecting a spousal benefit on your wife and that you intend to collect your own retirement benefit when you turn 70 and not a day earlier.

Kim: This isn’t directly applicable to me, but something that I encountered at the Social Security Administration office and noticed in the software result. In the sequence of events, my wife had filed for her benefits along with my daughter’s (dependent child) in March 2015 at age 62. The software suggests that I should have applied for child-in-care support at that time, which would have been before my 62nd birthday (June 2015). I did not, because I was still working until mid-August 2015, and then I immediately applied. When I was at the Social Security Administration office, the Social Security Administration person said that it was good that I had waited until after my 62nd birthday, otherwise I would have been considered as deeming. However, the date from the software was earlier.

Larry Kotlikoff: The Social Security Administration representative you spoke to is mistaken. Child-in-care spouse’s benefits are not deemed if you take them before age 62. Nor are they deemed under the new law for those born after Jan. 1, 1954. There is a very specific exemption from deeming for child-in-care spouse’s benefits.

Molly: We went to the local Social Security office, and my husband who turned 66 yesterday filed and suspended his benefits today. He was born in 1949. When I asked if his benefits could remain suspended so that I could file for my full spousal benefit in November 2016, they said no. The man we talked to went and asked the technical expert in the office who said I had to file early during the six-month grace period if I wanted to get a benefit check while my husband’s benefits remain suspended. I wasn’t in the room when the Social Security guy talked to this expert. I don’t know if he even told the guy that my husband was born before 1950. He said they looked up on the Congress.org website and that’s what he based his info on.

Have you verified your interpretation of the new law with the powers that be at Social Security? Is there somewhere on the Social Security website that states that my situation is not affected by the law so long as my husband files and suspends during the grace period? The law is still so new and so confusing. I just don’t know if I have enough time to wait for people to challenge a stricter interpretation of the law’s intent by Social Security. I have read “Get What’s Yours,” which is brilliant and would prefer to trust, but I don’t know what to do now. It would be so helpful if Social Security could publish their verification of your interpretation.

Larry Kotlikoff: Our understanding from senior officials at the Social Security Administration is that if your husband files and suspends within the grandfathered 180-day window, and you are 62 by or on Jan. 1, 2016, you can file just for your spousal benefit when you reach full retirement age.

This is how we have reprogrammed our software. It is also the only interpretation of the new law that makes any sense.

So my answer to you is yes, you can collect just your spousal benefit if you husband files and suspends.

Bill: I still am not sure I understand the new rules. I turned 65 in October of this year. My first ex is 63. At age 66 next year, I was planning to claim a divorce spousal benefit on her. My second ex will turn 62 in January 2020. I was planning to switch my ex-spousal benefit to her in January of that year, then claim my own benefit in October 2020 when I turn 70. I was married to both exes more than 10 years each. Can I still do that under the new law? Do I have to do something else by the end of April 2016?

Also, my girlfriend turned 62 in September of this year, and she was married more than 10 years prior to her divorce. Can she still collect a divorcee spousal benefit at age 66, then switch to her own benefit at 70? Does she have to do something by the end of April 2016?

These are important questions, because we were thinking of getting married before I learned about the divorcee spousal benefit in your book. If we can’t get it, we might tie the knot. I know that’s not romantic, but that life under Social Security rules.

Larry Kotlikoff: You are OK with your strategy, that is, you are grandfathered in. Your girlfriend is also grandfathered in and will be able to do what you wrote. So getting married will cost you two full divorce(e) spousal benefits for four years. And because neither of you can file and suspend by or on April 29, 2016 (you can’t do so until you turn 66), if you marry, neither of you will be able to collect a full spousal benefit on the other’s record while waiting until 70 to collect your own retirement benefit on your own record. In short, Congress and the President, in their infinite wisdom, just legislated a huge tax on your getting married. Were you already married, you’d be facing a huge subsidy to getting divorced.

Rebecca: I read your article on how the Bipartisan Budget Act of 2015 changes a number of Social Security Rules. Thank you for the information, although it came as quite a shock this close to needing my benefits!

I am 57 and a widow. I lost my job and have been living off my savings. Finding a new job at this age has been quite a challenge. I had planned to take my late husband’s Social Security when I turned 60, then mine when I turned 70. Has this new bill changed my ability to do that? I am very concerned and hope you can give me some guidance. I keep hearing conflicting information, and I’ve been told you are the most reliable person to ask.

Thank you in advance for any advice you can give me!

Larry Kotlikoff: Fortunately, the new law doesn’t change your options at all. I wish you all the best. It could well be that taking your own retirement benefit at 62 and your widow’s benefit at or before full retirement is the better option. Only careful software can say for sure.