Over the line

 NPR describes the experiences of those who inadvertently ended up disqualifying themselves from SSI and other programs managed by the Social Security Administration, and ended up owing thousands in overpayments. 

The asset limit of $2,000 has not been updated since 1989, it reveals. 

Unexpected information from SSA

When you apply for Social Security benefits, the Social Security Administration will review the reports that it has received from former employers. If it finds information about a pension plan that you participated in during a period of employment, SSA will notify you of that plan and the fact that you might be entitled to benefits. One client of ours learned that she was entitled to $235 per month that she did not know about, in addition to her Social Security benefit.

Social Security marriage wrinkles

1. Are you approaching age 60?
2. Are you currently unmarried? 
3. Were you previously married for more than 10 years?
4. Have you been divorced for more than two years?
5. Did your ex-spouse have higher lifetime earnings than you did?

If you answered yes to all of these questions, or in some cases all but the second, then you may be entitled to a social security benefit payment that is higher than the benefit you would receive based on your own earnings.

If your ex-spouse is alive, you will be entitled to a benefit of one-half of what his or her benefit is, if that figure is higher than your own, beginning as early as age 60, or in some cases even age 50 if you are disabled. Taking that benefit will not reduce the benefit that the ex-spouse and his/her current spouse will receive.

If your ex-spouse is deceased, you will be entitled to a benefit that is 100% of his/her benefit, under the same conditions.

Normally, this benefit is available only if you have not remarried. If you remarry after age 60, however, it is available.

There are other wrinkles as well - other very rare exceptions to this divorced widow(er)'s remarriage penalty that will apply to those who remarry before age 60, based on the Social Security status of the new spouse. Contact us for additional details, if desired.

Social Security and "fairness"

In Playing God with Social Security Fairness, economist and Social Security guru Lawrence Kotlikoff responds to an article by economist Alice Munnell, criticizing Kotlikoff and others for promoting strategies for maximizing their Social Security benefits.

Munnell quotes the Obama Administration as saying that these strategies "allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits." Not mentioned, of course, is that the vast majority of people receiving Social Security benefits depend on them as their sole or major source of income, and are far from "upper-income." Any of them, not just those with high incomes, can follow the recommendations made by Kotlikoff and others to maximize what they will receive.

Kotlikoff notes that using the methods that are built into the system by Congress and the Social Security Administration is simply not "gaming the system." He states further,

"It's not our jobs as individual citizens to make the system more equitable by paying more taxes or taking fewer benefits unless we can persuade everyone else in our shoes to do the same thing, which we most certainly cannot."

Many decades ago, in Commissioner v. Newman, 159 F.2d 848 (1947), Judge Learned Hand said,

"Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

But that quote was about taxes, you may say. These authors are advising people about governmental benefits.

As Kotlikoff notes, there are 25 or more different systems within which citizens interact financially with their governments, and many have elements of both positive tax (money paid to the government) and negative tax (money received). And of course the Social Security system is comprised of a combination of taxes paid by those who work, and benefits received by those who become eligible.

The "fairness" issue is very similar to that involved in Medicaid planning by elder law attorneys. These lawyers advise clients about, and use, the techniques permitted under the Medicaid statute and rules to allow clients to become eligible for Medicaid coverage for nursing home care when that need arises. Some years ago, Congress responded to that issue by enacting an amazingly hamhanded and clearly unconstitutional statute that simply made it a crime for lawyers to advise their clients on how to make themselves eligible for Medicaid coverage.

The government can, and occasionally does, take action to modify the rules if it appears that there are unforeseen complications or problems. If the rules lead to an undesired result, Congress or the SSA is free to change the rules. But to criticize lawyers and other advisors for telling citizens what the rules are and how they can maximize the benefits that they receive is contrary to our sense of fairness.

Attorneys as representative payees?

An article in Bifocal, the journal of the American Bar Association's Commission on Law and Aging, notes that the Social Security Administration is "considering several long-term strategies" to address the fact that there are numerous social security recipients who are of limited capacity, in need of a representative payee, but for whom no suitable family member or friend is available. The SSA believes that attorneys, regardless of their areas of practice, are particularly qualified to serve in this role on a pro bono basis. (What is not mentioned in the article is that retired attorneys are in an even better position to serve.)

The SSA is pursuing a pilot program in the State of Maryland and will consider expanding it to other states depending on the response.

Social Security calculations

If you have done some reading on the subject, you no doubt know that you will need to decide at what age you wish to start drawing social security benefits, and that decision will make a significant difference on the level of your monthly benefit. Much of the available online information makes it appear that you have only three choices: begin to draw benefits at age 62, the full retirement age, or age 70. In truth, you can begin at any time between age 62 and age 70. The longer you wait, the larger your monthly benefit will be. A person whose full retirement age is 66 will find that the monthly benefit increases for each year he waits after age 62:

Age	Monthly
62	750
63	800
64	866
65	933
66	1,000
67	1,080
68	1,166
69	1,240
70	1,320

Thus, a single 62-year-old can increase his benefits by 33% by waiting until age 66, and by 76% by waiting until age 70. That decision is permanent. If he chooses to draw $800 per month at age 63, that will be his monthly benefit for the rest of his life.

Should he start at age 62 or should he wait? For some people, there is no choice. If they are not working, have health issues, or otherwise need the money now and cannot wait, they will start as soon as they can.

For those who can choose, life expectancy is a major consideration. The retiree who waits until age 66 or age 70 will catch up at a certain point, assuming he lives that long, and after that he will be ahead of the game when the total cumulative benefits are considered. The longer he lives, the further ahead he will be.

After doing some calculations, we estimate that the breakeven point, after which the retiree who waits will begin to pull ahead of the one who takes benefits early, will be:

Contrast	Breakeven
Age 66 vs. age 62	Age 76
Age 70 vs. age 66	Age 81

For the married worker whose spouse will be drawing spousal benefits, the same breakeven point applies, but the dollar difference is more pronounced because the spousal benefit is calculated as a percentage of the worker's benefit.

This SSA publication (PDF) is very informative on the subject.

See our previous entries on social security planning.

Useful site for Social Security information

One of the very useful sources of information on the web is well-hidden. Larry Kotlikoff is Professor of Economics at Boston University and is the author of Ask Larry, a weekly column posted at the PBS web site. The column, posted somewhat irregularly, answers questions from readers and viewers on some of the finer points of social security benefits. Highly recommended, although a caveat is warranted. The advice that is given does have occasional inaccuracies, so it should be double-checked with the Social Security Administration's own web site.

The timing of social security benefits

Bob is 61, working as a physical therapist, and is the owner of a clinic with two other therapists. He earns an average of $170,000 per year. His wife Carol, also 61, is a homemaker. She had worked as a medical secretary, full-time for 14 years before their first child was born, and part-time for the next ten years before her position was eliminated. She has not worked since. She made $30,000 per year in her last year of full-time work.

Both of them have earned enough credits to be eligible for social security benefits. They could begin as early as next year, when they reach age 62.

These are among the considerations:

• If Bob retires at age 62 and begins collecting social security benefits, he will only receive 80% of what the benefit would be if he waited until 66, his "full retirement age." 
• If he waits until age 70, the benefit he will receive will be 32% higher than the NRA figure, and 64% higher than the age 62 figure. 
• The percentages of each will change each year. No one has to choose between age 66 and age 70. If Bob wants, he can decide to retire at age 68. 
• When Bob begins collecting his benefits, Carol will be paid a spousal benefit that is 50% of Bob's benefit. That calculation, which uses his earning record, will be much higher than her own benefit, using her earning record. Essentially, the household will receive payments equal to 150% of his benefit. This is all the more reason to wait until he is age 70. 
• If Bob dies, Carol will begin collecting benefits equal to those he was receiving, based on his earning record, in her own name. 

Carol cannot start receiving that 50% spousal benefit now. She has to wait until Bob starts collecting. But there is one step that she could take now. She could apply for a benefit based solely on her earning record now, and collect that (lower) monthly benefit until Bob decides to retire at age 66 or later. When he does so, she can then apply for the 50% spousal benefit.

Most people in her position should take that step. When Bob does retire, the total combined 150% figure will take effect, and it will not be affected by her decision to start taking her own benefits early. The cost-benefit analysis that goes into the personal decision on the question of when to retire does not enter into this question. If she does not begin collecting benefits on her own record now, that money will be forever lost.

As always, consultation with a qualified adviser is recommended.

Social Security information online

The Social Security Adminstration has announced that it will no longer send an annual statement to workers to list the earnings that have been reported on their social security numbers and to provide a projection of the levels of benefits.

Instead, it now offers an online service called My Statement. In addition to the information previously contained in the paper statement, it will give the registered visitor links to submit an application for benefits online.

The site also has other calculators which will help with estimating benefits for those who may not qualify for social security based on their earnings history.

Previously: We can help with Social Security Planning.

Social security planning

Should you retire at age 62? at 66? at 70? The answer you give makes a big difference to how much you and your spouse will receive in Social Security benefits.

Did you know that the spouse of a worker whose earnings were much higher can elect to receive a benefit based on the worker's earning history?

How much will the lower wage-earning spouse receive as a spousal benefit? Should he or she choose to receive benefits based on his/her own earnings history or instead elect to receive spousal benefits?

We can assist with these issues. We can run a series of calculations based on the reports that you have received from the Social Security Administration, and provide a comparison of the amounts that you and your spouse will receive based on different retirement dates. We can calculate the "family maximum" that limits the amount that the worker and the spouse can receive if both draw benefits based on the worker's earning history.

This information will allow you to make more knowledgeable choices.