As millions of baby boomers make Social Security decisions, it’s important that they have reliable information about the impact of their choices. And the sad truth is that Social Security representatives are unlikely to give correct answers, even to simple questions.
Consider the actual case of a woman we’ll call Ellen, a reader who asked for help on my blog. Her husband of many years had recently passed away. He had been receiving Social Security benefits for several years. And she, too, had taken her allowance, albeit before her full retirement age.
Now Social Security told her she wouldn’t be eligible for survivor benefits because half of her husband’s full benefit was less than her full retirement benefit.
Ellen felt she was being misinformed. After waiting weeks for an appointment to speak with a Social Security manager, she was given more misinformation.
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It was then that I reached out to a Social Security guru, Boston University economist Laurence Kotlikoff, author of the bestselling (and featured in a previous column in this space) “Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life” (Little, Brown Spark).
Kotlikoff has focused on Social Security decisions — and mistakes — for over a decade. In fact, he became so annoyed by the government that he set up his own online service to provide specific advice on benefit decisions. The website, MaximizeMySocialSecurity.com, uses state-of-the-art software to help people make the right timing decisions and potentially discover tens of thousands of dollars in additional lifetime Social Security income.
Kotlikoff has long advised that you cannot trust Social Security calculated benefits. He says, “At least half of what Social Security tells you is either completely wrong, misleading, or incomplete. My rule is never ask Social Security anything. Just tell them exactly what to do.”
And my reader, Ellen, is a prime example of that. I’m going to give you her question, as posted, to illustrate her situation:
“I recently became a widow. I am 65 years old and started receiving social benefits at the age of 63. My late husband, 76, started collecting social benefits when he was 65 years old. I had the impression that if his benefit was higher than mine I would receive his benefit if he died I contacted social security to notify them of his death and was told I would only receive the higher amount if my benefit was less than 50% of his benefit My benefit is over 50% at $65 a month so I was told I’m not eligible I’ve never heard of that and can’t find any information to confirm that what I was told was true.”
After a series of emails to confirm whether her husband was receiving benefits at full retirement age, and when Ellen (early) began taking her own benefits, the experts at MaximizeMySocialSecurity.com concluded that the first Social Security analysis — no extra benefits – was totally wrong.
I won’t bore you with the details, but Ellen has contacted Social Security three times – using questions from Kotlikoff’s team. I was copied on those emails and loved this one from the team: “In the unlikely event that they repeat the mistake, ask them which section of POMS they are basing their claims on and contact us.” (POMS stands for Program Operations Manual System.) Ellen was diligent and had the support of experts.
The end result, says Kotlikoff: “They told ‘Ellen’ she would get nothing on her first call, 85% of the correct amount on her second call, and the correct amount on her third call. If she had stopped calling after her first call , she could never have applied for a widow’s benefit and lost a huge amount.”
How much would she have missed? Well, according to the company’s calculations, if she had accepted Social Security’s first answer and not received a widow’s benefit, Ellen would have missed out on $268,003 in benefits earned (present value) by age 90.
Social Security decisions have a huge impact over the course of your life. It’s worth the $40 cost to run the decision software on MaximizeMySocialSecurity.com.
Whether you’re deciding on the impact of taking your benefits early versus waiting until age 70, or maximizing benefits for a couple, this is more than a simple math problem. And that’s The Savage Truth.
Terry Savage is a registered investment advisor and author of four bestselling books, including “The Savage Truth on Money.” Email her at [email protected]