Don’t take Social Security rep’s word as final

As millions of baby boomers make Social Security decisions, it’s important they have reliable information about the impact of their choices. And the sad truth is that Social Security representatives are unlikely to give the right answers.

Consider the case of a woman we will call Ellen, a reader who posted on my blog asking for help. Her husband of many years had passed away recently. He had been receiving a Social Security benefit for several years. She had also taken her benefit, though before her full retirement age.

Now Social Security was telling her that she wouldn’t qualify for a survivor benefit because half her husband’s full benefit was less than her full retirement benefit.

Ellen sensed she was being misinformed. After waiting weeks for an appointment to talk with a Social Security manager, she was given more misinformation.

At that point, I reached out to a Social Security guru, Boston University economist Laurence Kotlikoff, author of the bestselling “Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life.” Kotlikoff has been focusing on Social Security decisions — and errors — for more than a decade. In fact, he was so annoyed with the government that he created his own online service to give specific advice on benefits decisions. The website, MaximizeMySocialSecurity.com, uses stateof-the-art software to help people make correct timing decisions and potentially uncover tens of thousands of dollars in additional lifetime Social Security income.

Kotlikoff has long advised that you cannot trust the benefits calculated by Social Security. He says: “At least half of what Social Security tells you is either dead wrong, misleading or incomplete. My rule is never ask Social Security anything. Just tell them precisely what to do.”

And my reader, Ellen, is a case in point. I’m going to give you her question, as posted, to illustrate her situation:

“I am recently widowed. I am age 65 and started collecting Social Security benefits early at age 63. My late husband, age 76, began collecting Social Security benefits at his full benefit age of 65. I was under the impression that if his benefit was greater than mine, I would receive his benefit amount when he passed. I contacted Social Security to advise them of his death and was told that I would only receive the greater amount if my benefit was less than 50% of his. My benefit is greater than 50% by $65.00 per month, so I was told I am not eligible. I have never heard of that and can’t find any information to confirm what I was told was true.”

After a series of emails to confirm whether her husband took benefits at his full retirement age, and when Ellen started taking her own benefits (early), the experts at MaximizeMySocialSecurity.com concluded that the initial analysis by Social Security — no additional benefits — was totally wrong! I won’t bore you with the details, but Ellen contacted Social Security three different times — using questions provided by Kotlikoff ’s team. I was copied on those emails and loved this one from the team: “In the unlikely event they repeat the error, ask them which section of POMS they’re basing their claims on and get back to us.” (POMS stands for Program Operations Manual System.) Ellen was diligent and had the backing of experts.

The end result, says Kotlikoff: “They told ‘Ellen’ that she’d get nothing on her first call, 85% of the right amount on her second call and the right amount on her third call. Had she stopped after her first call, she could have never applied for widow’s benefits and lost a massive amount.”

Just how much would she have missed out on? Well, according to the company’s calculations, if she had accepted the first answer from Social Security and received no widow’s benefit, Ellen would have missed out on $268,003 in deserved benefits (present value) by age 90!

Social Security decisions have a huge impact over the course of your life. It’s worth the $40 cost to run the decision software at MaximizeMySocialSecurity.com.

Whether you’re deciding on the impact of taking your benefits early vs. waiting until age 70, or maximizing benefits for a couple, this is more than a simple math problem. And that’s The Savage Truth.