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Retirement Weekly: Social Security has more than 2,700 rules — how much do you know?

Two thousand, seven hundred and twenty-eight.

That is the number of rules there are in the Social Security Handbook. These include provisions of the Social Security Act, regulations issued under the Act, and precedential case decisions, or rulings.

The handbook preface states that, “The Social Security programs are so complex that it is impossible to include information about every topic.”

It certainly tries though, with 27 chapters and an index of every possible term one could search for, the Handbook is a valuable resource. And there are even more rules in the Program Operations Manual System (POMS), which is essentially the handbook for Social Security Administration employees.

Attempting to sift through and understand the specific rules that apply to your circumstances, is a challenge most soon-to-be retirees do not look forward to. It is pretty much impossible to know every single one of the 2,728 rules. However, it is your job to make a Social Security claiming decision based upon these rules.

Considering that many of us will live another 20 to 30 years in retirement, when to start collecting benefits is, for many retirees, the most important retirement financial decision they will make.

How knowledgeable are you in Social Security?

The term retirement can be tricky since you might “retire” from work, but might hold off on collecting Social Security retirement benefits. Or you might start taking those benefits while still working. Whether you are approaching retirement or further away from that stage in life, do you feel competent in your knowledge of the Social Security rules? Do you know what claiming decision is best for you and/or your family?

As someone who specializes in Social Security planning, here are some of the most common statements I hear. Do you know if they are true or false? Test yourself on each one and I’ll share the answers.

My Social Security retirement benefit amount will increase between age 62 and 70.

This is true if you delay collecting. Once you begin collecting, your monthly benefit remains permanent. If you begin collecting at age 62, your benefit will not increase over time. Social Security retirement benefit amounts increase every month you delay collecting them. This adds up to about 8% per year and is 76% higher at age 70 than age 62.

2. My full retirement age is 65.

This is false. The full retirement age (FRA) is 66 for those born in 1943 through 1954 and increases by 2 months for each year born from 1955 to 1959, with a FRA of 67 for those born in 1960 or after.

3. Divorced individuals can’t collect benefits on the earnings of a former spouse.

This is false. Divorced individuals are eligible to collect ex-spousal benefits based on the earnings of their former spouse if they were married for 10 years or more, are at least 62, are single, and if the amount is greater than what they would receive based on their own earnings.

4. Social Security beneficiaries are guaranteed an annual cost-of-living-adjustment (COLA).

This is false. Social Security beneficiaries are not guaranteed an annual cost-of-living-adjustment because COLA is based on inflation and it can be 0% as it was in 2009, 2010 and 2015.

5. When one member of a couple dies, the survivor receives both benefits.

This is false. When one of a couple dies, the survivor receives the higher amount of the two benefits, not a combined amount.

6. A spouse who has never worked or earned income can’t collect Social Security benefits.

This is false. A spouse who has never worked or earned income may still collect Social Security spousal benefits based on their spouse’s earnings record. There are rules that determine how much this amount is, but it is never greater than 50% of what the other spouse’s retirement benefit is at that spouse’s FRA.

7. Teachers and government workers who receive pensions are not eligible to collect retirement benefits.

This is false. Many teachers and other government workers who receive pensions may not be eligible to collect spousal or survivor benefits. However, if they are entitled to retirement benefits, the Windfall Elimination Provision (WEP) rule can only reduce the amount, not eliminate it entirely.

8. Some children may be eligible to receive Social Security benefits.

This is true. The minor and/or adult disabled children of a retired worker are eligible to collect “child” dependent benefits when a parent begins collecting retirement benefits.

9. Only U.S. citizens may qualify to receive Social Security benefits.

This is false. Workers do not need to be U.S. citizens to qualify for Social Security. Immigrants who are granted the status of Lawful Permanent Resident are also eligible for benefits assuming they’ve earned enough credits and meet the other specific criteria.

10. You can change your mind if you regret collecting Social Security.

This is true. Once you start claiming benefits, you may change your mind, but only within the first 12 months. You may withdraw your application and pay back the funds you have collected and then refile later.

Mistakes and missteps

For many years I have had a business working with future retirees to help them make the optimal Social Security filing decision. Through my work, I have witnessed the negative impact that a lack of Social Security knowledge can have on the security of one’s financial future.

I have worked with teachers and government workers who believe they are not eligible to collect Social Security. I have worked with couples who are not coordinating their benefits to maximize the future survivor benefit and divorced individuals who do not understand ex-spousal benefits. And especially disheartening, I have worked with survivors who have not made the most advantageous claiming decision available to them.

I have also had prospective clients come to me with stories of their “not so good” experiences with the Social Security Administration (SSA) or claiming decisions they made and later regretted. My client, a recently widowed woman, was told by an SSA employee she could not collect survivor benefits when in fact she could and even collected retroactive payments. Another client of mine was waiting to claim spousal benefits until age 70 when she should have started collecting at her full retirement age. Another client, a divorced individual who due to the specific year they were born, could have taken advantage of claiming an ex-spousal benefit then later switch to their own higher retirement benefit. 

You can see that the claiming age decision for most people is much more complicated than simply choosing a date to start. The amount of money over your lifetime is significant and no one likes to “leave money on the table.” The maximum monthly benefit for those retiring in 2021 at their FRA of 66 and 2 months is $3,134. If each spouse has these high earnings, their lifetime amount over 20 years would be $1,504,251. For those waiting to collect until age 70 this year, the amount is $1,869,600. That is a lot of money.

You have worked hard and contributed into Social Security for many years and you should be planning for this decision with knowledge and care. You may want to work with a professional to plan for your claiming decision. Whether that be your financial planner, your accountant, or someone else who specializes in Social Security, make sure they have the knowledge and skills to help you.

Martha Shedden is the president and co-founder of the National Association of Registered Social Security Analysts (NARSSA) in which she leads the development of the education and training program for all Registered Social Security Analysts (RSSAs). As an RSSA® and CRPC, she is a leading expert in the field of Social Security, has authored many articles and whitepapers, and has presented on the topic numerous times. She is passionate about educating financial professionals and retirees on the details of Social Security income planning, the foundation and first step to creating a financially secure retirement plan. Follow Martha and NARSSA on LinkedIn.

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