Discover more from Economics Matters by Laurence Kotlikoff
Social Security Blows It Yet Again, But, With My Company’s Help, Ultimately Redeems Itself
Originally Posted on Forbes.
Half of Social Security's advice is wrong, misleading, or incomplete. Here's a case where Social Security both under-estimated widows benefit and failed to pay spousal benefits for years. But with my software company's help, one top staffer made things right.
Here's a description from Emily (not her real name) of Social Security's original misestimate of her widows benefit and its failure to pay her the spousal benefit she was owed when her husband was alive. Ultimately, a Social Security employee calculated the right amount and got her paid missed spousal benefits—but only after Emily consulted outside experts who thought something was amiss and then persisted.
My bottom line?
No one should file for Social Security without at least running some other private software you trust. (Full disclosure: one private option is my company’s Social Security lifetime benefit optimization program and I play a part in Emily’s story.)
The problem, as explained here, is that Social Security's benefit calculators are not to be trusted. In very complex cases, like the one Emily describes below, Social Security actually makes calculations by hand! If the person making the calculations is as knowledgeable as the typical staffer, you could be given either too little or too much. If it's too little, you'll never necessarily learn you're being underpaid. If it's too high and they discover their mistake, it will be deemed your fault (I kid you not) and you'll get a potentially huge bill in the mail. I saw one such bill, sent to a disabled worker, for $300K! — all due to Social Security misinformation.
The following is Emily’s report:
Larry, After my husband died and on the advice of several resources, I contacted my local Social Security office to report his death. He had been receiving social security disability benefits after being diagnosed with recurrent and metastatic colorectal cancer, about two years previously.
During the call, the representative set me up for a survivor-benefit claim phone appointment. Prior to that appointment, I was to bring in my original marriage certificate and put it in their dropbox. They already had the electronic death report from the mortuary.
I explained about the specific complications in my situation:
1. My husband was receiving disability benefits at the time of his death at age 63.
2. I was receiving retirement benefits for a little more than two years, since age 62.
3. My husband had two adult sons from his first marriage who had both been determined to be disabled since before they were aged 22 and were receiving disabled child benefits.
4. It was unknown whether one of them had possibly done some W-2 work at some point.
5. The two adult sons had also been collecting survivor’s benefits from their mother’s social security; she had died about three years prior.
I was told there is a Family Maximum amount and that amount would be divided between myself and my husband’s two adult, disabled sons, depending on which deceased parent’s benefit would give them more money, after calculating for my percentage, where applicable.
The telephone appointment took two and half hours. In spite of this being such a complex case, a trainee was assigned to the call. At one point, a manager was brought on. She explained the total benefit would be split between myself and my deceased husband’s disabled adults sons, “like a pie, cut in thirds” and that the amount I would receive would be between $500-$800/mo, plus my monthly retirement benefit (of $800). I was told it would take up to six months for the calculations to be made and the amount to be determined.
I was also told they had lost track of our marriage certificate and that the claim couldn’t proceed without that document. The following week, I called the office again. The representative shook some things up, located our document and got things on some track again.
During the following months, I consulted with several financial advisors and hired an estate lawyer to help me make arrangements for my now-single-person’s affairs. They were all very skeptical that the amount quoted to me was accurate. My estate lawyer suggested I speak with an advisor whom she knew had a lot of experience with complex situations.
The advisor asked a lot of questions, then said there was a high likelihood Social Security would figure the wrong amount and that the only way for me to get an accurate monthly payment would be to consult with the country’s top expert on complex Social Security matters, Laurence Kotlikoff. He directed me to Kotlikoff’s “MaximizeMy Social Security” website and I emailed a brief description of my complicated situation on the contact page.
Larry Kotlikoff contacted me directly and after asking more questions, began a flurry of email communications between himself, me, and two of his company's experts. They figured out the likely (given the data I had) amount — a thousand dollars a month more than the minimum amount I’d been quoted and also the reason why Social Security was so far off. It was ignoring the combined family maximum — the higher maximum that applied given the boys could also collect on their deceased mom's record. Larry asked me to call my local office to find out the combined family maximum amount they were using for their calculations.
The representative who answered the general line explained that survivor’s benefits were not his area of expertise. He sent several written questions to a specific expert in whom he had confidence. He told me, after a few more exchanges, that she wanted to speak with me, directly.
This turned out to be a very fortuitous contact! She was very knowledgeable, friendly, and compassionate. I told her that Larry Kotlikoff would be very happy to speak with her. She said that likely would not be necessary, because she could see, looking at my case, where things needed to be recalculated.
I told her I was nervous that a trainee had entered information and that, even though the trainee’s submission would be carefully checked, if the information was incorrectly entered, it would affect the results. She replied that the benefit amount she was coming up with was significantly more than the amount I was initially told. She then refigured the amount again, because she realized I was much closer to my full retirement age than first indicated. Her calculations came out very close to what Larry Kotlikoff and his team had estimated.
In addition, the expert asked me why I had received spousal benefits during the 21 months my husband was disabled. I had never been told anything about that. In the two years since my husband’s terminal diagnosis and disability, I didn’t recall any of the more than fifteen social security representatives with whom I’d spoken mentioning anything about spousal benefits. She explained that both my husband’s disabled sons and I should have been receiving benefits during that time.
If I hadn’t received a letter from Social Security telling me to file for those benefits, I was entitled to receive them retroactively. She checked the history of communications sent to me and determined that, in fact, no letter had been sent. She immediately made the calculations on my behalf and submitted for the back payment and the monthly widow’s benefit.
Within just a few days following that call, the deposits were made into my bank account.