Why Some Retirees are Losing Social Security Benefits
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The Social Security benefit formula is short-changing a select group of retirees, and the losses are apt to exceed $25,000 over a lifetime. There is no effort to fix the flaw, so the concern is on-going.
In response, financial advisors need to revisit claiming strategies for past and present clients.
The benefits formula of Social Security overly penalizes certain retirees who worked some part of their career earning a pension in lieu of participating in Social Security system.
Retirees who are subject to the Government Pension Offset (GPO) provision who claimed spousal or survivor benefits before full retirement are likely getting a lot less than what they should. The impact on lifetime benefits is substantial and varies by client.
There is no effort in motion to address this problem, and responses to address the losses are apt to come up well short of an entire cleanup.
In 2019, the Office of the Inspector General completed an audit of Social Security, concluding that the agency action had cost one segment of seniors more than $25,000 on average as a result of incomplete or inaccurate advice provided by the agency. Specifically, the agency had failed to explain the full cost of early retirement adjustments to seniors subject to the GPO.