When Social Security gets its wrong on claiming advice

It’s one of the most important decisions you’ll make about retirement: when to claim Social Security benefits. Delaying past your full retirement age (currently 66) adds valuable delayed retirement credits of around 8 percent to your benefit – and couples can gain even more through coordinated strategies.

But the claiming rules are complex, and the guidance available from the Social Security Administration (SSA) has been the target of recent criticism.

The SSA came under fire last year by the U.S. Senate Special Committee on Aging, when key members pushed the agency to improve the guidance it provides on claiming decisions. The lawmakers were armed with a report from the U.S. Government Accountability Office (GAO) that found problems and inconsistencies in the advice that SSA claims specialists give to people applying for benefits, and on the agency’s website.

The report concluded that the SSA needed to be more proactive about informing claimants that Social Security benefits can be a hedge against longevity risk, and that they should lean more heavily toward advising delayed claiming.

An SSA spokesman notes that the GAO audit included six recommendations, largely related to how the agency trains employees to communicate with claimants about their filing options. He reports that the agency has since provided policy and training reminders to employees and updated its procedures. It also modified publications that provide guidance, including one that advises on claim timing and a frequently asked question on the topic.

Some of the critics are not convinced that the changes are sufficient. “The culture of the agency is to simply look at the benefits of the individual and her likely mortality,” says William Meyer, cofounder of Social Security Solutions, a fee-based service that helps workers optimize their benefits. “We believe you need to look at the spousal and survivor benefits—and the fact that not everyone will have average mortality,” says Meyer, who testified at the Senate committee’s hearing last year.

Meyer and his partner, William Reichenstein, a professor of investment management at Baylor University, recently published the third edition of their useful book for planners, Social Security Strategies: How to Optimize Retirement Benefits.

The book reviews all aspects of claiming for single people, married couples, children, divorced spouses and the disabled. One of the most useful chapters focuses on the benefit application process, reviewing the options for applying online, by phone or in person, and necessary documentation for making a claim.

The chapter also includes an intriguing brief section titled “What if the Social Security Administration Doesn’t Understand the Strategy?” This section focuses on a strategy emphasized throughout the book that, in the experience of Meyer and Reichenstein, often leads to misunderstandings or confusion between claimants and SSA representatives: suspending benefits.

Learn more in my column at WealthManagement.com.

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