by I.K. Mullins
Copyright©2015 I.K. Mullins. All Rights Reserved. No part of this book may be reproduced or retransmitted in any form or by any means without the written permission of the author.
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Social Security, a US federal program of social insurance and benefits, pays out hundreds of billions of dollars every year. It is one of the largest government programs in the world, and it is a very convoluted program. Social Security benefit rules are difficult to navigate and understand. For married couples, for example, the formula for each spouse’s benefit involves 10 mathematical functions. Overall, the Social Security system includes 2,728 core rules and thousands of additional instructions in its Program Operating Manual (the additional instructions are supposed to elucidate the core rules). Their printed version is longer than the printed version of the Federal Tax Code.
While the Social Security system has become more and more complex, its staff and resources have been shrinking. The number of Social Security employees was recently cut by 11,000 positions. Today, approximately 75,000 Social Security workers have to handle benefits for about 56 million Americans, and many Social Security representatives are not trained well enough to help retirees navigate Social Security benefits. This is why people who have already retired, and people who plan to retire, should be cautious about taking advice from Social Security representatives.
Laurence Kotlikoff, Phillip Moeller and Paul Solman wrote a book, Get What’s Yours: The Secrets to Maxing Out Your Social Security, that explains basic strategies for navigating the Social Security system and maximizing a household’s Social Security retirement, as well as spousal, child, parent, survivor, divorcee and disability benefits. Kotlikoff, Moeller and Solman explain in their book how “file and suspend” (applying for benefits and not taking them) and “start, stop, start” (starting benefits, stopping them and restarting benefits) strategies can help people get more money out of Social Security. Their book also discusses the pitfalls in the Social Security benefit system that people should avoid.
This book, A Guide to Kotlikoff, Moeller and Solman’s Get What’s Yours: The Secrets to Maxing Out Your Social Security Summary and Critique, Key Ideas and Facts, includes an unofficial summary and analysis of the key ideas of Kotlikoff, Moeller and Solman’s book, Get What’s Yours: The Secrets to Maxing Out Your Social Security, as well as a critique of its principal messages . Moreover, this Guide goes beyond the information included in Kotlikoff, Moeller and Solman’s book and reviews other selected studies and data related to the present and future of Social Security benefits.
Today, a typical American saves less than 10,000 dollars by the time he or she is 10 years from retiring. Rising costs of living, as well as the rising costs of medical expenses, can easily force many people to outlive their not-so-big savings, therefore making Social Security benefits crucial for the survival of millions of Americans. According to the Center on Budget and Policy Priorities, Social Security benefits remain the major source of cash income for almost 70 percent of American retirees. The average monthly benefit—1,217 US dollars—does not seem like a large amount of money, but it keeps approximately 14 million older Americans out of poverty.
The history of the emergence and evolution of Social Security goes all the way back to 1929, the year when the US stock market crashed. After the crash in October 1929, the US stock market lost 40 percent of its value within three months, erasing 26 billion dollars of wealth. While the US was slipping into the Great Depression, unemployment exceeded 25 percent, approximately 10,000 banks failed, millions of people became unemployed. These dire circumstances called for change. Many proposals have been made to address the situation.
For example, Huey Long, who was Governor of Louisiana from 1928 to 1932 and elected to the US Senate in 1930, wanted the government to confiscate the wealth of the nation’s rich. His program, which was called Share Our Wealth, required the federal government to provide every family with an annual income of $5,000, limit private fortunes to 50 million dollars, legacies to 5 million dollars, and annual incomes to 1 million dollars. Under this program, everyone over age 60 would get paid a pension. By 1935, the program had 7.7 million supporters.
In order to deal with the rising economic problems, Workers Compensation programs and welfare programs for the elderly were created at the state level. Then, on June 8, 1934, President Franklin D. Roosevelt announced his intention to provide a nation-wide program for Social Security. He created the Committee on Economic Security (CES) that had to study the problem of economic insecurity and to provide recommendations for its solution. In January 1935, the CES made its report to the President, and, on August 14, 1935, President Roosevelt signed the Social Security Act into law. In addition to Social Security, it included unemployment insurance, aid to dependent children, old-age assistance, as well as grants to the states to provide medical care.
Today, Social Security offers various types of benefits to Americans: retirement benefits; spousal benefits; spousal benefits for those who care for an eligible child or children; child benefits for the young children of retirees; child benefits for disabled children of retirees; divorcee spousal benefits; widow or widower survivor benefits; divorcee widow or widower survivor benefits; parental benefits; survivor benefits to young children; survivor benefits to disabled children regardless of age; and disability benefits.
Any American who has worked in “covered” employment for 40 quarters of a year (i.e., 10 years in total, and those 40 quarters are not required to be consecutive) is eligible for Social Security benefits. By “covered” employment, Social Security understands those jobs where Social Security taxes (FICA contributions) are deducted from a person’s employee compensation. The Social Security tax applies to wage or self-employment income that is equal to or less than the “tax max,” which changes with time. In 2015, the tax max is 118,500 dollars.
Moreover, if a person is qualified for Social Security benefits, then his or her current spouse, ex-spouse(s), young children, disabled children and parents may also be eligible to receive certain Social Security benefits (even if they have never worked and never paid the Social Security tax). When the person dies, the person’s work record can also make his or her survivors eligible to receive Social Security benefits.
Social Security is intended to help people who reach their retirement age, as well as their relatives. However, Kotlikoff, Moeller and Solman argue that the Social Security program is not fair. It describes its benefit rules using confusing language; it provides complicated instructions that are often difficult to understand; and it allows those beneficiaries who are better educated about the Social Security system’s rules to get more benefits than other beneficiaries.
It is not a surprise then that Kotlikoff, Moeller and Solman’s book has become a national bestseller. In their book, the authors list 50 secrets to getting higher benefits. They also draw readers’ attention to pitfalls (gotchas) that can cost retirees lots of money. The primary objective of Kotlikoff, Moeller and Solman’s book is to help all beneficiaries understand the Social Security jargon and learn how to get the most out of the system.
The authors of Get What’s Yours: The Secrets to Maxing Out Your Social Security are certainly experts in questions of retirement and Social Security benefits. Laurence Kotlikoff is a professor of economics at Boston University. Philip Moeller writes about retirement for Money Magazine, the PBS website’s Making Sen$e, and other news outlets. Paul Solman is a business and economics correspondent for The PBS NewsHour. The idea of the book came to them when they were discussing their own retirement planning. Their discussion brought up their concerns about the complexity of the Social Security system. Then, they decided to write a book that would tell Americans how to maximize their retirement benefits and how to avoid some traps that exist in the system.