Social Security has 2,728 rules governing benefits, and many more variations and exceptions--a tangled web of red tape that causes people to lose benefits, according to Laurence Kotlikoff, one of the leading Social Security experts in the nation.

Kotlikoff calls Social Security “horribly complex” and “scary,” among other things, and says the average person does not have a chance at figuring out all the possibilities that go into making an optimal decision.

There are 567 separate ways to claim Social Security benefits. In addition to the 2,728 rules in the Social Security handbook, there are thousands, maybe tens of thousands, of rules to explain the first set of rules in the Social Security Program Operating Manual System, Kotlikoff says.

All of this exemplifies “the unbelievable complexity we face in deciding when to take Social Security and which benefits to take,” he says. Kotlikoff is a professor of economics at Boston University and president of Economic Security Planning Inc., a financial planning software firm.

Numerous provisions that can mean money in a person’s pocket are hidden in those thousands of rules, says Michael Niemczyk of MLN Retirement Planning Inc. in Grayslake and McHenry, Ill.

“There are a lot of benefits that are overlooked. Social Security staff members are forbidden to give advice, so you have to present a situation to them before they can tell you about it. If you do not know a benefit exists, you cannot know to ask about it,” he says.

An example of the little known benefits is the lump sum terminal illness benefit that some people can qualify for, says Niemczyk.

Most people know that the longer you wait up until the age of 70, the more your Social Security benefits grow. But what if a person decides to delay taking benefits beyond the full retirement age of 66 and then at age 68 is diagnosed with a terminal illness?

Under some circumstances, a beneficiary in this situation can apply for the back benefits that he was entitled to between the age of 66 and 68 and receive a lump sum payment, Niemczyk says.

In order to receive this benefit, the terminally ill person must have filed for Social Security when he reached full retirement age or later and then suspended the benefits so that he was not receiving any benefits. If he has not submitted the paperwork to “file and suspend” (also known as “claim and suspend”), he cannot apply for retroactive benefits for a terminal illness, says William Meyer, author, Social Security expert and co-founder of Social Security Solutions. Meyer and William Reichenstein, also a Social Security expert who advises financial planners, have a Web site for advisors at