YOUR MONEY

The Social Security Maze and Other U.S. Mysteries

Robert Neubecker 
In recent years, the Boston University economist Laurence J. Kotlikoff has made something of a game — and then, eventually, an art — of cornering smart people and convincing them that they were leaving tens of thousands of Social Security dollars on the table.
He did it with Glenn Loury, an M.I.T.-trained, Brown University economics professor whose wife, Linda, had recently died of cancer. His spouse was a prominent economics professor herself, but neither of them realized that her survivor’s benefits would be worth more than $100,000 to Mr. Loury until Mr. Kotlikoff told him.
Philip Moeller, a writer and retirement expert, also had it wrong, though he almost didn’t find out as he stubbornly insisted to Mr. Kotlikoff that he and his wife knew what they were doing. They did not; Mr. Kotlikoff landed them nearly $50,000 extra with some fancy footwork related to spousal benefits.
The pair eventually teamed with a third author, the “PBS NewsHour” correspondent Paul Solman, to write the guide to Social Security “Get What’s Yours,” which came out last month. The overwhelming demand took the publisher by surprise. The book raced to the No. 1 slot sitewide on Amazon, whose inventory of paper books was wiped out for weeks.
Robert Neubecker 
But we should not be surprised by this. Social Security is the biggest source of retirementincome for many Americans, and even if you’ve made more money than average during your career, that just means that the book’s tricks and tips will be ever more relevant. After all, the more you’ve made, the more you have at stake when it comes to filing for benefits in just the right way at precisely the right moment.
Given that there are 2,728 core rules and thousands more supplements to them according to the authors, it pays, literally, to seek out a guide. The book covers filing and suspending, “deeming” rulesthat are too complicated to explain here, the family maximum benefit and other head-scratchers that can nonetheless move the financial needle in a significant way.
The book’s success is also, however, symptomatic of something that we take for granted but should actually disgust us: The complexity of our financial lives is so extreme that we must painstakingly manage each and every aspect of it, from government programs to investing to loyalty programs. Mr. Kotlikoff’s game has yielded large winnings for his friends and readers (and several dinners of gratitude), but the fact that gamesmanship is even necessary in the first place with our national safety net is shameful.
Mr. Kotlikoff, 64, did not set out to become Dr. Social Security. Two decades ago, he and a colleague were studying the adequacy of life insurance. To do so, you need to know something about Social Security. Soon, Mr. Kotlikoff was developing a computer model for various payouts from the government program and realized that consumers might actually pay to use it.
From that instinct, a service called Maximize My Social Security was born, though it wasn’t easy to do and get it right. “We had to develop very detailed code, and the whole Social Security rule book is written in geek,” he said. “It’s impossible to understand.”
Because of that, most people filing for benefits have to get lucky enough to encounter a true expert in their social circle, at a Social Security office or on its hotline. They are rare, and this information dissymmetry offends Mr. Kotlikoff. “We have a system that produces inequality systematically,” he said. It’s not because of what the beneficiaries earned, either; it’s simply based on their (perhaps random) access to those who have a deep understanding of the rules.
Given that fact, it’s no surprise that the book, with its imperative title, has broken out in a big way. Still, it’s just one topic set against the landscape of confusion and tedium that characterizes our financial lives, and every task seems to require its own multichapter management manual. You could select almost any product, service or employee benefit for criticism and mockery here, but I always find it fun to kick around the health care flexible spending account system a bit.
If you work for an employer that offers one, your account allows you to shield up to $2,550 of your paycheck each year from taxes, as long as you use it by a certain date for eligible health costs that your usual insurancedoesn’t cover. Those conditionals aside, you also have to figure out which expenditures are in fact legitimate.
And for that, you might just consult a jukebox. No, seriously. Click the linkin the digital version of this article and you’ll find an insanely long and detailed list of expenses that are eligible in the federal employees’ F.S.A. It’s all there in the online chart that looks a little like a jukebox — the yeses and nos on acne, activity trackers, air-conditioners, wigs, water fluoridation and whirlpool baths. All subject to change without notice, of course.
Want to avoid saving dozens of receipts to get your money back each year? You could use a special debit card to buy your items in the first place. But the card company may not recognize the purchase, may angrily spit forms at you demanding an explanation and then cut off your card if you don’t fill them out in time. So much for simplification.
In my family, we do all of our F.S.A. reimbursements at once to consolidate the pain and then dump the money into college savings. But families that do that must choose from multiple investments and more than one overall plan in nearly every state. And then when that savings isn’t enough to pay the costs, you can borrow money for college from one of four federal loan programs and repay it in several ways, depending on your income and the phase of the moon. Even the Citi Simplicity Card has a big fat footnote on its supposedly permanent promise of no penalty interest rates or annual or late fees.
This appears to be a distinctly American condition. While Social Security may well have evolved to its muddled state in part to let more citizens benefit earlier and not suffer from inflation’s effects, our tax system and other arenas are ones where multiple constituencies lobby against decreased complexity and make their livings off everyone else’s confusion. Mr. Kotlikoff, with his software and books, skims his cream, too, but he hates the system that gives rise to these opportunities.
“There are democracies that don’t have this craziness, where you get something for yourself by lobbying and hide it from everyone else,” he said. “I think it’s pernicious and disgraceful and an insult to the American public.”
We get the laws that the politicians we vote for create on our behalf, so perhaps we have only ourselves to blame. Still, if we want a better system, we can tilt toward companies and services that make things simpler at a reasonable price. Services like Betterment, FutureAdvisor and Wealthfront, for instance, will invest your money in index funds for a reasonable fee. Now Charles Schwab has introduced its own service, a free offering that may actually be costly for some customers and lucrative for the companydepending on market conditions and the choices the company makes for you. Less simplicity, more confusion. Sigh.
“Get What’s Yours” is a useful book. Indeed, we all need better instruction guides for the many parts of our financial lives that only grow more complex over time. That these manuals exist at all, however, is a shame, and every American should be profoundly embarrassed that we live in a nation where so many confused people feel like they have to read them all.
A version of this article appears in print on March 14, 2015, on page B1 of the New York edition with the headline: The Social Security Maze and Other U.S. Mysteries. Order Reprints|  Today's Paper|Subscribe