A loophole in the Social Security Act could give married couples up to an extra $US50,000, reports NPR correspondent David Kestenbaum in a Planet Money podcast episode.
This loophole, which economist Larry Kotlikoff and reporter Paul Solman write about in their book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” is all thanks to something called a spousal benefit.
“The spousal benefit dates back to the early days of the Social Security program, when women tended to stay at home and take care of the kids,” reports Kestenbaum for NPR. “It was a way for wives to get something out of the Social Security as well as the husbands.”
While you’re waiting to collect your Social Security — which you can receive starting at age 62, but may want to defer until age 70 to get a much larger check — you can also file for additional money: the spousal benefit.
The way the Social Security Act is written, one spouse can begin claiming regular benefits starting at age 62, while the other spouse claims spousal benefits. As the latter spouse gets this additional money, his or her standard benefits continue growing until claimed at age 70.
Before writing about this trick in “Get What’s Yours,” Solman did some research, found a few couples who did it, and decided to give it a whirl with his wife.
“I simply made a date to talk to the Social Security people on the phone,” he told Kestenbaum. “The woman whom I talked to said, ‘Well you can’t do that sir,’ and I said, ‘Well yes I can!'”
The woman asked her supervisor, and sure enough, there was nothing wrong with collecting spousal benefits. The Solmans’ money, about $US1,000 a month, started arriving soon after, and eventually accumulated to roughly $US50,000. Solman did not specify how long it took, but a simple calculation suggests that receiving $US1,000 a month, he had about $US50,000 in a little over four years.
The double benefits trick seems to be an accident of the law. The Social Security act of 1935 was a complicated one, and several amendments have been made to it.
“Our impression is that it was not specifically intended that this opportunity would be provided,” Stephen Goss, the Chief Actuary for the Social Security Administration, told Kestenbaum. “But it is definitely legal. It is definitely allowed. There is nothing wrong with people pursuing this.”
Whether it be a loophole, accident, or mistake, it’s costly. Goss estimated that this spousal benefit trick could cost the Social Security administration roughly $US1 billion a year.
President Obama’s current budget proposal calls for eliminating aggressive Social Security strategies that benefit the wealthy, such as this one. Ultimately, “It will take an act of Congress to close the hole that it has created,” says Kestenbaum.
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