Discover more from Economics Matters by Laurence Kotlikoff
Social Security Horror Stories -- Contents and Introduction
Keep What's Yours! Please buy this book to stay out of Social Security's horrific clutches and avoid its terrible scams. And please send copies to your members of Congress.
Part 1 Social Security Nightmares
· 1 Nightmares by the Numbers
· 2 The
Nightmare Claw in Your Mailbox
· 3 Welcome to
Clawback Social Security Hell
· 4 Terrorizing Teachers and Other Public Servants
· 5 Impoverishing the Disabled
· 6 The Claw from the Grave
· 7 Ending Social Security’s Financial Abuse
Part 2 Social Security Scams
· 8 Social Security’s Foundational Scam
· 9 The Use-It-or-Lose-It Scam
· 10 The Widows Scam
· 11 The Retirement Trap Scam
· 12 The Contribute-for-Nothing Scam
· 13 The Benefit Taxation Scam
· 14 The Take-Your-Benefits-Early Scam
· 15 The Crazy Calculator Scam
· 16 The Employer Contribution Scam
· 17 Social Security’s Sexism Scam
Part 3 Avoiding Your Personal and Our Collective Social Security Horror Stories
· 18 Knowledge Is Power
· 19 Don’t Trust Social Security
· 20 Treat Social Security for What It Is—Your Potential Adversary
· 21 The Appeals Process—or non-Process
· 22 Keep Your Own Records
· 23 Social Security Is Dysfunctional
Conclusion: Action Is the Only Reaction
Social Security was created out of a dream to make all Americans’ lives far more secure. The initial goal was that no older American would live in poverty. That dream has turned into an actual or potential nightmare for each of us—old or young, rich or poor, healthy or disabled. The nightmare comes in a letter clawing back benefits that Social Security says it paid out in error.
Social Security is quietly issuing a million clawback letters every year. Its 2022 Annual Trustees Report says recipients collectively owe $21.6 billion because of Social Security’s mistaken overpayments, essentially none of which appear to reflect fraudulent claims.
Compared to Social Security’s total yearly outlays, $21.6 billion is a small number. But it is a financial disaster to those depending on their monthly benefit. Even worse, Social Security’s demand letter comes with no explanation, no proof, no accounting for their error. Instead, it comes with a demand for immediate repayment—or the threat that the money will be withheld from future benefit checks.
At any point in time, roughly five million households are experiencing or contesting Social Security’s basic rule: Our mistake is your problem. In other words, when Social Security makes a mistake, it bears no responsibility or cost. You are the one that must repay—immediately out of your savings or through cuts in your future Social Security benefit checks. In fact, you may never have personally filed for Social Security and still receive a clawback letter. Or your disabled brother may receive one and now you’re on the hook as they will likely cancel his benefit within a month — for years if not decades.
Since Social Security bears no cost for its egregious mistakes, it has absolutely no incentive to fix its software and train its staff to get things right. Its mistakes cost the system vital resources and billions in administrative dollars—funds needed to help cover Social Security’s huge financial shortfall.
The clawback letters can be for $175 dollars or as much as $304,122. They can arrive soon after benefits begin, or 45 years later. They can come for benefits you technically received at age two for which your now-deceased parents applied. The clawback letter can appear the month your husband dies, announcing that your widow’s benefit isn’t coming for the next 18 years to recover excessive retirement benefits paid to
you’re the spouse you buried last week. husband.
These demands fall particularly hard on the poorest among us—senior citizens who depend on their monthly checks for basic needs and disabled families who have no other source of income. Confiscating benefits when recipients are unable to work can represent a financial and physical death sentence. Minorities are disproportionately poor and, thus, disproportionately victimized.
Clawback letters all have common denominators—deadlines, threats to cut current or future benefits, and not a word of explanation. Each letter is admitting a mistake. But with no explanation, no one can tell whether the alleged mistake is, itself, a mistake.
Everyone who is grabbed by Social Security’s merciless claw is in the same boat—powerless to deal with a bureaucracy that violates all norms of due process and provides no explanation of its actions. It’s a bureaucracy that rarely responds—leaves you on hold for hours, schedules calls that never come, always deflects responsibility, and keeps no records of your case.
This book confronts the system that is quietly overwhelming our most vulnerable citizens and, indeed, all of us. It’s also about terrible scams Social Security is running, of which very few are aware. These include the widows scam, the use-it-or-lose-it scam, the earnings test scam, and the take-your-benefits-early scam. Some can cost you a small fortune over your lifetime. All are intrinsically linked to Social Security’s foundational financing scam and all are described here, along with advice on protecting yourself. And if you are female, get ready to be outraged. Social Security is an incredibly sexist institution that specializes in scamming women based on provisions enacted by men who sought to punish and control women who didn’t toe their line.
This book is not about addressing the future solvency of the Social Security system, which its trustees have clearly revealed. Yes, within a decade—unless substantial reforms are made by Congress—Social Security will find itself unable to pay out promised benefits in full. That comes as no surprise. Instead, we want to reveal today’s horror stories—happening to your mother, father, child, or friend -- even as we write this book. Left unchecked, you may be the next victim. These are travesties that can and must be confronted immediately.
We are two distinct voices who find ourselves in perfect harmony when it comes to sounding these alarms. We both seek to fix Social Security, not end it. We both think a well-functioning Social Security system is essential. But so much of what’s going on under Social Security’s hood makes a mockery of the system’s title, specifically the word “security.”
We both write to the public about personal finance. Larry is a Boston University economist, and Terry Savage is a nationally syndicated columnist. We learned about clawbacks from readers describing their personal horror stories. Over time, we realized that the stories coming our way were just the tip of the iceberg—that millions of Americans were being clawed back and caught in Social Security’s impenetrable bureaucracy, with millions more facing their own vicious claw grabbing
their income both their wallets and their throats. As for scams, we are both students of the system. We know all the good the system is doing and precisely where its bodies are buried. It’s time to pinpoint those graves.
To reiterate, this book is not about all the well-publicized concerns over the future solvency of Social Security. Instead, it is about the dysfunction of the current system that is causing massive financial pain for so many Americans. We do, however, expose the system’s original sin—lying about the nature of its financing. One lie begets another, and the system’s original lie turned deception into
a Social Security’s basic operating principle.
Avoiding Your Personal Horror Story in Three Parts
Our book has three parts. The first details personal horror stories that are truly unbelievable. We’re not writing a Steven King novel. This is nonfiction. We’re letting you know precisely what’s happening (in the words of clawback victims) to so many of us every day.
Part Two is about Social Security’s aforementioned terrible scams that are secretly harming millions of us and our children—being induced to check an extra box on a form and losing hundreds of thousands of dollars in future benefits; making a lifetime of Social Security “contributions” in exchange for not a single red penny of extra benefits; remarrying a day before age 60 and losing widow(er)s benefits from your deceased former spouse; being conned into not returning to work under threat of a massive tax that’s isn’t. And the list goes on.
Part Three is our advice on how to avoid clawbacks and the system’s other traps. Indeed, there are simple steps you can take to avoid your own horror story. This will require a bit of work on your part. You’ll need to create your own assessment of benefits owed instead of relying on Social Security calculators. You’ll need to understand the tradeoffs of claiming early and of dealing with spousal benefits. As well, you should be able to get a
real estimate fully correct measure of the benefit reductions caused by facing retirees who also have public service pensions or retirement accounts from jobs not covered by Social Security.
As you’ll see, that’s information you can access on your own. But your efforts will provide a huge payoff. You will know that the benefits you receive are exactly what you are owed. The computations will be easy once you input your information into the user-friendly tool
– Maximize My Social Security (MMSS) – that was developed by Larry. It can tell if you are being overpaid or underpaid if you’re already collecting, as well as what you should receive once you start collecting.
Other commercial programs may also get these calculations right, at least in simple cases. But you need to act before the error adds up to a small fortune—your retirement fortune. Social Security may take 45 years to figure out a mistake. The amount of a clawback can be astronomical—$301K is the highest amount we’ve seen to date.
We prescribe remedies for this unacceptable failure of process. Some involve money to update the creaking computer systems that fail to gather information and track its processes. But other fixes involve the leadership of this important agency, to create a culture of service and training that enables hard-working employees to fulfill the agency’s pledge to provide superior customer service. In that regard, we recommend Social Security create an ombudsman’s office, similar to the Taxpayer Assistance Center at the IRS. Attention must be paid immediately, instead of allowing problems to fester over the remaining lifetime of older Social Security recipients.
We’re also going to enlist you in an extremely satisfying collective mission—ending Social Security’s financial malfeasance, including the system’s Ponzi scheme that’s threatening to ruin our retirements and bankrupt our children. Through our collective efforts, Social Security can be the system we revere, not the system we fear.
Let us tell you more about our background so you’ll know we are here to protect you.
Larry and Terry
Larry is, as mentioned, a Boston University professor. As his Kotlikoff.net website makes clear, Larry works on everything from climate change to healthcare to tax reform. But his passion, exemplified by his software company and latest and award-winning book, Money Magic—an Economist’s Guide to More Money, Less Risk, and a Better Life, is conveying economics-based personal finance. He’s on a mission to help people plan their finances properly, as economics and common sense prescribes. In 2022, he was honored with the SABEW award for Money Magic, the top personal finance book of the year.
Larry founded Economic Security Planning, Inc. in 1993. He’s never taken a penny of salary. He works for free for two reasons—to better compensate his employees (full disclosure: including two relatives) and to keep the prices of his company’s software tools as low as possible. His best-selling book, Get What’s Yours: the Secrets to Maxing Out Your Social Security, was co-authored by Larry, Paul Solman of PBS NewsHour, and Phil Moeller, longtime personal finance journalist.
Terry is the best-selling author of The Savage Truth on Money and a nationally syndicated personal finance columnist for Chicago Tribune content agency. She has won a National Press Club award for her financial reporting. Terry appears regularly on WGN-TV and WGN-Radio in Chicago, and is a frequent guest on national news programs. She is a registered investment advisor, and was a founding member and the first woman trader on the Chicago Board Options Exchange, as well as a trader on the Chicago Mercantile Exchange, where she now serves on the Board of Directors of CME Group. Her weekly columns are designed to demystify the financial markets and planning decisions. Terry answers money questions on the “Ask Terry” section of her website, TerrySavage.com.
We have each dedicated our lives to helping people make smart money decisions. This book is an extension of our mission.
Grab a Drink
Our first story comes from a victim who emailed Terry. She could be you, your mother, or your grandmother—now or in a few years. This is one of the many, many emails we received that made us realize we needed to understand the magnitude of the system’s clawbacks and other problems. So we both started writing columns—Larry in his Forbes column and on his Substack newsletter, larrykotlikoff.substack.com, and Terry in her syndicated column and posted at TerrySavage.com—asking readers to send us their horror stories.
Here’s that first email from a widow named Ruth who was horrified at a notice from Social Security telling her they had made a mistake and were clawing back $87,000 of benefits, potentially forcing her to sell her home.
In May 2021 I received a letter from Social Security stating I owe $88,734 dollars because I was not entitled to my husband’s benefits because I collect a pension. I went through all the process with the SS office, brought in all documents that were needed by them and nothing was ever told to me by them that I was not able to collect. I filed an appeal but never heard from them until now!
I am 73 and had a heart attack with triple bypass done. I don’t want to lose my house!! I have all documents since this began almost 2 years ago. With COVID they never would get back to me and offices were always closed. Now they are threatening me. Please help!
Ruth is not alone. Millions of seniors and disabled people are facing this nightmare. We will tell you their stories—and more. In fact, we continue to collect these stories at our website, www.SocialSecurityHorrorStories.com, where you can post your personal experience and get updated on our latest efforts to pressure the Agency and Congress to make changes.