[Senate Hearing 114-841]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 114-841

                    MAXIMIZING YOUR SOCIAL SECURITY
                    BENEFITS: WHAT YOU NEED TO KNOW

=======================================================================

                                 HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS


                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           SEPTEMBER 14, 2016

                               __________

                           Serial No. 114-28

         Printed for the use of the Special Committee on Aging
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


        Available via the World Wide Web: http://www.govinfo.gov
        
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-693 PDF                 WASHINGTON : 2022                     
          
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                       SPECIAL COMMITTEE ON AGING

                   SUSAN M. COLLINS, Maine, Chairman

ORRIN G. HATCH, Utah                 CLAIRE McCASKILL, Missouri
MARK KIRK, Illinois                  BILL NELSON, Florida
JEFF FLAKE, Arizona                  ROBERT P. CASEY, JR., Pennsylvania
TIM SCOTT, South Carolina            SHELDON WHITEHOUSE, Rhode Island
BOB CORKER, Tennessee                KIRSTEN E. GILLIBRAND, New York
DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
TOM COTTON, Arkansas                 JOE DONNELLY, Indiana
DAVID PERDUE, Georgia                ELIZABETH WARREN, Massachusetts
TOM TILLIS, North Carolina           TIM KAINE, Virginia
BEN SASSE, Nebraska
                              ----------                              
                  Kevin Kelly, Majority Staff Director
                 Derron Parks, Minority Staff Director
                         
                         
                         C  O  N  T  E  N  T  S

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                                                                   Page

Opening Statement of Senator Susan M. Collins, Chairman..........     1
Opening Statement of Senator Claire McCaskill, Ranking Member....     3

                           PANEL OF WITNESSES

Charles Jeszeck, Director, Education, Workforce, and Income 
  Security, U.S. Government Accountability Office................     5
Virginia P. Reno, Deputy Commissioner for Retirement and 
  Disability Policy, U.S. Social Security Administration.........     7
William Meyer, CEO, Social Security Solutions, Inc...............     8
Sita Nataraj Slavov, Professor of Public Policy and Visiting 
  Scholar, Schar School of Policy and Government at George Mason 
  University and American Enterprise Institute...................    10

                                APPENDIX
                      Prepared Witness Statements

Charles Jeszeck, Director, Education, Workforce, and Income 
  Security, U.S. Government Accountability Office................    33
Virginia P. Reno, Deputy Commissioner for Retirement and 
  Disability Policy, U.S. Social Security Administration.........    44
William Meyer, CEO, Social Security Solutions, Inc...............    64
Sita Nataraj Slavov, Professor of Public Policy and Visiting 
  Scholar, Schar School of Policy and Government at George Mason 
  University and American Enterprise Institute...................    69

                       Statements for the Record

GAO Report: Improvement to Claims Process Could Help People Make 
  Better Informed Decisions About Retirement Benefits............    77

 
                    MAXIMIZING YOUR SOCIAL SECURITY
                    BENEFITS: WHAT YOU NEED TO KNOW

                              ----------                              


                     WEDNESDAY, SEPTEMBER 14, 2016

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2 p.m., in Room 
562, Dirksen Senate Office Building, Hon. Susan M. Collins, 
Chairman of the Committee, presiding.
    Present: Senators Collins, Heller, Scott, Tillis, 
McCaskill, Casey, Gillibrand, Donnelly, and Warren.

                 OPENING STATEMENT OF SENATOR 
                   SUSAN M. COLLINS, CHAIRMAN

    The Chairman. Good afternoon. This hearing will come to 
order.
    If someone offered me $100 today, no strings attached, I 
would be tempted to accept it and say thank you, but if I were 
told that if I just waited until next week I could receive $200 
instead, I think most of us would agree that it might make 
sense to wait.
    Of course, I have way oversimplified with my example, but 
essentially this is how our Social Security system works for 
those who qualify for retirement benefits. Retirees are 
entitled to claim benefits as early as age 62, and for many 
retirees that makes sense. Either their health may be poor or 
the job is too physically demanding for them to continue to 
work, but those who are able to work and, nevertheless, claim 
their benefits at age 62, will see their annual benefits 
permanently reduced by nearly one-third compared to what they 
could have received by waiting until they are older. In fact, 
few people realize that their benefits can go up by 8 percent 
annually for each year they delay claiming benefits, up to age 
70.
    Deciding at what age to begin claiming Social Security 
retirement benefits is the single most important financial 
decision that many Americans will ever make. Few, however, 
understand that making the wrong choice for them can end up 
costing them tens of thousands of dollars or more during their 
retirement years.
    To illustrate how this works, take a look at this chart. 
The average person in my State of Maine earning $42,000 a year 
would receive $1,200 a month from Social Security if he or she 
retired when they first became eligible at age 62, but if this 
person is able to keep working until the age of 66, he or she 
would receive $1,600 a month, and if the person remains in good 
health, can work, and is fortunate enough to be able to wait 
until age 70 to begin claiming benefits, this senior could 
receive a check for $2,112 a month. That is nearly $1,000 more 
each and every month, and $12,000 more every year than if the 
senior had started to receive benefits 8 years earlier.
    As we have explored in prior hearings, we face a retirement 
crisis. The simple fact is far too many Americans have not 
saved enough money to live comfortably in retirement. Many of 
these retirees will rely on Social Security for nearly all of 
their income. For them, a Social Security check that is at the 
maximum level for which the senior is eligible could make the 
difference between a secure retirement and living in poverty, 
but Social Security is a complex program. I was reminded of 
this just this week when I happened to receive my own statement 
in the mail, of projected benefits, and believe me, it is 
pretty opaque. Its rules are difficult to understand, and that 
is why it is critical that those who are approaching their 
retirement years have the information they will need to decide 
when to begin claiming their benefits and what will work best 
for them and for their families.
    Last year, Senator McCaskill and I asked the Government 
Accountability Office to look into the Social Security claiming 
process. Our goal was to identify ways that the process could 
be improved and more information made available to help people 
make the best decisions given their circumstances.
    The GAO found that many individuals do not fully understand 
key details of Social Security's rules that can affect their 
retirement benefits, nor do they understand how spousal and 
survivor benefits are determined. Many may not realize just how 
long their financial assets may need to last. For example, a 
65-year-old today can expect to live for another 20 to 25 years 
and 1 in 4 will live past to age 90.
    As the GAO details, the Social Security Administration does 
make a great deal of information available to the public. 
Unfortunately, this information is not always easy to digest 
and is sometimes conflicting. Field offices do not consistently 
provide the information that claimants need to make well-
informed decisions about their benefits.
    Now let me be very clear. There are many reasons why 
someone might want to begin receiving Social Security just as 
soon as they become eligible. They, or a spouse, may be in poor 
health, or their jobs may require physical labor that they can 
no longer perform. Certainly the decision on when to begin 
claiming Social Security is highly personal. We also know that 
Social Security is designed in a way that it provides greater 
replacement income for lower-income workers, a structure that I 
support.
    I am hopeful that the GAO's report and our hearing today 
will help highlight the steps that the SSA should take to 
present vital information that claimants need in a clear, easy-
to-understand manner, so that they can make the best possible 
decision for themselves.
    I thank our witnesses for appearing today and I look 
forward to discussing this important topic.
    I now am delighted to turn to our Ranking Member, Senator 
McCaskill, for her opening statement.

                 OPENING STATEMENT OF SENATOR 
                CLAIRE McCASKILL, RANKING MEMBER

    Senator McCaskill. Thank you, Chairman Collins. As you have 
indicated, many financial experts consider the Social Security 
claiming decision to be the most important financial decision a 
person can make in retirement. I find it ironic that financial 
experts say this but the American public is clueless that this 
decision is so important.
    It is staggering that so many Americans do not even realize 
that this is a decision at all. Many think you just claim at 62 
or when you stop working, or when you claim Medicare, or when 
you hit full retirement age at 66 or 67. In fact, fewer than 1 
in 3 people in a recent AARP study knew that 70 was, in fact, 
the magic age at which you could get the most out of your 
Social Security benefits. I do not know how we can describe 
this other than a fail for the Social Security Administration.
    Another study found 1 in 3 people did not even realize they 
could get a larger benefit by simply waiting to claim. How much 
more? Eight percent a year. Eight percent a year. That is a 
very attractive return in today's market. It is really the best 
deal in town. You cannot invest in a risk-free, inflation-
protected annuity, which is what Social Security is, in your 
60's and expect to see any return like that, so why don't more 
people know about this? That is what Chairman Collins and I 
wanted to find out when we sent the GAO online and into field 
offices to see what prospective beneficiaries were being told. 
This was supposed to be a two-part investigation. The first 
part was focused on what the field office employees told 
claimants, when a GAO investigator was sitting right there, in 
the room. The second part was going to be an undercover portion 
where we were going to hear what people were being told when a 
third party was not watching.
    Sadly, we did not even need to do the second part of the 
investigation, because what these investigators heard in their 
official visits was so disturbing and so disheartening that 
there was no need for the GAO investigators to go undercover, 
as secret shoppers.
    Multiple people were told they could claim their benefits 
retroactively and get a big check today, without the incredibly 
important warning that this would reduce their benefits for 
life. Others were given outdated information like break-even 
analyses that we know pushes people to claim benefits earlier, 
many times to their financial detriment.
    Now I know this is not a scientific significant sample, but 
the idea that so many mixed and inconsistent message occurred, 
in just 30 interviews, is startling, and it, unfortunately, is 
not surprising to those who do business in field offices on a 
regular basis.
    This is not an attack on field office workers. These people 
are dealing with understaffing and underfunding while seeing an 
increasing volume of retired baby boomers. There is a price we 
pay for cutting the budgets for customer service, and I am very 
sensitive to that.
    This Committee has explored the difficulties faced around 
the country due to closing field offices, and just this week 
the Center on Budget and Policy Priorities released a report 
showing a nationwide reduction of 6 percent of field office 
staff and more than 20 percent in seven different states, so 
this is not on the field workers. This is on the agency as a 
whole. Until 2008, the Social Security Administration used to 
advise seniors on when to claim, using a break-even analysis, 
which told people how long they would have to live to make up 
for the fact that they were claiming later. As I mentioned 
earlier, research has shown this advice prompted people to 
claim earlier. Now the agency claims to be agnostic, but this 
lack of any real position creates a void, and the public is 
getting mixed signals.
    SSA claims it does not want to be a financial advisor, but 
that is not what we are asking. All we want--and this goes back 
to Bowles-Simpson and Domenici-Rivlin, all the way to the 
Bipartisan Policy Center report we examined in last week's 
Committee hearing--is for the SSA to provide information. It is 
not hard to ask people a few simple questions. Do you know that 
for every year you wait you get an 8 percent increase in your 
benefits for life? Why is that a hard question to ask? 
Certainly it would be an easy question for someone to answer. 
Yes, I know that and I have reasons I need to claim now, or, 
no, I did not know that; thank you for giving me that 
information.
    Did you know you do not even have to file for Social 
Security when you stop working or when you claim Medicare, or 
even when you hit 62, 66, or 67? What an easy question to ask. 
It does not require huge revamping of the system. It just 
requires a new mindset.
    Stop telling people about the break-even analysis. Tell 
people that if you make it to 65, odds are you are going to 
live 20 more years. That is actuarially sound. That is 
statistically valid, and at that point, for most Americans, 
your only income will be that Social Security check. That is 
it. The disappearing of defined benefits is paying a huge 
penalty on so many Americans and Social Security is all they 
have got.
    Tell them the decision you make in your 60's, you will live 
with the rest of your life.
    We have experts here today to talk about the benefits of 
waiting, and they will also explain that waiting is not for 
everyone, and we certainly acknowledge that, and I do not want 
that idea to get lost here. Waiting does not make sense for 
people in poor health, or who could no longer work and have no 
other choice, but for a secondary earner in a couple, the 
research is somewhat mixed on whether that person benefits by 
waiting.
    Professor Slavlov and Bill Meyer will delve deeper into 
these ideas. I am especially pleased to welcome Bill, even 
though he lives in dreaded Kansas--it is right across the 
border, in Leawood--but he has a satellite office in Missouri 
so we are happy to see him here and we are going to claim him 
as ours today. Bill is actually here to say things that could 
hurt his business, but the very point he is trying to make is 
that a lot of the information companies pay him for is 
information that the Social Security Administration should be 
providing for free, and that is the thing. While people of 
means who work for large companies may be able to pay financial 
advisors to help them crunch the numbers, not everyone has or 
needs a financial professional, and it should not take a 
financial professional to impart the basic message we are 
talking about today. Every person who claims benefits must 
interact with the Social Security Administration, so this is 
our last stop to inform people about the advantages of waiting.
    We hope, after banging the table, and having this hearing, 
and all of the professional recommendations, we hope that SSA 
will finally see it is in all of our interests to make sure 
that the public, being fully educated on this issue, should be 
one of their very top priorities.
    Thank you, Madam Chairman.
    The Chairman. Thank you very much, Senator McCaskill.
    Now we turn to our panel, and first I want to welcome all 
of our members who are here today as well. First we will hear 
from Charles Jeszeck. Mr. Jeszeck is the Director of Education, 
Workforce, and Income Security Division at the Government 
Accountability Office.
    Next we will hear from Virginia Reno. She is the Deputy 
Commissioner for Retirement and Disability Policy at the Social 
Security Administration.
    Then, as Senator McCaskill has indicated, we will hear from 
William Meyer, who is the CEO of Social Security Solutions, 
Incorporated.
    Finally we will hear from Sita Slavov, the Professor of 
Public Policy at the Schar School of Policy and Government at 
George Mason University and also a Visiting Scholar at the 
American Enterprise Institute.
    Thank you all for joining us. We look forward to hearing 
your testimony and we will start with you, Mr. Jeszeck.

            STATEMENT OF CHARLES JESZECK, DIRECTOR,

           EDUCATION, WORKFORCE, AND INCOME SECURITY,

             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Jeszeck. Thank you. Madam Chairman and members of the 
Committee, thank you for inviting me here today to discuss one 
of the most important financial decisions many of us will ever 
make during our lifetimes--when to claim our Social Security 
retirement benefits.
    Social Security is the cornerstone of our retirement 
system, accounting for over half of the total income received 
by our Nation's seniors. My testimony, and the Committee-
requested report that is being released today, focus on the 
extent to which people understand key program rules regarding 
their Social Security benefits, and the information SSA 
provides to enable seniors to make prudent claiming decisions.
    In summary, our review found that while many have some 
basic knowledge about Social Security benefits, many older 
Americans do not understand important program rules and 
details. We also found that SSA provides broad claiming 
information on its website and publications. However, despite 
the clear concern displayed by its staff, our analysis of 30 
face-to-face claims interviews we observed in 7 local SSA 
offices in 3 states, found that people do not always receive 
the information they may need during the claims process.
    Our analysis of surveys, academic studies, and expert 
interviews indicate that many people do not understand key 
details about Social Security retirement benefits. 
Specifically, they are unclear on how claiming age affects the 
monthly benefit amount, how earnings both before and after 
claiming affect benefits, the option of spousal benefits, and 
other aspects of the claiming decision.
    For example, seven surveys we reviewed found that many 
people do not understand the tradeoffs of claiming early versus 
claiming later. This is important information for people to 
consider as they engage the Social Security claiming decision, 
as some could permanently raise their monthly benefits by 6 to 
8 percent per year by delaying when they take benefits.
    Nevertheless, in one study, 36 percent of the respondents 
indicated that they did not understand either how their 
benefits would change with different claiming ages or thought 
that their monthly benefits would be the same no matter when 
they claimed.
    SSA provides comprehensive information to help people 
decide when to claim retirement benefits through various 
sources, including web pages, online calculators, the periodic 
earning statement, and publications.
    For the almost 40 percent of people claiming benefits at 
SSA offices, claims specialists follow an automated, step-by-
step process for reviewing basic information from prospective 
claimants to determine their eligibility and benefits. This 
process includes prompts for specialists to confirm basic 
information on claimants and inform them about their benefit 
amount, and often to discuss spousal benefits and other key 
program rules.
    However, during the in-office claims interviews we 
observed, the discussion often did not include questions or 
prompts about key information that could inform the benefit 
claiming decision. For example, we observed the multiple claims 
inquiries concerning the retirement earnings limits. In only 7 
of 17 cases where the limit could apply did the claims 
specialist accurately explain that the limit is not a penalty. 
Any benefits withheld because of above-limit earnings are 
returned through higher benefits later. This could have 
important consequences, both for people's claiming and work 
decisions.
    In another example, in 13 of 26 claims we observed, we 
found that claims specialists did not provide at least three 
different benefit amounts that the claimant may be eligible 
for: at the earliest possible month of claiming, at the full 
retirement age, and at age 70. They also did not inform people 
that monthly benefits would be higher if the person waited to 
claim. Both actions are required by SSA's Field Manual. In one 
case, a 62-year-old claimant stated she wanted to claim 
benefits and the claimant specialist simply proceeded with the 
claim.
    Given how many retirees rely so heavily on Social Security, 
the complexity of the claiming rules, and the permanence of the 
decision, it is essential that they have the information that 
they need to make wise claiming choices. Thus, our report makes 
a number of recommendations that we believe will help seniors 
make decisions regarding the Social Security benefits that are 
in their best interest.
    That concludes my statement, Madam Chairman. I will be 
happy to answer any questions you or any other members may 
have.
    The Chairman. Thank you very much. Ms. Reno.

             STATEMENT OF VIRGINIA P. RENO, DEPUTY

           COMMISSIONER FOR RETIREMENT AND DISABILITY

          POLICY, U.S. SOCIAL SECURITY ADMINISTRATION

    Ms. Reno. Thank you, Chairman Collins, Ranking Member 
McCaskill, and members of the Select Committee.
    I am Virginia Reno, Deputy Commissioner for Retirement and 
Disability Policy at the Social Security Administration and I 
am pleased to be here to explain how we provide information to 
help workers make the decision when to take retirement 
benefits.
    I would like to start by emphasizing workers and their 
employers, as we know, pay for Social Security by financing out 
of 6.2 percent of their wages, matched by employers, and in 
return they get disability and life insurance protection as 
well as a foundation of retirement security for themselves and 
their families. We recognize that these benefits are paid for 
out of workers' wages.
    When to take benefits is an important decision that affects 
what you get for the rest of your life. As we have emphasized, 
seniors now get full benefits starting at 66, but the benefits 
are reduced if they take them as early as 62, by 25 percent. If 
they delay beyond 66, the benefits increase by 8 percent for 
each year of delay until 70. Delaying the start of benefits 
from 62 to 70 permanently increases the benefits per month by a 
total of 76 percent. In brief, it pays to wait to take Social 
Security and it pays much more to wait than it used to.
    Married couples have two lives to plan for. If you are the 
higher earner, delaying Social Security also means higher 
survivor protection for your spouse if she or he should outlive 
you.
    The amount of monthly benefits, however, is not the only 
factor people need to consider. As the Chairman has pointed 
out, they also must consider their health, how long they might 
live, their other income, their living expenses in retirement, 
savings they can draw on, and whether they expect to work and 
will be able to work in retirement. Consequently, the decision 
of when to start benefits is unique to each individual. Our 
role at SSA, as we understand it, is to explain the program 
rules and the benefits so that people have the facts they need 
to make an informed decision that fits their own situations.
    Our Social Security statement, which we mail to workers, 
beginning with their 25th birthday, is a very valuable tool to 
explain what you can get from Social Security. It shows your 
earnings history, it estimates your disability and survivor 
protection, and the retirement benefits you could expect to 
receive at 62, at full retirement age, and at 70.
    We also provide user-friendly information and publications 
via our website, and some of the most highly rated online tools 
in the Federal Government are those at SSA--the Retirement 
Estimator, the iClaim, which allows people to apply for 
benefits online, and My Social Security, where you can get your 
personal benefit estimates, your own Social Security account.
    By the time people come to our offices to apply for 
benefits they often have made their decision to claim, so we 
believe it is very important for people to get the information 
they need well before they come to our office, if we can. That 
is why we have put such a high premium on our public education 
and the statement.
    Still, when someone contacts our field offices, our 
employees are there to provide full information and our policy 
is to provide full and complete information on what you can 
expect to receive at the earliest age available to you, at full 
retirement age, and at 70.
    We appreciate GAO's recent review of how we inform the 
public about their claiming choices. We are pleased that GAO 
recognized the professionalism and helpfulness of our employees 
and the value of our online services, and we generally agree 
with GAO's recommendations and are looking into how to 
incorporate them and reinforce the messages where they may not 
be as fully implemented as we believe they should be, and as 
are spelled out in our policies.
    Before I finish I want to stress that our ability to 
provide excellent service, as you have already mentioned, is 
tied directly to our appropriations. When workers pay into the 
Social Security Trust Funds they are paying not just for 
benefits for themselves and their families but also for the 
customer service we provide. Yet, we can use the Trust Fund 
money to serve our customers only to the extent that Congress 
appropriates it. The last several years have been very 
challenging in this regard. Since 2010, the number of 
beneficiaries we serve has grown by 12 percent, yet we have 
reduced our core operating budget, from appropriations, by 10 
percent, after adjusting for inflation.
    If funding levels in the House or Senate appropriation 
bills become law, the situation will be worse. We need the $13 
billion recommended, and requested in the President's budget, 
to provide the quality of service that the public, the GAO, and 
this Committee expect from us, and that older Americans have 
already paid for through the deductions from their paychecks 
throughout their lives.
    I thank the Committee for commissioning the GAO report, and 
I look forward to the discussion and will be happy to answer 
any questions.
    The Chairman. Thank you for your testimony. Mr. Meyer.

               STATEMENT OF WILLIAM MEYER, CEO, 
                SOCIAL SECURITY SOLUTIONS, INC.

    Mr. Meyer. Thank you. Thank you, Chairman Collins. Thank 
you, Ranking Member McCaskill, other distinguished Committee 
members.
    I am Bill Meyer. I am founder and CEO of Social Security 
Solutions. It is important to know that we are the largest 
provider of Social Security help after the Social Security 
Administration, and we do provide our services for a fee, but 
the majority of our services are for free.
    I am going to deviate from the testimony I submitted 
because I think there are a number of remarks at the very 
beginning that were spot-on and really important.
    First, Social Security is the most important financial 
decision 99 percent of Americans make in their lifetime. There 
is no doubt, mathematically, that is right. The second comment, 
from Ms. Collins, was the best outcome is really to give people 
all the data they need to come up with the best decision 
possible, and Ms. McCaskill saying that it should be clear and 
simple. Just give people the information so they can make an 
informed decision, and then this has nothing to do with rich or 
poor. This is not about gaming the system. This is about 
getting information to make a good decision. That is it, and 
unfortunately I disagree with some of the last comments that 
there is not full and complete information that is given right 
now. We have seen this from the studies that were done and the 
statements, which I will comment in a second. Let us just give 
people the information and a tool, and then they will be able 
to make better decisions.
    With that as context, I have four simple suggestions. I 
will probably only get to two of them within my time. My 
partner is Bill Reichenstein from Baylor--he is down in Texas--
and we have written more about maximizing Social Security than 
anyone else in the country. He is at Baylor University and we 
have written research on singles, married, widow, whether you 
have a non-covered pension, whether you die early, whether you 
work part-time. The rules are overwhelming. They really are 
overwhelming.
    The point I do want to make, which I agree with, is Social 
Security agents and the people that work in the field offices 
and on the 800 number, they are awesome. They do the best job 
they can, but there is a fail. Those words are strong but there 
is a fail.
    I will start by suggestion No. 1, and it has to do with the 
statement. We are not giving the right information and we are 
not giving enough information, so the slide that was shown on 
the bar charts before were monthly benefits. That is just one 
dimension, and if I am making a tradeoff between $1,000 or 
$500, that does not incorporate what I call the cumulative 
benefits.
    Now everyone focuses on break-even. It is almost a dirty 
word. Let us put that aside. Showing two bar charts, showing 
the tradeoff if I add up all those monthly benefits going 
early, or all of them going late, can be $100,000 or more for 
many, many people. We have to show people not the monthly 
amount, that is a small amount. You show them the larger 
amount, it changes claiming decisions. We have seen the 
behavior in our company. This is just a view that can be done 
on the statement. We have this data.
    The second dimension--and I have an example in my 
testimony; I will not have time to go over it--is that it does 
not include spousal or survivor, or any other benefits. It is 
just about that single person's benefits, so I could in my 
example, I am finding another $100,000 in addition to the 
cumulative benefits that are shown just about that single 
individual statement.
    We are not giving the full and complete data to people. We 
are just not, and again, I am not trying to disparage. I 
believe in Social Security. I would do anything to help Social 
Security do a better job. This is too important of an issue.
    My recommendation is make improvements to the statement. 
Get realistic data in there so people can make information. My 
second suggestion--there is a current policy that agents or 
people that work for Social Security in the field offices and 
the 800 cannot give any guidance. This is controversial, and 
when I give speeches--you spoke about it at the beginning--is 
that it is--I do not want to be a financial advisor. It is not 
about being a financial advisor. It is about giving people the 
information they need to make a good claiming decision. We are 
currently not doing it, and the Social Security Administration 
cannot have a policy where they cannot give people the 
information they need. It is ludicrous. It has to change.
    Now what I get when I talk to Social Security are quotes 
like, ``It is too complicated,'' ``It adds too much risk,'' 
``We will not be able to implement it,'' things like that. What 
I would say is I have hired people with no financial background 
and from Missouri and Kansas, and in 1 week with our software 
training them to be experts. This can be done. If we can do it 
and other institutions can do it, Social Security can do it 
too. There are processes and protocols that are available.
    My suggestion and recommendation is review how Social 
Security can give guidance, not advice, or not be a financial 
advisor, but give them, as Ms. Reno said, the full and complete 
information so that they can understand the tradeoffs between 
the decisions they are making. It is too important.
    I will conclude by saying I published some research in the 
``Journal of Financial Planning,'' and we showed, by maximizing 
Social Security that we could add between 2 to 10 years of 
longevity to someone's savings--2 to 10 years. This is not just 
a gigantic decision about how to claim. It is a gigantic 
decision on how it will make someone's savings, whether it is a 
lot or a little, last longer. We need to do more on education 
and helping people in this area.
    Thanks for your time.
    The Chairman. Thank you so much for your testimony. 
Professor.

         STATEMENT OF SITA NATARAJ SLAVOV, PROFESSOR OF

           PUBLIC POLICY AND VISITING SCHOLAR, SCHAR

           SCHOOL OF POLICY AND GOVERNMENT AT GEORGE

       MASON UNIVERSITY AND AMERICAN ENTERPRISE INSTITUTE

    Ms. Slavov. Good afternoon, Chairman Collins, Ranking 
Member McCaskill, and members of the Committee, and thank you 
for the opportunity to speak to you today about Social Security 
claiming decisions.
    I will start by talking generally about the gains from 
delaying Social Security. Social Security benefits can be 
claimed at any age between 62 and 70, with higher monthly 
benefits paid for later claims. Delaying Social Security does 
involve a tradeoff, that is sacrificing benefits today in 
exchange for higher benefits in the future. However, my recent 
research with Professor John Shoven of Stanford University 
shows that that tradeoff appears to be a favorable one for many 
people.
    The gains from delay depend on individual circumstances and 
life expectancy, but my calculations suggest that typical 
couples can gain more than $80,000 and singles can gain more 
than $35,000 over a lifetime by using the optimal claiming 
strategy versus claiming at age 62, and beyond this monetary 
gain, the increased Social Security annuity provides additional 
insurance against both inflation and outliving one's savings.
    Despite the large gains from delay, most people claim 
Social Security at or before their normal retirement age. Very 
few people delay to age 70. One possible explanation for this 
is that individuals want to stop working and do not have the 
retirement savings to pay for living expenses while they delay 
benefits. That explanation might be applicable to some people 
but my research suggests that around a third of those who claim 
before normal retirement age have individual retirement account 
assets that would allow them to delay Social Security by at 
least 2 years.
    Delay may not have a high payoff to some people with a 
relatively low life expectancy, but that also cannot explain 
why most people do not delay beyond normal retirement age. In a 
recent survey that my co-authors and I conducted, the most 
common reasons individuals cited for claiming Social Security 
early were that they needed the money or that they had stopped 
work and assumed that Social Security should be commenced upon 
stopping work. Another sizable group cited the fear that Social 
Security benefits would be cut in the future.
    I hesitate to say that claiming Social Security early is 
definitely a mistake, as delaying does generally involve a 
tradeoff between current and future benefits, but given the 
amount of money that people appear to be leaving on the table, 
it is worth ensuring that the claiming decision is an informed 
one.
    To that end I have several suggestions. First, it could be 
worth referring individuals to the various online calculators 
that inform them of the lifetime resources they would have 
under different Social Security claiming strategies. Second, it 
is worth encouraging people to think carefully about different 
options for using their various retirement resources. In 
particular, some people may want to draw down on private 
retirement assets or take a lump-sum payment from a defined 
benefit pension in order to delay Social Security.
    Third, to most people, the term ``retirement'' means 
stopping work. That term should not be used to describe 
claiming a Social Security benefit as it sometimes is. Making a 
clear distinction between retirement and claiming lets people 
know that it is possible to stop work and then wait a few years 
before claiming.
    Fourth, for individuals who are afraid that their Social 
Security benefits will be cut if they do not claim right away, 
it is worth reassuring the public that any credible Social 
Security reform plan is likely to protect the benefits of 
people close to retirement. It is also worth undertaking Social 
Security reform sooner rather than later.
    Finally, it might be worth considering alternative ways to 
frame the claiming decision. One suggestion might be to simply 
start calling 70 the normal retirement age and informing people 
that claiming earlier results in a benefit reduction, without 
actually changing the benefits payable at any age.
    In conclusion, I hope that any changes that are made to the 
way information is presented are done in a way that makes them 
easy to evaluate, for example, by using randomization. That 
could greatly improve our understanding of people's retirement 
and claiming decisions and help inform better policy.
    Thank you again for the opportunity to speak to you today. 
I will be happy to take any questions.
    The Chairman. Thank you very much.
    Mr. Jeszeck, as I mentioned, by sheer chance, I just 
happened to have received in the mail my personal Social 
Security statement, and at the top it estimates what my payment 
would be per month at ``full retirement age.'' The other term 
that we hear frequently is ``normal retirement age.'' Studies 
that have been done by the professor and others show that 
individuals tend to claim benefits at whatever age is 
designated as the normal or full retirement age.
    Do you--does GAO have any views on the use of those terms 
and how they may cause people to make decisions that may not be 
in their financial interests?
    Mr. Jeszeck. Well, Senator, first--and I will defer to 
Virginia on this, but I think the agency has moved away from 
the term ``full''--I am sorry, from ``normal'' to ``full'' 
retirement age, because I think the normal retirement age, 
right, was--did--might give misleading impressions.
    We have not really looked at this issue. In the past, the 
full retirement age was relevant because there were a number of 
strategies that claimants could undertake after the full 
retirement age that were not available prior to that, like, for 
example, file-and-suspend and restricted claiming. Some of 
those were eliminated in the budget act in 2015, so there might 
be less relevance to the full retirement age now than there was 
in the past, but it is not something that we have really taken 
a look at, what it should be called.
    The Chairman. Mr. Meyer, do you have any comments on the 
use of, as it says on my statement, ``full retirement age''? To 
me, full retirement age means full benefits.
    Mr. Meyer. Yes.
    The Chairman. It means maximum benefits.
    Mr. Meyer. Yes, and I think the professor said it. Some of 
how you frame it and the words that are used can misrepresent 
things, and that is why I am a proponent of more data. You 
know, for the average person, you know, it is very similar to 
your example, showing full retirement age and what I get if I 
start early or late. Well, I have calculated the same numbers. 
The difference between the cumulative benefits at 62 versus 70, 
at a 2 percent COLA, which is below the average, is $198,000. 
Let us round that up to $200,000, so if you knew that there is 
a $500 difference between full retirement age and going early, 
but, as a result, there are hundreds of thousands of dollars of 
swing, does that change your claiming behavior? And again, this 
is the average. We are not talking about rich people. We are 
talking about the average, so all I am a proponent of is what 
you--both of you said in your opening remarks--more data. I 
think proper framing changes claiming behavior. We have seen it 
with thousands and thousands of people.
    The Chairman. Well, I thought that your idea of showing the 
annual amount is an excellent one. Most of us do not do the 
math when we see the monthly, and when you take it over time it 
would make a big difference.
    Ms. Reno, is there any reason why, when you come in to 
claim benefits, the Social Security Administration could not 
give a printout that would show how much your annual benefit is 
going to be over a 10-year period, with the proviso that 
obviously to be adjusted for some sort of COLA some years--some 
years not--for different ages, so that people could see that? 
Is that routinely done, and is there any obstacle to doing 
that?
    Ms. Reno. That is an excellent question. Thank you.
    To be perfectly frank, our most user-friendly tool for 
having printed information before you is the Social Security 
statement. What is available to the people in the field 
offices, and the claims specialists who are helping members of 
the public, is a computer printout that is not terribly user-
friendly. It is, in fact, quite ugly. It looks something like 
this. Having a more accessible document would certainly be 
ideal, but that is a major IT investment that we have not been 
funded to do yet, so what we can do in the office is help an 
individual file for their statement. Most people who--we send 
statements, the user-friendly statement to people on their 
birthday and when they are 25, 30, 35, 40, 45, 50, 55, 60, and 
from 60 on every year until they are beneficiaries. If I person 
has not yet seen a statement or needs help interpreting it, the 
person in the field office could help them access one by 
setting up a system so that they have their own Social Security 
account and can look at it. That is the most user-friendly 
printed document, unfortunately, that we have at this point.
    The Chairman. I am going to followup on that but a vote has 
started so I want to yield to Senator McCaskill.
    Senator McCaskill. I went on the Social Security website. I 
am assuming at what age is it best for me to retire would be a 
frequently asked question. Wouldn't you, Ms. Reno?
    Ms. Reno. Probably.
    Senator McCaskill. I looked at the frequently asked 
questions and guess what? It is not on the list--what age 
should I retire? I mean, I cannot imagine that that is not the 
most frequently asked question, because it is one that 
everybody--I am--you know, I will be honest here. I am 63 years 
old and it is the talk of my peers, about what age, and the 
notion that it is not a frequently asked question is mind-
boggling to me, so now I go back to the home page, because it 
is not on frequently asked questions, so I go back and I see, 
on the home page, that you have got Retirement Estimator. Now I 
look on Retirement Estimator and, yes, somewhere in here it 
says ``what is the best age to start receiving retirement 
benefits.'' I click on that. I am dying to know what age I 
should retire.
    Now I want to read you the first paragraph under ``Monthly 
payments differ substantially based on when you start receiving 
benefits.'' Listen to this sentence: ``If you live to the 
average life expectancy for someone your age, you will receive 
about the same amount in lifetime benefits. It does not matter 
if you start receiving benefits at age 62, full retirement 
age''--it does not say what that is--``or age 70, or any age in 
between.''
    Is that a true statement, Ms. Reno?
    Ms. Reno. It is true in the sense that those adjustments 
for age are based upon actuarial estimates that, at the time 
they were created, are designed to be actuarially neutral.
    Senator McCaskill. That is not my question.
    Ms. Reno. Right.
    Senator McCaskill. Mr. Meyer, is that a true statement?
    Mr. Meyer. No, it is not, and I can----
    Senator McCaskill. Okay. We have, right here, on the source 
for someone who is retiring, on your web page, a sentence that 
is flatly false.
    Now I do not get--I do not get the reluctance of the Social 
Security Administration. For years, bipartisan groups have been 
asking you to give more data. In fact, you have blogged about 
it. Before you took your job you blogged about, you know, the 
reality of when you get retirement. I mean, we could pull up 
this screen for the person coming in, getting retirement 
benefits, could we not? That would not take an IT adjustment, 
would it? Could we not put information on this screen that we 
could pull up? I am sitting here, and you are helping me, and 
you pull up this screen, and you show me this information. That 
would not take an IT adjustment, would it?
    Ms. Reno. You are talking about the publication that is on 
the screen?
    Senator McCaskill. I am talking about what is on your 
website.
    Ms. Reno. Exactly.
    Senator McCaskill. I am sure that your field officers have 
access to a computer----
    Ms. Reno. Yes.
    Senator McCaskill [continuing]. and to internet, and they 
could pull up a screen that could be easily programmed--I can 
get you some folks over there to program it if you cannot find 
any--that would actually give accurate information on this 
screen.
    Why can't you do that?
    Mr. Meyer. That is exactly what our company does, for free. 
You can put in your basic information and we will show you how 
to maximize, and the difference between if you claim early or 
late, for free.
    Senator McCaskill. Why can't you do that, Ms. Reno?
    Ms. Reno. We can tell people what their benefits will be at 
any age that they wish to begin receiving benefits, and we can 
explain that at early retirement age, or at the so-called full 
age, at age 70, at any age in between, we can provide that 
monthly benefit, and we are happy to do so.
    We do not try to suggest to a person which of those ages is 
best for them.
    Senator McCaskill. No. You suggest to them that it does not 
make any difference when you claim it. The information says if 
you live to the average life expectancy, for someone your age, 
you will receive about the same amount in lifetime benefits. It 
does not matter when you get it. That is what you are telling 
them.
    Ms. Reno. I hear you.
    Senator McCaskill. I hope so.
    Ms. Reno. I hear you.
    Senator McCaskill. I swear, I am going to raise a ruckus 
about this until this website gets fixed. It is outrageous that 
it says that on this website, because it is simply not true, 
and hundreds and thousands of dollars that seniors deserve are 
going unclaimed, and there is no reason this website cannot get 
fixed, and it ought to get fixed in the next 30 days, and we 
are going to--my office is going to continue to track it until 
it does.
    Mr. Meyer, I have 25 seconds left.
    Mr. Meyer. To Ms. Reno's credit, though, it is very 
complicated. There are 10,000 permutations for a married 
couple, so the logic to be able to in real-time deliver this is 
complicated. We have solved it. Other people have solved it. 
Information that is bad--you are correct. That should be shored 
up right away, but she is right. It is a very hard math 
problem, but it is solvable.
    Senator McCaskill. I get it that it is a really hard math 
problem, and I do not mean to be--I am killing you because you 
are here--you are the only one I can kill--and I apologize to 
you for that, but we can certainly correct misinformation. We 
can certainly remove the idea from people's minds that it does 
not matter when you retire, you are going to get the same 
amount of money, and that is what that sentence says, and the 
only place I can find on the website that answers the question, 
when should I claim, and that is what I want to see some real 
energy behind in terms of fixing.
    Thank you.
    The Chairman. Senator Warren.
    Senator Warren. Thank you, Madam Chair, and thank you. I 
think this is really an important hearing and these are 
important points.
    I want to ask in a different direction now. As we have 
talked about, because of the way Congress set up the formula 
for calculating the amount of Social Security benefits that 
people will get on retirement, people who start claiming at age 
62 receive about 25 percent lower benefits than those who wait 
until 66, and about 76 percent lower benefits than those who 
wait until they turn 70, when their benefits will max out. This 
formula was obviously designed to incentivize workers to delay 
collecting their benefits and save Social Security some money.
    According to a recent survey from AARP, 9 out of 10 
Americans know that claiming later results in higher benefits, 
yet almost half of Americans begin collecting at 62, and only 
about 3 percent of seniors wait until they are 70, when 
benefits would be the highest, so most Americans who say that 
they know that claiming early will cause them to end up with 
smaller benefits do it anyway.
    Mr. Jeszeck, you are the Director of Education, Workforce, 
and Income Security at the U.S. Government Accountability 
Office, so if anyone is an expert on what is going on here it 
should be you. Can you explain to us some of the reasons that 
Americans begin collecting Social Security benefits before age 
70, even though they know it will result in permanently lower 
benefits?
    Mr. Jeszeck. Yes, Senator. We did a report, I believe 2 
years ago, where we looked at the characteristics of early 
claimants, and we found a number of things, as I think, as we--
as has been mentioned earlier. A lot of early claimants are 
blue-collar workers with very long careers, and so they are 
worn out. They may be physically debilitated, although not 
disabled.
    Another key characteristics is health, of course. Another 
area is an economic shock. We did some work earlier, in the 
aftermath of the Great Recession, and what we looked at there, 
we actually saw people--I mean, the labor market for older 
workers has some real challenges for them. While they are less 
likely to be laid off, if they are, they are unemployed for a 
much longer period of time, and if they are lucky to get new 
employment it is at a much lower wage.
    We found people during that work who basically have been 
unemployed for about 4 years, were basically using their 401(k) 
as a bridge to make it to age 62, so there are certainly cases 
like that. If you have a factory that closes in a town where it 
is the large employer, you are an older worker, you may face 
similar circumstances, and regarding health shocks, health 
issues, it is not only the primary worker claimant but also it 
could be a caretaker. I know from personal experience of a 
close family member, his wife was very ill. He had to quit his 
job in his late 50's. He was, again, a blue-collar worker. He 
had to use his 401(k) as a bridge to take care--because he had 
to stay home to take care of his wife--as a bridge, until 
retirement.
    There are a lot of cases where it is a necessity, that 
people----
    Senator Warren. Yes, and I think that is the key. You are 
saying that people need the money. I mean, that is what it 
comes down to for many of these, different reasons, but that is 
where it all comes in. It seems pretty clear that most 
Americans would like to wait until their benefits are higher 
but they simply do not have the luxury of doing that.
    Now, Ms. Reno, you are the Deputy Director for Retirement 
and Disability Policy at the Social Security Administration. 
Are there changes that Congress could make to the benefits 
formula so that Americans who are forced to start collecting 
benefits early because of a job loss or the loss of a spouse or 
because of health reasons, are not being penalized permanently 
with lower benefits?
    The Chairman. Excuse me. Before you respond, Senator 
Warren, Senator Casey, I just want you to know that there is 1 
minute left in the vote, so you may want to complete, but after 
that we will do a recess and resume the hearing upon the 
completion of this vote and the next.
    Thank you.
    Senator Warren. Thank you, Madam Chair. Please, Ms. Reno?
    Ms. Reno. [Off microphone.]
    Senator Warren. [Presiding.] I was asking about are there 
changes that we can make in the benefits formula so that 
Americans who are forced to start collecting benefits early, 
because of a job loss or loss of a spouse, are not being 
penalized with permanently lower benefits for doing so.
    Ms. Reno. Well, certainly there are many ways. It is 
important that the benefits be adequate and be adequately 
financed, and there are many options that could be used to 
address that question. President Obama himself has recognized 
that Social Security is more important than ever because fewer 
people have pensions that they can count on.
    Senator Warren. Okay. Actually, let me just put it this 
way. I will just pull it together because we are going to have 
to go and vote here.
    You know, it is harder than ever for Americans to save for 
retirement. As a result, Social Security is now the principal 
lifeline for two-thirds of all people who are collecting it. 
For 50 millions Americans, Social Security is all that stands 
between them and poverty, and this means that the squeeze is on 
people to start collecting the very minute that they turn 62, 
even though it means large, permanent cuts.
    I understand that everyone who can wait, should wait, but 
the long-term solution here is for Congress to expand Social 
Security, to make sure it works for those who depend on it, no 
matter what age they have to begin claiming, and that is not 
just my view. It is the view of the Bipartisan Policy Center, 
who was here just last week, and even some House Republicans 
who want to make changes to the program, and I see that as the 
real task in front of us here, to make sure that Social 
Security benefits are big enough so that after a lifetime of 
hard work, all people have the opportunity to retire with 
dignity.
    I am going to run and vote. I think we will just put you 
all on hold for a minute and the rest will be back, and I have 
to gavel out, so I am on the run. Thank you.
    [Recess.]
    The Chairman. The hearing will come back into session. My 
apologies to our witnesses. We unfortunately cannot control 
when votes occur, but you can be assured that if the two 
leaders of this Committee were in charge that they would be 
scheduled at more logical times.
    Senator McCaskill. Yes, they would.
    The Chairman. Senator Casey, I believe you left before you 
got an opportunity to question, so I would call upon you now, 
if you were settled enough to begin your questions.
    Senator Casey. Thank you very much, Madam Chair. We are 
grateful we have some votes today. I cannot say that we are 
exhausted because you only have to put your hand up or down, 
but it is good we are voting, but thanks for reconvening.
    I wanted to go back, Ms. Reno, to your--not to your 
responsibilities, necessarily, but some of the services or 
information that is offered now. I realize that you had to 
break it down. It is either online or in person or by way of 
telephone. I know a lot of folks in a State like mine, because 
we are a very rural State between the two big cities or two big 
urban areas, we have--and I wish it were just tens of thousands 
but I am afraid it is a much higher number of people living in 
rural areas that have no access to the internet at all. I just 
heard a story today about one county that--where it is more 
than 70 percent, so it is very high.
    You do not have a lot of places where people are online, 
the further away you get from urban areas. That is number one, 
and two is, they have every right to the--both complete 
information as well as accurate information, so I guess what we 
are trying to figure out, are there better ways for you to both 
standardize the information that you are providing--or 
standardize those services, I should say--or better integrating 
those services into the real lives of a lot of communities?
    What can you tell us about both standardizing as well as 
integrating those services?
    Ms. Reno. That is a very good question and I am glad you 
asked it. We need to think seriously about that, and certainly 
mailing the Social Security statement that is personalized to 
each individual, again, on their 5th year birthdays--35, 40, 
45, 50, 55, 60--and after 60 every year until people have filed 
for benefits, is one way to at least get information in their 
hands that is about their own particular situation, their own 
work record, wage record, as it shows up in our records, and 
what their benefit would be in case they become disabled, and 
what their benefit would be as a disabled worker, what would be 
available to their spouse and children if they died, and then 
what their retirement income would be if they took it at 62, at 
the so-called full retirement age, or at 70. That is 
personalized information that is available, and one can use a 
telephone to contact SSA if you have questions about that or if 
you think the record is wrong, the wage record is wrong, 
because part of the purpose is to fix people's wage records if 
they are not correct.
    I guess that would probably be the best way, is to have 
this personalized information that comes to them through the 
mail and they can contact us by telephone if they do not have 
access to the Internet.
    Senator Casey. Well, I hope you will be committed to 
standardizing those services because as we have heard today, 
sometimes people are getting information that does not answer 
their question, number one, and number two, there should not be 
a variance between either the accuracy or the reliability of 
information, depending on whether you access SSA through the 
phone--by way of the phone or by way of an online engagement, 
or even in person, so we expect that the next time we meet that 
you will have some changes that have been implemented.
    Thanks very much.
    The Chairman. Senator Donnelly.
    Senator Donnelly. Thank you, Madam Chair.
    Ms. Reno, the GAO has made six recommendations for SSA to 
improve the in-person claim application process. Implementing 
these changes would likely require resources for training or 
updated materials, and it is important to note that SSA 
disability claims process is also in need of additional 
resources. There is a large shortage of administrative law 
judges. It has created a significant backlog for disability 
claims.
    I have heard from many of my constituents about significant 
delays at the Valparaiso and the Indy hearing offices in 
Indiana, with some delays running over 2 years in length.
    How would you prioritize the resources, if you decide to 
make changes, and what can we, on this end, do to ensure that 
people are receiving their retirement benefits and disability 
benefits in an effective and timely manner?
    Ms. Reno. I would say the most important thing--and we kind 
of reiterate our--my testimony, it is absolutely--our capacity 
to deliver the quality of service that the American people are 
entitled to expect is directly tied to our appropriations for 
our administrative budget, and it has been less than we have--
than the President's request, repeatedly, in the past years, 
while our funding has declined in real terms, while our 
caseloads are rising, and even in the retirement area, and we 
need the full appropriation, the $13 billion that has been 
requested in the President's budget, to provide the quality of 
service that we think needs to be delivered.
    Senator Donnelly. The GAO also surveyed your print and 
online materials, and also observed 30 face-to-face claims 
interviews, and found that the information was presented in an 
inconsistent fashion across the board. Can you tell us more 
about how you train your claims specialists?
    Ms. Reno. Yes. The claims specialists--before one becomes a 
claims specialist they get 4 months of very in-depth training 
on how to take benefit claims, how to explain eligibility ages, 
the benefit calculations, the benefit of rights of that are 
available to family members as well as to an applicant for 
retirement benefits.
    After the 4-month intensive training period there is 
another full year in which claims--a trainee, a claims rep, is 
closely supervised by a journeyman claims supervisor to help 
them complete their education. Only when a person is really 
fully versed in all of the aspects of taking claims are they--
do they become an independent claims rep. Even then, there is 
refresher training that goes on periodically in the field 
offices, as we find that for one reason or another refresher 
training is needed, and finally, there is always new training 
as the laws changes, as regulations changed, or as policies, we 
find that we need a more clear way to do something.
    Senator Donnelly. That brings two questions to mind to me. 
Number one, how do you plan to respond to the GAO findings, and 
if we do all those things, how do we have so many different 
presentations given?
    Ms. Reno. We are going back and figuring out exactly how we 
are going to do all of those things, but we do agree with the 
GAO's, the thrust of their recommendations, and much of that 
can be done through refresher training of our field office 
staff, as well as reviewing, again, the materials--the written 
materials that are available to the public for areas of 
clarification.
    Senator Donnelly. Mr. Meyer.
    Mr. Meyer. Yes. It was brought up before--technology spend. 
Ms. McCaskill said it. I mean, we helped, on Veterans Day, 
10,000 veterans for free. We offered an updated, detailed 
statement and we had six people on the phone, so I think with 
technology and very discrete protocols on training we can serve 
people better. Small firms like mine, in the middle of nowhere, 
Kansas, have done it before. It can be done.
    Senator Donnelly. Thank you very much. Thanks, Madam Chair.
    The Chairman. Thank you very much.
    I do want to clarify a point before I go to my additional 
questions, and that is that the Social Security Administration 
is, in fact, still using the term ``normal retirement age.'' I 
have it in a publication that just came out in June of this 
year. SSA may be phasing it out but it is right here in black 
and white, and I think the term ``normal retirement age'' or 
even ``full retirement age'' implies that that is the age you 
are supposed to be getting---at which you are supposed to be 
getting benefits.
    Ms. Reno, you are not the one who said that. It was Mr. 
Jeszeck, but would you like to comment?
    Ms. Reno. Yes. I would very much like to comment. One of--I 
could not agree more that we need to rethink the labels that 
are given to the ages--62, that 66 now, and 70. They have--they 
had historical relevance and appropriateness, but the law has 
changed and the names have not changed to keep pace.
    I think it is important to give real serious thought and 
some empirical testing to what names work better, and we are 
collaborating with AARP, which I know is very interested in 
this. They are doing some focus groups. We are also consulting 
with a social and behavioral sciences team in the White House 
that are very thoughtful about how messaging and labels 
influence how people think about those ages. They are helping 
us both with how to describe the retirement earnings test. It 
is not a penalty. It means that if your benefits are reduced at 
one point they will be recouped at a later point.
    These are things that we have active research going on, and 
we recognize there is a need for fresh thinking and new 
labeling.
    The Chairman. I have to say that I am glad to hear that you 
are looking at that, but your last statement was confusing to 
me when you said if the benefits are reduced at one point they 
will be recouped at another point, because I think there is a 
misconception among some claimants that if they claim at age 
62, that as they grow older there is going to be some sort of 
automatic adjustment beyond the COLA that is age-related.
    Ms. Reno. I am sorry. What I said was not clear. When I was 
talking about the retirement earnings test, where if you work 
prior to that so-called full retirement age, your benefit--and 
earn above a certain level, your benefit will be withheld for a 
month. The fact that that benefit was withheld will be 
reflected in an adjusted benefit amount when you get to full 
retirement age, so that foregoing a benefit under the 
retirement earnings test is not a penalty. It is a delay in a 
benefit adjustment.
    The Chairman. Mr. Meyer.
    Mr. Meyer. Education on this topic is so critical. The 
research shows more people need to work part-time, and there is 
confusion, so in our software, you actually can put in how much 
you are going to work and what the impact of your benefit is, 
and then we recalculate what your benefit is at full retirement 
age, so you can see, what is the impact if I work or not. These 
are the sorts of real-time things that someone can see on a 
computer or on a piece of paper, and we need to get it to real 
Americans and impending retirees.
    The Chairman. I could not agree with you more, but what is 
frustrating to me, this is not something we need to invent. 
This is--the software is there. It is not something that--I 
realize that the system is complex, but it sounds like----
    Mr. Meyer. It can be built, or, again, we have it. We are 
happy to partner with Social Security or have them use it, and 
it has been vetted by the largest institutions in America--
Vanguard, Northern Trust. The largest retirement provider--I 
cannot say their name--uses our software, so it works.
    The Chairman. It works.
    Mr. Meyer. We have these interactions that clients--or, 
consumers get better information, to make informed decisions. 
That is all----
    The Chairman. That is our goal.
    Professor, I want to talk a little bit about whether a 
senior's behavior changes depending on how--and the decisions 
that he or she makes change, depending on how the information 
is displayed? For example, Mr. Meyer was very compelling to me 
when he said if I received a statement showing either my 
projected, cumulative, lifetime benefits, or even an annual 
benefit versus the monthly benefit difference compared to what 
age I choose to claim Social Security.
    Have you done any research looking at whether 
decisionmaking changes depending on what information is 
presented on Social Security benefits, and how it is presented?
    Ms. Slavov. I have not personally done research on this. 
The research I am aware of, there is the study that you cited, 
showing that break-even framing tends to encourage early 
claiming. That same study showed that it matters what you use 
as kind of the benchmark age to show how benefits are adjusted, 
whether that is 62 or 66 or 70. People tend to delay if you 
kind of frame it as, you know, so these are the benefits you 
get at age 70, and you State everything else kind of relative 
to that. People tend to delay more.
    It also matters whether this is framed as a gain or a loss, 
so you gain by delaying versus you lose by claiming early, so 
these are the things that seem to matter. I think there is 
actually a lot that we still do not understand about this, 
which is why I would support, you know, if changes are made to 
the way in which information gets presented, it be done in a 
way that we can actually study it to see how that changes 
people's decisions, so we can present the information in the 
best way possible.
    The Chairman. Thank you.
    Ms. Reno, I am just going to ask one more question for you, 
prior to turning it over to my Ranking Member, and that is the 
SSA's online application requires claimants to provide a reason 
for not choosing the lump-sum payment option, if that applies. 
GAO suggests that asking applicants to provide a reason for 
that choice may lead them to believe that they are making the 
wrong choice, or an unusual choice, and so for that reason GAO 
recommends removing that question from the online form.
    In response, your agency has suggested that it will 
``evaluate removing or revising the question.'' Why not just 
remove the question?
    Ms. Reno. [Off microphone.]
    The Chairman. The question asking for a reason.
    Ms. Reno. I believe the way that online application works, 
the question applies whether you--whatever age, whether you 
backdate the application or whether you put it forward for up 
to 4 months, which you can do, and I think that the question 
there--rather than now--and I think the question was, the 
reason for asking the question is that the answer may lead the 
claims representative to want to call the person on the 
telephone and just make sure they understand what the 
consequences of each choice is.
    That same question is asked not just about the retroactive 
claim but also about the forward-dated claim--forward-dated 
choose month of entitlement. We want to just look at it more 
closely and make sure that there are not unintended 
consequences of getting rid of that question.
    The Chairman. Of course, the problem with the retroactive 
claim, which I wonder if seniors, most seniors realize, is it 
locks them into that lower benefit level for the rest of their 
lives.
    Ms. Reno. Absolutely. We want to make sure that they 
understand that.
    The Chairman. Why not say that instead of asking them their 
reason? Why not have sort of a red flag go up, to say, ``Do you 
understand that if you choose this retroactive lump-sum 
payment, that you will be receiving a lower benefit level?''
    Ms. Reno. It is absolutely--I could not agree with you more 
that that information also needs to be very clear.
    The Chairman. Do you think it is clear now?
    Ms. Reno. I think the reason for asking this question was 
to be able to find out if more clarification is needed, for a 
further conversation with the individual, and if there is 
nothing more to it than that, it does make sense. The 
application should be clear that, yes, there is a permanent 
reduction if you take retroactive benefits. We need to make 
that clear.
    The Chairman. Senator McCaskill.
    Senator McCaskill. One out of three--I know this is not 
statistically valid--but one out of three agents, who were 
being watched by the GAO--that is one-third--suggested a 
claimant retire earlier and get a lump-sum payment. Acceptable? 
Is that acceptable to you, Ms. Reno? Isn't that financial 
advice?
    Ms. Reno. I think it is certainly important that the 
applicant know they have a choice of back-dating up to 6 months 
and they have forward-dating up to 4 months, and that the 
consequence of that is a permanent reduction in their benefit.
    Senator McCaskill. Well, but--I think--I am--you know, I am 
confused because there seems to be a stubbornness about giving 
certain information out, because--the stated reason being that 
we do not want to be financial advisors, but the GAO witnessed 
1 out of 3 of the field agents that were being watched by them 
suggest they--the claimant retire earlier and take a lump-sum 
payment. Is that a problem that needs to be solved?
    Ms. Reno. That is definitely not our current policy and we 
definitely are going to go back and make sure that if refresher 
training is needed, if clarification is needed for the 
personnel, we will be doing that.
    Senator McCaskill. I know I am making you defensive, but I 
think part of the problem is that we are all wanting the Social 
Security Administration to say, ``We can do this better. We are 
going to make changes. We are not giving out enough 
information. We are not even giving accurate information.'' If 
we could hear those words coming from the Social Security--but 
it is always, like, ``Well, we are going to look at it,'' and 
``We will consider it,'' and ``Well, we heard you,'' and 
meanwhile, every day--we are in a demographic bump right now. 
Every day thousands of people are making this decision. There 
just does not seem to be a sense of urgency.
    How would you suggest that we do a better job in Congress 
making the Social Security Administration feel that this is an 
urgent situation?
    Ms. Reno. The Administration does feel that it is urgent 
that people get accurate information about their retirement 
claims. Absolutely.
    Senator McCaskill. I just thought that the responses to the 
suggestions--I used to be an auditor, so I know about responses 
to audit findings, and there are three ways you can respond. 
You can make excuses and disagree, you can say, ``We will think 
about it,'' or you can say, ``You know, thanks. You are right. 
We are going to change this.''
    Ms. Reno. I think----
    Senator McCaskill. I am going to tell you, you are not in 
the third category.
    Ms. Reno. I think our response--the gist of our response to 
GAO is, by and large, ``Yes. Thank you. This is helpful and 
we--"
    Senator McCaskill [continuing]. we are going to change it.
    Ms. Reno. ``--we are going to change it or we are going to 
go back and look and take a closer look.''
    Senator McCaskill. That is my problem, is going back and 
look--and taking a closer look, because we have had three 
bipartisan commissions telling you the same thing, and you have 
just been taking a look. Meanwhile, thousands of people are 
leaving money on the table. That is why I think I am animated 
about this, because I do not sense animation on the part of the 
Social Security Administration about how important this is.
    Why don't you put on Senator Collins' letter what her full 
retirement age is rather than say ``full retirement''? In the 
front of my statement, at the very top--you do a monthly; you 
do not do an annual--you say, ``Your monthly benefit will be'' 
blank, blank, blank, and then underneath it - it says, ``at 
full retirement age.''
    Why doesn't the Social Security Administration say ``at 66 
years'' or ``at 65 years'' or--well, obviously, if it's 65, 
they have obviously, long ago, made the decision, but for those 
of us that are in the bubble--I mean, at 66, from 1943 to 
1954--so, you know, for people now that are getting them 
annually, some of them it is 66 and 2 months, some of them it 
is 66 and 3 months--why don't you--and even on the website, it 
says ``full retirement age.'' In order to find out what your 
full retirement age, you have got to hunt down the table.
    Ms. Reno. Mm-hmm.
    Senator McCaskill. You know, you have got to go click-
click-click-click and find the table. Why don't you say ``62, 
66, 70''? Is there a reason? I mean, is there a good reason?
    Ms. Reno. I think once the--the retirement age is different 
for different birth cohorts. The so-called full ``retirement 
age'' is different for different birth cohorts. We are now at 
age 66. It begin to begin phasing in to age 67, that is fully 
phased in sometime----
    Senator McCaskill [continuing]. 1960, when people--people 
who were born in 1960 or later.
    Ms. Reno. Right.
    Senator McCaskill. I am looking at the table. I found it.
    Ms. Reno. Right.
    Senator McCaskill. I clicked around.
    Ms. Reno. Great.
    Senator McCaskill. I found it, so--but you know all the 
information about her----
    Ms. Reno. Yes.
    Senator McCaskill [continuing]. because you have printed it 
all out here. This cannot be a hard thing to program in. You 
know how old she is. I mean, why can't you put the age up 
there? Couldn't you? Wouldn't that be a simple way of letting 
everyone know that, you know, what your full retirement age is, 
and, you know, the word ``full'' is, obviously, I think--you 
have already acknowledged that the way we have labeled these 
things are really, really unfortunate.
    Ms. Reno. Well, they are accidents of history----
    Senator McCaskill. They are.
    Ms. Reno [continuing]. that have not been adjusted yet.
    Senator McCaskill. Yes.
    Ms. Reno. I think that is a very important issue that we 
need to address.
    Senator McCaskill. That would be terrific, and in the 
meantime, if you could put the number, you know, it would be--
--
    Ms. Reno. Well, we will certainly look into that.
    Senator McCaskill. Well, what about on this--on the--when 
you go to the one place where it says ``when you should 
retire,'' when it says 62 and then it says, ``comma, full 
retirement age, comma, 70,'' full retirement age could be a 
click-through, and you could see that it is a link, and you 
could click on that and get the table, because somebody reading 
that does not know what that is. They are assuming full 
retirement age might be when they actually retired. I mean, 
they do not know that that is a set-in-stone number, based on 
when they were born.
    One out of every 6 of the field representatives were using 
the break-even analysis, while they were being watched, 1 out 
of every 6. Has there been a notification gone out to all the 
field offices about advising retroactive with lump sum and 
using the break-even analysis since the GAO study was 
completed? Has there been a notification by electronic means to 
all the field offices not to do that?
    Ms. Reno. I do not believe it has been done yet. My 
understanding is that the GAO report is officially out today, 
and it is clear--we are clearly--that is high on our agenda to 
do something about it.
    Senator McCaskill. Would you let the Committee know when 
the field offices have all been informed, not to use the break-
even analysis and not to advise that someone retroactively--not 
to suggest that someone should retroactively claim for a lump 
sum? Would you advise the Committee on the dates that you do 
that?
    Ms. Reno. Of course. Of course.
    Senator McCaskill. That would be terrific.
    I wanted to reiterate the off-the-shelf versus--in a 
different committee and a different time I have spent way too 
many hours on acquisition reform in the Federal Government, and 
probably the biggest black hole of all black holes has been IT 
acquisition, and one of the reasons it has been so expensive is 
because every agency thinks they need to build what they need.
    Now nobody is worse than the Pentagon. On your worst day, 
Ms. Reno, you will never be as bad as the Pentagon, because the 
Pentagon is at the apex of wasteful spending on IT acquisition, 
because they think they always have to build it from scratch, 
and they always have to have their own systems, but do you know 
if there has been any analysis in the Social Security 
Administration about what off-the-shelf products are available 
that would make this kind of analysis much more simple for 
average Americans?
    Ms. Reno. I am sure we can--I will look into that.
    Senator McCaskill. That would be terrific too, if you would 
let us know--if anybody in your agency has looked into, what 
could we buy off the shelf without putting out a scope, without 
trying to build, because, believe me, there will be contractors 
that will rush to the trough. ``We can build it. We can build 
it. We can build whatever you want,'' and it will be very, very 
expensive, and it will take a long time, and by the time it is 
done it will not be flexible enough, it will be outdated, and 
we will have wasted the money, but off-the-shelf now, there is 
actually so many products, it would be so easy for you all to 
use, and I am just anxious to know if you all are looking into 
that. If you would share that with the Committee I would really 
appreciate it.
    Thank you. Thank you.
    The good news, Professor, is that--finally, this is my last 
one--that the trends in claiming age have relatively been 
positive. Correct?
    Ms. Slavov. [Off microphone.]
    Senator McCaskill. So we are doing better.
    Ms. Slavov. Yes. That is correct.
    Senator McCaskill. The percentage of people who claim at 62 
has declined over the last 15 years.
    Ms. Slavov. It has declined.
    Senator McCaskill. We still only have 2 percent of the men 
and 4 percent of the women claiming at 70.
    Ms. Slavov. That sounds reasonable, yes.
    Senator McCaskill. Okay. Do you believe that the main 
reason people are not waiting is lack of knowledge or lack of 
resources?
    Ms. Slavov. For most people--it is probably lack of 
resources for some people, so as I mentioned earlier, my co-
authors and I did a survey, and about a third of the 
respondents--and this was not a nationally representative 
sample. It was a pilot survey but I think it is still 
informative--about a third of the respondents said they needed 
the money, so lack of money probably does play a role, but we 
have also shown, in other research, that about a third of 
people who claim before their full retirement age actually do 
have resources to delay by a couple of years, so it is not 
always lack of resources, and in those cases it is still 
somewhat of a puzzle why they do not. Lack of information might 
be an explanation.
    Senator McCaskill. All right. Mr. Meyer.
    Mr. Meyer. Yes. I published an article in the ``Journal of 
Financial Planning'' a few months ago on what is called redo 
strategies. There is so much confusion over the rules. I mean, 
right now with the ending of file-and-suspend, people do not 
realize if they, for unforeseen reasons, had to claim early--
let us say I lost my job--you actually can suspend your 
benefits at full retirement age and get that 8 percent, so the 
lack of information how to fix or improve your situation is a 
black hole, and we can do a better job.
    Senator McCaskill. I did not know that.
    Mr. Meyer. Yes. Why--I mean, there are so many people who 
claim early for bad circumstances who can get that 8 percent 
after full retirement age, so it is--we just need to get more 
education out to people. The awareness is low.
    Senator McCaskill. That should be on----
    Mr. Meyer. Redo strategies.
    Senator McCaskill [continuing]. it should be on----
    Mr. Meyer. I have an article on it.
    Senator McCaskill [continuing]. it should be on the front 
page of the website, too.
    I thank you, Ms. Reno. I am so sorry that you took the 
brunt of this, but we are agitated, for all the right reasons, 
and I think you agree with us. I think you are in a difficult 
position. You are representing the agency, but obviously, from 
your writings, which I have looked at, you understand the value 
of waiting, and we think that it is important that the Social 
Security Administration bring their practices up to that 
standard, and I want to really thank you, Mr. Meyer. We would 
like you to move across the line, but if you do not, we still 
appreciate your testimony today, and thank you, Professor, and, 
as always, GAO. You guys have a special place in my heart. I 
love the auditors.
    Thank you, Madam Chairman.
    The Chairman. Thank you. I want to thank all of our 
witnesses for your testimony today.
    I want to, in my closing comments, end where I began, and 
that is with the statement that the decision on when to claim 
Social Security benefits is, for most Americans, the most 
important financial decision that they will ever make, and I do 
not think that most people who are approaching the age where--
such as our generation--of making that decision, realize the 
enormous implications of choosing one age versus another.
    Now, obviously, that is why we are so insistent that there 
be accurate and complete information. The decision of when to 
choose Social Security benefits is a highly individual one, and 
we recognize that, but I think it is important for the record 
today, for me to indicate that if an individual is healthy 
enough and wants to keep working, that postponing retirement, 
postponing the decision to receive Social Security benefits, 
makes sense, can make sense for low-income workers as well, not 
just for middle-income workers or wealthy employees, and one 
way to see this is to look at what happens to replacement rates 
for individuals who postpone claiming their Social Security 
benefits, and by replacement rate I mean the percentage of a 
worker's wages that Social Security benefits will cover when 
that worker retires.
    Social Security data showed that the replacement rate for 
low-income workers who postpone retirement will rise from 61 
percent to nearly 75 percent, if that low-income employee or 
employer postpones retirement to age 66. That could make such a 
difference for that worker for the rest of his or her life, 
particularly since we are now living far longer than ever 
before. That is real money, and if I had Mr. Meyer's software, 
I would have translated it into dollars to show the difference 
that it would make.
    I think, as we look at this issue, we have to remember the 
implications for those that we are most concerned about, and 
that is low-income Americans whose savings may be small, who do 
not have defined benefit pensions, and who understandably worry 
that what should be their golden years may be, in fact, years 
spent in poverty, and that is why this debate and this hearing 
is so important.
    I want to thank Senator McCaskill for all of her work, and 
our staff. Most of all I want to thank our excellent witnesses 
for your contributions.
    Committee members have until Friday, September 23rd, to 
submit questions for the record, and I look forward to 
receiving an update from the Social Security Administration in 
response to this hearing.
    Thank you very much, and this hearing is now adjourned.
    [Whereupon, at 4 p.m., the Committee was adjourned.]
   
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                                APPENDIX
    
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                      Prepared Witness Statements

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                       Statements for the Record

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