Social Security is a complex system. I developed a passion for helping people unlock the most from their social security benefits after realizing you truly need to know which type of benefit you should be receiving at any given time and exactly what that benefit amount should be. Sadly, the Social Security Administration (SSA) makes mistakes (quite often) which can cost people thousands in missed benefits. I'll share some real mistakes the Social Security Administration made which nearly impacted our clients over their lifetimes. Without help, they likely would have been none the wiser.
WORKING & COLLECTING
If you don't know this about me yet, I'm a huge Social Security nerd. In fact, we recently finished filming some short videos on social security to help educate people on the topic. My passion began with the first mistake I uncovered. Irene had lost her husband a few years before we met. She was 63 at the time and was still working, but earning very little. Irene began collecting a survivor benefit when she was 60, but a few months later, the SSA stopped her survivor benefit and sent a letter stating she would need to repay the funds she already received. Irene returned the funds and later applied for her own benefit when she attained 62. It happened again! She received benefits for a few months and then they suddenly stopped. When Irene called the administration to find the root of the issue, she was told she earned too much to collect a benefit. When I met her, it was apparent she was struggling to make ends meet. My first suggestion was for her to start survivor social security benefits. Irene broke into tears and told me what had occurred. We arranged an appointment with the SSA and I accompanied Irene to help rectify the issue.
What did Irene do wrong? Nothing! The employee processing her application saw she was working and determined Irene wasn't eligible for benefits. Irene had earned just slightly more than the earnings threshold. This meant she should have had only $1 of benefits withheld for every $2 she earned over the threshold. Irene should have never been completely excluded from receiving a benefit! It took a manager assisting to acknowledge and correct the SSA's error. In the end, Irene was awarded a lump sum of survivor benefits (nearly $45,000) back to age 60 when she first applied. You can begin to see why it's vital to know which benefits you're eligible to collect and why you can't solely rely on information from SSA employees.
Additional takeaways from Irene's story:
- Survivor benefits can begin at age 60 (50 if you're disabled). Personal benefits can begin one month after age 62.
- You can work and still collect a social security benefit. There's an earnings threshold though. For 2021, the threshold is $18,960 if you are under full retirement age for a full year. After full retirement age, the earnings thresholds are removed and you can collect an unreduced benefit while working.
Kevin and his wife, Claudia, both worked and earned a social security benefit. Claudia, who was a bit older and the higher earner, waited until age 70 to collect her benefits. With a full retirement age of 66, this grew her monthly benefit amount by 32% (8% each year). Sadly, Claudia died from aggressive cancer at 72. When Kevin was ready to discuss finances, he met with my team member, Quentin. Quentin advised Kevin to call the SSA and switch from his personal social security benefit to a survivor benefit based on Claudia's work history. Quentin informed Kevin that he would get to benefit from the delayed credits Claudia banked by waiting to collect until age 70. Kevin called the SSA and his next benefit deposit was a few hundred dollars higher than his last, but not nearly as high as the benefit Claudia had been receiving. Quentin checked in on Kevin a few months later and asked him about the survivor benefits. Kevin explained that the SSA told him he would receive Claudia's full retirement age benefit (her benefit at age 66), but not the delayed credits; those only apply to the worker, not the spouse per the SSA employee. Kevin had thought Quentin may have misinformed him and he didn't want to point out a possible mistake. Unfortunately, the mistake was again on the SSA's side. Quentin called the SSA with Kevin and spoke to a different employee. This employee acknowledged that Kevin was indeed eligible for Claudia's delayed credits. Without the correction, Kevin would be missing out on about $550 per month to this day.
Additional takeaways from Kevin's story:
If you delay collecting social security benefits after your full retirement age, you will earn an 8% deferral credit up to age 70. Past 70, there's no longer a reason to delay benefits further.
If a worker dies, their spouse can benefit from the delayed credits as well.
- Often, it's optimal for the higher earner to delay benefits.
FILE & SUSPEND
In April of 2016, Roger and Maggie met with Kerry and me for the first time. One of the many topics we discussed was their social security collection strategy. They were both self-employed and earned roughly the same social security benefit. Roger was 68 at the time and Maggie had just attained her full retirement age of 66. Both intended to delay their benefits until 70 to receive the delayed credits. Kerry and I advised them to have Roger file for his benefit, but to suspend it. This would allow Maggie to submit a "restricted" application and to collect a spousal benefit based on Roger's work history. The restricted application would allow Maggie's personal benefit to accrue delayed credits and at age 70, she could switch to her personal benefit which would have grown by 32%. This strategy would gross them an additional $1300/mo for the next 4 years! There was a catch though. In 2015, congress changed the rules on "file & suspend" collection strategies. After April 30, 2016, this would no longer be an option for filers. Roger and Maggie went to the SSA the next day to beat the upcoming deadline. Roger called me later that day and was quite upset. The SSA employee assisting him and Maggie said that Roger could not file & suspend and that Maggie would need to begin her own benefits unless she chose to delay her filing. Since they had no appointment, they had waited over 4 hours for this result. Surely the SSA employee would give them the correct answer—that's their job after all. Nope, this was yet another mistake. I went to the SSA's own website and emailed Roger and Maggie information showing they could indeed implement the strategy Kerry and I presented to them. With my email in hand, they went back to their local SSA office the following day. A different employee assisted this time and they had no issues submitting their social security strategy. Had Roger and Maggie not persisted, they would have given up over $62,000 in spousal benefits.
Additional takeaways from Roger and Maggie's story:
- File & Suspend was an excellent strategy to initiate spousal or child benefits without stopping delayed credits on a worker's own benefit. Unfortunately, after April 30, 2016, if a worker files and suspends, all benefits based on the worker's benefits are also suspended. In other words, there's no point to file and suspend anymore.
- If time permits, make appointments with the SSA. It's a huge time saver since wait times are often several hours for walk-ins.
There are many great people who are helpful and knowledgeable that work at the SSA. I share these examples because filing mistakes can have costly, life-long consequences. Without knowing the ins & outs, it's hard to catch mistakes, especially when they aren't your own. It's important to know what types of benefits you and your family are eligible to collect. Because social security is such a complex system, it's helpful to consult with an expert. KWB advisors are happy to help ensure you're unlocking your benefit's full potential.
~ Mike Razzouk