Does Social Security Save $300 Million Per Year By Rounding Down Benefits?

Social Security routinely rounds down the benefit amounts paid to the next lowest full dollar amount – even if the original amount would have included more than 50 cents. For example, if they calculate that your benefit is $685.90, you only get $685. But as there are 90 cents, most people would round it up, not down (if rounding is necessary at all).

This is not an error but an actual policy of Social Security. It wasn’t always that way; the new rule took effect in June 1982, as a result of PL 97-35, The Omnibus Budget Reconciliation Act of 1981 (enacted 8/13/81). [thanks to Larry]

Multiplied by 50 million SS recipients, the amount not paid out because of this rule amounts to approximately $300 million per year. What happens to this money? It’s simply not paid out and therefore remains available for future payouts. But some people are worried that somebody else might be collecting their missing cents, which is a pretty reasonable concern, but fortunately not true.

“I got a fifth-grade math problem for Social Security. The question is, I was told that I will get a benefit of $685.90 by their letter to me. But I have been getting only $685. They shortchange me by 90 cents. So my question is what happened with 90 cents? I don’t know. So I called and I was told that they just drop off 90 cents. It just disappears. I don’t know where, but it just disappears. Now, I was taught that when you round to the last one dollar, you’re supposed to round up if it’s more than 50 cents, so that makes sense that I should get a check for $686 and not $685. But they gave me $685 and they’re saying 90 cents they just drop off. They don’t worry about it.

Well, somebody is collecting those 90 cents. Now, the simple same typical math problem, we can extend that, too. Today there are 50 million people collecting Social Security checks every month. So on the average, they’re collecting 50 cents for every Social Security recipient per month and there are 50 million people so they are collecting $25 million per month times 12, that’s $300 million per year. What happened to those $300 million? Why can’t we get that back? Why are these other people, Citigroup, Bank of America, they are still getting… “

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