Bad Social Security Advice

Don’t trust the Social Security Administration call center when seeking guidance on filing for benefits. SSA staffers are ill-equipped to give you a lifetime strategy. 

Better ways to understand Social Security: consult a financial advisor, read up on the subject and talk to friends and relatives who already went through the process.

The Social Security Administration staff might not be trained to help you to get the most from your lifetime benefits. They are trained to help you maximize the benefit you can get today. The options that the SSA staff presents are often not the best for you in the long run.

In addition, the case volume absolutely overwhelms SSA staff members. Even disability claims are backlogged by as much as three years, so you can imagine the staff’s difficulty handling new, unusual cases. Having an advisor available for questions could mean the difference between taking the SSA’s money-losing advice and getting the benefit you deserve.

Much of the advice revolves around the level of benefit people can receive. What is called full retirement age is now 66 (it rises gradually to 67 for those born in 1960 or later). You can start getting benefits at 62, but they are reduced. If you delay until 70, you receive more than by filing at 66.

Here are a few examples where folks got erroneous or incomplete responses to basic questions presented to SSA staff. This is not an exhaustive list, just a few things I heard about recently.

Restricted application. A husband, age 66, wished to delay his filing until age 70, when he will receive the highest benefit amount. At the same time, his wife, age 62, filed for her own benefit today, the earliest date possible, which entitles her to the lowest benefit. The husband wanted to file a restricted application for spousal benefits only, meaning he would get 50% of what she would get if she waited until 66. (When he reaches age 70, he can shift to his own benefit, which is increased to the highest level since he delayed receiving it until then.)

But SSA staff told him that, since his own benefit is greater than half of his wife’s PIA, he couldn’t claim half hers now.

This is flat out incorrect. The man called me and asked about it. I told him to go back to the SSA and make the request again, specifically requesting to file a “restricted application for spousal benefits only.” I also recommended that if he still received a negative response, he should request to speak to a supervisor about it. Eventually, with this guidance, he got the benefit that he asked for.

“Bonus” lump sum. If you are over 66, the so-called full retirement age, and you file for benefits, the SSA may present you with an option for a so-called bonus lump sum of up to six months’ worth of benefits. This is to be paid to you when you receive your first check. Don’t fall for it without knowing what’s going on.

The SSA staff is suggesting the legitimate option of retroactively applying for benefits six months prior to the actual date. Effectively, if you are 67 years old, for example, when you take this option, you file as if you are 66 years, six months of age. This reduces your delayed retirement credits by six months, or 4%. You end up with a lump sum check for the six months that you hadn’t received up to that point, but your future benefits are 4% less than if you filed at age of 67.

If this is what you want, then go for it – but realize that not only is your own future benefit permanently reduced, so are any survivor benefits to your spouse.

Divorce planning. If you are divorced and qualified to receive benefits based on your ex’s work record, it can be difficult to plan when to receive benefits. This is especially troublesome if you are pretty certain that your spousal benefit is significantly more than your own, and you want to maximize it.

The trouble is that you may not have access to the complete information about your ex’s entitlement and any spousal benefit you receive. People are turned away if they don’t have everything in order.

The key to this issue is to have the correct documentation about your situation when you talk to Social Security. Most often, this requires a visit to the local SSA office.

You need your marriage license and divorce paperwork, showing that you were married for 10 or more years and the divorce occurred more than two years ago. Also, have your ex’s Social Security number and date of birth. Then, the SSA staff must provide you with information about what benefits you are eligible for based on the ex’s record. Without this documentation, they deny you access to the information.

Don’t let the Social Security staff lead you into a bad situation that you can’t get out of. Before you file for benefits, talk it over with your advisor and know your options.

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Jim Blankenship, CFP, EA, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill. He is the author of An IRA Owner’s Manual and A Social Security Owner’s Manual. His blog is Getting Your Financial Ducks In A Row, where he writes regularly about taxes, retirement savings and Social Security.

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