A Billion Dollar Tweak For Saving Social Security

The author proposes a change to Social Security that he says would enable the program to pay out more in benefits than it is currently projected to be able to do.

I have a suggestion to tweak the Social Security program. This tweak will save the system enough money so starting in 2034, even if no other changes are made, Social Security will be able to pay 80% of the benefits promised instead of the current 74%.

The beauty of this tweak is that few are aware of this program windfall until contacted by Social Security. In addition, the change is simply reversing program regulations created by Social Security’s Central Office when Social Security was swimming in excess money.

Social Security policy for many years was heavily influenced by the fact that Social Security was collecting far more money then it was spending. Social Security’s policy analysts devised regulations that increased benefits. These regulations were not based on new laws.

In 1997, one of these regulatory changes was extending the Delayed Retirement Credit provision to widows and widowers who were already collecting survivor benefits.

Congress created the concept of delayed retirement credit in the 1970s. These credits are percentage increases to a person’s retirement benefit. These credits are based upon a person delaying receipt of their retirement benefits beyond their full retirement age, currently 66 and going up to age 67.

The delayed retirement credits are currently 8% per year ending at age 70. The credits were to provide a reward or incentive for not receiving a monthly benefit earlier in life

Prior to this policy change in 1997, widows and widowers could choose between their survivor benefit and their retirement benefit when they filed for benefits. They could receive 100% of the other benefit (the other benefit being their uncollected retirement or survivor benefit) at full retirement age.

Starting in 1997, those widows who chose to collect their survivor benefit, which in the majority of cases was the higher monthly benefit, now had their retirement benefit increased by delayed retirement credits Since 2000, these retirement credits increased their monthly benefit payments by 32%.

This policy change was significant and has resulted in over one million widows/widowers receiving a Social Security benefit increase at age 70.

After the policy change in 1997, Social Security issued 200,000 notices in 1997 to widows/widowers who were eligible for higher benefits on their own retirement record. This change impacted so many widows/widowers that in 1998 Social Security started sending notices twice a year to widows/widowers informing them of eligibility for higher monthly benefits due to the application of delayed retirement credits.

For example, 37,000 notices were mailed in May 2010, 42,916 notices were mailed in May 2011, 23,009 notices were mailed in November 2011, 38,911 notices were sent in May, 2012 and so forth. The May mailing usually numbers in the high 30,000s, and the November mailing is usually in the 20,000s. Each year 50,000+ notices are sent. Since 1997, Social Security has sent out approximately 1,150,000 notices.

The policy goal of using Social Security’s excess funds to pay higher Social Security benefits to widows (thereby lifting many out of poverty) was achieved. The problem, in my opinion, is that this financial largess was not known or understood outside Social Security When Social Security ‘s finances got into trouble, there was no review of this internal policy change that was made in 1997.

The Survivor and Retirement trust funds are one and the same. These one million widows and widowers did not delay receipt of their Social Security benefits. They did not save the trust fund money by delaying the start of benefits. They did not earn delayed retirement credits. Quite the opposite; most filed as early as possible for their survivor benefits, many at age 60.

Assuming each of the 50,000 widows/widowers per year who received a $100 per month benefit increase, the cost to the trust fund would be $5,000,000 per month or $60,000,000 million per year. This one policy change has depleted the Retirement Survivor Trust fund by over a billion dollars.

It is illogical to increase someone’s Social Security benefit because they delayed receipt of benefits (thereby earning delayed retirement benefits) when in fact, the person did not delay drawing benefits from the retirement survivor trust fund.

This issue is similar to the unintended loopholes that were closed in the Bipartisan Budget Act of 2015. It is no longer justified to artificially increase benefits to widows and widowers when the entire retirement and survivor trust fund is in financial jeopardy.

The solution is to eliminate paying delayed retirement credits to individuals who did not delay their filing for benefits.

Robert White retired from the Social Security Administration in 2013 after nearly forty years of service.