The Obama administration's new budget plan proposes closing a Social Security loophole. The loophole allows some couples to get up to $50,000 extra.
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One of the best-selling books right now is about mind-numbing government rules, the rules of our Social Security system. It's called "Get What's Yours: The Secrets To Maxing Out Your Social Security." David Kestenbaum with our Planet Money podcast dug into one of the tricks in the book that can get some couples an extra $50,000.
DAVID KESTENBAUM, BYLINE: The story of the $50,000 trick starts with a tennis game between an economist and a reporter. Maybe tennis is overstating it. They're not great.
PAUL SOLMAN: Terrible.
LARRY KOTLIKOFF: If you count the number of braces and knee braces and arm braces, it's a lot.
SOLMAN: Yeah, maybe more than the actual winners we ever hit.
KOTLIKOFF: We're thinking about wearing helmets. (Laughter). That's coming.
KESTENBAUM: That's Larry Kotlikoff - he's the economist - and Paul Solman - he's economics correspondent for the PBS NewsHour. They're two of the authors of the book. But back then they were playing tennis. They took a break and Larry said to Paul, hey, what are you and your wife doing about Social Security? Paul was slightly insulted. He'd covered economics for over 30 years.
SOLMAN: I smugly smiled and said, (laughter) we've got it all figured out, Larry. You don't have to worry about it. We're both waiting until we're 70.
KESTENBAUM: If you wait until age 70, you get bigger Social Security checks. But Larry had a way for Paul and his wife to went get even more. You still get to wait until 70 to start collecting your main money, he explained, but while you are waiting, you can also file for additional money, something called a spousal benefit. The spousal benefit dates back to the early days of the Social Security program when women tended to stay at home and take care of the kids. It was a way for the wives to get something out of Social Security as well as the husbands. Now, Paul and his wife both worked, but the way the Social Security Act is written, one of them could claim spousal benefits and still let their own benefits build to a maximum at age 70.
SOLMAN: I was a little anxious because I - I did think that there was something a little screwy about it.
KESTENBAUM: But Paul did some research and it seemed to be a real thing. He found some other people who had done it. So he and his wife gave it a try.
SOLMAN: I simply made a date to talk to the Social Security people on the phone. They were incredibly polite. They were incredibly punctual. The woman whom I talked to said, well, you can't do that, sir. I said oh, yes I can.
KESTENBAUM: The woman went to talk to her supervisor and, yes, it was allowed. The money started arriving, about $1,000 a month.
How much did this get you, total?
SOLMAN: Almost $50,000.
KESTENBAUM: That you wouldn't have had otherwise.
SOLMAN: Oh, sure.
KESTENBAUM: Did you feel at all guilty?
SOLMAN: No because - well, no. I thought, the law is the law and I should be taking advantage of a benefit that is available to everybody. But I thought everybody should know about it.
KESTENBAUM: That's one of the reasons they wrote the book. This trick seemed kind of crazy to me, though, a way to get double benefits. I asked Larry Kotlikoff, the economist, if he thought you were supposed to be able to do this. Was this an accident of the law? He wasn't sure. The Social Security Act, he said, is so complicated and it's been amended so many times it's hard to know.
So I spent a few days looking into it and it was weirdly hard to figure out. One key change happened in 1956, but another happened recently, in 2000. It was just a few words in an amendment introduced by two senators, two senators who have since died. I tried reaching out to their former staffers, but no one seemed to know for sure what the story was. Finally, I reached the chief actuary for the Social Security Administration, Stephen Goss, and I asked him, was this intentional? Were people supposed to be able to get this extra money?
STEPHEN GOSS: No, our impression is that it was not specifically intended that this opportunity would be provided.
KESTENBAUM: But it is legal and allowed by the law?
GOSS: It is definitely legal, it is definitely allowed. There's nothing wrong at all with people pursuing this.
KESTENBAUM: So this doesn't seem like it's a loophole in the sense of something someone snuck into the law for their own benefit. It's weirder - just a mistake, a mistake that allows some couples to get extra money - for high earners, about $50,000. Stephen Goss expects the spousal benefit trick will eventually cost the Social Security fund about a billion dollars a year. The Obama administration, in its current budget proposal, calls for eliminating aggressive Social Security strategies that benefit the wealthy - mainly this one. But it will take an act of Congress to close the hole that it created. David Kestenbaum, NPR News. Transcript provided by NPR, Copyright NPR.