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 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 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.
Over the past week, I have heard of four cases in which Social Security staff — in different parts of the country, in local offices and on the phone — are telling people with 100 percent certainty something that is 100 percent false. The mistake involves the new Social Security law.
When households are mistakenly advised by Social Security staff, it can cost them tens of thousands of dollars in benefits. Not only is it a problem for the households who are being deprived of benefits they worked and paid for, but it’s also a problem for the staff who, when they learn of their mistake, will regret it for years to come.
On Nov. 2, 2015, Social Security benefit provisions changed dramatically. One would think that everyone in Social Security who is assisting the public would have been meticulously and repeatedly briefed about the new law. This appears not to be the case.
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On the contrary, Social Security has yet to issue final regulations with respect to the new law, and apparently, the agency has sent no guidance out to its staff about the new provisions with respect to suspending benefits. The hold up appears to be with the lawyers, but it’s not clear for sure who is responsible. Meanwhile, time is passing and the critical deadline under the new law for suspending benefits, namely April 29, is rapidly approaching.
Last week Social Security did, to its credit, issue an emergency memo to its staff about the deeming provisions of the new law. This memo seems to have arisen thanks to a conscientious senior official at Social Security who sounded the alarm after I relayed three of the cases to him.
All three cases involve an identical situation, so I’ll just tell you about the first case. It involves a friend of mine who is one of our country’s top CEOs, who we’ll call Sarah. Sarah is now 66. Her husband, who I’ll call Bill, will be 66 in August. (Their full retirement age is 66.)
Sarah and Bill are grandfathered in under the new law to pursue the file and suspend strategy. Consequently, I advised Sarah to immediately file for her retirement benefit and suspend its collection. (I said immediately, because if you file and suspend after April 29, you can’t, thanks to the new law, provide your spouse or children benefits on your work record while your own retirement benefit is in suspension.) Once Sarah did this, Bill, upon reaching 66, could file just for his spousal benefit (equal to half of Sarah’s full retirement benefit) and let his own retirement benefit continue to grow. At 70, Bill would file for his retirement benefit when it would start at its maximum value.
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Sarah took time off from work and went into her local Social Security office in Riverhead, New York. She was told she could file and suspend her retirement benefit. This was right. But then she was told that Bill would not be able to file for just his spousal benefit in August, because he won’t be 66 by the end of April. This was “dead wrong” to use the words of another senior Social Security official with whom I spoke. The Social Security staff confused the grandfathering deadline involving suspending benefits and still being able to provide auxiliary benefits off of a suspended retirement benefit with the grandfathering deadline for avoiding deeming between full retirement age and 70. (Deeming refers to being forced to take both your retirement and spousal benefits at the same time if you take either of the two. As a result, you receive what essentially amounts to the larger of the two benefits.)
The deadline involving suspending involves age and time. You have to be 66, and you also have to suspend your retirement benefit before April 30, 2016 to still be able to provide your spouse and children benefits off of your suspended retirement benefit. The deeming deadline has now passed. You had to be 62 before Jan. 2, 2016 to avoid being deemed between full retirement age and 70.
Carol asked to speak to a supervisor and the supervisor confirmed the same mistaken information. She left the Riverhead office and called Social Security’s 800 number. She spent an hour on hold only to be told by the Social Security staffer on the phone the same wrong information for the third time that day. When she explained that she didn’t believe she was being told the right information, the person on the phone said that Social Security had sent out “guidance” about the new law and this was based on that “guidance.” If she wanted to hear this in person, she was told, she should go into her local office.
I have now spoken with three senior officials at Social Security about this problem. They are very concerned, have already issued one emergency memo and are, I believe, going to take further steps to sort out staff on this critical matter. But having read the emergency memo on deeming, I can see that it’s not something that most staff will easily digest. It’s written in technical terms that make it hard to follow. Also, there are no examples that clarify how to treat a household like that of Sarah and Bill.
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So here’s my suggestion to all Social Security staff around the country. Please read this column and other columns I have written about the new law, which are posted here. Also, take a look at “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” which I co-authored with Paul Solman and Phil Moeller. We have a new edition of the book, which deals with the new law, coming out on May 3. But the current edition will give you a good refresher course on how the system worked through Nov. 2 (and in many cases still works) and help you put the new provisions in context.
And here’s my advice for households. If you think Social Security staffers are telling you the wrong thing, you may be right. You need to know exactly what you can and can’t do with Social Security before you speak with Social Security on the phone or in the local office or file for any benefits online. Finally, if you are told something by Social Security that you think is wrong, don’t take no for an answer. Keep asking to speak to someone else until you find someone who really knows their stuff. I hope from what Social Security officials tell me, this will soon be everyone. But I’m not holding my breath.
As for Sarah, her story has a happy ending. This is an example of Social Security staff jumping on a problem and fixing it, and they deserve some credit for so doing.
Thank you both for being so solicitous. I have just gotten home from a visit to the Riverhead Social Security Administration office where I got excellent help. A Mr. J. Garcia helped me fill out all the necessary forms and was extremely clear to both me and my husband about the process and what we needed to do in the future (for both Social Security and Medicare). He confirmed that if I did file and suspend, my husband in August could file for spousal benefits. He also said that my husband did not need to file and suspend himself; he could just file for the spousal benefit at that time and his own benefits would continue to grow until he filed when reaching age 70. The process was finished quickly and efficiently.
The manager, Ms. Ceddin, also came over. She mentioned that she’d gotten notice that the office had given incorrect information and she asked me about it – both what wrong information we’d received and when. She apologized and wanted to make sure we were satisfied with our experience this time.