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Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Social Security turns 80 today! Should we cheer or cry?
We should cheer that the system has kept millions of seniors out of abject poverty.
We should cry that it’s done so in large part by leaving a massive $26 trillion unfunded liability for our children to pay. It’s poorly designed, arcane, sexist and the least user-friendly system ever created by mankind (in my humble, but very well informed opinion).
Maybe everyone who contributed to the hundreds of thousands of rules was trying his or her best to do good on a piecemeal basis within their capacity to do good. In any case, we now have a system that is being run by staff that are a) underpaid, b) undertrained and c) far too few in number to handle 10,000 retirees per day.
Every day, I hear from someone with a different Social Security horror story — sometimes a small one, sometimes a big one. Everyone needs to understand what’s really going on with this system, because collectively, we have the option of keeping the status quo or paying off what we owe to seniors and all current workers, shutting Social Security down and starting from scratch.
HORROR STORY NUMBER ONE
Recall my recent discussion of the woman who was told the wrong thing about suspending her benefits by not one, but by seven separate Social Security personnel. She would still be trying to suspend her benefit had I not called her local office and told the office head how suspending your benefits works.
HORROR STORY NUMBER TWO
Today, I heard from a gentleman, who went about a year later than he should have into Social Security to file and suspend his benefit and get his wife a full spousal benefit. He got to the local office early by 9 AM. Both he and his wife work, and they could only spare an hour. They were told they could wait in the office until 1 PM and maybe get to talk to someone who might be able to handle their request, or they could come back in two months — on October 8th, the first available appointment. Trouble is, his wife is having surgery that week and can’t make it. The conversation went something like this:
“Can we make a later appointment?”
“No, we can’t book further out than two months. You’ll have to contact us in a couple of weeks to reschedule. But, not to worry, we’ll make note that you came in today, and you’ll get your benefits, when you get them, as if you were seen today. So you won’t lose anything.”
“Okay,” he says.
He leaves the office and emails me. I tell him to get the last bit in writing. He calls and finds out they can’t produce a written document without his going back into the office. They would undo confirmation of today’s visit (if it is indeed in their system) and then confirm the new visit and requests. Only then, could he get a written confirmation.
I tell him that he better go back and waste more time to get something in writing.
He calls Social Security again and emails me:
“I called back, got a different person, and was told that she would send me confirmation letter regarding the original date of the lead, so nothing was changed in the SSA’s records, nothing supposedly will be cancelled, etc.”
HORROR STORY NUMBER THREE
Yesterday, I received an email from a gentlemen who is 63 and wants to file for his benefit now in order to activate child benefits for his two young children. He then, at full retirement age (66), wants to suspend his benefit and restart it at 70. This is all perfectly legitimate.
After waiting 6 weeks for an appointment, he went to his local office, waited for another hour and was told he can’t suspend his benefit when he turns 66. He left and emailed me.
They told him the wrong thing. “You can suspend,” I said. He didn’t trust me.
“Okay, call them up, or go back to the office,” I urged.
“I don’t want to wait another six weeks for an appointment. I’ll call.”
A couple days later he calls, talks to a supervisor, who says, “Yes, you can suspend at full-retirement age, but if you suspend, the child benefits to your children will stop.”
This too is absolutely untrue and it’s coming from a supposed supervisor.
HORROR STORY NUMBER FOUR
Going back a few days, I received an email from a lady who was sent a $19,000 bill from Social Security telling her they’d made a mistake and had overpaid her benefits to the tune of $19,000 for the past two years. (They did not make a mistake, but that’s a story for a future column.) They demanded repayment. She appealed their request. They then stopped sending her any benefits, and with no notice, kicked her off of Medicare because, it seems, they were deducting her Medicare premiums from her benefit check. They did this with no advance warning.
HORROR STORY NUMBER FIVE
Speaking of getting kicked out of Medicare, a Mr. William Davey emailed me today with a twist on Gotcha statement #11 in my book with Paul and Phil: ”If you suspend retirement benefits and don’t pay Medicare Part B; you may lose your delayed retirement credits.” Here’s what he wrote:
My Situation: I suspended my benefits at 66 in order to receive benefits for my underage 14 year old and to max out benefits at 70. I did not pay my Medicare Part A and B for one quarter only, and as a result my Medicare part A WAS SUSPENDED for 9 months. I paid a penalty and have paid my Medicare in all other quarters for the past two and a half years. Question: Am I going to lose my delayed retirement credit for this four year (66 to 70) period due to this one mistake?? A whopping 8 percent annually or a four year total 32 percent increase of delayed retirement benefits gone?!!!!
I told Bill that since they kicked him off of Medicare, they probably hadn’t secretly reactivated his retirement benefit in order to grab the premium from it. Had they done so, he would have lost his delayed retirement credits. But the key word here is “probably.” I don’t know and don’t know if anyone inside Social Security really knows. Last I was told, their computer program was written in Cobol, an ancient computer language that few people read or write. That program may produce some nasty surprise for Bill when he reaches 70, because he missed a few Medicare premium payments. And then straightening it out may turn into yet another nightmare.
HORROR STORY NUMBER SIX
Another woman emailed me last week about having learned years ago that she and someone else were given the same Social Security number. When she learned, she immediately filed for and got a new number. Decades later she started collecting her retirement benefit on which she is surviving. Recently, she was informed that she was collecting benefits on the wrong record and that Social Security would no longer pay her a retirement benefit. She is now without income and fighting the bureaucrats to have her benefit — which was, in fact, correct based on the new Social Security number she received — reinstated.
AND… THE REOCCURRING HORROR STORY
Then there are all the people that Social Security are sure are dead, except they aren’t. And if you are dead to Social Security, don’t expect them to start believing you are alive and give you the benefits you are due just because you actually are alive and offer to come to office with a heart monitor to prove it. The dead, after all, can’t appeal Social Security decisions.
Do we need to be plagued by a system like this? Do we want our children to deal with such a system? Do we really need to have what for most of us is our primary source of retirement income in the hands of well meaning, but often highly incompetent bureaucrats? Is this the best our country can deliver — a lottery ticket to getting what we’re due and then, only after a Kafkaesque slog fest with Tweetle Dee and Tweetle Dumb?
No, no, no, no, no. We don’t need to keep the current system around for another day, let alone another 80 years. If I was in charge, I’d freeze it, and pay off, over time, everything it now owes. I’d treat all workers as having no future earnings under Social Security, but fully recognize their past covered earnings and provide all the benefits owed on those earnings. And finally, I’d replace it with a modern version of Social Security that’s fully funded, fair, simple and efficient. That’s my birthday wish for Social Security — to put it to sleep and start it anew.
Laurence Kotlikoff is a William Fairfield Warren Professor at Boston University, a Professor of Economics at Boston University, a Fellow of the American Academy of Arts and Sciences, a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, President of Economic Security Planning, Inc., a company specializing in financial planning software, and the Director of the Fiscal Analysis Center. Kotlikoff's columns and blogs have appeared in The New York Times, The Wall Street Journal, The Financial Times, the Boston Globe, Bloomberg, Forbes, Vox, The Economist, Yahoo.com, Huffington Post and other major publications.
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