Sooner or later Congress has to do something about our unsustainable Social Security system. A cautionary tale will help explain why the system is headed for bankruptcy. Like any personal story, it is anecdotal, but anecdotes in the aggregate can add up to billions of dollars.
A year and a half ago I decided to retire from teaching. Nearly 40 years in the professoriate provided me with a better-than-adequate retirement income from TIAA-CREF. Fifty years of FICA withholding from my wages and salary also made me eligible for Social Security.
The first thing I learned about Social Security is that the people who work for the Social Security Administration, at least the ones I talked with, are not the problem. Every person I dealt with was knowledgeable, polite and efficient. But here is what I learned from those people.
As soon as I expressed my desire to apply for Social Security benefits, it became clear that the folks in Washington know a lot about me. The application required very little information beyond what they already had.
I stated that I wanted the benefits to begin in January of 2013, at which time I will be two months short of 68. I was told that would be fine, but that I could choose to draw benefits retroactive to April 2012. I asked what difference it would make in terms of monthly payments and was told it would be about $200.
After a little quick math I decided to opt for retroactive benefits. For the nine months from April to December I would receive a lump sum payment of about $24,000. At $200 per month it would take 10 years to make up that amount if I waited for the higher monthly payments beginning January 2013. Because I could be dead in 10 years and really don’t need the money anyway, it was easy to opt for a nice bonus today.
It took less than a week for the $24,000, less taxes withheld, to appear in my bank account.
But that wasn’t the end of it. The nice man at Social Security said he would need to schedule an interview for me with someone in the local office to confirm the eligibility of my dependent children. Not knowing that my decision to have children at an advanced age would qualify them for Social Security benefits when I retired, I was taken aback. But the interview was scheduled for the next week.
On the appointed day, a pleasant woman called from the local Social Security office to confirm that my younger children are indeed eligible. Qualifying was simple. They must be dependent and either under the age of 18 or still in high school. That means that my son will receive benefits until he graduates from high school next June and my two daughters will receive benefits for the next three and five years, respectively. Alas, my two much older children will have to fend for themselves, but their mother, my former wife, will be able to claim benefits, “if she chooses to do so,” explained the nice Social Security person. I wonder what she will choose to do.
Because all of this seemed a bit extravagant to me, I pondered what sort of benefits my children would receive. The Social Security person asked if I had a couple minutes while she calculated their benefits. In my mind I guessed something in the neighborhood of $100 a month for the three of them. Wrong. She said they each would receive approximately $615 per month, and because I had chosen to commence my payments last April, they too would receive back pay. Within days, about $4,500 (again, taxes withheld) appeared in each of their bank accounts.