Waste of the Day: Social Security Withholds $132 Million From Widows

The Social Security Administration is perpetrating a scam on some of society’s most vulnerable — recently widowed senior citizens — and withholding millions of dollars of earned benefits.

Economist and Boston University professor Larry Kotlikoff, partly responsible for the Auerbach-Kotlikoff model widely used by economists, recently wrote in Substack that SSA staff aren’t informing recently widowed senior citizens of their true benefits.

“When you are eligible to collect a widow’s or divorced widow’s benefit, you don’t have to file for your own retirement benefit at the same time, and vice versa,” he writes. “Since the system will pay you only the larger of the two benefits, it’s always best to take one benefit first while letting the other grow.”

But that’s not something he encountered on a recent call with SSA and a client who was trying to determine her benefits shortly after her spouse died.

Instead, the widow was told she must file for all benefits at the same time for which she is eligible.

Based on Kotlikoff’s calculations, doing so would cost her over $400,000 in present value.

Sadly, this was not an isolated case, it happens all the time. Kotlikoff asked the agent “whether she had been trained to automatically file everyone for whatever benefits they could immediately receive. She said yes.”

In fact, the Social Security inspector general issued a report in 2018 that found the agency wasn’t informing widow(er) beneficiaries of their option to delay their application for retirement benefits, a move that would have allowed them to collect the higher payouts to which they are entitled.

The report estimated 11,123 people “would have been eligible for a higher monthly benefit amount had they delayed their retirement application until age 70.”  Of that group, they estimated SSA underpaid about $131.8 million to 9,224 beneficiaries who were age 70 and older.

They also estimated SSA “will underpay an additional 1,899 beneficiaries who were under age 70 about $9.8 million, annually, beginning in the year they attain age 70.”

“We did not find any evidence SSA had informed claimants of the option to delay their retirement application when they applied for benefits, as required,” the inspector general wrote.

The almost six-year-old report clearly didn’t put an end to the problem and, based on the inspector general’s estimates, beneficiaries are being underpaid almost $10 million every year.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.

This article was originally published by RealClearInvestigations and made available via RealClearWire.