Know Your Options When Talking to Social Security

When you get ready to file for your retirement benefits, it’s important to understand what options are available to you before you talk to the Social Security Administration.  There are many ways to get a good understanding of your options, including working with your financial advisor, reading up on the subject (this blog is a good place to start!), and talking to friends and relatives who have already gone through the process.

The reason it’s important to know your options is because the Social Security Administration staff that you may encounter are not trained to help you maximize your lifetime benefits – they are trained to help you maximize the benefit that you have available to you today.  Often the options that the SSA staff present to you are not the best options for you in the long run.  In addition, SSA staff are absolutely overwhelmed by the volume of folks that they are in contact with.  As I understand it, disability claims are backlogged by as much as three years in some cases – so you can imagine how difficult it is for the staff to handle new, unusual cases.

Listed below are a few examples that I’ve heard recently where folks have gotten erroneous or incomplete responses to basic questions presented to SSA staff.  This is not intended to be an exhaustive list, just a few things I’ve heard about recently.

Restricted Application

An husband, age 66, wishes to delay his filing to age 70.  At the same time, his wife, age 62, is filing for her own benefit today.  The husband wishes to file a restricted application for spousal benefits only – which would allow him to receive a benefit equal to half of his wife’s PIA (not her reduced benefit) while he continues to delay his own benefit to age 70.  SSA staff told him that since his own benefit would be greater than half of his wife’s PIA, he would not be able to do this.

Of course, if you’ve read this blog or my book, you know that this is incorrect.  The man called me and asked about it – and 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 then recommended that if he still received a negative response to request to speak to a supervisor about it.  Eventually, with this guidance, he was able to get the benefit that he asked for.

“Bonus” Lump Sum

If you are over Full Retirement Age (age 66 these days) and you go to or call the Social Security Administration to file for retirement benefits, you may be presented with an option for a “bonus” lump sum of up to six months’ worth of benefits, to be paid to you when you receive your first check.  Don’t fall for it without knowing what’s going on!

What is happening is that the SSA staff is suggesting an option to you that is available – of retroactively applying for benefits six months prior to the actual date.  Effectively, if you are (for example) 67 years old when you take this option, you will be filing as if you are 66 years, 6 months of age.  This will reduce your Delayed Retirement Credits by that 6 months, or 4%.  You’ll end up with a lump sum check for the six months that you hadn’t received up to that point, but your future benefits will be 4% less than they would have been had you filed at your attained age of 67.

If this is what you want, then go for it – but realize that not only is your own future benefit going to be permanently reduced from what it could have been, any survivor benefits that your spouse will receive are also reduced.

Divorcee planning

A divorced person who is qualified to receive benefits based upon her ex’s work record often has difficulty in planning when to receive benefits.  This is especially troublesome if you are pretty certain that your Spousal Benefit will be significantly more than your own benefit, and you’d like to maximize that benefit.  The trouble is that you may not have access to the complete information about your ex’s benefit (and therefore, any spousal benefit you could receive).

The key to this is to have the correct documentation about your situation when you talk to Social Security.  Most often, this is going to require a visit to the local office, although I’ve been told this can be done over the phone.  I assume in a case like that there are several calls involved because you’ll have to send your documentation for the SSA to verify.

At any rate, if you have your marriage license and your divorce paperwork, which show that you were married for ten or more years and the divorce occurred more than two years ago, along with your ex’s Social Security number and date of birth, the SSA staff will be able to provide you with information about what benefits you are eligible to receive based on the ex’s record.  Without this documentation, you will be denied access to the information.