Published January 13, 2015
Reduce the federal deficit! Strike a blow against identity theft! It's simple! It's free!!! (Have I got your attention?)
If you or someone you know is receiving benefits from Social Security, do yourself or them a favor by signing up for automatic deposit of your/their monthly checks.
While the federal government has offered this for years, more than 11 million people are still getting their payments the old-fashioned way: by mail. I have to admit, this has me baffled.
First of all, getting your check via the mail is a hassle for the obvious reason that you've got to take it to the bank and deposit or cash it before you can spend the money.
Direct deposit means your money is already sitting in your bank account the morning your benefit is scheduled to arrive. That beats waiting around for the mail to get delivered and then trudging off to the bank.
If you go on vacation, your money doesn't get deposited until you get home. If you live part of the year at another address, you have to arrange for your checks to get re-directed to your second home.
God forbid you live someplace that has a natural disaster! You could be without income for weeks or even months before things get sorted out. Alvina McHale, project manager of the U.S. Treasury's "Go Direct" program, says Hurricane Katrina hit the Gulf Coast just when most monthly checks go out.
"We had 85,000 people who didn't get their paper checks," McHale said.
(And that was just the first month. While Treasury officials scrambled to issue emergency payments, the major problem was that they "didn't even know where these people were.")
The "check's-in-the-mail" approach is also rife with the potential for identity theft. According to the Treasury Department, the vast majority — 90 percent — of reported fraud and identity theft problems involve paper checks.
If your Social Security check is stolen, the Treasury Department has to launch an investigation to confirm that it was cashed by someone other than the rightful beneficiary and to try to nab the thief. McHale says it can take months before you eventually get your money, resulting in "a grave inconvenience and a grave financial strain because people are counting on this income."
Let me give you an idea of the size of this problem. Last year, the Treasury Department sent out 154 million benefit checks to Social Security and SSI beneficiaries. Of those 154 million, 57,000 were endorsed by someone other than the intended recipient. (Total amount involved: $54 million)
No, it is not OK for you to sign your mother's checks even if she has Alzheimer's. You need to go to court to get the legal authority to do this. Otherwise, it's considered fraud.
Guess what? Identity thieves are also aware of the days of the month Social Security checks get delivered. Unless you've got a lock on your mailbox, your check can easily be stolen.
Last year, $12.7 million worth of checks were altered. That is, the name of the beneficiary and/or the date on the check was changed and they were cashed.
On top of that, thieves collected $32.6 million from counterfeit Social Security checks.
Which means that in 2006 alone, nearly $100 million of our tax money ended up in the pockets of the wrong people!
It's not just the fact that millions are being diverted to the wrong beneficiaries. Paper checks cost the government 10 times more to produce, mail, and process — 89-cents apiece compared to 9-cents for an electronic transfer to a bank account.
For the sake of argument, let's say we're talking about 11 million Social Security beneficiaries (which is less than the actual number involved). Sending each individual a year's worth of monthly checks via the mail costs the government — you and me — $10.68 per beneficiary (12 x $.89). That compares to $1.08 per person for direct deposit (12 x $.09).
This doesn't seem like much until you multiply by the number of recipients involved, which comes out to a staggering difference of ….
In other words, if you combine the money lost due to fraud and the additional cost of mailing paper checks, we're talking about more than $200 million.
Like me, you might be asking yourself, why don't more people opt for direct deposit? It turns out, 40 percent of us — American adults of all ages, not just seniors — think paper checks are "safer."
In case I wasn't clear, let me just say that this is absolutely not true. Direct deposit is both more secure and more convenient.
"Nine times out of 10, if there's a problem, it involves a paper check, not direct deposit," says McHale. "You're not safer just because you can hold your check in your hand. You're putting yourself in a very vulnerable place."
She says there are new stories all the time from seniors who report that, for some reason, their check wasn't in the mail. "It's very hard to hear the people who call day after day, who really rely on these checks."
Unfortunately, the situation is on-track to get much worse as 78 million Baby Boomers prepare to retire. According to a Treasury Department survey, members of this generation are even less likely to use direct deposit than today's retirees.
The reason? Many baby boomers have worked for employers that don't offer direct deposit of paychecks, so they're not used to having their income paid directly to a bank account.
"It surprised us and is a big concern," admits McHale.
She says if Baby Boomers opt for paper checks in the same proportion as today's retirees, the expense involved is going to present a financial problem for the Treasury Department.
Signing up for direct deposit of Social Security and SSI benefits couldn't be easier. You can do this online at www.GoDirect.org or by calling toll-free 1-800-333-1795 (Monday-Friday from 8:00 a.m. to 8:00 p.m. EST). If you prefer, you can apply by mail (it's your 29-cents this time) by printing the forms available at the "Go Direct" Web site.
The only snag you might run into is if a beneficiary does not have a bank account. McHale suggests looking for a financial institution that offers free or low-cost checking and setting up an account just to receive your Social Security checks. A pilot program is currently underway to test the feasibility of having monthly benefits automatically credited to a debit card.
So, to sum this up, direct deposit is:
Better for the beneficiary.
Better for the government.
What's not to like?
Hope this helps,
*"Supplemental Social Security" is paid to certain low-income senior citizens and the disabled
If you have a question for Gail Buckner and the Your $ Matters column, send them to: firstname.lastname@example.org, along with your name and phone number.