General Social Security

If your Social Security earnings have been recorded incorrectly, it could make a big difference in your benefit amount. You need to check for errors yourself — and you need to do it now. Today!

Whether you are close to retirement, or in your early working years, this is something that absolutely cannot wait.

Why the rush? Because the Social Security Administration imposes time limits on correcting your earnings record — even if the mistake on your record is not your fault!

Mistakes in the Social Security earnings record are fairly common. For proof, look no further than the Earnings Suspense File. This is where earnings reports with a mismatched name and SSN combination are stored.

Since the inception of Social Security, there have been a total of $1.2 trillion in wages that could not be matched to an earnings record. Because sthey couldn’t be matched, they were added to the Earnings Suspense File. In tax year 2012 alone, the Social Security Administration reported $71 billion added to the file!

Those numbers are astronomically high, which begs the obvious question: why are there so many mistakes within the Social Security earnings records?

Why Mistakes Tend to Happen With Social Security Earnings Records

To be clear, most of these mistakes are not the fault of the Social Security Administration. A good number of the mismatches are due to employer reporting errors or administrative errors that happen when people change names. Others are due to the fraudulent use of Social Security numbers.

The Social Security Administration has a pretty good system for figuring these mistakes out and assigning the earnings to the correct record — but even with their process, nearly half of the mismatches are never corrected.

Unless you’re vigilant about monitoring your earnings record, you could have earnings gaps that could have a substantial impact on your Social Security benefit calculation.

A mistake in your earnings calculation can make a big difference. How? It all goes back to how your benefit is calculated. The Social Security Administration uses your highest 35 years of earnings as a cornerstone of the benefit calculation.

If any of these 35 years are incorrect or missing altogether, the average is skewed. One year of missing earnings can make a big difference in your benefit amount.

Unless you’re vigilant about monitoring your earnings record, you could have earnings gap that could have a substantial impact on your Social Security benefit calculation.

Errors Can Dramatically Affect How Much in Social Security Income You Can Claim

Let me give you an example of how this can affect your benefit amount. For this example, I used the actual online calculator from the Social Security Administration. If you want to follow along, you can just go to the Online Calculator and crunch the numbers for yourself.

In the example calculation I ran, I assumed the following:

A worker has 35 years of earnings that started in 1984 and ended in 2018. Instead of going for a really high annual earnings amount, which would have exaggerate the effect, I assumed that this individual started in 1984 with a salary of $35,000 and had a 2% raise every year.

Under that assumption, this individual would have a full retirement age benefit of $2,418 dollars. That’s the baseline benefit amount we’d expect this person to receive.

But what happens if information is missing from the earnings record? I went back to our calculation and assumed just one year of earnings in 1990 wasn’t included on the worker’s record due to clerical error.

For one missing year, the benefit would decrease to $2,385 dollars. For two missing years, it would decrease to $2,353 dollars. For three, it would be $2,322. For four, it would be $2,291 and for five, it would be $2,260.

That’s a difference of $158 dollars per month.

Now, you might be thinking, Devin, that doesn’t sound like such a crisis. $158 extra per month would be nice, but that’s not paying for much.

Maybe not when we look at it on a monthly basis. But how would this affect you over your entire retirement?

If we take those same amounts and assume a annual cost of living adjustment of 2%, you’ll see that the effect is now measured by thousands of dollars.

For one year, it’s nearly $8,000 in reduced benefits. For two, it’s over $15,000. For three, it’s slightly over $23,000. At four years, it’s more than $30,000, and at 5 years, it’s nearly $38,000.

I don’t think anyone would willingly give up any of those amounts.

The Burden of Proof Is on You When Correcting Your Record

If you did look at your earnings record and notice a mistake, the burden is yours to prove it. You might want to start by checking out the SSA’s Request For Correction of Earnings Record form.

You should be prepared to locate documents that prove the error such as tax forms, W-2 forms or pay stubs. If you can’t find these, don’t despair quite yet.

In the SSA manual, the Administration states that an oral or written statement from the employer can serve as primary evidence of wages. Or, the Social Security Administration also says you can take the following steps:

1. Write down the name and address of your employer
2. Note the dates you worked there and how much you earned
3. Provide the name and Social Security number you were using while you were employed

The SSA will then use this information to investigate the problem. But even if they can help you investigate, you still have to remember there’s a time limit to making these corrections.

The Social Security Administration’s Time Limit For Corrections

The Social Security Administration’s language on the time limit for fixing an earnings record is incredibly clear:

“An earnings record can be corrected at any time up to three years, three months, and 15 days after the year in which the wages were paid or the self-employment income was derived.”

How’s that for clarity! Without an exception, you have a little over 3 years to fix earnings record mistakes. Unfortunately, the rules on those exceptions aren’t as clear.

Here’s what the SSA says about the issue:

After the time limit has passed, earnings records can only be revised under the conditions described below and in §1425:

1. To correct an entry established through fraud;

2. To correct a mechanical, clerical, or other obvious error;

3. To correct errors in crediting earnings to the wrong person or to the wrong period;

4. To transfer items to or from the Railroad Retirement Board (if reported to the wrong agency), or to add railroad earnings to Social Security earnings records when the law permits;

5. To add wages paid in a period by an employer who made no report of any wages paid to the worker in that period, or if the employer is increasing the originally reported amount for the period;

6. To add or remove wages in accordance with a wage report filed by the employer with IRS; or, if a State or local governmental employer, with SSA if the report is filed within the time limitation specified for assessment, refund, or credit under a State’s coverage agreement;

7. To add self-employment income in a taxable year if an individual or the individual’s survivor establishes that:

   1. A self-employment tax return for that year was filed before the time limit ran out; and

   2. Either no self-employment income for that year has been recorded in the individual’s earnings record, or the recorded self-employment income for that year is less than the amount reported on the self-employment tax return; or

8. To add self-employment income for any taxable year up to the amount of earnings that were wrongly recorded as wages and later deleted. This can be done only if a tax return reporting such self-employment income is filed within three years, three months, and 15 days after the taxable year in which the earnings wrongly recorded as wages were deleted. The self-employment income must:

   1. Be for the same taxable year as the year in which the wages were removed; and

   2. Have already been included on the individual’s Social Security record.

9. Prior to the expiration of the time limit the worker or the worker’s survivor has:

   1. Applied for benefits and stated that the earnings for a year(s) were incorrect; or

   2. Requested a revision of his or her earnings record for a year(s).

Here’s the boiled down version of the exceptions: The only case where an exception does not apply is when a self employed individual does not file his/her taxes within the time limit.

Like many of the Social Security rules, the rule on time limits are broad and sometimes not completely understood by the technicians at the Social Security Administration. I’ve seen cases where there was a clear exception, but the technician refused to enter the earnings because they did not understand the rule.

Thankfully, this client was able to get help from a financial planner who understood the rules and helped the client draft a request for review letter. A few weeks later, the earnings were back where they should be: on the client’s earnings history.

While that case had a happy ending, it should highlight the importance of not just checking your Social Security earnings report… but making sure you or the right professionals who can help you get the error corrected ASAP.

How to Check Your Social Security Earnings History

Checking your earnings history with the Social Security Administration is easy. You can find the details in your Social Security statement.

(If you’re younger than 60, you only get these every 5 years. For those over 60, you get one every year.)

If you don’t have a recent statement, don’t let that stop you. Go online and instantly print your most recent statement.

To create a My Social Security account, visit www.ssa.gov/myaccount. You’ll need to provide a Social Security number, mailing address and a valid e-mail address. You’ll also need to be able to answer questions that only you are likely to know and it needs to match the information on file with Social Security.

In addition to checking your earnings history, there are many other other reasons to set up your online account. You can:

• Get an estimate of your future benefits
• Get a letter with proof of your Social Security benefits
• Start or change your direct deposit
• Get a replacement SSA-1099 or SSA-1042S for taxes
• Change your address

Please, please, please…check your Social Security earnings history today! And don’t stop there. Urge your friends, family members and clients to do the same. Better yet, just share this article!

Ignoring this could cost you thousands of dollars in missed Social Security benefits, whereas checking your record only takes 5 minutes. It’s a worthwhile use of time!

If you still have questions, you could leave a comment below, but what may be an even greater help is to join my FREE Facebook members group. It’s very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time I’ll even drop in to add my thoughts, too. 

You should also consider joining the 100,000+ subscribers on my YouTube channel! For visual learners (as most of us are), this is where I break down the complex rules and help you figure out how to use them to your advantage. 

One last thing that you don’t want to miss: Be sure to get your FREE copy of my Social Security Cheat Sheet. This handy guide takes all of the most important rules from the massive Social Security website and condenses it all down to just one page.

If you are a minister, you have several key tax issues that makes you uniquely different from other taxpayers. These differences include the housing allowance, self-employed treatment for W-2 wage earners and the big one…the ability to opt out of Social Security.

All of these tax differences can create a great deal of complexity, and should only be handled with a team of competent tax and financial advisers. However, the ability to irrevocably opt out of Social Security is probably the most complex financial planning issue for new ministers as it carries a high degree of long-term consequence if the wrong decision is made.

If you are a new minister, I know this decision can be complicated. It’s more than just a financial decision.  If you opt out, you must agree to the following language:

I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. 

That’s weighty for sure, but my focus for this article is not to debate the ethical and moral issues of opting out, the good Lord knows there’s already been plenty written about that.   My goal is to examine the economic aspects of opting out.  Specifically, I want to help quantify what it would take to replace the benefits that you’re walking away from.

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I help a lot of people with Social Security. One thing they all have in common is that they’ve called their local Social Security office at least once. Most of these calls have ended in frustration. It doesn’t have to be that way. If you know who to ask for, you’ll get the help you need.

A decent part of my living comes from consulting with individuals throughout the nation with Social Security issues. For some, it’s simply determining how their filing strategy fits in with their overall retirement plan and making sure they haven’t missed anything. For others, I help solve complex Social Security problems. Many of these people that I help would never call me if they would have received a satisfactory answer and solid advice when they called their local Social Security office. So I may be hurting myself slightly, but I can’t stand to see any more bad (and sometimes non-reversible) decisions made as a result of incorrect guidance from the Social Security Administration. I’m going to tell you who to ask for the next time you call.

Read more

Ever dreamed of retiring overseas?

After a life spent in the States, maybe you’d prefer the cultural heritage of Latin America, the sand of the Caribbean or the ancient beauty of Europe. Before you pack your bags, make sure your selected destination is one of the countries where you can still receive your Social Security benefit.

The rules are incredibly complex for those who are eligible for Social Security benefits, but are outside of the United States.  These rules apply not only to those who plan to move, but could apply to someone who was on a missions trip or extended vacation.

For the purposes of this article, we’ll limit our discussion to US citizens who have lived and worked in the United States and decided to retire overseas (or extensively travel) during their retirement years.

The Social Security Administration makes it clear.  If you are a US citizen, you can receive your Social Security benefits if you are outside of the United States.  As you may suspect, there are some stipulations.

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Social Security Overpayment letters are becoming more common.

For those who depend on Social Security payments, receiving a Notice of Overpayment is no fun.  These notification letters will often show up after a change in income or family status and generally allege that the Social Security Administration has paid you too much money.  In this letter they offer you a 30 day window to repay the benefits.

This leaves many shaken who count on this income to buy their groceries or some other necessity.   Fortunately, the Administration is often incorrect in their calculations.

However, there is still a process to follow if you receive one of these letters.  Unless otherwise stated, you have three options.

Read more

If you are planning for retirement, and have prior marriages, it’s critically important to fully understand the rules around Social Security divorced spouse benefits.

Divorce is difficult. Though I’ve never personally been through it, I’ve watched as dozens of my clients and friends have gone through the process.

From my side of the desk, I’ve yet to see a single divorce where either spouse emerged with a higher net worth after the split. Everything changes.

The change brought on by divorce requires major adjustments to your financial plans for the future. One of the most important things you’ll need to do is adjust your plans for retirement. Now you may not have the income to continue saving at your prior level, but you probably won’t need as much to fund your lifestyle in retirement. All of this is up to your individual wishes, goals, and dreams. But one thing is for sure…if you are over 50 you need to plan on part of that retirement being funded by Social Security.

So before you sit down with your financial planner to rethink your retirement income strategy, let me explain more about how Social Security benefits for a divorced spouse actually works and why you need to know.

Are There Social Security Benefits for a Divorced Spouse?

Will Your divorce impact your ability to file for Social Security? There’s some good news to start. What divorce may not impact is your ability to file for Social Security on your ex-spouse’s record.

All you need to do is meet the qualifications. The basic rules are that:

1. Your marriage must have lasted at least 10 years*
2. You must be 62 or older (60 if they are deceased)

That’s pretty much it — but if we stop there, we’re only telling part of the story about how Social Security divorced spouse benefits work. Let’s take a closer look.

*Note: While divorced spouse benefits do require a 10 year length of marriage (where the final divorce became final on or after the 10th anniversary of the marriage), the rules say that if that 10 year period was ‘interrupted’ by divorce, the marriage still qualifies provided the remarriage took place no later than the calendar year immediately following the calendar year of the divorce.

For example, Steve married Rebecca on 6/15/2000 and divorced 5/15/2003. On 9/7/2004, they remarried but divorced again on 8/5/2010. This scenario would satisfy the 10-year requirement even though there weren’t married for the entirety of the 10 year period.

The 10 year marriage rule simply looks to see if the total marriage lasted for 10 years and if it was in existence at some point in each year of the 10 year period.

How Social Security Divorced Spouse Benefits Work, Depending on Your Circumstances

The spousal benefit rules for married individuals require the higher earning spouse to file first before a spousal benefit can be paid to a lower earning spouse.

But that’s not how it works with divorce cases. You can collect on your ex-spouse’s record even if he or she hasn’t applied for benefits!

There are some caveats, though. You must have been divorced for at least two years and your ex-spouse must be eligible for benefits, and typically this means that your ex must be at least 62 years old.

If you’ve met the length of marriage rules, and your ex-spouse is still living, you are eligible for the greater of:

• your own benefit, or
• up to 1/2 of your ex-spouse’s full retirement age benefit.

Here’s an example:

Your ex-spouse has a full retirement age benefit amount of $2,000. Based on that alone, you could expect to receive $1,000 spousal benefit at your full retirement age.

However, the actual amount you receive may be less, based upon the age that you file for benefits.

Depending on how old you are when you file, the spousal benefit amount will range between 32.5% and 50% of the higher-earning spouse’s full retirement benefit.

 

So, if a spousal benefit is the highest benefit that you are entitled to, there is usually not a good reason to delay filing beyond your personal full retirement age.

And remember: if you are divorced, and your ex-spouse has not yet filed for benefits, you must have been divorced for at least two years before you can claim benefits based on your ex-spouse’s history.

Filing for Benefits When You’ve Had Multiple Marriages, Or Your Ex-Spouse Is Deceased

Social Security rules say that as long as all marriages have ended, you are not currently married, and you’ve met the length of marriage rules, you can choose the highest benefit from any of your ex-spouses.

If circumstances change — perhaps an ex-spouse passes away — then you could switch from a spousal benefit on one spouse to a survivors benefit on another.

If your deceased ex-spouse was the higher income earner, your benefit would be equal to his or her full benefit, minus any reduction for your age. (You can file for a survivor benefit as early as age 60.)

Before you do this, however, be warned: If you remarry prior to age 60, you lose the right to claim on an ex-spouse’s record, at least until the subsequent marriage(s) end in death or divorce.

If you remarry after age 60, you are eligible to receive benefits based on the highest of your benefit, your current spouse’s benefit, or your deceased spouse’s survivor benefit.

If You Want to File for Benefits on Your Ex-Spouse’s Record, Use This Special Strategy to Yield Higher Benefits

Don’t grab your keys and head off to your local Social Security office just yet. Just because you can file on your ex-spouse’s benefit doesn’t mean that you should.

At the very least, you need to know your options about some filing strategies that could drastically increase the amount of cash flow and lifetime benefits you could receive.

If your ex-spouse is deceased, you have met the length of marriage rules, and don’t exceed the income limitation, you could file a restricted application for a survivor benefit as early as age 60 and switch back to your own benefit at full retirement age or later.

Here’s an example to illustrate how this works:

Let’s say that Karen has her own Social Security benefit available of $2,000 at her full retirement age of 67. Currently she’s 62, and is also eligible for a survivors benefit of $1,300 today.

She could file for only the survivors benefit and let her benefit increase with delayed retirement credits. At age 70, she could switch back to her own benefit which would have grown to $2,480 (not including cost of living adjustments!).

This strategy is only available for those eligible for a survivors benefit — but if you qualify, it can help you reap big rewards in attaining more retirement cash flow.

Don’t Expect the Social Security Administration to Tell You This

The rules for Social Security benefits for former spouses are pretty generous, and the program can provide much-needed income during retirement years. Making sure that you understand the rules is key to receiving the maximum benefit to which you are entitled.

The amount of benefits you, or your survivor, will receive can often hinge on how much you know! But don’t expect the Social Security Administration to look at all of your prior marriages and make a determination about which eligible benefit is best for you.

They make it pretty clear…proving that there are eligible benefits from prior marriages is the responsibility of the claimant.

Unless you know the rules, it’s pretty easy (and common!) to miss benefits from a prior marriage.

Adding to the challenge is that once you are divorced, the Social Security Administration stops sharing information about your ex-spouse’s benefit amount with you.

That’s great for privacy but bad for obtaining information and planning.   However, if you ask them specific questions, they will answer.

See their publication on Social Security and Divorce here.

At least now you know that you need to dig into the rules and figure out your options before you make a filing mistake — but you could still be concerned that you might miss out on benefits.

In that case, if you still have questions you could leave a comment below… but what may be an even greater help is to join my FREE Facebook members group.

It’s very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time I’ll even drop in to add my thoughts, too. 

You should also consider joining the 330,000+ subscribers on my YouTube channel! For visual learners (as most of us are), this is where I break down the complex rules and help you figure out how to use them to your advantage. 

One last thing that you don’t want to miss: Be sure to get your FREE copy of my Social Security Cheat Sheet. This handy guide takes all of the most important rules from the massive Social Security website and condenses it all down to just one page.