Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Boston University economist Larry Kotlikoff has spent every week, for over two 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 by Simon & Schuster.
Watch Larry explain how Paul and his wife could collect an extra $50,000 in Social Security benefits:
I recently persuaded a long-term gay couple, who I’ll call them Liz and Jane, to get married in order to take advantage of spousal and potentially, widow benefits. Liz and Jane are two very lovely ladies who have been together for 35 years. Both are flower children, so neither was interested in anything conventional, including marriage. Liz is a bit older and has much higher earnings than Jane. They got in touch to ask me whether or not it would pay them to get married — from a Social Security perspective.
“A lot!” I said. “Jane will be able to get a full spousal benefit and also collect Liz’s larger retirement benefit if Liz were to predecease her.”
It took repeated cajoling (involving the notion that more money wasn’t such a bad thing and marriage wasn’t going to end their relationship) and bingo, they agreed to tie the knot — this August in fact!
And get this. They invited me and my fiancee to their wedding (yes, love is in the air), which we hope to attend.
Will it be in a big fancy schmancy country club or expensive restaurant or in a venerable house of worship? No chance. Not for these two. It’s going to be on the beach, rain or shine!
But in the meantime, Liz found out that she was dead, well, at least according to Social Security.
But Liz wasn’t dead. She was alive and well and about to get married.
This is my gist of the interplay between Liz and Social Security:
“No,” Social Security insisted, “our paperwork says you are dead. So, sorry, you’re dead.”
“I can’t be dead. Here, feel my pulse.” said Liz, “It’s normal.”
“Okay, okay, you’re not actually dead, but you’re officially dead.”
“Well, make me officially alive.”
“Oh no, we can’t do that. If you’re dead, you’re dead. Live with it. Now you could be able to write us a letter telling us you aren’t dead, but only living people can write letters about being not dead, and you are dead, so, sorry, you’re really permanently dead. Have a good day.”
Here’s Liz’s version.
My Social Security fiasco
Several months ago, I tried to activate a new American Express Card online. When I completed all the steps, a response came back saying that I needed to call as there was a problem with the activation. When I called, they advised me that Social Security had notified them that I was deceased. Needless to say, I was a bit taken aback by the news. Despite the fact that I was on the line with American Express, they said they needed verification from Social Security. When I contacted Social Security, who indeed had me in their files as alive, they said they were unable to provide documentation supporting that over the phone. With dread in my heart, I went to Social Security with my passport, birth certificate and original Social Security card. When I was finally seen, they said they were unable to provide me with any documentation certifying that I was not deceased. I spoke with the head person at the office, who again confirmed that this request was not possible to fulfill, given that they are “not allowed to originate any correspondence and could only fulfill my request if it was possible to do by form letter, which it was not. This was in spite of my in-person presence with all the appropriate verification in hand! In the meantime, I continued to receive cancellation notices of all my American Express cards and several condolence notices to my estate.
At my wits end, I decided to call my representative’s office, Joe Kennedy III, given that I was having difficulty with a federal agency. When I spoke with the liaison to Social Security, he was sympathetic, but concerned that there was nothing that could be done. He agreed to connect with his contact at Social Security to see if he could facilitate any resolution, but I was unconvinced that he would be successful. After a bit of back and forth, he was able to arrange a process where I would pay $38 in-person for them to compose “original correspondence” documenting my viability, which I could send to American Express to have my credit restored. Having already taken off a half-day of work the first go-round, I said I refused to go to the Social Security office another time. I then followed all the directions (sent the check by mail to the designated person) and received by mail a pre-written form with a one sentence addendum stating: “The above named person is alive and not deceased.” I sent the form to American Express, and they immediately restored my credit.
The process took place over several months and caused much angst. In describing my ordeal to American Express at a later time, they credited me $38.00 for my expense.
What’s the moral to this story?
Our bureaucrats are the best in the business. They’d out bureaucrat any other country’s bureaucrats hands down. Maybe we should stage a bureaucracy Olympics. But, on second thought, that would require actually getting something done.
Susan – Chino Valley, Ariz.: You have mentioned the advantages of filing and suspending at full retirement age and then collecting maximum Social Security benefits at age 70 — with the option of collecting everything owed to you should you need the money before reaching age 70. However, you never mention whether there’s an advantage to start collecting a higher monthly amount at, say, age 68 or 69, without getting everything owed previous to that. My full retirement age is 66.5, and I hope to work till 67 or 68 in the nursing field. I don’t know if I can continue working till 70. My husband is three years younger, and I carry the health insurance for us both through my job. I think I’d rather collect a higher monthly Social Security check for life than get everything owed and collect less monthly thereafter. What do you think? Can I still do it this way even if I file and suspend?
Larry Kotlikoff: I’ve mentioned the big advantages of file and suspend, which is primarily the ability to activate benefits for spouses, ex-spouses and children on your work record while still waiting until 70 to collect your own retirement benefit. But I’ve also mentioned an important risk of file and suspend. Once you do, you can’t collect a full widow’s benefit, full divorcee widow’s benefit, full spouse’s benefit or full divorcee spouse’s benefit. These benefits are called auxiliary benefits, and I’m referencing auxiliary benefits you’d be collecting on a spouse (alive or deceased) or an ex-spouse (alive or deceased to whom you were married for a decade or more). Filing for your retirement benefit, whether or not you suspend it, leaves you able to collect only your excess auxiliary benefits, not full auxiliary benefits. An excess auxiliary benefit is the excess of your full auxiliary benefit over your retirement benefit. In many cases, excess auxiliary benefits are zero or negative. So I’m worried about high earners who don’t need to file and suspend right away (in terms of activating auxiliary benefits not for themselves, but for their current and former spouses and their children) nonetheless doing so early to have the option of taking a lump sum payment of their suspended benefits, if circumstances make that desirable. Doing so runs the risk of having your spouse or your ex pass away and you no longer being able to collect a full widow(er) benefit on their work records. This is why we are very careful in my company’s software when it comes to recommending filing and suspending to married or divorced people, before it can be used to activate an auxiliary benefit for someone off the worker’s record.
Having gotten this off my chest, let me respond to your question. I’m not advocating that you take everything that you’re owed at some age, be it 68 or even 70. I’m not advocating you unsuspend your suspended benefit unless you are in an emergency situation and desperately need the cash or are, for example, a never-married single person who was diagnosed with a terminal disease. In your case, I recommend you work as long as you can and take your retirement benefit at 70, but that if you can collect a full spousal or full divorcee spousal benefit at full retirement, do so. Also, if your spouse (if you are married) or your ex (if you were married for 10 plus years) passes away, make sure you optimize your benefits by using very accurate commercial software and decide whether to take a widow’s benefit as early as possible and your retirement benefit at 70 or your retirement benefit at 62 and your widow’s benefit before or at full retirement age. This depends on what’s optimal given when your spouse or ex dies and whether or not he took his retirement benefit early.
Anonymous – N.C.: My husband worked in France and the U.K. before emigrating to the United States in 1987 and subsequently becoming an American citizen. His U.S. Social Security earnings record only reflects his work in the United States from 1987 onward; however, he worked for three years in the U.K. and nine years in France and paid into these countries’ retirement systems before coming to the U.S. Is there any way to have his non-U.S. work record and contributions “count” toward his U.S. Social Security benefits? I know the U.S. has agreements with France and the U.K., but I am not sure what this means and if it is of any benefit to us.
Larry Kotlikoff: I’m not yet an expert on SS’s totalization agreements with France and the U.K. I’ve asked our Social Security Technical Advisor, Jerry Lutz, to weigh in.
Jerry Lutz: The Social Security Administration has totalization agreements with both the U.K. and France, but the U.S. would not combine your husband’s foreign and domestic earnings to increase his Social Security benefit. Both the U.K. and France may, however, credit his U.S. earnings in order to qualify him for benefits under their programs. He should probably apply for them either directly with the foreign agencies or at any Social Security Administration office. Although entitlement to foreign benefits could reduce his U.S. benefits due to the Windfall Elimination Provision (WEP), his combined benefits would be higher due to the Windfall Elimination Provision’s guarantee provision.
Bruce – Fresno, Calif.: For 20 plus years I paid into Social Security. Then I started a new career in education. I have been a teacher in California for 15 years. As a teacher I do not pay Social Security taxes, since we pay into a teacher’s retirement program called STRS. I have heard it rumored that this makes me ineligible for Social Security benefits. Is this true? I am now 62 years old. I plan to teach for another five years. Can you give me some advice?
Larry Kotlikoff: Your Social Security benefit will be somewhat reduced by the Windfall Elimination Provision. The spousal, divorcee spousal, widower and divorcee widower benefits you may be able to collect on current and former spouses will be reduced by the Government Pension Offset (GPO) provision. But these won’t kick in until you start collecting your California pension. That would to lead you to believe that you ought to take your Social Security benefits now. But there is another gotcha here, namely Social Security’s earnings test, which can mean losing all your Social Security benefits if you earn too much. This earnings test ends when you reach full retirement age. Also, were you to quit working in the non-covered sector, you’d potentially end up with 30 years of substantial covered earnings, which would eliminate the WEP, but not the GPO.
Sandra – Elkins Park, Pa.: I was married to my ex for 21 years. I was a homemaker and he was a pharmacist. After our divorce, I worked at several jobs, but my jobs did not pay very much. I am 75 and he is 77. I receive $903.00 from SS each month plus $143.00 from a pension plan. I was told by the SS office that I do better using my own salary information. I do not understand this. My ex is living a good life. I live in a Federation Building for low income people over 62 years of age.
Larry Kotlikoff: Once you are taking your own retirement benefit, which you are, you get, roughly speaking, the larger of your own retirement benefit and half of your ex’s full retirement benefit. But when you ex passes away (not wishing for this, mind you), you should be able to collect his full check in the form or a divorcee widow benefit.