TIME Social Security

Social Security Spent $300 Million on ‘IT Boondoggle’

Social Security Computer Woes
This Jan. 11, 2013 file photo shows the Social Security Administration's main campus in Woodlawn, Md. Patrick Semansky—AP

"The program has invested $288 million over six years, delivered limited functionality, and faced schedule delays as well as increasing stakeholder concerns," a report said

(WASHINGTON) — Six years ago the Social Security Administration embarked on an aggressive plan to replace outdated computer systems overwhelmed by a growing flood of disability claims. Nearly $300 million later, the new system is nowhere near ready and agency officials are struggling to salvage a project racked by delays and mismanagement, according to an internal report commissioned by the agency.

In 2008, Social Security said the project was about two to three years from completion. Five years later, it was still two to three years from being done, according to the report by McKinsey and Co., a management consulting firm.

Today, with the project still in the testing phase, the agency can’t say when it will be completed or how much it will cost.

In the meantime, people filing for disability claims face long delays at nearly every step of the process — delays that were supposed to be reduced by the new processing system.

“The program has invested $288 million over six years, delivered limited functionality, and faced schedule delays as well as increasing stakeholder concerns,” the report said.

As a result, agency leaders have decided to “reset” the program in an effort to save it, the report said. As part of that effort, Social Security brought in the outside consultants from McKinsey to figure out what went wrong.

They found a massive technology initiative with no one in charge — no single person responsible for completing the project. They issued their report in June, though it was not publicly released.

As part of McKinsey’s recommendations, acting Social Security Commissioner Carolyn Colvin appointed Terrie Gruber to oversee the project last month. Gruber had been an assistant deputy commissioner.

“We asked for this, this independent look, and we weren’t afraid to hear what the results are,” Gruber said in an interview Wednesday. “We are absolutely committed to deliver this initiative and by implementing the recommendations we obtained independently, we think we have a very good prospect on doing just that.”

The revelations come at an awkward time for Colvin. President Barack Obama nominated Colvin to a full six-year term in June, and she now faces confirmation by the Senate. Colvin was deputy commissioner for 3½ years before becoming acting commissioner in February 2013.

The House Oversight Committee is also looking into the program, and whether Social Security officials tried to bury the McKinsey report. In a letter to Colvin on Wednesday, committee leaders requested all documents and communications about the computer project since March 1.

The letter was signed by Rep. Darrell Issa, R-Calif., chairman of the Oversight committee, and Reps. Jim Jordan, R-Ohio, and James Lankford, R-Okla. They called the project “an IT boondoggle.”

The troubled computer project is known at the Disability Case Processing System, or DCPS. It was supposed to replace 54 separate, antiquated computer systems used by state Social Security offices to process disability claims. As envisioned, workers across the country would be able to use the system to process claims and track them as benefits are awarded or denied, and claims are appealed.

But as of April, the system couldn’t even process all new claims, let alone accurately track them as they wound their way through the system, the report said. In all, more than 380 problems were still outstanding, and users hadn’t even started testing the ability of the system to handle applications from children.

“The DCPS project is adrift, the scope of the project is ambiguous, the project has been poorly executed, and the project’s development lacks leadership,” the three lawmakers said in their letter to Colvin.

Maryland-based Lockheed Martin was selected in 2011 as the prime contractor on the project. At the time, the company valued the contract at up to $200 million, according to a press release.

McKinsey’s report does not specifically fault Lockheed but raises the possibility of changing vendors, and says Social Security officials need to better manage the project.

Gruber said Social Security will continue to work with Lockheed “to make sure that we are successful in the delivery of this program.”

Steve Field, a spokesman for Lockheed Martin, would only say that the company is committed to delivering the program.

Nearly 11 million disabled workers, spouses and children get Social Security disability benefits. That’s a 45 percent increase from a decade ago. The average monthly benefit for a disabled worker is $1,146.

The report comes as the disability program edges toward the brink of insolvency. The trust fund that supports Social Security’s disability program is projected to run out of money in 2016. At that point, the system will collect only enough money in payroll taxes to pay 80 percent of benefits, triggering an automatic 20 percent cut in benefits.

Congress could redirect money from Social Security’s much bigger retirement program to shore up the disability program, as it did in 1994. But that would worsen the finances of the retirement program, which is facing its own long-term financial problems.

Social Security disability claims are first processed through a network of field offices and state agencies called Disability Determination Services. There are 54 of these offices, and they all use different computer systems, Gruber said.

If your claim is rejected, you can ask the state agency to reconsider. If your claim is rejected again, you can appeal to an administrative law judge, who is employed by Social Security.

It takes more than 100 days, on average, to processing initial applications, according to agency data. The average processing time for a hearing before an administrative law judge is more than 400 days.

The new processing system is supposed to help alleviate some of these delays.

MONEY Social Security

How to Fix Social Security — and What It Will Mean for Your Taxes

As Baby Boomers retire, the Social Security trust fund is getting closer to running out of money, a new study finds.

Last week I explained why I thought it would be a bad idea to close Social Security’s long-term funding gap by simply making all wages — not just those up to the annual ceiling, which this year is $117,000 — subject to payroll taxes, thereby socking it to wealthier workers. That wasn’t a popular opinion among those who feel it only right to raise the levies on the top 1%, or even top 5%.

“When all other sources have been depleted soak the portfolio holders even more disproportionately,” one critic responded via social-media .

Tweets, unfortunately, don’t make great policy arguments. And as Social Security’s doomsday clock keeps ticking, it’s all the more urgent to come up with a balanced reform strategy and act on it. Last week the Congressional Budget Office projected Social Security’s trust funds would be depleted during calendar year 2030—a year earlier than its previous estimate. If this happens, the program could then pay only about three-fourths of its scheduled benefits.

How, then, to close the funding gap? Although I do not want to see the wealthy as the primary bill-payer for Social Security reform, I do think the payroll tax ceiling is set too low. Today that ceiling, which is $117,000 this year, captures about 83% of all wage income, but it used to apply to 90%. The reason for the decline is widening income inequality, as the upper end of the wage scale has soared disproportionately higher.

Raising the ceiling until it once again covers 90% of the nation’s wage income would help, somewhat, to improve Social Security’s finances, the CBO found. The big headline here is that hiking the ceiling to cover 90% of wages would require a huge jump—from a projected $119,400 in 2015 to $241,600. The steep hike is necessary because high-end earners are a relatively small slice of the U.S. population. Even so, raising the payroll tax ceiling, which more than doubles the amount of Social Security payroll taxes paid by wealthier earners, would close only 30% of the system’s projected 75-year actuarial deficit.

You might wonder why we don’t eliminate the ceiling altogether so all wages are subject to payroll taxes. Glad you asked. Eliminating the ceiling would still close only 45% percent of the deficit, according to CBO. Both these projections assume that wealthier people would also see their Social Security benefits increase.

To make a more significant reduction in the deficit, you could limit Social Security benefit increases for the wealthy to only an additional 5% of pre-retirement earnings. In that scenario, along with eliminating the earnings ceiling, we could close nearly two-thirds of the funding gap. Still, as I wrote last week, I think soaking the rich this way is nearly as bad as soaking poorer people. Soaking people is not what Social Security was or should be about. It’s about requiring people to set aside enough money through a mandatory payroll tax to provide them a modest level of retirement security.

For most people the payouts are, indeed, modest. In 2013 a 66-year old who had earned average wages during his or her working life would qualify for lifetime Social Security payments beginning at $19,500 a year. This amounts to 45% of average pre-retirement income. What’s more, most workers file for benefits early, which sharply reduces the level of income replacement.

Yet that’s pretty much how the program was designed, and even these low levels of replacement income have been enough for Social Security to be a spectacular success. Before the program began in the ‘30s, retirees had the highest poverty rate of any age group. Today they have the lowest. (Medicare gets major credit as well.)

Problem is, even as Social Security has worked well, the other parts of the retirement system have fallen apart. The move from defined benefit pensions to 401(k)s and other defined contribution plans has shifted enormous retirement risk from employers to employees, and the numbers show that many aren’t saving enough to meet their goals.

Given the looming retirement shortfall, there has been growing support to expand Social Security benefits, not contract them. That will be tough to do. As the CBO reported last week, under current rules Social Security’s long-term deficits will continue to balloon. Over the next 25 years, program income will amount to 5.2% of the nation’s gross domestic product, while program benefits will account for 6%.

The fundamental problem is the aging of America. As the wave of Baby Boomers moves into retirement, the number of people collecting Social Security is projected to rise by roughly a third from 58 million today to 77 million in 2024—and by nearly 80% to more than 103 million by 2039. By contrast, the work force, defined as people aged 20 to 64, is expected to increase by only 5% by 2024 and just 11% by 2039.

Something’s got to give. Higher taxes, in one form or another, are inevitable.

Philip Moeller is an expert on retirement, aging, and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY retirement planning

Answers to 5 of Twitter’s Most-Asked Questions About Retirement

Following a recent Twitter chat, a retirement expert expands on answers to queries about Roth IRAs, Social Security and more.

The Twitterverse has questions about retirement. What’s the best way for young people to get started saving? Are target-date funds good or bad? Should we expand Social Security to help low-wage workers?

Those are just a few of the great questions I fielded during a retirement Tweet-up convened this week by my colleagues at Reuters. Since my column allows for responses beyond Twitter’s 140-character limit, today I’m expanding on answers to five questions I found especially interesting. You can view the entire chat —which included advice from personal finance gurus from Reuters and Charles Schwab—on Twitter at #ReutersRetire.

Q: What’s the best way for parents to help young adult children save for the long term? How about Roth IRAs?

Roth IRAs are no-brainers for young people. With a traditional IRA, you pay taxes at the end of the line, when you withdraw the money. With a Roth, you invest with after-tax money, and withdrawals (principal and returns) are tax-free in most situations. That’s especially beneficial for young retirement investors, since most people move into higher income-tax brackets as they get older and make more money.

Q: How would you expand Social Security? Any current proposal appealing?

This question was posed during Twitter chatter about the difficulty low-income workers face building retirement saving, and ways to make our retirement system more equitable. Expanding Social Security may fly in the face of conventional wisdom, which argues that rising longevity should dictate reductions in future benefits, not increases. But this is a case where the conventional wisdom is wrong.

An expanded Social Security system is the most logical response to our looming retirement security crisis because of its risk pooling and progressive approach to income distribution. Social Security replaces the highest percentage of pre-retirement income for workers at the low end of the wealth scale.

Several ideas are kicking around Congress. Most would raise revenue by gradually phasing out the cap on wages subject to the payroll tax ($117,000 in 2014) and raising payroll tax rates over a 20-year period. Some advocates also would like to see a surtax on annual incomes over $1 million. On the benefits side, advocates want to increase benefits across the board by 10%, recognize the value of family caregivers by awarding work credits toward Social Security benefits and adopt a more generous annual cost-of-living adjustment formula.

Q: With the myriad questions about retirement, can “live” advisers really be replaced by automated advice and data-driven programs?

Online software-driven services—so-called robo-adviser services – can’t fully replace human advice. But they address a key problem: how to deploy retirement guidance to mass audiences at a low cost. Services like Wealthfront and Betterment interact with clients online using algorithms, with low fee structures—typically 0.25% of assets under management or less.

Another variation on this theme: services that deliver advice through a combination of software and human advice, such as LearnVest. One of the most interesting tech-enabled experiments is Vanguard’s Personal Advisor Services, which provides access to a managed portfolio of Vanguard index funds and exchange-traded funds, along with portfolio management services from a human adviser.

Vanguard charges just 0.3% of assets under management for the service. The service is in test mode with a small group of clients, and only available to clients with $100,000 to invest. The minimum will be reduced when the service expands, and it should be rolled out more broadly over the next 12 to 18 months, a spokeswoman says. Given Vanguard’s huge scale, it’s a venture worth watching.

Q: What’s the final verdict on target-date funds—good or evil?

We don’t have a final verdict yet, but target-date funds (TDFs) are doing more good than evil—though they generate plenty of controversy, confusion and misunderstanding. The general idea is to reduce the risk you’re taking as retirement approaches by cutting your exposure to stocks in favor of fixed-income investments—the “glide path.” But some TDFs glide “to” your retirement date, while others glide “through it.” Experts debate which is better, but you should at least know which type of fund you own.

Many retirement investors misuse TDFs by mixing them with other funds, a recent survey found. These funds are designed as one-stop investment solutions that automatically keep your account balanced; doing otherwise will hurt your returns.

Bottom line? TDFs do more good than harm by automatically keeping millions of retirement portfolios balanced with reasonably good equity-to-fixed-income allocations. And they are the fastest-growing product in the market: Some $618 billion was invested in TDFs at the end of 2013, according to the Investment Company Institute, up from $160 billion in 2008.

Q: Anyone know what the highest Social Security income is for a retiree today versus what’s expected 30 years from now?

This year’s maximum monthly benefit at full retirement age (66) is $2,642. The Social Security Administration doesn’t have projections for future benefit levels, but the answer certainly will depend on how Congress decides to deal with the program’s long-term projected shortfalls. Solutions could include tax increases (discussed above) or higher retirement ages. Boosting the retirement age would mean a lower benefit at age 66.

MONEY Social Security

Why Taxing the Rich is the Wrong Way to Fix Social Security

ERROL FLYNN as Robin Hood
Errol Flynn, as Robin Hood, leading an early fight against income inequality. WARNER BROS/RGA/Ronald Grant Archive/Mary Evans—Everett Collection

It may feel good to jack up payments by wealthier earners, but Social Security is a safety net, not a tax collector.

How do you categorize the money that comes out of your paycheck to fund Social Security? Do you consider that deduction to be a tax, or a mandatory contribution into a retirement account, or an insurance premium?

For many people, the answer is a tax. That’s what I heard from the majority of readers who responded to my most recent column, “3 Ways to Fix Social Security and Medicare.” It’s an understandable view. After all, the Social Security payroll deduction is commonly referred to as a FICA tax. (FICA is the acronym for Federal Insurance Contributions Act.) And because it’s called a tax, these readers think that Social Security reforms should focus on making wealthier wage earners pay more into the system. Making all wage income subject to payroll taxes would solve between 75% and 80% of the system’s funding shortfall.

I don’t agree with this approach, as I’ll explain. Still, these readers have plenty of company, including some leading critics of Social Security, who argue that payroll taxes are less progressive than the federal income tax. Everyone who works in a job that is covered under Social Security rules pays the same rate: 7.65% of their earned income up to an annual ceiling of $117,000 in 2014; the level is increased annually for inflation. Employers pay another 7.65%. (These totals include 6.2% for Social Security and 1.45% for Medicare.)

The way Social Security’s benefits are designed, at this year’s $117,000 income level, you receive the maximum credit—those earning higher salaries would not qualify for any more benefits. That’s why requiring wealthier people to pay even higher taxes without any additional income would break the implicit bond between your contributions and the benefits you may receive. And the move would certainly undermine support for the program.

Whatever Social Security lacks in progressive taxation it more than makes up for in the benefits it pays out, which are heavily weighted toward lower earners. Here’s how: The program breaks a person’s lifetime earnings history into three dollar segments that are divided by so-called “bend points.” Adjusted annually for inflation, the bend points are $816 and $4,917 in 2014. For the first $816 of your lifetime average monthly Social Security earnings, 90% are credited toward your monthly benefits. Between $816 and $4,917 in earnings, only 32% are applied to benefit entitlements. And for average monthly lifetime earnings above $4,917, only 15% are counted in determining your monthly retirement benefit.

Add it all up, and lower-income retirees wind up with Social Security benefits that make up a much higher portion of their pre-retirement incomes, typically 50% or more, than wealthier households, which may receive less than 20% of income from these benefits.

That payout usually exceeds the amount that lower-income beneficiaries put in, according to research by the Urban Institute, a Washington non-profit. (That’s notwithstanding the mantra of groups pushing to protect and even expand Social Security: “It’s Your Money; You Paid for It.”) The difference between the amount lower-income households pay and the benefits they eventually receive comes out of the pockets of higher-paid workers.

Of course, balancing Social Security by jacking up payments by wealthier earners feels good to many people and may even seem fair. But let’s try a thought experiment. What if Social Security worked like a 401(k) plan—you contributed a percentage of your salary, often matched by an employer contribution, and the account grows tax-deferred until you withdrew it at retirement. If I put $5,000 a year into my 401(k), but you earn more and can put $20,000 into yours, is this unfair? Should some of your contributions be placed instead inside my 401(k) simply because you make more money?

If you think Social Security is different from a 401(k), then you must also be viewing it at least in part as a welfare program that should be taking assets from the top 10% and distributing them to the other 90%. I don’t share this view, but I would support boosting the earnings ceiling by a hefty amount. Payroll taxes used to catch 90% of all wages. After years of lopsided wage gains by wealthier persons, only a little more than 80% of wages is currently subject to payroll taxes. It would be a reasonable move to restore the original level of taxation.

Even so, Social Security’s primary mission is to provide retirement security—a safety net that would help keep aging Americans out of poverty. It was not supposed to be a tax collector. That’s why I think the best way to look at the program is as a form of insurance for longevity, rather than an investment that should give you a better-than-break-even rate of return.

So if you believe that wealthy people should pay higher taxes, change the tax code. Don’t look to Social Security to do this work for you.

The Committee for a Responsible Federal Budget, a Washington non-profit, has a Social Security calculator showing reform options and their impact. If you use this tool, we’d like to hear how you would reform Social Security, so please share your ideas. We’ve all got a stake in this.

Philip Moeller is an expert on retirement, aging and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY 401(k)s

Millennials (With Jobs) Are Super Saving Their Way to Retirement

Laptop with cord in shape of piggy bank
Atomic Imagery—Getty Images

Young adults are outpacing Baby Boomers and Gen X when it comes to getting a head start on their 401(k)s.

You may have heard that Millennials are taking saving more seriously than Gen X-ers and Baby Boomers did at their age. But their financial prospects look much worse, given student loan debts, high unemployment, and shaky entitlement programs.

No question, Millennials face steep challenges. But it turns out, twenty-something savers who managed to land jobs (some 74% of this age group) are doing even better than you might have thought—and they’ve built a huge head start toward retirement security.

Those are the findings of a just-released study by Transamerica Center for Retirement Studies, which surveyed more than 1,000 Millennials in the work force. “Millennials have seen what happened to their parents, many of whom lost their jobs and savings in the financial crisis—and they are taking steps to avoid a similar outcome,” says Catherine Collinson, president of the Transamerica center. “We’re seeing an emerging generation of retirement super savers.”

Millennials have also benefitted from the widespread adoption of 401(k) auto enrollment, automatic contribution hikes, and target date funds, Collinson says. Some 71% of Millennials who are offered a 401(k) end up joining their plan. By being enrolled into 401(k)s as soon as they start their jobs (unless they opt out), many Millennials are being nudged onto the retirement savings path sooner than previous generations.

How much sooner? Some 70% of Millennials started saving for retirement at an unprecedented young age, just 22, the survey found. By contrast, the average Boomer began saving at age 35, while Gen Xers got started at 27.

Transamerica’s findings show that Millennials are contributing an average 8% of salary to their 401(k) plans; adding an employee match, they’re stashing a solid 10% of income into their accounts. Those findings echo earlier surveys of young adults, which have found that Millennials are saving more.

Those contribution rates are especially impressive, given that Gen X savers are putting in just 7% of pay before the match on average. Boomers are saving at a higher rate, 10% before the match, but they also have higher pay on average and are facing a looming retirement date. Some 27% of Millennials also said they raised the amount they contributed in the past 12 months vs. just 7% who decreased it.

Thanks to this early savings start, Millennials have amassed an average $32,000 in their 401(k) accounts, according to Transamerica. And unlike older generations they are relying heavily on professional advice to invest their money—some 62% use a managed account or target date fund, vs just 47% of Boomers and 56% of Gen X-ers.

Of course, most young adults have plenty of shorter-term financial worries. Some 27% say their top priority is covering basic living experiences, and 27% say they want to pay off debt. Only 16% listed saving for retirement as a top concern. Complicating matters, three in 10 expect to provide support for their aging parents or other family members.

Even so, Millennials are optimistic about their retirement prospects. A whopping 60% expect to retire at age 65 or sooner. That’s a stark contrast to the majority of Baby Boomers (65%) and Gen X (54%), who plan to work past retirement or never retire. But Millennials share the expectations of older generations in other ways—half plan to work the job in retirement, either full time or part time. When it comes to staying busy in retirement, there’s not much of a generation gap.

MONEY Social Security

3 Smart Fixes for Social Security and Medicare

Betty White in OFF THEIR ROCKERS
Actress Betty White works well past traditional retirement age. Justin Lubin—NBC/Courtesy Everett Collection

The aging of America threatens the financial stability of the nation's safety net programs. Here are sensible reforms that can help.

Last week Washington made a rare effort to help America’s fast-growing aging population. The U.S. Treasury and the IRS issued a new rule permitting people to use funds in their tax-advantaged retirement accounts to buy so-called longevity annuities—deferred annuities that typically don’t begin making payments until a person turns 80 or 85.

Longevity annuities can be a great option to ensure you don’t outlive your assets, as well as provide higher quality of life. Since you can count on future annuity income, you can spend more now, instead of having to set aside a big chunk of your nest egg for a longer-than-expected old age.

Related: The New 401(k) Income Option That Kicks In When You’re Old

But longevity annuities are only a small first step. Much more needs to be done to prepare for the many changes—legal, social, and behavioral—that will occur as we become not only an older society but one enjoying amazing longevity gains. In 1954 a 65-year-old man might be expected to live to age 83. In 2014 the average life expectancy for a 65-year-old is 86.

These gains have led many to push for raising the Social Security retirement age to 68, 69 or even 70. That needs to happen. (It’s already set to rise to 67 for people born in 1960 and later.) Still, longevity increases are not being shared by people with little education, lower incomes and, often, physically demanding jobs that wear out their bodies well before even the current full retirement age. So if we raise the retirement age, we also need to provide improved early retirement benefits for those who can no longer work.

Longevity and related healthcare issues will eventually lead to additional changes in the big three old-age safety net programs—Social Security, Medicare, and Medicaid. Few people in government have been willing to deal with these challenges. We do not have enough money to continue funding current benefit levels. Voters don’t want to hear this.

Well, I’m not planning a run for elective office anytime soon. So here are three aging and longevity reforms that you’ve heard less about but deserve serious consideration:

*Social Security payroll taxes should be reduced for workers who stay on the job past full retirement age (this change should also apply to employers). Continuing to work will improve what are, for millions of baby boomers, looming financial shortfalls in retirement. The design would be tricky, to say the least, but it’s possible to do this in a way that lowers total government spending. Giving employers a financial incentive to hire older employees encourages them to do the right thing and covers any higher costs of employee benefits for this group.

*A hybrid form of Medicare should be blended with employer health insurance to accommodate older persons who are still drawing a paycheck. The federal government will spend less than on pure Medicare. Employers will also spend less than for a purely private health policy. Older employees may spend more but they will have a job to help pay these bills.

*Medicaid must be reinvented or it will (further) bankrupt the nation. A long-term care trust fund should be created to help shoulder the enormous long-term care costs staring at us from the future. This would ease a lot of the financial pressure on Medicaid. Yes, it would cost taxpayers more money but a pooled approach is efficient and can reflect a progressive benefit structure as does Social Security. In the long run, these changes are well worth the cost.

Philip Moeller is an expert on retirement, aging and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY Social Security

Social Security Keeps Some Same-Sex Claims on Hold

If a gay couple lives in a state that doesn't recognize same-sex marriage, they may not be able to claim Social Security benefits.

The White House recently announced an expansion of federal benefits to same-sex couples, which had been promised by President Barack Obama. But the expansion does not fully include Social Security, which will require legislation to significantly broaden benefits. That leaves many gay couples seeking to make claims in legal limbo for now.

The timing of the Obama administration push occurred just before the one-year anniversary of the U.S. Supreme Court’s partial overturning of the Defense of Marriage Act (DOMA). (The ruling was issued on June 26, 2013.) The court’s decision triggered a sweeping state-by-state legal assault on bans of same-sex marriages and civil unions. Today more than half the people in the nation live in states where such unions are recognized; legal challenges have been filed in every other state.

In the wake of these changes, most federal agencies now recognize same-sex marriages as valid if they took place in a state that recognized the union, even if the couple currently lives elsewhere. But as the Attorney General noted last week, a federal statute requires the Social Security Administration to “confer certain marriage-related benefits based on the law of the state in which the married couple resides or resided, preventing the extension of benefits to same-sex married couples living in states that do not allow or recognize same-sex marriages.” (The Veterans Administration is also hampered by this law.)

Given these legal restrictions, the approval of a same-sex Social Security claim depends largely on whether the applicant whose earnings record is the basis for the claim actually lives in a state that permits same-sex unions. If you happen to live in a state that does not, your application for benefits may be put on hold. There can be exceptions if the claimants lived in a state that recognized same-sex unions when they applied for benefits but later moved to a state that did not.

After the DOMA ruling, Social Security quickly encouraged same-sex couples to file for benefits if they felt they were entitled to them and developed new and expanded rules for these claims. But because of the state residence issue, the agency has placed an unknown number of those applications on hold. Social Security did not respond to repeated requests for details about approvals and holds for same-sex benefit applications.

Social Security apparently is approving benefit applications from couples married in one of roughly 20 states (plus D.C.) where same-sex unions are recognized and who meet the residence requirements. The agency also has recently begun to recognize civil-union spouses as qualifying for benefits. Under rules that apply to all couples, people must be married for nine months to qualify for widow or widower benefits and 12 months to qualify for spousal benefits. The Program Operations Manual System that instructs agency employees has been overhauled to include new guidance and examples of how to handle same-sex benefit applications.

A marriage must last for 10 years before divorce occurs in order for an ex-spouse to qualify for divorce benefits. Massachusetts was the first state to approve same-sex marriage, in 2004, so few same-sex couples currently qualify for divorce benefits.

To date, the biggest effect of the DOMA ruling has been to educate same-sex couples about potential claims, according to Stuart H. Armstrong II, a Massachusetts financial planner at Centinel Financial Group, who advises many LGBT clients. “Because this is such a sea change in the way of thinking, it is important for people to be aware of these benefits,” says Armstrong, also a national board member of the Financial Planning Association. “A lot of us are still pinching ourselves, realizing that this has happened so fast.”

Armstrong advises same-sex couples to review any recent Social Security claiming decisions made before they were married. Such decisions, made as individuals, might be less appealing financially than decisions available to a spouse who is married. Under Social Security rules, benefit decisions less than a year old can be withdrawn and claimants can get a “fresh slate” as regards their benefits. (They would have to repay any Social Security benefits already received, including Medicare Part B premiums for hospital insurance.)

“As access to marriage equality expands state by state, the denial of [Social Security] benefits based simply on ZIP code will increase the demand and urgency for a real solution for all families,” said Robin Maril, senior legislative counsel for the Human Rights Campaign, a Washington non-profit that has led efforts to broaden legal recognition for the LGBT community.

The group supports legislation that already has been introduced to change the Social Security law. But it’s hard to envision House conservatives voting to recognize same-sex marriage. Don’t expect the legal limbo over Social Security claims to clear up anytime soon.

Philip Moeller is an expert on retirement, aging and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY Social Security

Social Security Closes Offices As Boomers Retire. How to Get Help Now.

With fewer offices and fewer employees, the agency is overwhelmed. These five steps can help you find the information you need.

As millions of Baby Boomers start to retire, the Social Security Administration is being flooded with demands for help with benefits. But in a feat of bad timing, the agency has closed 64 field offices (1 out of 20), reduced hours at all the others, and now has 11,000 fewer employees today since 2010, according to a recent bipartisan Senate report.

The reason for these cutbacks? Pressure from Washington budget-cutters, who are requiring the agency to do more with less. Social Security’s “solution” is to reduce face-to-face interactions and beef up less-costly options: online tools, call centers and, in some cases, video connections.

For its troubles, SSA got hammered last week by the U.S. Senate Special Committee on Aging, which issued the report. More accurately, the agency got hammered by the panel’s ranking members, Florida Democrat Bill Nelson and Maine Republican Susan Collins. They were the only Senators present for just about the entire session, and they made good use of their time.

Nancy Berryhill, SSA’s deputy commissioner for operations, got the dubious honor of playing punching bag for Sens. Nelson and Collins. At one point, close to frustration if not tears, she said the agency has been decimated. “With these tight budget times, I’m trying to survive. . . . It’s been devastating to us. . . . And we are losing our most experienced employees.”

The loss of veteran workers will not be easily made up by online tools. The agency logged more than 156 million public interactions last year, including 45 million office visits, 46 million field-office calls and 56 million call-center interactions. Meanwhile, the total of all its Internet interactions—for benefit applications, address changes, disability reports and other service requests—was fewer than 9 million. Expecting the Internet to somehow emerge as the preferred and dominant source of Social Security assistance overnight is simply virtual unreality.

So, we are facing a world where there are fewer and fewer workers available to help more and more aging Americans make very complicated Social Security decisions. And, as Ms. Berryhill said, the remaining agency employees are not as skilled as those that have left. Given this reality, here are five steps you can take to help you make the right decisions about your Social Security benefits.

Sign up for My Social Security. You’re reading this story online so, clearly, asking you to use the Internet should not be a stretch. Create a personalized account with the SSA to see your official earnings history and the agency’s projection of your benefits at various claiming ages.

Use benefit calculators. Compare the financial impact of claiming at different ages—and be sure to consider your spouse’s benefits too. Financial Engines is the latest financial advice firm to offer a Social Security benefits calculator. The AARP calculator does a good job of explaining the virtues of delaying benefits. My favorite calculator by far is Maximize My Social Security. (Full disclosure: MMSS was created by Boston University economics professor Larry Kotlikoff, who also happens to be co-authoring a book about Social Security with me and PBS business and economics correspondent Paul Solman.)

Personalize the numbers. Calculators are fine when it comes to plain-vanilla claiming situations. But most of us require more complex assessments to determine the best Social Security options. What’s your longevity outlook? Are you divorced? Has your present or former spouse died? Do you have young kids? Are you financially supporting your own parents? Did you or your spouse work in a job on which Social Security taxes were not paid? All of these situations may affect your Social Security benefits. Calculators rarely provide such nuanced advice.

Compare answers. As a background check, enter your precise Social Security question or claiming situation into your favorite search engine, and you’ll see a wealth of solid (and often not-so-solid) advice. You can use this information, along with your other research, as preparation for the next, and last, step.

Push for top-level Social Security advice. Armed with your research, confirm your answers with SSA. You will find plenty of basic information on the SSA website. Next, call the 800 line with any specific questions. Then follow up with a visit to your local SSA office and meet with a claims representative. Yes, you may have a long wait, but it’s worth the effort. Finally, confirm your understanding of your benefit options with an SSA technical expert—these pros are the agency’s most experienced benefits staffers. To connect with one, you may need to be persistent. But that way, you’ll get the best help SSA still has to offer.

Philip Moeller is an expert on retirement, aging and health. He is an award-winning business journalist and a research fellow at the Sloan Center on Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

MONEY working in retirement

How to Find Happiness in Your Second Career—and Earn Money Too

These days, the retirement-planning conversation goes something like this: How can I earn an income after my initial career and give back at the same time?

This article was originally published at NextAvenue.org.

Cindy Lennartson is a 48-year-old library specialist at the University of Texas Libraries, in Austin. She has worked for a university library system for 25 years and is excited about retiring from there at 52 (when she can collect her pension) to start her next career. But she’s not quite sure how to do it.

After Lennartson read my inaugural column on rethinking retirement, “Why I’m Not Buying the Retirement Gloom,” she emailed me for insights on how she might make, and embrace, a life transition. I’ll offer them, as well as advice for others contemplating their move into “unretirement,” shortly.

The Lure of Trying Something New

To find out more about Lennartson’s situation and the future she envisions, I spoke with her. She told me that she’s a recently divorced mother of three who has loved her job and, until a few years ago, believed she’d retire at 62. But the lure of trying something new has convinced Lennartson to start reimagining her next chapter.

(MORE: Busting the Myths About Work in Retirement)

With her new plan of “retiring” at 52 when her children are out of the house, Lennartson said, she can use the next four years to find an encore career that will be meaningful and will come with a paycheck. “I’m rethinking the whole retirement thing — what else do I want to do,” she says. “I’m in the exploratory stage.”

Lennartson is far from alone. For more than three decades, the national conversation among people contemplating retirement was dominated by the haunting question: What is my number? Of course, the sum of savings we’ll need to live comfortably when we’re no longer working is disconcertingly uncertain. There’s no way of knowing what the market will return, let alone how much money will be enough to fund a lifestyle and medical bills.

The New Retirement Question

That’s why, these days, the retirement-planning conversation is increasingly focused on a different question: How can I earn an income after my initial career and give back at the same time?

Recent polls have found that most boomers expect to earn a paycheck during retirement. For example, 72% of pre-retirees age 50 and over just surveyed by Merrill Lynch and the Age Wave consulting firm said they want to work during the traditional retirement years. (You can read more about the survey in the Merrill Lynch report: Work in Retirement: Myths and Motivations, Career Reinventions and the New Retirement Workscape.)

What I found particularly striking in that survey was that many of the respondents said they see retirement “as a chance to try something new and even pursue careers dreams they were unable to explore during their pre-retirement years,” according to the report.

(MORE: Bright Spots and Challenges of Growing Older)

The Payback for Working in Retirement

The personal financial return from earning even a slim paycheck well into the traditional retirement years is big.

Your savings can continue compounding and you’ll live off your accumulated assets for a shorter period of time. A job can also allow you to delay filing for Social Security. Benefits are more than 75 percent higher if you start claiming at age 70 than at 63.

The difficult issue, as Lennartson has discovered, is figuring out what to do next — locating a paying gig that is also engaging.

Lennartson is smart to have a four-year exploration horizon and I encourage you to do the same. “You should be looking for the kind of jobs you could do that are challenging and interesting and offer an acceptable income,” says Arthur Koff, the septuagenarian founder of Retired Brains, an online job and advice portal. “The time to do it is while you’re working.”

(MORE: Change Careers With the ‘Sugar Grain’ Principle)

Why Planning Ahead Can Help

Making inroads before you retire can also help make you more valuable in retirement, as Jake Warner, the founder of Nolo.com, the self-help legal publisher explained to me.

“Let’s say someone thinks of themself as an environmentalist and dreams about working in environmental causes when they retire. But because of work, saving money, raising kids — all the pressures of daily life — they don’t get engaged,” said Warner. “Now they’re 70 and they have time. They head toward an environmental group they admire and say, ‘Here I am. How can I help you?’ The answer is going to be probably not much. Now, take that same person who gets involved with several local environmental groups in their 40s or 50s. At age 70, they’re valued and they’re needed. They earned it.”

The Librarian’s Encore Career

What might Lennartson do for her encore career? Well, she currently volunteers at a nonprofit, recording incarcerated fathers reading to their children and that’s an activity she finds deeply fulfilling. Perhaps there’s a paying job for her with the nonprofit or a similar endeavor.

Alternatively, since her undergraduate degree was in Spanish, she could try to land a job that would let her use her language skills.

Whatever she decides, a part-time gig would probably be best, since Lennartson wants the freedom to travel with her daughter, an activity they enjoy doing together.

Part of the equation revolves around her finances.

Running the Numbers

Lennartson had initially thought she would keep her house in retirement so her children would have a bedroom to come back to. Now, with her new next chapter mindset, she wonders if maybe just a couch is enough. A move into a smaller place would lower her expenses, giving her greater financial freedom.

Henry “Bud” Hebeler, founder of the retirement planning website Analyzenow.com, recommends Lennartson run the numbers to see how much downsizing will boost her cash flow. (That’s a useful site for anyone over 50 noodling a next act.) When she gets closer to making a shift, Lennartson could run her financial blueprint by a professional planner, he says.

As Lennartson is finding, transitions can be tricky and the process takes time. But they’re also liberating. “I feel like I am in college, so much is open to me,” says Lennartson. “It’s like I’m 21 or 22 once again,” she says. Now, that’s exciting.

Chris Farrell is economics editor for APM’s Marketplace Money, a syndicated personal finance program, and author of the forthcoming Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and The Good Life. He will be writing on Unretirement twice a month, focusing on the personal finance and entrepreneurial start-up implications and the lessons people learn as they search for meaning and income. Tell Chris about your experiences so he can address your questions in future columns. Send your queries to him a tcfarrell@mpr.org. His twitter address is @cfarrellecon.

MONEY Social Security

As Social Security Cuts Take Effect, The Most Vulnerable Are Left to Cope

Cuts to Social Security have closed offices in some of the areas where they're needed most.

Until earlier this year, there was a Social Security field office in Gadsden County, Florida, in the state’s panhandle. It’s the kind of place where seniors need to get in-person help with their benefits rather than pick up a phone or go online.

“Our poverty rate is nearly double the state average, and we trail the state averages in education,” said Brenda Holt, a county commissioner. “Most of the people here don’t have computers, let alone reliable Internet access.”

Holt testified Wednesday before the U.S. Senate Special Committee on Aging, which is investigating the impact of budget cutting at the Social Security Administration over the past five years. Sixty-four field offices and more than 500 temporary mobile offices, known as contact stations, have been closed. And the SSA is reducing or eliminating a variety of in-person services that it once provided in its offices.

The SSA also has been developing a long-range strategy for delivering services. A draft document states that it will rely on the Internet and “self-service delivery”—and provide in-person services in “very limited circumstances, such as for complex transactions and to meet the needs of vulnerable populations.”

Gadsden County meets any criteria you could pick for vulnerability. But the field office in Quincy, the county seat, was closed with just a few weeks’ notice in March, Holt said. The nearest office is 30 miles away in Tallahassee—reachable only by car or a crowded shuttle bus that runs once a day in each direction.

The Senate committee’s investigation found SSA’s process for office consolidation wanting for clear criteria, transparency and community feedback. Only after persistent objections by local officials did the SSA offer to set up a videoconferencing station in a local library that connects seniors to representatives in its Tallahassee office.

“It’s deeply frustrated and angered our community,” said Holt. “Many of our residents live in a financial environment where they make choices between medications and food to feed their families. Problems with Social Security benefits can have a catastrophic effect on families.”

The SSA’s workload is rising as baby boomers retire; the number of claims in fiscal 2013 was 27 percent higher than in 2007. Yet the agency has 11,000 fewer workers than it did three years ago, and hiring freezes have led to uneven staffing in offices.

The SSA has received less than its budget request in 14 of the last 16 years. In fiscal 2012, it operated with 88% of the amount requested ($11.4 billion). The budget was restored somewhat in fiscal 2014 to $11.7 billion. And President Barack Obama’s 2015 budget request is $12 billion.

But service still suffers. The National Council of Social Security Management Associations reports that field office wait time is 30% longer than in 2012, and wait times and busy rates on the agency’s toll-free 800 number have doubled.

The SSA’s plan to save $70 million a year by replacing annual paper benefit statements with electronic access also has been a misstep, at least in the short run. Paper statements were suspended in 2011, but just 6 percent of all workers have signed up for online access, in some cases because of a lack of computer access or literacy but also because of sign-up difficulties related to the website’s complex anti-fraud systems.

In April the agency backtracked, announcing it will resume mailings of paper statements this September at five-year intervals to workers who have not signed up to view their statements online. (You can create an online account here.)

Wednesday’s hearing shed much-needed light on the customer service squeeze at SSA, though it would have been good to hear legislators acknowledge that Congress had no business cutting the SSA budget in the first place. The agency is funded by the same dedicated stream (payroll taxes) that funds benefits, and its administrative costs are low, 1.4% of all outlays. The SSA is funded by Americans’ tax dollars and exists to provide customer service to all Americans.

Nancy Berryhill, the SSA’s deputy commissioner for operations, did her best at the hearing to defend the agency’s efforts to cope. “It’s my job to balance service across nation—these are difficult times.”

Still, she conceded that there’s room for improvement. “We need to get more input from the community,” she said, speaking about the events in Gadsden County. “Adding the video service made a difference after the fact, but we need to be more thoughtful in the future.”

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