I shared important numbers and data on why and how the dream of retirement is turning out to be a nightmare
Retirement involves a lot of moving pieces. Most Americans are realizing the hard way that retirement is not some super, special, happy place where things are automatic and easy.
Even the bedrock of American retirees – Social Security – is not automatic.
And that brings me to the important statistic I promised yesterday.
According to Yahoo Finance, close to 97% of Americans make a mistake in filing their Social Security.
As a result, most of them are not getting every penny that’s owed to them.
And that’s a BIG problem. Especially considering that most retirees count Social Security as a main source of income:
So to know that many American’s are underpaid, is truly scary…
In fact, U.S. Inspector General Audits found the Social Security Administration has indeed underpaid tens of thousands of recipients.
You might be one of them.
And it’s not as if this is a one-off mistake. The audits showed that some of these errors have been going on for over many years.
It’s so bad, that the Office of Inspector General (OIG) has cast serious doubts about whether retirees are aware of all the FREE information.
Here’s a quote from the OIG report…
“We did not find any evidence SSA had informed claimants of [all their options] when they applied for benefits, as required.”
Can you imagine? The Social Security Administration was not actively telling Americans how they can get all that is owed to them.
If they did, things would be vastly different.
According to the Boston College Center for Retirement Research…
If everyone who was able to used three under-utilized filing strategies, it would unleash an extra $21.5 billion in Social Security payouts every year.
Those are staggering numbers
On one hand, 97% of Americans are not filing correctly. On the other, you have 21.5 billion that could be paid out every year.
It just shows that if Americans filed correctly, they could get an additional $500, $700, or even over $1,000 in their Social Security checks. Every month.
But because the Social Security is not equipped to give individual personalized advice on important matters related to filing, you are missing out.
But that’s not all…
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Your nightmare could get worse.
While social security underpayment is bad, your nightmare could go into ‘hell’ mode if…
Social Security overpays you.
Yes, this happens. And it happens too frequently for anybody’s good.
How can overpayment be a problem?
Well, at some point the SSA realizes their mistake.
If it’s early on, things can be easily adjusted. But imagine if they realize their mistake after 10 years.
Now, out of the blue, you receive a letter demanding a repayment of say $172,000.
No, I’m not painting an imaginary picture to scare you. These things have happened.
Forbes has listed such horror stories and, in one such instance, a victim was asked to repay the Social Security Administration $309,000.
When the victim went to court, the judge ruled in favor of the Social Security Administration.
Clearly, everything seems to be rigged against the tax-paying American.
Now if you ask the Social security Administration, they will just shrug their shoulders and say they are not at fault.
And the truth is, if you go by the letter of the law, they are not.
They are just supposed to check your claim, to see you are not making any false claims and send you your check.
It is not their job to educate you on how to maximize your benefits.
So whose job is it?
And the answer to that is, sadly, nobody’s.
Nobody taught you how to file for social Security in school or college.
Neither did they tell you how to do it in all your years of working.
They just expect you to know.
In their defense, the Social Security Administration will tell you that all the information is freely available in the Social Security Handbook.
They are right.
But here is the problem. That book is over 835 pages of text.
It’s so heavy some senior retirees may not even be able to lift it, leave alone go through it.
And even if you got through it from cover to cover you might not be able to figure out which of those rules applies to you and which does not.
For example, if you get workmen’s compensation for an injury sustained at work… are you eligible for Social security disability benefits?
It is very difficult to find an answer to such a complex question in the hand book.
But you had better find it.
And you had better know the right answer… because a lot could depend on it.
There is an instance when the IRS went after a man and his wife because he did not know the right answer and made a mistake in filing for disability.
This is just one such instance, and it became famous because a national magazine carried this story.
There could be hundreds of such stories that do not come to light.
What this means is, whether you are underpaid by Social Security, or overpaid by them, you’re the one who finally gets bitten.
And badly at that.
It is a sad state of affairs. A literal nightmare.
You might ask… is there no waking up from this nightmare?
There is, but as I mentioned before retirement is a bunch of moving parts.
Social security is just one of them.
And while I believe it is the most important cog in the retirement wheel, there is one more aspect of retirement that is giving many Americans sleepless nights.
We’ll discuss that in part 3 of The American Retirement nightmare.
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