Q. I'm going to be applying for my retirement benefits soon and have read that Social Security makes more than 59 million benefit payments every month. How can it manage so many without mine getting lost in the shuffle?
A. As you might imagine, the job requires a lot of computer time, organization and scheduling.
Let's start with scheduling. Social Security used to send out all benefit payments on the third day of the month. That became unwieldy as the number of beneficiaries grew. So for people who began their benefits on or after May 1, 1997, Social Security switched to a "payment cycling" system that uses their birthdays to spread payments over three Wednesdays in each month. This staggered schedule is also a big help to the nation's banking industry, which each month has to process those millions of deposits.
Q. How exactly does payment cycling work?
A. Like this: Benefits are paid on the second Wednesday of each month to people whose birthdays fall between the first and 10th day of a month. For birthdays between the 11th and 20th of a month, the money goes out on the third Wednesday, and for birthdays between the 21st and 31st, payment is made on the fourth Wednesday.
If a scheduled Wednesday payment day is a federal holiday, payment is made on the preceding day that is not a federal holiday.
Social Security's website has a payments calendar.
By the way, each payment is for the previous month. For example, if you qualify for a benefit for July, you'll receive it in August.
Q. But today not everyone is on the payment cycling schedule, right?
A. Right. People who filed for benefits before May 1, 1997, generally still receive their payments on the third day of each month. And, regardless of the start date, payment will be sent on that day if a beneficiary meets various conditions, such as collecting the money overseas or receiving both a Social Security benefit and one from Supplemental Security Income (SSI).
Q. Is it possible for me to request a different payment day?
A. Only if you're getting your payment on the third of the month. If so, you can request that it come on the Wednesday that your birthday determines, provided that any other people who receive benefits on your work record — a spouse or a child, for instance — agree to the switch. Once made, the change is permanent.
Q. So how does the money actually go out?
A. In the old days, it was sent as paper checks in the mail. But that was costly — think of the huge administrative expenses and postage fees — and often was inconvenient for beneficiaries. You had to take the check to the bank and there was always a chance it would be lost, stolen or mishandled.
Gradually, Social Security began making payments electronically. On March 1, 2013, the Treasury Department formally took the system fully into the new age: It decreed that all benefit payments issued by Social Security and other federal agencies had to be delivered in electronic form. As of March 2015, 98.6 percent of Social Security beneficiaries were receiving their money this way.
The Treasury Department has estimated that for every paper check that has been converted to an electronic deposit, American taxpayers save about $1, for a total of about $1 billion over 10 years.
Q. So how do I get started?
A. When you sign up for benefits, you'll be asked whether you want to get your money by a direct deposit to a bank account, the most common means of electronic payment. If so, you'll need to provide your bank's ABA routing number, the type of account (checking or savings) and your account number. Once direct deposit is set up, you won't need to do anything — your money will simply appear in your account once a month.
You can also opt for a Direct Express Debit MasterCard. Your benefits will be loaded automatically each month onto this card, to be available as cash or as payment for purchases and other financial needs.
These cards are aimed at what's known in the business world as "the unbanked" — people who have no bank accounts. The Federal Deposit Insurance Corporation has estimated that about 8 percent of all U.S. households fall into that group, and so far, about 5 million people are getting Social Security benefits this way, totaling almost $2 billion a month.
Q. Will I get hit by fees if I opt for a Direct Express card?
A. Direct Express has no enrollment fee or minimum balance requirements. The card allows you to make purchases and pay bills anywhere that the Debit MasterCard is accepted, which means most banks and retail locations. There are no fees to use the card for purchases, which are deducted from the balance on the card. You get one free withdrawal at an in-network ATM per month. You can check your card balances without charge and be notified when money is deposited on the card or if your balance falls below a certain amount.
However, fees are charged for a limited number of transactions and services. Among them: A monthly paper statement mailed to you will cost 75 cents a month; a card replacement will cost $4 after one free replacement each year; the overnight delivery of a replacement card will cost $13.50. You can find a list of these fees on page 6 of the Social Security booklet "Get Your Payments Electronically."
To sign up for Direct Express, call Go Direct at 800-333-1795 and select the option for Direct Express. You may also call Social Security at 800-772-1213 (for TTY, call 800-325-0778) or visit a local Social Security Office.
Q. Who runs the Direct Express program?
A. It's a collaboration of Comerica Bank of Texas, MasterCard and the Treasury Department, which teamed up in 2008. Treasury officials said they chose Comerica from among about a dozen interested banks because of its experience in providing prepaid debit cards for millions of people enrolled in state-run programs.
Q. Does the government offer any other options for people to get their benefits electronically?
A. Yes: an ETA, or electronic transfer account. It's a low-cost, federally insured account designed for people who receive federal payments but don't already have or may not qualify for a checking or savings account. To open an ETA, you must find a bank, savings and loan or credit union that participates in the program, and then sign up for direct deposit of your federal payments.
The government cites the following advantages of an ETA account:
- Funds are federally insured.
- No minimum balance is required.
- Fees are $3 or less a month.
- You get use of an ATM/debit card.
Each month, an ETA account provides four free withdrawals, four free balance checks and a monthly statement.
Stan Hinden, a former columnist for the Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question? Check out the AARP Social Security Question and Answer Tool.
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