Social Security’s website self righteously proclaims, “We take fraud seriously and so should you.” Yet the biggest perpetrator of Social Security fraud is surely Social Security itself. I’ve been exposing the system’s fraud, incompetence, malfeasance, and outright cruelty for decades — in my Ask Larry Social Security column, originally appearing in PBSNewHour and, in recent years, in Forbes, on my company’s Social Security software website, in my co-authored New York Times bestseller, Get What’s Yours - the Secrets to Maxing Out Your Social Security, and in my new book, Money Magic - an Economist’s Secrets to More Money, Less Risk, and a Better Life.
In short, when I accuse Social Security of doing X, I provide overwhelming evidence and do so on an ongoing basis. My case against Social Security doesn’t stem from any fundamental animus with the system’s goals. Given how poorly we Americans handle our personal finances, amen for a government program that effectively forces us to save and insure against early mortality, excessive longevity, divorce, disability, poor earnings, shortened careers, and more.
But there is no reason we can’t fix the system’s awful problems, including its terrible insolvency as well as its ingrained sexism. There’s certainly no reason to keep running the system with incompetent Commissioners who make no attempt whatsoever to address any of Social Security’s internal problems.
And there’s no argument for maintaining a decades-old system that, with its 2,728 rules and hundreds of thousands of rules about those rules, literally defines the term user nightmare. The right answer is to redesign Social Security from scratch while preserving and strengthening all its legitimate functions not to mention saving it from financial collapse. I describe, in a few pages, how this can easily be done, on a bipartisan basis, in my book You’re Hired.
But back to the current system and its systematic, massive benefit theft from, of all people, elderly widows and widowers — theft that yet to be stopped, let alone addressed by compensating it victims!
Theft is a strong word. So, don’t take it from me. Take it from Social Security’s own Inspector General (IG), whose 2018 report estimates that Social Security wrongfully deprived over 13,000 widows and widowers of $132 million and counting!
The fraud the IG documented was spotted back in 2013 by John McAdams. John is an outstanding, long-time, Social Security claims officer working at one of Social Security’s Philadelphia offices. John began blowing the whistle on Social Security’s widow-scamming starting in 2013. It took five years, but Social Security’s IG finally investigated.
John contacted me in 2015 about what was going on. At the time, I was writing Ask Larry columns for PBSNewsHour about Social Security. I now do so for Forbes. (You can post here and read answers at my company’s maximizemysocialsecurity software website.) Anyway, this is how John knew I wasn’t just answering Social Security questions, but also exposing its truly unbelievable mistreatment of the public.
After hearing from John, I immediately wrote a column for PBSNewHour about the system’s widow(er) scam. I wrote another column in Forbes in March 2018 about the issue when the Inspector General’s report appeared. And, in 2020, when John told me the IG report was being ignored, I tried to get victims to sign up to sue Social Security under a class action suit via yet another Forbes column. I also included the issue in my New York Times co-authored bestseller, Get What’s Yours - the Secrets to Maxing Out Your Social Security and in my new book, Money Magic - an Economist’s Secrets to More Money, Less Risk, and a Better Life. In short, like John, I’m committed to ensuring Social Security pay back what it has stolen and end its theft.
Let me clarify the precise nature of the theft via an example using my company’s $40 maximizemysocialsecurity.com (MMSS) software. Take a hypothetical 62 year-old widow, named Joan, who retired in January when her husband, John, passed. Last week Joan contacted Social Security to decide whether to collect widows benefits. They suggested she do so and also file for all available benefits. Joan naturally said yes, assuming this was to her advantage. It was nothing of the kind. In saying yes, Joan was instantly defrauded to the tune of $175,431!
This MMSS calculation assumes Joan can receive a $3,000 inflation-adjusted retirement benefit if she waits till age 70 to collect and that John was receiving a $2,500 retirement benefit when he died. (It also assumes a real discount rate of 0.59 percent and an inflation rate of 3.56 percent in line with the prevailing yields on 30-year inflation-protected and nominal Treasury bonds.)
By saying yes, Joan was effectively given the larger of the two benefits, namely $29,555. This constitutes her reduced widows benefit. (It’s reduced because she’s taking it before her full retirement age of 67.) It’s the inflation-adjusted amount she’ll receive each year for the rest of her life. The rest of her life could encompass 38 years, if Joan lives to her maximum age of 100.
By saying yes, Joan was, in Social Security’s convoluted language, actually given her reduced $20,944 annual retirement benefit plus a reduced annual excess widows benefit of $8,610. The total adds up to $29,555 because every dollar of Joan’s reduced retirement benefit lowers her reduced excess widows benefit by one dollar. In short, saying yes (or having a staffer specify yes without Joan’s knowledge) gains Joan nothing.
But the word yes, costs Joan $175,431 because if she answers no, not yes, she can wait till 70 and collect an annual retirement benefit at its maximum value of $36,000 per year. How so? Because a) her retirement benefit will not be reduced due to Joan’s linguistically “taking it” before full retirement age. Moreover, it will be increased beyond the full retirement age retirement benefit amount due to Joan’s receiving three years of Delayed Retirement Credits. All in all, not saying yes or not having some staffer enter yes out of ignorance or malice deliversJoan with 76 percent higher real retirement benefits starting at 70 while receiving not a penny less in benefits prior to 70.
In Social Security’s Inspector General’s words:
We did not find any evidence SSA had informed claimants of the option to delay their retirement application when they applied for benefits, as required. We also found that SSA did not have systems controls in place to alert its employees when they should inform widow(er)s of their option to delay their applications for retirement benefits. … (Based on its practices,) we estimate SSA underpaid about $131.8 million to 9,224 beneficiaries who were age 70 and older. In addition, we estimate SSA will underpay an additional 1,899 beneficiaries who were under age 70 about $9.8 million, annually, beginning in the year they attain age 70.
To repeat, Social Security has, to date, done nothing to compensate it victims, let alone stop its practice — any competent software programmer could fix in five minutes!
Now for the rest of the story.
I recently learned, again via John, that Social Security has publicly stated in the smallest of small print that it will neither provide recompense for its malfeasance nor stop its ongoing scam.
In an email, John detailed Social Security’s justification of its theft.
In the following letter to the President, Social Security provides a footnote at the bottom of the 2nd page. It provides the only written response I’ve seen anywhere that discusses SSA’s refusal to reimburse the widow(er)s its defrauded:
President's letter OSC File No DI-19-0626 (SSA OIG audit)_RedactedPF.pdf
It says: “SSA declined to re-open and reimburse affected claimants, citing the agency’s Rule of Administrative Finality.”
Admin Finality says if a claimant is getting TOO MUCH in benefits, if we only discover the error after more than 4 years, then we let them keep the increased payments for the rest of their lives. If they were getting TOO LITTLE, as is the case with the dually entitled victims, we can go back and pay them the amount they’ve been short-changed all the way back. So this “reason” is completely bogus.
John McAdams continues to blow the whistle. This week he appeared on Full Measure to discuss Social Security’s decades-long and continuing widows scam.
It’s time for the President, Congress, and the Consumer Financial Protection Agency to take all steps needed to force Social Security to pay what it owes and to stop its ripping off of innocent widow(er)s.
More generally, we all need to understand that Social Security is systematically giving misleading, incomplete, or incorrect “advice.” No one should listen to a word a Social Security staffer says — not a word. Instead, you should use expert Software (MMSS costs all of $40!) and simply tell Social Security what to do. And don’t do so over the telephone. Only file in writing, indicating in the section for comments precisely what you are and aren’t applying for.
Again, you can say No on the phone and the staffer can tell the system Yes. In Joan’s case, if she says No, but the staffer specifies Yes, she’ll spend the next eight years expecting to collect an extra, inflation-adjusted $6,445 annually starting at age 70. This is when she’ll contact Social Security and request they start her Social Security retirement benefit. They’ll then tell her, Sorry, you’ve been taking your retirement benefit for the last eight years. Sue will scream, “But I never applied for it.” They will reply, Sorry, the system says you did. And Sue will have absolutely no recourse unless she has documentation that she said no.
One last point. Taking your widow(er)s benefit first and your retirement benefit second is not always optimal. It’s often better to do the reverse. But filing for both at once is, for thousands of widow(er)s, generally a huge mistake — a mistake one that Social Security will and does routinely help you make.
PS, Here is an email John sent me describing a 2015 meeting with then Social Security Acting Commissioner Carolyn Colvin and his email documenting the meeting. (Acting is the right word!)
Good Afternoon Commissioner Colvin,
On June 11, 2015, I had the pleasure of joining my Council President, Agatha Joseph, in a meeting with you to discuss the future role of the payment centers and other issues.
During that meeting, we brought to your attention an issue from one of our members. Here is a brief recap.
TWO YEARS AGO I brought up the issue of widows who were simultaneously entitled to both Retirement (BIC-A) and Survivor (BIC-D) benefits, thereby robbing them of their ability to file for DRC’s at a later date. Instead of actively searching out these claimants and making them whole, I’ve been told I can investigate them on a case by case basis as I accidentally stumble across them – and then have the local field office make their own determination as to whether misinformation was involved.
I kept pushing the issue and eventually was threatened by my superior with, Rest assured that your concerns are being addressed by the subject matter experts in OAS…. What I need for you to do is… focus on your work assignments… Not just select few who may have been disadvantaged.
Laurence Kotlikoff is a Boston University Economist, a NY Times Best Selling Author, President of maxifi.com, and Author of Money Magic.
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I write often about Social Security and Medicare for a variety of companies -- mostly. The complexity of both programs is absurd. People can't help but make bad choices.
Thanks Larry for keeping the fight going, it is dishonest and wrong what SSA continues to do.