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 $50,000 in Social Security benefits:
John McAdams works as a Social Security claims authorizer in Philadelphia. He’s worked for the Social Security system for 10 years. At possible risk to his career, John wrote to me blowing the whistle on a number of Social Security practices he considers unfair, dishonest and unworthy of our government. He has been trying internally to get Social Security to act appropriately in the cases he is questioning, but so far to no avail.
As those of you who have been following my PBS NewsHour Making Sen$e columns know, I’ve been repeatedly skeptical of the Social Security Administration. John is the first person working for it to come forward and provide a glimpse of what goes on inside the agency. Here’s what’s gone on in this case, according to John: people have been accidentally cheated out of higher benefits by uninformed staff. But rather than take the steps needed to inform the victims and make restitution, John’s superiors have turned a blind eye. Here’s what John wrote:
The problem: A person files for benefits. The claims taker accidentally signs them up for both WIB (survivor benefits) and RIB (retirement benefits). For most people it doesn’t have any effect – their PIA (primary insurance amount) was so low that their RIB would never have grown past their WIB. But for an unknown number of widows, having lost the ability to file for DRC’s (Delayed Retirement Credits), has already cost them tens of thousands of dollars — and will continue to cost them hundreds of dollars per month for the rest of their lives.
Let me illustrate the type of case that John’s referencing with a fanciful hypothetical. A 62-year-old widow named Susan comes into her local Social Security office eight years ago and asks to take her widow’s benefit early. The pleasant, new-to-the-job staffer — let’s call her Martha — says “Happy to help you. Your age-62 widow’s benefit is $1,500 a month. You are also able to collect an early retirement benefit of $1,400 a month. I’ll sign you up for that as well. But you’ll just get the widow’s benefit since it’s the larger of the two amounts.”
Susan makes nothing of the fact that she’s being signed up for both benefits. She figures this is the rule: You have to sign up for both benefits if you sign up for one. Not the case when it comes to widow’s benefits (or spousal benefits if you’re at or over full retirement age.) Susan had the option of filing just for her widow’s benefit.
So, starting at 62, Susan began receiving $1,500 a month. Leaving aside Social Security’s adjustment for inflation, Susan, now 70, is still collecting $1,500 a month. What Susan doesn’t know and what Social Security does know and isn’t telling her is that Susan is being cheated out of $964 per month, which is a massive 64 percent more than she’s now collecting!
Well, a) Martha wasn’t compelled to sign Susan up for her retirement benefit, and b) had Martha not done so, Susan, starting at age 70, would have been eligible to receive not $1,400 a month in retirement benefits, but $2,464!
Susan, I’ll assume, hasn’t read my columns or my recent book with Paul Solman and Phil Moeller about how to optimally claim benefits. So she, to this day, doesn’t know that when Martha signed her up to take her retirement benefit at 62, even though she received nothing extra for being so signed up, Susan’s retirement benefit was permanently reduced by 25 percent relative to its full retirement level. Furthermore, Susan knew nothing about suspending her retirement benefit at full retirement age (as this column makes clear, Social Security staffers, themselves don’t necessarily know about suspending one’s retirement benefit). Consequently, Susan didn’t suspend at full retirement age and didn’t, therefore, accumulate delayed retirement credits from full retirement age through age 70. These two factors — having her retirement benefit reduced by one quarter and not having it raised by 32 percent via the delayed retirement credits — explains the loss of $964 per month.
But here’s the point — John’s point. Since Martha’s signing Susan up for her retirement benefit was a) not required, b) provided no benefit whatsoever to Susan, and c) produced a huge long-term loss in benefits, Social Security should tell Susan and others just like her about its mistake and reset Susan’s benefit and those of others in her same situation to the appropriate level had they been properly treated. Moreover, if Susan were over 70, Social Security should not only reset her benefit going forward, but also pay for the benefits she’s lost to date due to the agency’s mistake.
My informant, John, thought this was an outrage. As he explained in what he wrote to me:
I reported this problem to my immediate manager and my module’s technical expert (SCPS – Senior Claims Processing Specialist) in August of 2013. The SCPS took it to the technical experts monthly meeting and told me my “voice had been heard.” Unfortunately, while I was “heard,” nothing was ever done to address the problem — to find all the victims and make them whole. I continued to push the issue and was eventually told to, “concentrate on my job” — as if making sure claimants weren’t being cheated wasn’t part of “my job.”
On 6/11/2015, my union president, Beverly Wilmer, raised the issue with Social Security Commissioner Carolyn Colvin. On 7/8/2015 (see my email 7/9/2015 7:32AM “FW: Reply: Public Relations Issue”) Beverly got a response from Nancy Berryhill in the commissioner’s office that once again ignored the issue. So the problem is being swept under the rug from both the bottom up as well as from the top down.
I have no idea how many people are affected, but even a tiny percentage of the huge number of Social Security beneficiaries is significant — and it certainly is to those affected. And no matter what the total number is, it’s not right to balance any budget on the backs of innocent elderly widow(er)s. The crime was an accident — The cover-up is criminal.
Here is the email form Beverly Wilmer that John included in his emails to me. In Beverly’s email to John she apparently reproduces in full the email from Nancy Berryhill. I insert my comments in italics at particular spots in Nancy’s email.
From: Wilmer, Beverly A.
Sent: Thursday, July 09, 2015 6:11 AM
To: McAdams, John
Cc: Parks, Kevin; Joseph, Agatha
Subject: FW: Reply: Public Relations Issue
From: Berryhill, Nancy
Sent: Wednesday, July 08, 2015 7:51 PM
To: Wilmer, Beverly A.
Cc: Colvin, Carolyn; Jones, Erik N.; Roland, Van; Berryhill, Nancy; Stricks, Rosemary
Subject: Reply: Public Relations Issue
[Calling this a “Public Relations Issue” when it represents, however innocently, cheating people out of their benefits is disgraceful.]
Thank you for following up on this issue. Although we understand your concerns, automation will never fully resolve the issue you outlined nor remove our obligation to explain an individual’s retirement
However, we have made great strides over the past several years in identifying those widow(er)s potentially eligible for a higher RIB.
[The issue of widows like Susan is not that they are potentially eligible, it’s that due to Social Security’s mistake, they were rendered ineligible.]
Each year, we notify widow(er)s that they could be eligible for a higher retirement benefit on their own account. Notification occurs in two mailings, one in the Spring, when individuals attain full retirement age (FRA), and the second, when they attain age 70 as a cleanup effort to identify individuals that have yet to file for the higher benefit. It is the choice of the widow(er) to file after they receive notification, but it is also the responsibility of SSA to explain an individual’s options if, and when, they contact us.
[Again, this pertains only to people that still have an option. John’s concern is with the people whose options were inappropriately eliminated by Social Security itself.]
GOT SOCIAL SECURITY QUESTIONS?
Because of the statutory provision that an applicant for or recipient of SSI must file for any other benefits for which he/she is potentially eligible, beneficiaries who are concurrently receiving SSI benefits must file for the higher RIB benefits.
[This part of SSA’s reply is true, but in reality it’s a straw man argument since only a limited number of these cases involve people receiving SSI (Supplemental Security Income) benefits.]
In addition to our efforts, the agency has a responsibility to provide claimants with their options when filing.
[Fair enough. But John is saying that the agency in many cases is not fulfilling its responsibility. In this case it should address its failure.]
A beneficiary has the option to voluntarily suspend benefits to earn delayed retirement credits (DRCs).
[It’s good that Nancy gets this. My guess is that at least 40 percent of Social Security’s staff does not understand this.]
If a beneficiary is eligible for both Retirement Insurance Benefits (RIB) and Widow(er)’s Insurance Benefits (WIB), he or she may have the option of restricting the scope to exclude the RIB claim and continue payment as a WIB only until age 70.
[Absolutely true. But when someone is deprived of that option via misinformation, miscommunication or mistake, there is no option. Furthermore, John’s point is that no one should have the option of depriving themselves of higher future benefits in exchange for absolutely nothing. Nor should the agency ever permit someone to exercise such an option, let alone force people to take options that will only cost them benefits.]
If we receive a new application from a claimant who is eligible for both RIB and WIB, we should always explain an individual’s options. The claimant can elect to file only as a WIB and wait until age 70 to file for RIB.
[Should is not the same as must. Nor does this expression of good intention make up for the failure to do the right thing.]
We plan on continuing our recurring mailings and reminding staff, as needed, of their obligation to assist our claimants. Ultimately, it is up to the claimant to decide their financial future, but it is also important that the agency provide complete and accurate information.
[If the staff makes a harmful mistake of which the claimant is unaware and never informed, how can the claimant decide their financial future? Saying the agency should provide complete and accurate information does not in the least excuse it in cases when it doesn’t do so. In such cases, the agency should fix its mistake. Otherwise, these words are just hollow bureaucratic bunk.]
Earlier this week, we sent this column to the Social Security Administration for comment. William “BJ” Jarrett, from Social Security’s National Press Office responded as follows:
“While our programs are complex, the vast majority of our employees provide accurate information. However, when we learn of these situations, we take action to correct the errors and provide employees training. Social Security has an ongoing commitment to provide excellent customer service to the American public. We apologize for providing any misinformation.”
This column clearly describes a class of errors made by Social Security, which Social Security has neither corrected nor appears to be in the process of correcting.
Correction: In commenting on Ms. Berryhill’s email exchange, the wrong provision was referred to. While the original statement was correct, the provision that Ms. Berryhill cites is that a person receiving SSI (Supplemental Security Income) must file for all other benefits for which they are eligible, not that people receiving Social Security benefits must file for all other benefits.