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