Social Security: Improvements to Claims Process Could Help People Make Better Informed Decisions about Retirement Benefits
Published: 2016-09-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Many eligible individuals claim Social Security retirement benefits at the earliest eligibility age, even though they would receive higher benefits if they waited until older ages. In order to make an informed decision about when to claim, people need to understand how various Social Security rules and other factors affect benefit amounts. GAO was asked to examine these issues.
This report examines (1) the extent to which people understand Social Security rules affecting their retirement benefits; and (2) what information SSA provides to individuals to enable them to make informed claiming decisions. GAO observed a demonstration of the online claims process and a nongeneralizable sample of 30 in-person claims applications and inquiries in 7 field offices; reviewed applicable federal laws, regulations, and agency documentation; reviewed surveys and academic studies, selected in part based on expert referrals and a comprehensive review of the research literature; and interviewed Social Security experts and agency officials.
section_title: What GAO Found
paragraphs: GAO's review of nine surveys and academic studies, and interviews with retirement experts, suggest that many individuals do not fully understand key details of Social Security rules that can potentially affect their retirement benefits. For example, while some people understand that delaying claiming leads to higher monthly benefits, many are unclear about the actual amount that benefits increase with claiming age. The studies and surveys also found widespread misunderstanding about whether spousal benefits are available, how monthly benefits are determined, and how the retirement earnings test works. Understanding these rules and other information, such as life expectancy and longevity risk, could be central to people making well-informed decisions about when to claim benefits. By having this understanding of retirement benefits, people would also be in a better position to balance other factors that influence when they should claim benefits, including financial need, poor health, and psychological factors.
The Social Security Administration (SSA) makes comprehensive information on key rules and other considerations related to claiming retirement benefits available through its publications, website, personalized benefits statements, and online calculators. However, GAO observed 30 in-person claims at SSA field offices and found that claimants were not consistently provided key information that people may need to make well-informed decisions. For example, in 8 of 26 claims interviews in which the claimant could have received higher monthly benefits by waiting until a later age, the claims specialist did not discuss the advantages and disadvantages of delaying claiming. Further, only 7 of the 18 claimants for whom the retirement earnings test could potentially apply were given complete information about how the test worked. SSA's Program Operations Manual System (POMS) states that claims specialists should explain the advantages and disadvantages of filing an application so that the individual can make an informed filing decision. The problems we observed during the claims interviews occurred in part because the questions included in the claims process did not specifically cover some key information.
Online applicants have more access to key information on the screen or through tabs and pop-up boxes as they complete an application. However, similar to in-person interviews, the online application process does not inform claimants that benefits are based on the highest 35 years of earnings or that life expectancy is an important consideration in deciding when to claim.
section_title: What GAO Recommends
paragraphs: GAO is making six recommendations to SSA, including that SSA take steps to ensure that claims specialists provide information on delayed benefits that is consistent with POMS, and that the claims process provides claimants better information on the retirement earnings test. SSA generally agreed with our recommendations. recommendations.ns.ommendations.

section_title: Letter
paragraphs: The decision of when to claim Social Security retirement benefits is one of  the most important financial decisions most people and households will  ever make. As of 2013, Social Security benefits make up the largest  component of household income in retirement, accounting for an average  52 percent of household income for those age 65 and older. Social  Security accounts for at least half of household income for 62 percent of  retirees age 75 and over, and at least 90 percent of household income for  almost a quarter of these retirees. Social Security benefits offer certain  advantages: monthly income until death, annual inflation adjustment,  some tax benefits, and survivor and spousal benefits. These benefits  have become increasingly important for retirees as employment-based  retirement plan coverage has shifted from traditional defined benefit  pension plans, which typically pay lifetime annuity benefits in retirement,  to defined contribution plans, in which workers accumulate savings over  their careers and manage withdrawals in retirement. In addition, despite  the shift in pension coverage, as of 2013 about half of households with  someone age 55 and older have no retirement savings in account-based  defined contribution plans, such as 401(k)s or Individual Retirement  Accounts, and 29 percent have no retirement savings or a defined benefit  plan.
Those eligible for Social Security benefits can generally elect to receive  them starting at age 62, but the monthly benefit amount increases  permanently the longer someone delays claiming, until age 70.
Depending on how long a person, and possibly a spouse, lives, the age at  claiming could make a difference of tens of thousands of dollars in  retirement income for the individual or his or her spouse.
Despite delayed claiming offering the promise of higher monthly benefits,  62 is the most common age to claim Social Security benefits, and few  people wait until age 70. According to the Social Security Administration  (SSA) data, 42 percent of eligible men and 48 percent of women born in  1945 claimed retirement benefits at age 62. Only 28 percent of that  cohort’s men and 23 percent of its women waited until age 66, the age at  which SSA pays full benefits for people in this birth cohort, also known as  the full retirement age (FRA). Only 2 percent of eligible men and 4  percent of eligible women from the 1945 birth cohort waited until age 70  to claim. However, the percentage of eligible individuals claiming benefits  at age 62 declined significantly from 1996 to 2013, according to the  Center for Retirement Research at Boston College.
While there are sound reasons for taking benefits early, such as financial  need or short life expectancy, many people might benefit from claiming at  a later age. Making an optimal claiming decision requires individuals and  households to understand how multiple factors—such as claiming age,  earnings, life expectancy, and longevity risk—affect benefits. SSA, as  the program administrator, is in a unique position to help ensure  prospective claimants make informed choices. With the challenges this  complex decision may pose to many claimants, you asked us to analyze  this issue.
In this report, we examine: (1) the extent to which people understand  Social Security rules affecting their retirement benefits and other factors  that may influence when they claim them; and (2) the information that  SSA provides to individuals that enables them to make informed claiming  decisions. To address these objectives, using the Internet and expert  referrals we found and reviewed surveys and academic studies that  assessed understanding of Social Security benefits and identified the  factors that influence claiming. Of the studies we found, nine were most  relevant to our work. We also interviewed Social Security experts from  academia, public policy organizations, and financial firms to obtain their  views on how SSA provides information about claiming benefits. To  analyze the information SSA provides to individuals about claiming, we  reviewed published SSA materials related to understanding how benefits  are calculated. We also reviewed applicable federal laws and regulations,  and SSA’s Program Operations Manual System (POMS), a primary  source of information used by SSA employees to process claims for  Social Security benefits. We interviewed SSA headquarters officials to  learn how Social Security benefit claims are processed. To learn about  the information SSA provides during the claims process, we observed a  non-generalizable sample of 30 face-to-face claims interviews at 7 SSA  local offices in 3 different regions of the country. We identified the local  SSA offices where we would observe the retirement claims process,  taking into consideration regional geographic diversity, income level,  urban and rural composition, and the number of new claims each office  processes. We noted the information SSA claims specialists provided to  claimants during this process and evaluated what we observed against  POMS guidance, and to determine how fully specialists were addressing  key information categories we identified from our literature review and  expert interviews. SSA also demonstrated the online claims process for  us, showing the information on each screen that a claimant might see  when filing a claim. We also interviewed managers and claims specialists  at these local SSA offices about training, workload management, and the  process for completing retirement benefit claims.
We conducted this performance audit from July 2015 to September 2016  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: According to SSA, 84 percent of households with someone 65 or older  received Social Security benefits in 2014. To qualify for benefits, an  individual must typically earn at least 40 credits, based on earnings on  which they and their employer pay Social Security payroll taxes.  According to SSA, as of 2015, 69 percent of the population age 20 and  over had earned 40 credits. The amount of initial monthly retirement  benefits depends on the beneficiary’s earnings history and the age at  which he or she chooses to begin receiving benefits. SSA figures monthly  retirement benefits by calculating the individuals’ average indexed  monthly earnings (AIME) during his or her highest 35 years of earnings,  with earnings from past years adjusted to reflect the growth in average  wage levels over time. (If the individual has earnings in less than 35  years, non-earning years count as zeroes in the AIME calculation.)  Retirement benefits are then determined by a formula that converts an  individual’s AIME into a Primary Insurance Amount (PIA). The PIA is the  monthly benefit a claimant receives if he or she chooses to begin benefits  at the FRA (see fig. 1). Benefits are generally adjusted based on inflation  each year. Up to 85 percent of retirement benefits are also potentially  subject to income tax, depending on total income.
The FRA has risen from 65 originally to 66 for individuals born from 1943  to 1954, and it will be 67 for individuals born in 1960 or later. Beneficiaries  may generally elect to begin receiving Social Security benefits as early as  age 62; however, an age-62 claimer will receive less each month than if  he or she waited to claim until reaching FRA. As the FRA has risen, so  has the reduction in benefits for pre-FRA claiming, relative to PIA. An  eligible individual with an FRA of 66 who claims at 62 would receive a  monthly benefit equal to 75 percent of PIA (see fig. 2). Future retirees  with an FRA of 67 who claim at 62 will receive 70 percent of PIA.  Although SSA uses the term “full retirement age” to refer to the age at  which workers receive unreduced benefits (sometimes called “full  benefits”), those who wait to claim benefits beyond their FRA receive  “delayed retirement credits” that boost monthly benefits to more than 100  percent of PIA. An eligible claimant born in 1943 or later can receive  delayed retirement credits equal to 8 percent of PIA per year past FRA  until age 70. For example, a claimant with an FRA of 66 who claims at  age 70 receives 32 percent higher monthly benefits than PIA. Thus, a  retiree with an age 66 FRA and a PIA of $1,000 per month would receive  $750 per month if claiming at age 62, $1,000 per month if claiming at age  66, or $1,320 if claiming at age 70. Individuals who claim benefits at ages  in between would receive a monthly benefit between $750 and $1,320.
According to SSA, someone who lives to an average life expectancy  should receive about the same amount in lifetime benefits irrespective of  when they claim benefits because the lower monthly benefit amount and  earlier start date would offset each other. However, several factors  affect the tradeoffs of claiming at different ages. For example, how long a  person expects to live, based on family history or current health status,  can affect when he or she claims. For married couples, the longevity of  both spouses could affect the lifetime household benefits received  because Social Security pays survivors benefits to widowed spouses.  Increasing life expectancy and years spent in retirement raise the  potential cost to retirees of receiving lower monthly benefit amounts from  claiming earlier. According to the 2016 Social Security Trustees report,  average life expectancy at age 65 has increased from 12.7 years in 1940  for men to 19.1 in 2015, and from 14.7 to 21.5 years for 65-year-old  women. However, lower-income individuals have shorter-than-average  life expectancy, which means that, on average, they can expect to receive  Social Security benefits for substantially fewer years than higher-income  individuals who have longer-than-average life expectancy. Moreover,  disparities in life expectancy by income have grown, according to studies  that examined trends over time. Interest rates also affect the tradeoffs of  claiming early versus later. When market interest rates exceed price  inflation by less than usual, delaying claiming may become more  financially attractive for those with the ability to continue working or to live  off of other financial resources. Several studies that have examined the  Social Security benefit formula and claiming decision process show that  many people would receive higher lifetime benefits by delaying claiming  benefits.
A spouse, ex-spouse, or surviving spouse of an eligible worker can  receive benefits based on the primary worker’s earnings, if this benefit  exceeds the benefit he or she would receive based on their own earnings  history. Spousal benefits generally amount to 50 percent of the primary  worker’s PIA, if the spouse is at FRA when claiming them. For survivors,  the age at which the primary worker claims benefits can potentially affect  the monthly benefit of the surviving spouse. A spouse can generally claim  as early as age 62, and survivors may begin receiving benefits as early  as age 60 (50 for disabled survivors); to qualify for benefits at age 50, a  surviving spouse must be disabled under the Disability Insurance  program rules. As with regular benefits, both spousal and survivors  benefits are reduced if the spouse or survivor begins receiving them prior  to their FRA. Unlike with regular benefits, spouses and survivors do not  receive delayed retirement credits if the spouses or survivors delay  claiming beyond their FRA.
Individuals who claim benefits before their FRA but continue to work for  pay face a retirement earnings test, with earnings above a certain limit  resulting in a temporary reduction of monthly benefits. In 2016, SSA  withholds $1.00 of benefits for every $2.00 of earnings above $15,720 for  someone younger than FRA for the full year. In the year the claimant  reaches FRA, the earnings limit rises to $41,880 (for 2016), and $1.00 of  benefits is withheld for every $3.00 in earnings in the months prior to the  claimant reaching FRA. Benefits withheld under the earnings test are  not forfeited, but are really deferred, and are, on average, paid back later  with interest. In addition, every year after the initial claim for benefits,  any new earnings the worker has are reflected in a recomputation of the  AIME and a potential increase in the PIA.
Many other rules can potentially complicate claiming decisions, creating  challenges in understanding key information for claimants and their  spouses. For example, there are rules covering eligibility for dependent  children (or grandchildren) and for maximum family benefits, to name a  few. Over time, changes have been made to eligibility ages, the  retirement earnings test, the FRA, and other important factors affecting  claiming. The Bipartisan Budget Act of 2015 recently eliminated two  complex strategies utilized by some married couples. One allowed a  person at or older than FRA to file for benefits, but then immediately  suspend this claim so that no benefit would be paid. This “file-and- suspend” strategy allowed that person’s spouse to claim spousal benefits  on the suspender’s record, while the primary worker’s benefit accrued  delayed retirement credits in suspension. Another strategy allowed a  person at FRA or older to file a claim only for spousal benefits based on  the earnings record of a primary worker who had claimed benefits. This  allowed the spouse to receive a benefit while allowing the spouse’s own  benefit to grow, then later switch to their own benefit as late as age 70.  The 2015 act eliminated the file-and-suspend strategy, effective April 30,  2016, by no longer allowing anyone to claim benefits on another person’s  record while the primary claimant’s benefits are suspended. It also  eliminated spousal-only claims for anyone born after January 1, 1954.
SSA pays retirement benefits from the Old Age and Survivors Insurance  (OASI) Trust Fund. The fund receives revenue from, among other  sources, Social Security payroll taxes paid by current workers, and pays  current beneficiaries. Workers and employers currently each pay a  payroll tax of 6.2 percent of an employee’s covered earnings, for a  combined total tax rate of 12.4 percent, into the Social Security Trust  Funds. This payroll tax applies only to workers’ earnings up to an  annual limit ($118,500 for 2016); this limit changes each year with  changes in average wages and has generally increased each year.  According to the 2016 report of the Social Security Trustees, the OASI  Trust Fund is projected to become depleted in 2035, at which point  payroll taxes of current workers are estimated to be enough to pay only  77 percent of promised benefits.
section_title: Lack of Understanding of Key Social Security Information, Along with Financial Need and Other Factors, May Contribute to Individuals Claiming Benefits Early
subsections: section_title: Individuals Have Some Knowledge of Social Security Benefits, but Most Do Not Understand Key Program Rules and Details
paragraphs: Our review of survey reports and academic studies, and interviews with  people with Social Security expertise, suggest that most individuals do  not understand important rules and details that could affect their  retirement benefits or the benefits of their spouses and survivors.  Specifically, many people approaching retirement age are unclear on how  claiming age affects the amount of monthly benefits, how earnings (both  before and after claiming) affect benefits, the availability of spousal  benefits, and other factors that may influence their claiming decision.  Understanding this key information is central to making informed  decisions about when to claim Social Security benefits because they  concern the tradeoffs of claiming benefits (and perhaps retiring) earlier  versus later—generally permanent decisions—and ultimately affect the  amount of lifetime benefits and people’s retirement security. GAO  recognizes that financial literacy is critical to empowering and helping  individuals and families to stay financially healthy and stable and the role  the federal government plays in promoting financial literacy. It also has  highlighted financial security for older Americans as a key issue, including  the importance of ensuring financial literacy in understanding the key  factors that can affect their retirement income.
subsections: section_title: How Claiming Age Affects Monthly Benefits
paragraphs: Seven of the surveys we reviewed found that some of the respondents  are aware that their benefits would increase if they wait until FRA to  claim; however, many do not have a good sense of how much and thus  may not understand the tradeoffs of claiming earlier versus later. Claiming  at younger ages means an earlier start to benefits, but at the expense of  the permanently higher monthly benefit amounts that come with claiming  at an older age. For example, in a phone survey of 2,000 individuals ages  25-65, the Financial Literacy Center found that when asked to estimate  their monthly benefit at their planned claiming age and what they might  expect if they waited two years, 62 percent of respondents seemed to  understand their monthly benefit would increase if they delayed  claiming. However, 36 percent of respondents indicated they did not  understand how their benefits would be adjusted depending on claiming  age or incorrectly believed that their monthly benefit would be the same  no matter when they claimed. Greenwald & Associates conducted for  Financial Engines an on-line survey with over 1,000 near claimants and  current beneficiaries between the ages of 55 and 70 and found that many  respondents did not understand the extent to which benefits can increase  between ages 62 and 70. For example, only 40 percent gave estimates  that approximated the real monthly increase that would result from a 2- year delay. In an AARP study that surveyed over 2,000 individuals ages  52-70, when participants were asked what would be the earliest age at  which they should claim benefits to maximize the monthly amount, only  29 percent responded with the correct age of 70.
section_title: How Lifetime Earnings Determine Benefit Amount
paragraphs: The three surveys that asked the respondents about the number of years  in the benefit calculation found that most do not know that benefits are  based on their highest 35 years of earnings. If the individual has earnings  in fewer than 35 years, non-earning years count as zeroes in the AIME  calculation. Thus, some individuals could permanently raise their monthly  benefits not only by delaying when they take benefits, but also by  replacing zero or lower earning years with higher earning years in the  “high-35” calculation. Three of the surveys we reviewed asked  respondents how benefits are determined. The median respondent in an  academic study that surveyed over 2,300 Social Security eligible  individuals between ages 50 and 70 believed only the 10 highest years of  earnings were counted. A study conducted by Greenwald & Associates  for the Financial Literacy Center reported that only 23 percent of the  2,000 age 25-65 phone-survey respondents could correctly identify that  benefits are calculated based on 35 years of earnings, and 27 percent of  the respondents believed, incorrectly, that benefits are based on the last  5 years of earnings and the number of years worked. Another 23  percent thought benefits were based on the Social Security payroll taxes  they paid and the interest earned on those taxes. An AARP survey of  over 2,000 individuals age 52 through 70 who were eligible for Social  Security benefits based on their own work asked respondents to select  from a range of options the number of years of highest earnings used to  calculate benefits. Only 7 percent selected the correct number of years.
section_title: Knowledge of Spousal and Survivors Benefits
paragraphs: Results from five of the surveys and studies we reviewed that asked  about spousal benefits indicate that many people may not know about  spousal benefits based on a husband’s or wife’s earnings history. Only 48  percent of the more than 2,000 age 52-70 respondents to an AARP  survey who were or ever had been married knew they could collect  benefits based on their living spouse’s record. Similarly, an academic  study found about 50 percent of the more than 2,300 survey respondents  between ages 50 and 70 who were eligible for Social Security benefits  incorrectly believed their spouse would not be eligible for benefits if the  spouse had never been in the paid workforce. Given the lack of  awareness about how claiming age affects benefits for the claiming  worker, it is likely the case that claimants do not know how early claiming  may reduce spousal benefits. Six of the studies we reviewed found their  respondents had a general understanding of survivors benefits. However,  two of the surveys show that some married respondents are not aware of  the effect their claiming age potentially could have on their widowed  spouses’ benefits, and one of the two studies also showed that just under  half (48 percent) of married or ever married respondents were not aware  of the additional effect the widowed spouse’s own claiming age has on  that benefit. A collaborative study by AARP and the Financial Planning  Association that surveyed more than 1,200 future Social Security  beneficiaries ages 45-64 showed that, among ever-married respondents  who knew they could receive survivors benefits, many did not know that  the age the deceased spouse or the age the surviving spouse claimed  could affect the monthly benefit amount of the surviving spouse.
section_title: Effect of Retirement Earnings Test on Benefits
paragraphs: Each of the four surveys that asked about the retirement earnings test  found that individuals, if they know of the retirement earnings test at all,  do not understand fully how working and receiving benefits before FRA  can affect their benefit amounts over time. An AARP survey of over 2,000  individuals age 52 through 70 who were eligible for Social Security  benefits based on their own work found that while 76 percent of survey  respondents understood benefits could be reduced by earnings  depending on the amount of earnings, 71 percent incorrectly believed that  the reduction would be permanent. In a 10-question survey of more than  1,500 individuals between ages 25 and 65, conducted on behalf of  Massachusetts Mutual Life Insurance Company, more than half of  respondents incorrectly believed that they could continue working while  collecting all of their benefits regardless of their age. A minority of the  over 2,300 respondents (40 percent) between age 50 and 70 in an  academic study who were aware of the earnings test threshold  understood correctly that any reduction for earnings up to FRA is offset by  an increase of benefits after FRA. Understanding the retirement  earnings test could prevent individuals erroneously thinking the earnings  limit will result in a permanent loss of benefits. It might also prevent a  claimant from seeing the earnings test as an incentive to retire and claim  benefits at age 62 or reduce earnings to stay below the earnings  threshold. Studies have pointed out that many claimants have earnings  that cluster around the retirement earnings limit, suggesting they believe  benefits withheld because of excess earnings are lost. Conversely,  misunderstanding the earnings test could cause some individuals to delay  claiming until FRA to avoid a perceived penalty.
section_title: Benefits May Be Taxed as Income
paragraphs: Understanding benefit taxation can affect retirement income planning and  could, for some individuals, influence when they claim benefits. One study  we reviewed that included a question on taxation of Social Security  benefits in the phone-survey portion found that 42 percent of the 2,000  respondents ages 25-65 did not understand that benefits could be  taxed. Several financial firms include information on taxation on their  web pages that cover Social Security.
section_title: Life Expectancy and Longevity Risk
paragraphs: Information on life expectancy and longevity risk is fundamental to the  decision to claim benefits because a retiree receives benefits until death  (and a surviving spouse might then continue to receive benefits until that  spouse’s death). Increasing life expectancy, along with increased  likelihood of living to advanced ages, and resulting increased time spent  in retirement raise the potential cost to retirees of claiming early, and  receiving reduced benefits for life, especially if in these later years they  have spent down other sources of retirement income. According to SSA’s  website, about one of every four 65-year-olds today will live past age 90,  and one of 10 will live past age 95. At the same time, longevity depends  on a claimant’s health and family history; shorter longevity expectations  may cause someone to claim benefits earlier.
Three of the surveys we reviewed asked about longevity, and each of  those surveys indicated that individuals might not understand the  probability of living to old age and why that is important in their decision to  claim benefits. The Financial Literacy Center found that roughly 30  percent of those surveyed indicated they had little or no idea about how  long they anticipated living in retirement. A Society of Actuaries survey  of 1,600 individuals found that 4 in 10 respondents ages 45 and older  underestimated average life-expectancy by 5 years or more. Our  interviews with academics who have expertise in Social Security  underscored the importance of understanding life expectancy and  longevity risk, and in particular the likelihood of living to very old age.  One Social Security expert we interviewed said that presenting people  with average life expectancy figures may get them to focus on that  number but not on the possibility of living well beyond that age. A second  expert we spoke with emphasized that using “breakeven analysis”— calculating the age at which the cumulative higher monthly benefits  starting later would equal the cumulative lower benefits from an earlier  claiming date—is an unsound way to decide when to start benefits.  Research shows that breakeven analysis can influence people to claim  benefits earlier than they might otherwise, in part because people fear the  potential loss of benefits if they die early more than they fear outliving  their retirement savings. Breakeven analysis also ignores the insurance  value of higher monthly Social Security benefits protecting against  outliving one’s other retirement assets, and the potential benefit to a  surviving spouse. The second expert said that Social Security is longevity  insurance against outliving one’s assets, and therefore, like other  insurance, one should base the decision to “purchase” (in this case, by  forgoing benefits at a younger age in order to lock in permanently higher  monthly benefits) on preventing a bad financial outcome and not  necessarily on the likelihood of breaking even.
section_title: Financial and Psychological Factors Also May Influence When People Claim Social Security Benefits
paragraphs: Even if people have accurate and complete information, when to claim  retirement benefits is a complex and personal decision. Personal  circumstances such as health, perceived life expectancy, savings,  employment, and other factors can influence when someone claims  benefits. In addition, psychological factors can affect how people with  similar knowledge and circumstances may make different decisions.
For many people, financial need may make claiming benefits at 62 a  necessity. Individuals who are laid off, particularly during periods of high  unemployment, those who work in physically demanding jobs they can no  longer perform, or those who suffer from poor health may retire earlier  than other individuals. Many unemployed older workers may struggle to  find new jobs and may face unique reemployment challenges, such as  employer reluctance to hire older workers or out-of-date skills. If these  older workers cannot find other or more suitable employment and are 62  or older, Social Security may provide their only option for regular income.  As a result, they may claim benefits earlier than they had planned,  especially if they have little saved for retirement and no pension  benefits. On the other hand, among those that have savings, a  decrease in their savings might induce them to delay their original  claiming date; a 2010 study found that individuals more likely to have  retirement savings retire later in response to weak financial markets.
Beyond knowledge of benefit rules and financial need, psychological  factors can influence when people claim benefits. Studies have shown  that framing—how information is presented—may influence how people  perceive Social Security choices, and ultimately have an impact on when  they claim benefits. One 2010 study showed that when delaying claiming  is framed as a gain (e.g., delaying claiming increases your benefits by $X)  rather than claiming early framed as a loss (e.g., claiming earlier reduces  your benefit by $X), individuals are more likely to report that they will  delay claiming.
Another factor that could lead individuals to claim early is loss aversion— people’s tendency to prefer avoiding losses to acquiring gains of a similar  magnitude. If individuals think of Social Security benefits as money they  are entitled to once they reach age 62, the loss from delaying claiming— foregone benefits—could carry more weight than a higher monthly benefit  in the future if they were to delay. Under loss aversion, dying early  without having claimed benefits, as opposed to living longer than  expected with reduced benefits, could be seen as a risk to be avoided.
Federal policy may also provide reference points or signals to individuals  about the timing of claiming and retirement. The availability of Social  Security benefits at age 62 and adjustments to benefits thereafter may  give individuals mixed signals about when to claim benefits. A 2012  study found that spikes in retirement claims at the FRA move along with  changes in the FRA itself, suggesting that people may see “full retirement  age” as a reference point for when they should claim. Finally,  uncertainty about future benefits may also influence when people claim. A  2011 study conducted an online survey and found that uncertainty may  cause people to claim earlier than they might otherwise in order to lock in  benefits.
section_title: SSA Provides Key Claiming Information on Its Website and in Publications, but Not Consistently during the Claiming Process
subsections: section_title: SSA Provides Multi- Faceted Information and Tools to Help People Decide When to Claim Retirement Benefits
paragraphs: SSA provides, through various sources, comprehensive written  information to help people decide when to claim retirement benefits. This  information includes many of the items identified from our literature review  and expert interviews including how claiming age affects monthly benefit  amounts, how benefits are determined, details on spousal and survivors  benefits, the retirement earnings test, information about life expectancy  and longevity risk, and the taxation of benefits. The agency makes this  information available through SSA’s website, publications on various  topics (available in electronic and paper forms), interactive tools such as  online calculators, and a personalized benefit statement mailed to  individuals and made available online. The different formats allow this  information to be presented in varying degrees of complexity, specificity,  and personalization.
subsections: section_title: SSA Web Pages and Publications
paragraphs: SSA’s web pages and publications cover virtually all information that  could inform a person’s decision to claim retirement benefits. For  example, the publication When to Start Receiving Retirement Benefits  provides an overview of information needed to make the claiming  decision, including a discussion of the tradeoffs of claiming benefits  earlier versus later, information on life expectancy and longevity risk, how  claiming could affect spousal and survivors benefits, and the retirement  earnings test. The SSA website also includes pages that cover these  topics individually. In addition, the web pages have links to related topics,  interactive calculators, and printed publications, making it possible for  someone with access to the Internet and comfort with using it to get  information on what they need to consider before deciding to claim  benefits.
Depending on the source, there are differences in how key information is  presented. In the publication Your Retirement Benefit: How It’s Figured,  SSA explains that benefits are based on the highest 35 years of indexed  earnings, and includes a worksheet for estimating benefits. In Retirement  Benefits, however, SSA says only that benefits are based on “lifetime  earnings.” While it is reasonable that publications may present similar  information in differing degrees of detail, such detail could be important  for someone with less than 35 years of earnings. SSA covers longevity  risk similarly. In some publications and web pages, SSA covers the  personal nature of the claiming decision and notes that as many as one in  three 65-year-olds today will live to age 90. At the same time, SSA says  that lifetime benefits for anyone who lives to the average life expectancy  will be the same regardless of what age they claim; this may run the risk  of unintentionally conveying to claimants that the decision on when to  claim does not matter. In contrast, when describing the retirement  earnings test, a complicated and potentially critical piece of information  for someone considering claiming prior to FRA, SSA explains consistently  that monthly benefits will increase at FRA if any benefits were withheld  due to the test.
section_title: Interactive Calculators
paragraphs: To further assist potential claimants, SSA provides 11 interactive  calculators on its web site for users to estimate future benefits under  varying scenarios, such as at different claiming ages and different  earnings levels. These calculators also generally vary in the precision of  their benefit estimates. One calculator—the Earnings Test Calculator— estimates the reduction in benefits for individuals who continue to work  after claiming, and another—the Benefits for Spouses Calculator— estimates spousal benefits. Others provide FRA or likely life expectancy  based on one’s date of birth.
The Retirement Estimator, for example, asks users to enter some  identifying information in order to use a secure interface that accesses  their earnings history in SSA’s database. In contrast, the SSA online  Calculator requires the user to enter earnings from each of their working  years in order to determine their estimated monthly benefit. The  instructions note the user should have his or her Social Security  statement with earnings history available in order to complete the entries.  Manually entering several decades of annual earnings can require  considerable time, and carries more risk of inaccurate earnings  information producing an inaccurate benefits estimate. Unlike the  Retirement Estimator, though, the online Calculator gives users the option  of having the estimated benefit amount given in either current or future  dollars. Both calculators also can be used to estimate benefits at different  retirement ages.
Other calculators focus on more specific factors that can affect benefits.  An Early or Late Retirement Calculator provides an estimate of how much  less a user’s benefit would be if the user claimed earlier than FRA. Others  focus on the effect of the retirement earnings test or the Government  Pension Offset (GPO) or Windfall Elimination Provision (WEP), which  affect benefits for an individual receiving a pension from a job that was  not covered by Social Security.
section_title: Social Security Statement
paragraphs: The Social Security statement is the most widespread piece of  communication that SSA provides to individuals about their future  benefits. It is a 4- to 6-page summary of personalized information that  includes an estimate of the individual’s future benefit payable at age 62,  FRA, and age 70, as well as estimates for the individual’s current  disability and survivor benefit amounts. In 1995, SSA began mailing  annual statements to individuals in selected age groups, beginning with  those 60 and over. By 2000, statements were generally mailed to all  eligible individuals 25 and older. In May 2012, SSA made the statement  available electronically for those establishing an online account. Since  September 2014, SSA has mailed printed statements to eligible  individuals age 25, 30, 35, 40, 45, 50, 55, and 60 or older who have not  created a personal online Social Security account. At age 60, SSA sends  the statement annually. The statement has three versions, one each for  those ages 25 to 34, 35 to 54, and 55 and older, with certain information  tailored for each group. For example, the statement for the age 25-to-34  cohorts has a section titled “Why should I think about retirement now?”  For those 55 and older, there is additional information on monthly benefit  amounts at different claiming ages and working while receiving benefits.
In addition to benefit estimates, the statement shows the individual’s  history of earnings on which he or she paid Social Security (and  Medicare) taxes, and total taxes paid. It also explains how people qualify  for benefits, assumptions SSA uses in their benefit estimates, and  information on the GPO and WEP provisions that generally apply to  people who receive pensions from non-covered employment. For those  55 and older, a section on the retirement earnings test explains that some  benefits can be withheld from workers under FRA who earn over a certain  amount, but goes on to explain that at FRA the worker’s benefit amount  will be increased to account for the benefits that were withheld. The  statement does not, however, include some basic information that may  help people understand some critical details about their benefits.  Specifically, while the statement includes an example of how a claimant’s  monthly benefits would differ based on age when claiming, it does not  make clear that the monthly benefit amount at claiming is permanent,  except for cost-of-living adjustments. An SSA official said that a common  misunderstanding by statement recipients is that a claimant will receive  higher amounts as they get older even if they claim benefits at 62.  Further, even though a section of the statement is titled “How Your  Benefits are Estimated,” it does not explain that benefits are calculated  based on the individual’s highest 35 years of earnings. It also does not  say that an individual’s claiming age affects not only his or her own  benefit but potentially a spouse’s survivor benefit. Finally, the statement  does not mention that benefits, once they are received, may be subject to  income tax.
According to various studies and surveys that looked at the statement,  individuals who received the Social Security benefits statement were, in  general, more knowledgeable about Social Security. According to SSA in  2012, surveys SSA has conducted found that 70 percent of respondents  age 60 and older said they had enough information about Social Security  from the benefits statement to plan for their financial future. However,  SSA’s studies did not assess whether receipt of the statement changed  behavior. A 2015 academic brief that reviewed additional studies reported  they did not find that the Social Security statement affects claiming  behavior.
section_title: Claims Process Sometimes Does Not Provide Key Information That Could Help People Decide When to Claim Benefits
paragraphs: While SSA provides important information through its website and  publications to help people make informed decisions about when to claim  benefits, our observation of the online and in-person claims process  found that some key information may not be consistently provided to  potential claimants when they file, particularly during in-person  interviews. SSA’s Program Operations Manual System (POMS) states  that claims specialists are to provide information, and avoid giving advice,  to claimants. The POMS also specifies that when taking an application for  Social Security benefits, the claims specialist is responsible for explaining  the advantages and disadvantages of filing an application so that the  individual can make an informed filing decision. However, our  observation of a nongeneralizable sample of 30 face-to-face claims  interview at 7 SSA field offices found that claims specialists did not  consistently provide key information to potential claimants, or ensure  individuals were aware of such information when they applied for benefits.  The SSA claims protocol follows a screen-by-screen process of questions  and prompts to collect basic information from claimants, but does not  prompt questions or discussion of some key information. Compared to the  in-person process, online applicants have more consistent access to key  information on the screen or through tabs and pop-up boxes as they  complete the application. Even so, the online process also left out  potentially important information that could inform an individual’s decision  to claim benefits. Furthermore, for both face-to-face and online  application methods, we found claimants were sometimes provided  information that could inadvertently influence them to claim earlier than  they might have otherwise.
subsections: section_title: In-Person Claims
paragraphs: Over 36 percent of people claiming retirement benefits in 2015 did so in  person at an SSA office. During the in-office claims we observed, claims  specialists followed an automated step-by-step process for collecting and  confirming basic information from potential claimants to ensure they  qualify for Social Security benefits and to determine the benefit amount.  Such information included confirmation of a claimant’s birth date, marital  status, earnings history, and any receipt of pension benefits from an entity  that did not participate in Social Security, among other information. This  process also included prompts to provide information or ask questions  about certain types of benefits, such as qualification for spousal benefits,  and key program rules, such as the retirement earnings limit for claimants  who are younger than FRA. However, in the in-office claims interviews we  observed, the discussion did not include questions or prompts about other  key program rules and information that could help inform the decision to  claim benefits. For example, claimants were not consistently informed  that monthly benefit amounts would be higher if the claimant waited, as  specified in POMS. Similarly, the protocols did not prompt claims  specialists to provide information on how working longer prior to claiming  might raise monthly benefits, or how personal circumstances such as  health, life expectancy, and longevity risk can factor into the decision on  when to start benefits. Claims specialists generally provided accurate  information about program rules and benefits and answered claimants’  questions. In some instances, however, they presented or omitted key  information in a way that could confuse or even bias people’s claiming  decisions. We discuss areas of key information, and how we observed  they were covered in in-person claims, below:  How claiming age affects monthly benefits: POMS states that  claimants filing for benefits should be advised that higher benefits may be  payable if filing is delayed. It also states that claimants should, if  applicable, be provided with at least three monthly benefit amounts at  three different claiming ages—at the earliest possible month for claiming,  at FRA, and age 70. Claims specialists should provide amounts for other  months as well if requested by the claimant. In 18 of 26 interviews we  observed in which delaying claiming was a potential choice, the claims  specialist mentioned that the claimant’s benefit amount would be higher if  he or she delayed claiming. However, the remaining 8 did not discuss this  option. Of the 18 interviews that mentioned delayed claiming, 13 claims  specialists presented at least the three benefit amounts per POMS, while  5 did not. Surveys have shown that most individuals do not know how  much monthly benefits can increase by waiting to claim, so offering  benefit estimates at different ages is likely to provide information many  claimants do not have. This information can influence the age at which  they claim, and expert opinion and past GAO reports found that delayed  claiming can be an important strategy to consider for most retirees.
In 10 of the 30 observed interviews, claims specialists offered the  opportunity to claim up to 6 months of retroactive benefits as a lump sum.  SSA allows for up to 6 months of retroactive benefits when a claimant is  at least FRA or has a “protective filing date”—a documented date within  the 6 months prior to a claims appointment when a claimant first  contacted SSA about filing a retirement claim. While retroactive benefits  offer an attractive lump sum, taking it essentially means applying for  benefits up to 6 months earlier, and results in a permanent reduction in  the monthly benefit amount. POMS provides eligibility criteria for  retroactive benefits. However, POMS does not instruct claims specialists  to inform claimants that taking lump-sum retroactive benefits will result in  permanently lower monthly benefits, compared to not taking retroactive  benefits, a tradeoff claimants may not be aware of. The claims specialist  explained this tradeoff in only 1 of the interviews we observed. In another  interview, a claimant who initially said he wanted benefits to start later in  the year changed his mind to start 6 months earlier after being offered a  lump sum.
During our observations, we also saw 6 instances in which a claims  specialist presented a breakeven age—the age at which the cumulative  higher monthly benefits starting later would equal the cumulative lower  benefits from an earlier claiming date—to help a claimant compare  claiming benefits now or waiting to claim. According to POMS, claims  specialists “should no longer discuss  with claimants,”  and research shows that breakeven analysis can influence people to  claim benefits earlier than they might otherwise. In some interviews,  however, claims specialists not only offered a breakeven year, they  added their conclusion that the analysis showed that claiming earlier was  preferable. One claims specialist showed the claimant that it would take  11 and 1/2 years to make up the difference for waiting to claim, and  added that “according to the actuaries, that  is a reasonable  choice.” Another claims specialist said the breakeven analysis showed “it  pays to file early.” In a seventh interview, breakeven had been discussed  before the claimant came into the local office. The claimant said he had  been planning to wait until age 70 to claim, but had been told by an SSA  representative over the phone that his breakeven age analysis suggested  he should claim earlier. While our observations are not generalizable,  they suggest that SSA may be inadvertently influencing people’s  decisions on when to claim and lowering claimants’ monthly benefit  amounts. The 2011 SSA Office of the Inspector General report concluded  that SSA needed to better explain to its claims specialists why the agency  believes breakeven points are not relevant to a claimant’s decision.
How lifetime earnings affect benefits: We observed only 8 interviews in  which a claims specialist mentioned that benefits are based on 35 years  of earnings and that working longer could potentially raise benefits by  boosting average lifetime earnings. While POMS does not require claims  specialists to explain how earnings affect benefit amounts, the claims  process could be modified to include prompts for claims specialists to  inform claimants that benefits are based on 35 years of earnings— information that SSA already makes available on its website. By  discussing how years of earnings are calculated to determine one’s  benefit amounts, claims specialists might better inform claimants who are  deciding when to claim, especially for those who have less than 35 years  of earnings.
Spousal benefits: The majority of claims specialists we observed  compared the amount the claimant would receive as a spouse versus the  amount based on his or her own earnings history, when applicable.  However, in 8 of 15 interviews in which the claimant was potentially  eligible to claim restricted spousal benefits or to file-and-suspend, the  claims specialist did not mention these options. To their credit, 4 claims  specialists we observed explained that while spousal benefits were  currently lower than the claimant’s own benefit, taking the lower spouse  benefit now and waiting to claim their own would increase the claimant’s  own benefit by 8 percent per year after FRA and up to age 70. As a result  of the explanation, 2 claimants decided to take their spousal benefits at or  older than FRA and wait to take their own benefits at age 70.
Retirement earnings test: In our observations, the step-by-step SSA  claims process for a claimant younger than FRA included questions about  plans to continue working. In the 18 interviews we observed in which a  potential claimant was younger than FRA, 17 claims specialist explained,  accurately, that the claimant would have benefits withheld if he or she  earned more than the retirement earnings limit. However, in only 7 of  these 17 interviews did the claims specialists explain that any benefits  withheld due to earnings would be recalculated and result in higher  benefit amounts after FRA. For the remaining interviews, the claims  specialists mentioned only that earnings may result in lower benefits, or  that the claimant cannot earn above the limit, perhaps inaccurately  suggesting the earnings test would result in a permanent loss of benefits.  In one interview, a claims specialist told the claimant she would be  “penalized” if she earned over the limit. POMS states that, when  applicable, the claims specialist should explain to claimants that earnings  could be withheld based on the annual earnings test, but does not instruct  claims specialists to explain that the earnings test is not a penalty or tax,  or that withheld benefits are repaid. However, if claimants do not  understand the full implications of the earnings test, they could  erroneously think it will result in a permanent loss in benefits and, as a  result, unnecessarily stop working or reduce their working income. This  was made clear in one interview in which a claimant with earnings likely  to be above the limit said she might have to quit one of her two jobs  unless she waited until FRA to claim. Ultimately, the claimant decided to  wait until she reached FRA and then start her benefits. This case  illustrates the potential risks of SSA not making clear to claimants that the  earnings test does not represent a permanent loss in benefits.
Taxation of benefits: That Social Security benefits are potentially subject  to income tax did not routinely come up in the interviews we observed.  While some claimants asked about withholding taxes from their Social  Security benefit checks, in only two instances did a claimant ask if  benefits themselves are taxable. In these instances, the claims specialist  told the claimant the benefits could be taxable. One claims specialist also  suggested that the claimant discuss this issue with their tax professional.  Furthermore, in both instances, the claimants did not realize that their  benefits can be taxed. POMS states that claims specialists “will not  answer questions about taxation,” and says they should refer individuals  inquiring about taxation of benefits to IRS Publication 915, Social Security  and Equivalent Railroad Retirement Benefits, for additional information.
However, a general explanation of taxation can be provided as it relates  to month of election and suspension or withholding of benefits to recover  overpayment. A lack of information about the taxability of benefits could  potentially affect the retirement planning of claimants.
Life expectancy and longevity risk: Claims specialists are not  prompted to ask for or provide any information to claimants about life  expectancy or longevity risk. Only twice in our 30 observations did family  health and longevity arise and how it might factor into when to claim  benefits, both times because the claimant raised the subject. While claims  specialists are not specifically required to discuss life expectancy and  longevity risk, the POMS does state that information should be provided  to help claimants make informed filing decisions. SSA also emphasizes  the importance of considering life expectancy and longevity risk in  information made available on its website. According to the American  Academy of Actuaries and the Society of Actuaries, understanding how  longevity, and in particular longevity risk, can impact retirement planning  is an important aspect of preparing for a well-funded retirement.
While time constraints may increase the pressure on claims specialists to  manage their claims case load, we detected no systematic way that these  constraints would push specialists to withhold key information from  claimants. In general, the claims specialists we interviewed told us that  they did not feel pressured by management to process a specific number  of claims in a day, nor to limit the time they spent with claimants providing  information and answering claimants’ questions. Field office managers  told us that their offices faced monthly performance goals for processing  claims efficiently and accurately; and both managers and claims  specialists acknowledged that some days present time constraints in  serving all potential claimants. However, managers and claims specialists  said they did not feel pressure to convince any people to claim benefits  when they came in for a claims interviews or inquiry.
While we did not examine training in depth, SSA officials said claims  specialists receive about four months of classroom training on processing  claims and have a regular review of claims they handle during their first  year. In addition, claims specialists have additional resources to help  them if questions arise during claims interview or inquires, including ready  access to POMS and the ability to ask questions of onsite SSA technical  experts. Our observations confirmed that claims specialists were able to  spend as much time as claimants required for answering questions.
section_title: Online Claims Process
paragraphs: According to SSA, over 40 percent of people claiming retirement benefits  in 2015 did so online through its website. SSA provided us a screen-by- screen demonstration of the online claiming process. In addition to  collecting information from the claimant, the online process offers  opportunities for the claimant to receive certain key information on the  screen via links to SSA web pages and in pop-up boxes. In contrast to the  in-person claims process, the online process includes screens that  provide information on how claiming at different ages raises or lowers  monthly benefits, and that any benefits withheld because of the retirement  earnings test will raise monthly benefits after FRA. For example, one  online screen asks the claimant to indicate when he or she would like to  start taking benefits, and explains that if the claimant chooses to start  receiving benefits early, before FRA, monthly benefits will be reduced. In  another online screen, SSA explains that any benefits withheld because  of the annual earnings test will raise monthly benefits after FRA. Similar  to in-person interviews, however, the online application process does not  inform claimants that benefits are based on the highest 35 years of  earnings; that life expectancy and longevity risk are important  considerations in deciding when to claim; and that benefits may be taxed.  And, as with in-person claims, the online claims process may  inadvertently influence people’s claiming age through the information it  presents. For example, if a claimant has the option of starting benefits  retroactively (i.e., taking a lump sum), and chooses not to, the online  process asks the claimant to provide a reason. This step runs the risk of  making the claimant believe he is making an unusual decision, or a  mistake, by choosing a later claiming date.
section_title: Conclusions
paragraphs: Many American retirees rely greatly on Social Security, making it  imperative that they have the information they need to make wise  claiming decisions. Therefore, it is important that claimants understand  key SSA rules and consider other factors that can assist them in making  informed decisions about when to claim. For many people, SSA may be  their only source of information when making the important decision of  when to claim retirement benefits. Though we found SSA’s claims  process largely provides accurate information and avoids overt financial  advice, certain key information is not provided or explained clearly during  the claims process. POMS specifies that claims specialists should explain  the advantages and disadvantages of filing for Social Security benefits to  help individuals make informed filing decisions. However, because SSA is  not fully operationalizing this guidance in the claims interviews, some  claimants do not receive all the information that is critical to making  informed claiming decisions. While SSA offers key retirement planning  information on its website and in written publications, it cannot be  assumed that potential claimants have obtained, read, or understood it  when they actually claim benefits, especially given documented gaps in  people’s knowledge about Social Security.
Claims specialists we observed performed their jobs with professionalism  and seemed very willing to help people navigate a complicated decision  by providing accurate information and answering questions. However, in  some areas, such as benefits of delayed filing and the inappropriate use  of breakeven analysis, information was sometimes not provided  consistent with POMS. Additionally, the claims interview could better  inform claimants that benefits are based on 35 years of earnings, that  benefits withheld due to the retirement earnings test are accounted for  after FRA, that taking lump-sum retroactive benefits reduces future  monthly benefits permanently, and that life expectancy and longevity risk  should be a consideration in a person’s decision to claim. The claims  process, either in person with a claims specialist or online, allows for SSA  to add additional questions or prompts—potentially using language SSA  already provides on its website and in publications. This information  would help each individual receive the information they need to make an  optimal decision. While we recognize that SSA claims specialists face  time constraints in processing claims, providing such information would  not necessarily add much time to a typical claim or inquiry. In some  cases, such as with breakeven ages, claims specialists could actually  save time by providing less information than they do. Given the near- universality and broad dependence on Social Security for retirement  income, improving the claims process could have a significant impact on  people’s retirement security.
section_title: Recommendations for Executive Action
paragraphs: To ensure that key information provided by claims specialists to potential  claimants of Social Security retirement benefits is clear and consistent  with POMS, the Commissioner of the SSA should take steps to ensure: when applicable, claims specialists inform that delaying claiming will  result in permanently higher monthly benefit amounts, and at least  offer to provide claimants their estimated benefits at their current age,  at FRA (unless the claimant is already older than FRA), and age 70;  and  claims specialists understand that they should avoid the use of  breakeven analysis to compare benefits at different claiming ages.
In addition, to ensure potential claimants are consistently provided with  key information during the claiming process to help them make informed  decisions about when to claim benefits, SSA should take steps to ensure  that: when applicable, claims specialists inform claimants that monthly  benefit amounts are determined by the highest (indexed) 35 years of  earnings, and that in some cases, additional work could increase  benefits; when appropriate, claims specialists clearly explain the retirement  earnings test and inform claimants that any benefits withheld because  of earnings above the earnings limit will result in higher monthly  benefits starting at FRA;  claims specialists explain that lump sum retroactive benefits will result  in a permanent reduction of monthly benefits. For the online claiming  process, SSA should evaluate removing or revising the online  question that asks claimants to provide a reason for not choosing  retroactive benefits; and  the claims process include basic information on how life expectancy  and longevity risk may affect the decision to claim benefits.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to SSA for review and comment. SSA  generally agreed with our recommendations. SSA’s comments are  reproduced in appendix IV. They correctly noted that some of our  recommendations apply only to certain claimants; for example, additional  information on the retirement earnings test would be important to provide  only to a claimant who is younger than FRA and who intends to work after  claiming. SSA emphasized that their claims specialists are not equipped  to serve as financial advisors, and that claimants must select the age that  is best for them based on their individual circumstances. We agree, and  believe that our recommendations are consistent with the principle of  providing important information—not financial advice—to claimants. To  the extent that SSA can incorporate the information we recommend into  the claims process, we believe that this will improve the likelihood that  claimants consistently receive the information they need to decide their  own optimal claiming decisions. SSA also provided technical comments,  which we incorporated as appropriate.
We are sending copies of this report to the Commissioner of the Social  Security Administration, appropriate congressional committees, and other  interested parties. In addition, this report is available at no charge on the  GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made contributions to this  report are listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: In this report, we examined: (1) the extent to which people understand  Social Security rules affecting their benefits, and other factors that may  influence when they claim retirement benefits; and (2) the information that  the Social Security Administration (SSA) provides to individuals inquiring  about claiming that enables them to make informed claiming decisions.  We conducted this research from July 2015 to September 2016 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence we obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
To address our objectives, we applied several methods for collecting and  analyzing relevant information, as described below.
subsections: section_title: Identification and Review of Applicable Law and Regulations
paragraphs: We reviewed relevant federal laws and regulations for requirements  relating to SSA providing the public with information about retirement  benefits. Additionally, we reviewed relevant sections of the SSA Program  Operations Manual System (POMS), a primary source of information  used by SSA employees to process claims for Social Security benefits.  We also interviewed SSA headquarters officials and District managers in  seven field offices to learn how Social Security retirement benefit claims  are processed.
section_title: Literature Search and Expert Interviews
paragraphs: Using the Internet and expert referrals, we found and reviewed surveys  and academic studies that assessed understanding of Social Security  benefits and identified the factors that influence claiming. The search  comprised publications from GAO reports, other government agencies,  research organizations, scholarly journals, and the financial industry from  2010 to 2015. Of the studies we found, nine were most relevant to our  work. These studies are described in appendix II. We also interviewed a  judgmental selection of Social Security experts from academia, public  policy organizations, and financial firms to obtain their views on how SSA  could provide information to better inform people about claiming benefits.  Based on our review of studies and on expert interviews, we identified  key information categories that are central to making an informed  decision about when to claim retirement benefits.
section_title: Review of SSA Publications, Web Pages, and Calculators
paragraphs: We identified materials to review from our own examination and search of  SSA’s website. We reviewed SSA’s publications, web pages, and  calculators that provided information related to understanding and filing  for retirement benefits, including how benefits are calculated. We  reviewed each of the publications and web pages and assessed how they  addressed each of the key information components we found from our  literature review and expert interviews that were not well understood by  prospective claimants. A second reviewer verified any initial assessments  that were used in this report. We reviewed the calculators to see if,  collectively, they addressed each of the key information categories.
section_title: Observations of Claims Process at Field Offices and Online
paragraphs: We observed a demonstration of SSA’s online retirement claims process  and a nongeneralizable sample of 30 face-to-face claims applications and  inquiries at 7 SSA field offices. We identified the local SSA offices where  we would observe the retirement claims process, taking into consideration  regional geographic diversity, income level, urban and rural composition,  and the number of new claims each office processes. SSA headquarters  provided local office data from each of the 10 SSA regions. After  reviewing those data and considering logistical issues, we selected 7  offices in the Philadelphia, Chicago, and San Francisco regions. We used  SSA data to identify local offices with high volumes of inquiries and visits.  We then looked at the number of retirement claims those offices were  processing and considered thoughts of SSA regional and field office  officials about pros and cons of each local office we had preliminarily  chosen, such as foot traffic or appointment schedules. Based on our  discussions with SSA headquarters and regional officials, and our  analysis of data on the field offices, we selected SSA field offices in  Alexandria, VA; Winchester, VA; and Arlington, VA (Philadelphia region);  San Francisco, CA and Santa Rosa, CA (San Francisco region); and  Mount Prospect, IL and Hillside, IL (Chicago region). We conducted these  site visits from March to May 2016.
At our site visits, we observed SSA claims specialists handle claims  intakes or inquiries from claimants for retirement benefits (including for  survivors and spousal benefits). We noted the elements of the claims  process and information the specialists provided to claimants during this  process and evaluated what we observed against POMS guidance and to  determine how specialists were addressing the six key information  categories we identified from our literature review and expert interviews.  We also interviewed managers and claims specialists at these offices  about the process for completing retirement benefit claims, training on  completing claims applications, and how claims specialists’ performance  is evaluated.
To learn about the online claims process for retirement benefits, we  observed a screen-by-screen demonstration by an SSA official covering  the steps of a retirement claim, and asked the official questions about the  process and the information provided. We did not observe an actual  online claim, but saw all the screens that potential claimants see and the  steps that they follow when a retirement claim is filed online through  SSA’s website.
section_title: Appendix II: Selected Surveys and Studies, 2010-2015
section_title: Appendix III: Social Security Administration Online Calculators to Assist in Filing
section_title: Appendix IV: Comments from the Social Security Administration
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: Michael Collins (Assistant Director), Mark Glickman (Assistant Director),  Laurel Beedon, Lilia Chaidez, Susan Chin, and Joel Marus made  significant contributions to this report. In addition, support was provided  by Susan Aschoff, James Bennett, Deborah Bland, Scott Clayton,  Alexander Galuten, Teresa Heger, Tom Moscovitch, Ardith Spence,  Frank Todisco (Chief Actuary), and Walter Vance.
section_title: Related GAO Products
paragraphs: Retirement Security: Low Defined Contribution Savings May Pose  Challenges. GAO-16-408. Washington, D.C.: May 5, 2016.
Retirement Security: Shorter Life Expectancy Reduces Projected Lifetime  Benefits for Lower Earners. GAO-16-354. Washington, D.C.: March 25,  2016.
Social Security’s Future: Answers to Key Questions. GAO-16-75SP.  Washington, D.C.: October 27, 2015.
Retirement Security: Federal Action Could Help State Efforts to Expand  Private Sector Coverage. GAO-15-556. Washington, D.C.: September 10,  2015.
Retirement Security: Most Households Approaching Retirement Have  Low Savings. GAO-15-419. Washington, D.C.: May 12, 2015.
Retirement Security: Challenges for Those Claiming Social Security  Benefits Early and New Health Coverage Options. GAO-14-311.  Washington, D.C.: April 23, 2014.
Retirement Security: Trends in Marriage and Work Patterns May Increase  Economic Vulnerability for Some Retirees. GAO-14-33. Washington,  D.C.: January 15, 2014.
Unemployed Older Workers: Many Experience Challenges Regaining  Employment and Face Reduced Retirement Security. GAO-12-445.  Washington, D.C.: April 25, 2012.
Social Security Statements: Observations on SSA’s Plans for the Social  Security Statement. GAO-11-787T. Washington, D.C.: July 8, 2011.
Retirement Income: Ensuring Income throughout Retirement Requires  Difficult Choices. GAO-11-400. Washington, D.C.: June 7, 2011.
Social Security Reform: Raising the Retirement Ages Would Have  Implications for Older Workers and SSA Disability Rolls. GAO-11-125.  Washington, D.C.: November 18, 2010.