There aren't many statistics that surprise me, but this one did: A recent report from the Social Security Administration's Office of the Inspector General estimates that tens of thousands of people who receive spousal benefits may be entitled to larger checks.
This figure comes in part from a random sample of 250 current spousal beneficiaries from which the OIG projects that 26,033 spouses are eligible for $195.3 million in higher retirement benefits. According to the report's authors: "We are 90% confident the number of spouses eligible for higher retirement benefits ranged from 22,005 to 30,339, and the additional payments ranged from $131.9 to $258.6 million."
The source of the discrepancy is twofold, though in both cases the issue relates to a spouse's entitlement to larger benefits from his or her own work history.
First, a person who applies for spousal benefits before full retirement -- which, at present, is age 66 -- is "deemed" to have simultaneously applied for benefits based on his or her own work history as well. The SSA then selects the option that yields a larger monthly benefit. This is known as "deemed filing."
Underpayment occurs when this process breaks down -- that is, when the SSA fails to check and thereby discover that a spouse's own work history entitles that person to larger benefits then the spousal share. This error, according to the OIG's report, caused 6.8% of the spouses in the random sample to receive smaller monthly checks than they otherwise qualified for.
The second and larger discrepancy comes about in a slightly different way. Unlike the first category, this group of spouses waited until reaching full retirement age before applying for their spousal share.
By doing so, the benefits stemming from their own work history continued to accumulate delayed retirement credits. This allowed their non-spousal benefits to grow by 8% a year up until age 70, for a total increase of as much as 32%. Not surprisingly, this oftentimes produced a benefit amount that exceeded their spousal share.
Five years ago, the SSA formed a work group that identified 18,768 spouses who were eligible for higher benefits as a result of this sequence of events. But while the agency developed a process to notify beneficiaries of this, it never followed through with doing so because of "limited resources."
By allowing this to fester, in turn, the latest OIG report found that 24.4% of the 250 spouses in its sample now fell into this second category. And according to the authors' calculations, these 61 spouses alone "could have received an additional $549,584 [cumulatively] in retirement benefits at age 70 or older."
As you can see, we're not talking about insignificant amounts here. On average, the spouses in this latter category each left more than $9,000 on the table. If you think you may be one of them, it could be worth your time to call the SSA and check. While it may take the administration a few minutes to dig up and analyze your work history, the investment of time could pay off handsomely.
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