I’ve always prided myself on being able to explain 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 reduced benefits for them. And of course, this irks them to no end. They figure the government is just out to shortchange them. But once I explain why the rule exists, they will almost always accept the fact (sometimes grudgingly) that the law makes sense.
My interest in these issues came about early in my career with the Social Security Administration. I would overhear clients complaining to a fellow SSA agent about some regulation that they didn’t like. And the agent frequently would respond by saying, “Well, it’s the law!” That unhelpful comeback did nothing to assuage the anger felt by 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 totally unsatisfactory “it’s the law” response.
In fact, during my SSA career, I even developed a training session I called “Rationale.” 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. After a few sessions, they nixed my project. They didn’t think it was necessary for SSA agents to be able to explain the laws. They felt it was simply their job to make sure the rules were enforced. I think they were wrong.
Anyway, 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 of the rules I can’t explain is this: Why doesn’t your dependent wife or husband share in the bonus you earn for starting benefits after full retirement age?
You can earn a bonus in your Social Security checks if you delay starting your Social Security benefits until after your full retirement age. You get an extra two-thirds of 1 percent added to your retirement check for each month you wait—up to age 70. (There is no bonus paid for months beyond age 70.) Depending on what your full retirement age is, that can be anywhere from a 24 percent to a 32 percent bonus.
But if you have a spouse eligible for benefits on your record, the spousal rate is based on your full retirement age benefit, not the augmented delayed retirement benefit. That’s the bad news. The good news is that when you die, the widow(er)’s benefit payable to your spouse is based on the higher delayed retirement rate. In other words, your dependent wife or husband doesn’t share in these delayed retirement credits, but your widow or widower will. And again, I can’t explain why one but not the other.
Another rule I can’t explain 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 actually, 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 Oct. 10. Some time afterward, he files for Social Security disability, and his claim is approved. Because he was disabled for only part of October, the five full calendar month waiting period would run from November through March of the following year. The first disability check he will get is for April of that year. And because all Social Security checks are paid one month behind, that check will actually come in May.
So why does Fred, who had a severe heart attack in October, have to wait until the following May 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 take some time to make sure Fred really is disabled. I don’t like either of those supposed rationales for the six-month delay in starting disability benefits. (By the way, there are some disabling conditions that are exempt from this waiting period.)
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. Today, I will just briefly summarize them.
The law says that if you are under your full retirement age and getting Social Security benefits, but you are still working, you will lose $1 in benefits for each $2 you earn over a certain limit. In 2024, that limit is $22,320. So, for example, if 63-year-old Alice is on Social Security and has a part-time job that will pay her $30,000 this year, the Social Security Administration will be required to deduct $3,840 from her benefits for the year. ($30,000 minus $22,320 equals $7,680 divided by two equals $3,840.)
That was a very simple example of a very confusing set of rules. There are also special rules that apply to your first year of retirement, and there is a different earnings penalty for the year you reach full retirement age. (Effective with the month you reach FRA, you could make a million dollars a day and still get your Social Security checks.)
My purpose today is not to give you an in-depth lesson in the earnings penalty rules but to tell you I can’t explain why the rules are there in the first place.
I can tell you that when the Social Security Act was enacted in the 1930s, Congress felt that 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 25 years ago, they completely eliminated the earnings penalty for people who have reached their full retirement age.
But why didn’t they just eliminate the penalty for all retirees? Why should people who are under their full retirement age and 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 really explain it!
