Jul 13, 2017
Over the past few years, the Social Security Administration (SSA) seems to have dramatically expanded its marketing budget. SSA is constantly putting out blog posts and other communications, primarily focused on enhancing its brand and trying to persuade us that it cares deeply about the members of the public they exist to serve.
The April 13, 2017, post was entitled What Every Woman Should Know About Social Security, written by “Suze Orman, Personal Finance Expert.” http://blog.socialsecurity.gov/suze-orman-what-every-woman-should-know-about-social-security/ Following is a verbatim quote from Ms. Orman’s article:
“Here’s what women need to understand about Social Security.
- You can claim a benefit based on your own work history, or on your spouse’s Social Security earnings record, if you are married for at least ten years.
- You are eligible for Social Security if you have worked (and paid into the system) for 40 quarters, which is 10 years.
- Your benefit is based on the highest 35 years of earnings. That’s where working through your 60s might be helpful, if it knocks out some of your lower-income years from your benefit computation.
- When your spouse dies, you won’t be allowed to keep collecting his/her benefit and you are entitled to just one benefit. But you will be able to claim the higher of the two benefits.
- If you were married at least 10 years before you divorce, you will be eligible to claim a benefit based on your ex’s Social Security record.”
What, you may ask, is so dangerous about that? The answer: taking it at face value and relying on it in your planning. Here are some observations and comments relating to her numbered paragraphs:
- You do not have to be married for 10 years to potentially be eligible to claim benefits on your spouse’s Social Security record. You are required to have been married for only one year. However, whether you have been married for 10 years or one year at the time you claim, there are a number of additional hurdles you must be able to clear in order to be eligible to collect spousal benefits.
- While it is true that you must have accumulated 40 credits of covered earnings to be eligible for benefits on your own record, you may still be eligible for benefits on the record of a spouse (or former spouse) even if you have never worked. In 2017, it takes earnings of $1,300 to generate one credit; and although the maximum number of credits you can earn in any given calendar year is four, you could theoretically earn enough ($5,200) in one quarter (or even in one day) to accumulate 4 credits. So you don’t actually have to have worked in 40 separate quarters to be eligible for benefits on your own record, although you must have earned credits over a minimum of 10 different years.
- It is essentially true that your benefits are based on your highest 35 years of earnings, but keep in mind that we are talking about inflation-adjusted However, the potential to increase your benefits by continuing to work is not limited to your 60s. For example, if your earnings during the year you turn 83 become part of your highest 35 years, your benefits will increase.
- It is true that you cannot receive spousal benefits after your spouse has died, because spousal benefits are available only during your spouse’s lifetime. Moreover you cannot collect your own benefits plus survivor benefits at the same time. However, there are circumstances under which it makes sense to claim benefits on your own record until you reach Full Retirement Age, and then switch to survivor benefits. In other situations, you might claim survivor benefits first and later switch to benefits on your own record.
- Yes, you must have been married for at least 10 years to have the possibility of claiming benefits on your divorced spouse’s record. However, there are many circumstances under which you will not be eligible to receive divorced spouse’s benefits despite having been married to your former spouse for at least 10 years.
By the way, to the extent that any of the above is applicable to women, it also applies to men.
I suspect that Ms. Orman was well compensated for bringing her name-recognition and celebrity status to the SSA’s online blog. However those who rely on these kinds of sound-bite articles do so at their peril.
Peter M. Weinbaum, J.D.
Jul 12, 2017
Over the past year I find myself increasingly being asked to assist in damage control. In many of those situations the damage has been inflicted by the Social Security Administration itself.
Case in point: having just read the May 31 SSA blog post entitled The Importance of Social Security Survivors Benefits http://blog.socialsecurity.gov/the-importance-of-social-security-survivors-benefits/, I sensed my blood pressure beginning to rise. Two different items set me off, one simply misleading and the other downright dangerous.
The misleading statement reads as follows: “The amount of benefits your family receives depends on your lifetime earnings. The higher your earnings are, the higher the benefits will be.” Obviously there is some truth to the foregoing statement, but it is misleading in at least two respects.
- If the worker died after claiming his or her benefits before Full Retirement Age, then his or her surviving spouse could receive significantly less than the surviving spouse of a lower earner. Survivor benefits are most often equal to the retirement benefits the worker was receiving at the time of death.
Example: Worker A had a Primary Insurance Amount (PIA) of $2,000. He died at age 71, having delayed claiming his benefits until age 70. His widow was potentially eligible for survivor benefits of $2,640.
Worker B had a PIA of $2,600. He died at age 71, having claimed his benefits at age 63. His widow was potentially eligible for survivor benefits of $2,145.
- The deceased worker’s earnings and date of claiming determine the maximum possible survivor benefits. However, the age at which the surviving spouse claims survivor benefits determines what percentage of the maximum possible benefit amount will actually be payable.
Example (continuing): Worker A’s spouse claimed survivor benefits at Full Retirement Age (66 in this case) and became entitled to receive $2,640 per month. Worker B’s spouse claimed survivor benefits at age 60 and receives $1,859 per month.
The dangerous statement reads this way:
“When a worker dies, we recommend that their survivors apply for benefits right away. You can apply by telephone or at any Social Security office. For more information about survivors benefits, visit www.socialsecurity.gov/survivors. If you think you qualify, please don’t wait. Apply today.”
Worker B’s surviving spouse did exactly what the SSA blog suggests. She applied for survivor benefits when she turned 60, which is the earliest age of eligibility. As a result, she received a benefit of $1,859, which amounts to 71.5% of Worker B’s PIA, the minimum possible based on a PIA of $2,600.
Worker A’s surviving spouse ignored the SSA advice, and waited until she reached Full Retirement Age to claim survivor benefits of $2,640, thus receiving 100% of the maximum possible based on a PIA of $2,000.
The bottom line: many factors can come into play when a person becomes eligible for survivor benefits. It is not always a foregone conclusion that one should “apply for benefits right away.”
The Coup de Gräce
Charlie was 67 in 2014 when he filed and suspended (a technique that is no longer available) to enable his wife, then 66, to claim spousal benefits on his record. His wife collected spousal benefits for about a year, and then died unexpectedly.
Shortly after she passed, Charlie contacted SSA to see if he would be eligible for survivor benefits on her record. The response was positive, so Charlie filed the application and began collecting survivor benefits of $2,373 per month while he waited to begin receiving his own higher benefits at age 70.
The monthly payments continued for a total of 11 months, then stopped abruptly in 2016. Shortly thereafter Charlie received a letter from SSA saying that they had made a mistake in approving his claim for survivor benefits and directing Charlie to immediately repay the $26,103 he had received due to their error.
Charlie doesn’t have that amount of cash readily available, and so he is now trying to negotiate a payment plan with SSA. He is also working with his tax preparer to amend his 2015 and 2016 federal income tax returns so that he can get a refund of the income taxes he paid on the survivor benefits he now must return.
If Charlie had called me before he filed for survivor benefits, I could have saved him a lot of trouble. However, by the time he contacted me there was nothing I could do but empathize, and then explain why he has no grounds to dispute the SSA’s latest decision. So much for the advice to “apply for benefits right away.”
Peter M. Weinbaum, JD
July 2017
