Social Security “Steals” $131.8 Million From Widows...
When it comes to Social Security, there are several points that I have made very consistently over the last decade (beyond the fact that the program itself is in poor financial condition)…
Point #1. The system is very complicated with thousands of rules, regulations, and possible forks in the road.
Point #2. Understanding all your filing options can make a huge difference in how much money you end up collecting out of the system.
Point #3. You cannot completely rely on your local Social Security office to help you choose.
My own father saw this when he went to apply a strategy that I gave to him and the Social Security employees tried to talk him out of it.
Fortunately, Dad had the knowledge and confidence to do what was actually best. My parents should end up getting an extra $100,000 over their lifetimes because of that.
Unfortunately, thousands of widows have not fared as well.
That’s the latest finding from the programs’ Office of the Inspector General.
According to this report:
“SSA needs to improve controls to ensure it informs widow(er) beneficiaries of their option to delay their application for retirement benefits. Based on our random sample of 50 beneficiaries, we estimate 11,123 would have been eligible for a higher monthly benefit amount had they delayed their retirement application until age 70. Of these, we estimate SSA underpaid about $131.8 million to 9,224 beneficiaries who were age 70 and older. In addition, we estimate SSA will underpay an additional 1,899 beneficiaries who were under age 70 about $9.8 million, annually, beginning in the year they attain age 70.
“We did not find any evidence SSA had informed claimants of the option to delay their retirement application when they applied for benefits, as required. We also found that SSA did not have systems controls in place to alert its employees when they should inform widow(er)s of their option to delay their applications for retirement benefits.”
In plain English, widows have the option of collecting their spousal/survivor benefit while allowing their own work record benefits to continue accruing delay credits.
Then, when they turn 70, they can switch to their own (possibly much richer) benefit checks.
However, Social Security employees weren’t telling applicants that this was an option or how it could end up handing them more money.
Hey, mistakes happen. I get it.
But it had happened in 41 of the 50 cases the inspector general examined in detail.
An 82% failure rate is abysmal!
And this is just one of many things I’ve seen from Social Security over the years.
A previous inspector general report from 2015 said active Social Security records existed for more than 6.5 million people born before the summer of 1901.
See, Social Security has a master “death file” but apparently it was unable to keep track of people “who exceed maximum reasonable life expectancies.”
So although there were only something like 40 people in the world living above the age of 112, MILLIONS of great grandfathers had been grandfathered into electronic immortality as far as the Social Security system was concerned.
The oldest birth date in the system went back to 1869!
According to the report, only 13 of those people were still collecting benefits. However, lawmakers were concerned that the active Social Security numbers were also being used to open bank accounts … to report wages earned illegally … to commit tax fraud … and to perform a whole host of other nefarious maneuvers.
Just as examples, the internal report indicated that:
- About 67,000 of these Social Security numbers have been used to report more than $3 billion in wages, tips, and self-employment income from 2006 through 2011.
- One Social Security number was used on 613 separate occasions.
- Nearly two hundred more numbers were used at least 50 times individually.
- And between 2008 and 2011, the Social Security Administration received more than 4,000 electronic verification requests for numbers of people born before June 16, 1901
But beyond the obvious risks of not doing so – and all the potential money that had already been lost or wasted because of this incompetence – the Social Security Administration said updating the records would be a huge and costly task since all the information was originally collected under an old paper system.
Meanwhile, in another example of a colossal Social Security screw-up, more than 700,000 retirees were shortchanged $850 million by a computer glitch.
The short story is that retirees should continue getting credit in the Social Security system if they continue working while collecting benefits.
But in 1972 a coding mistake didn’t account for that fact.
Worse yet, the mistake went undiscovered for the next 22 years. I repeat, 22 YEARS!
By the time they figured out what had happened, some of the people were already dead and Social Security couldn’t find any survivors to reimburse.
I could keep going but you get the idea … when it comes to Social Security, it pays to learn the rules, check the math, and compare multiple sources of information.
To a richer life,
Editor, The Rich Life Roadmap