I pride myself on being able to give my readers the rationale behind various Social Security rules and regulations. Many times, readers will send me emails in which they express utter befuddlement at a law or regulation that affects their eligibility for Social Security. It’s usually a situation that results in them getting reduced benefits. And, of course, this irks them to no end. They figure the government is out to shortchange them. But once I explain why the rule exists, they almost always accept the fact that the law makes sense.
My interest in these issues came about early in my career. I would overhear clients complaining to a fellow Social Security Administration agent about some regulation that they didn’t like. And the agent frequently would respond with, “Well, it’s the law!” That unhelpful comeback did nothing to assuage the anger of the customer. So, I made it my mission to understand some of the more confusing laws and why they were enacted. I never wanted to give the unsatisfactory “it’s the law” response.
In fact, during my SSA career, I developed a training session called “Rationale.” And my class did just that. It provided the rationale behind a myriad of Social Security rules and regulations that many people found hard to understand. Sadly, the powers that be at SSA never agreed with me. They didn’t think it was necessary for agents to be able to explain the laws. They felt it was simply their job to make sure the rules were enforced.
But even though I considered myself pretty much of an expert on the reasoning behind most of Social Security’s rules and regulations, there were some laws that even I couldn’t, and still can’t, explain. I thought I’d share a few of them with you today.
One has to do with what is known as the “waiting period” to collect Social Security disability benefits. The law says that if your claim for disability benefits is approved, you can’t be paid those benefits for the first five months of your disability. And because the law says it must be five full calendar months, it almost always means that a person has to wait six months before his or her disability checks start rolling in.
For example, let’s say Fred has a severe heart attack on March 10. Some time afterward, he files for Social Security disability and his claim is approved. Because he was disabled for only part of March, the five-month waiting period would run from April to August. His first disability check will be for September. And because all Social Security checks are paid one month behind, that check will arrive in October.
So why does Fred, who had a severe heart attack in March, have to wait until October to get his first disability check? Some have told me that waiting period is there because Fred should have other sources of income (maybe from an employer or an insurance company) during those first six months. Others have suggested the waiting period is built into the law to allow for time to make sure Fred really is disabled. I don’t like either of those rationales.
Something else I’ve never been able to satisfactorily explain is the reasoning behind the Social Security earnings penalty. I could (and frequently do) spend a whole column telling readers what those rules are. They are quite complex.
I will briefly summarize them.
The law says that if you are under your full retirement age (currently age 66) and getting Social Security benefits, but you are still working, you will lose one dollar in benefits for each two dollars you exceed a certain limit. In 2019, that limit is $17,640. For example, if 63-year-old Tom is on Social Security and has a part-time job that will pay him $20,000 this year, the Social Security Administration will be required to deduct $1,180 from one of his monthly retirement checks. ($20,000 minus $17,640 equals $2,360; dividing that by two equals $1,180.)
That was a very simple example of a very confusing set of rules. There are special rules that apply to your first year of retirement. Also, there is a different earnings penalty (it’s $46,920) for the year you reach age 66. And effective with the month you turn 66, that penalty goes away.
My purpose today is not to give you an in-depth lesson in the earnings penalty rules. Instead, my goal is to explain why those penalties exist. And guess what? I really can’t.
I can tell you that when the Social Security Act was enacted in the 1930s, Congress felt a person should be completely retired in order to collect “retirement” benefits. Maybe that made sense back then. But over the years, Congress gradually relaxed those rules. And about 20 years ago, they completely eliminated the earnings penalty for people who reach their full retirement age.
But why didn’t they just eliminate the penalty for all retirees? Why should people who are trying to make ends meet by getting a job to supplement their Social Security check lose some of those benefits? I can’t explain it.
Looks like I have space for one more. Let’s talk about what is commonly known as the “start, stop, start” strategy. And unlike the other rules I’ve been discussing that usually negatively impact Social Security beneficiaries, this one is intended to help them get more money. Obviously, no one complains about this rule. Still, I can’t explain the reasoning behind the law. What the law says is that you can take reduced retirement benefits at age 62. Then at age 66, you can suspend those benefits until age 70, when you would start them up again and get a 32 percent “delayed retirement credit” tacked on to your reduced retirement check.
Why anyone would want to do that in the first place is beyond me. Why would you throw away four years worth of Social Security benefits (that’s 48 Social Security checks) between the age of 66 and 70 just to get that 32 percent increase?
Still, this little-known and little-used strategy is available. But here is what I can’t understand or explain. That increase you would get at age 70 is known as a “delayed retirement credit.” Congress set up those credits as an incentive for folks to delay their retirement and the receipt of their Social Security checks until age 70. Thus the term, “delayed retirement credits.”
But here’s the deal. People who retired and started taking their benefits at age 62 definitely did NOT delay their retirement. So why in the world should they be allowed to make use of a provision called “delayed retirement credits?” I can’t explain it.