Social Security Benefits: Heads They Win, Tails You Lose

I receive emails on a routine basis from people who, out of the blue, received a letter from Social Security demanding, with no clear explanation, that they pay back previously paid benefits within 30 days! Very young children, elderly widows, retirees, spouses, divorcees, disabled workers — you name it. The bills can be in the thousands, tens of thousands, and even hundreds of thousands. One disabled lady was clawed back for over $300,000 for a mistake that Social Security admitted in writing was theirs! For that lady, who was living solely off of Social Security, and for lots of others, these letters can be a death sentence or, at least, an abject poverty sentence. How so? Well, if you don’t repay, which most can’t, Social Security almost always will stop sending you a single penny until you’ve repaid “what you owe.” This can take years or decades.

In virtually every case, the demands for repayment are due to Social Security’s having miscalculated a beneficiary’s correct benefit amount years or even decades in the past. But Social Security’s mistakes are your mistakes. If you are desperately poor, they may choose to let you keep their overpayments. Otherwise, tough luck. The disabled lady who “owed” some $300,000K was deemed by Social Security’s Administrative Law Judge to be too well off to qualify for relief from the system’s mistake. Why? Because the judge, I kid you not (I read his decree word for word.) decided she had too many channels on her cable plan and must, therefore, be well off.

Social Security is, put simply, a financial terrorist organization. Its routine abuse of countless (we don’t know how many) Americans — something I’ve been writing about for decades — has finally started receiving mainstream media attention. See this column discussing The Washington Post’s recent coverage. But nothing short of an act of our dysfunctional Congress will remove the financial Sword of Damocles hanging over the heads of 70,000 million American Social Security beneficiaries. That’s one in six of us!

Here’s today’s reality:

All 70 Million Americans Currently Receiving Social Security Benefits Live at Risk of Having Some, Most, or All of Past Received Benefits Clawed Back!

Let me describe what happened to Fredda McDonald, whose son went to elementary school with one of my sons. Fredda and her husband, Don, live in Lexington, Mass. Nicer people you won’t find. The contacted me three weeks back about their case.

In 2018, Don filed for his full retirement benefit at full retirement age and immediately suspended it. He did this in 2018 over the phone. The advantage of concurrently filing and suspending one’s retirement benefit was eliminated in 2015. However, doing so was and is still permitted. Yet, it provides no advantage of any kind. Any half-trained Social Security staffer should have known about the history of file and suspend and that the 2015 change in law eliminated its advantage for anyone filing and suspending after April 2016.

The staffer should have asked Don, “Why are you doing this?” Don would have said: “To let my wife file just for her spousal benefits when she reaches full retirement age in a year and a half. She was born before January 1, 1954, so she’s grandfathered to do this.”

To this the staffer should have replied. “You’ve got the key 1-1-54 birthdate straight. But you aren’t aware of another provision of the law passed three years back. During periods that your benefit is suspended, no one, including your wife, can collect benefits off of your work record.”

The staffer didn’t say those words. Instead, he/she filed and suspended Don the same day. Fast forward 1.5 years and Freeda and Don head to the Cambridge, Mass. Social Security office. There they explained that Don had filed and suspended and that Freeda wanted to collect just her spousal benefit because she was born before 1-1-54. “Fine, they said. Fredda, we’ll sign you up just for your spousal benefit.”

This was the even bigger blunder. The Cambridge staffers should have a) asked why Don had done something of absolutely no value and b) informed them both that Fredda couldn’t collect off of Don’s work record while Don’s benefit was in suspension. So, here we have Social Security screwing up not once, but twice. Why? Because the system is complex and the staff is overworked and undertrained. Or, they know what they are doing and are acting maliciously.

There is real economic damage here, even for people like Fredda and Don who aren’t surviving on Social Security. If you tell people for X years that their incomes are $Y larger, they are going to spend the extra income thinking it will continue for the rest of their days. When you then claw it back, they are going to need to cut back their spending by a larger annual amount than they had raised their spending because they now have fewer years over which to absorb the hit.

I wish Fredda and Don had used one of my company’s software tools — MaxiFi Planner or Maximize My Social Security. Had they done so, they would never let Social Security mislead them out of incompetence or malice. Indeed, I hope every person who is about to make any move of any kind with respect to Social Security uses our software in advance. Our software is the only tool I know that gets these complex calculations correct. There may be other such tools. The free ones are so primitive they are a joke. As for our competitors’ tools, we are prohibited by their license agreement to determine their accuracy.

Promoting our software may sound self-serving. So let me reveal some I haven’t done so publicly in the past. My software company is now 30 years old. I have yet to earn a penny from the company because I prefer to keep the prices low and help people. This is true effective altruism, not the BS effective altruism that FTX’s Sam Bankman-Fried was peddling. So don’t purchase our low-price software to help me. Use it to help, indeed protect yourselves.

If you are currently receiving, you can also use our software, in most cases (not if you are disabled or for some of those subject to the WEP or GPO provisions) to check that you are receiving the right benefit amount. None of us wants to get a bill in the mail, large or small, from a system that is making mistakes on a routine basis. Moreover, it’s a system with no internal software checks. Social Security’s software should have known, as our software knows, that Fredda couldn’t collect a spousal benefit when her husband’s retirement benefit was suspended. The fact that the System’s software is letting this mistake go through means some, many, or most of we 70 million beneficiaries may be collecting the wrong amount. This means:

All 70 Million Social Security Benefits Need to Check With Precise Software That They Are Receiving the Right Amount — Neither Too Little Nor Too Much!

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