For teachers and other government workers, the
rules can be tricky
by Phil Moeller | April 4, 2019
When you’re planning
for retirement, you should include an
estimate of what your future Social Security benefits will be.
In this week’s
column, Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your
Costs and co-author of the updated edition of How to Get What’s Yours: The Revised
Secrets to Maxing Out Your Social Security, explains why some
workers who’ve moved in and out of government jobs may be getting less than
they expected.
Got a question of
your own about Medicare or Social Security? Send it to askphil@considerable.com.
How will my teacher’s
pension affect my Social Security?
Rita Z: I am a 63-year-old
retired teacher collecting a pension from the state of Massachusetts. I also
have enough quarters in Social Security to collect.
What, if any, percent
of that Social Security can I collect? Also, I’m divorced. While collecting my
teaching pension am I entitled to any of my spouse’s Social
Security?
Phil Moeller: Rita’s question
triggers nightmares for me because it involves both Social Security’s Windfall
Elimination Provision (WEP) and its Government
Pension Offset (GPO). They remain one of the trickier sets of
provisions in Social Security, which is saying a lot!
These rules are
designed to prevent people from getting benefits that are considered unfairly
high. I’ve never encountered anyone who supports having their benefits reduced,
so I’m sure my explanation is not going to win over any hearts or minds.
The fairness issue
stems from the fact that Social Security sharply favors lower-income folks in
its benefit allocations. They receive much higher percentages of their earnings
in the form of Social Security benefits than do higher-paid workers.
Keeping this in mind,
with a government pension you are receiving benefits for work on which you did
not pay Social Security payroll taxes.
(Normally, to qualify
for Social Security
benefits, you need 40 quarters of “covered” work—i.e., jobs where
you paid Social Security payroll taxes. This is usually 10 years, but it could
take you longer to amass that many quarters.)
If you are receiving
a government pension and also had enough work where you paid Social
Security payroll taxes, the odds are your Social Security wage earnings would
be relatively small. When you apply for Social Security, therefore, your
benefits would be a generous percentage of those earnings, even though your
lifetime earnings might be much higher due to your government work.
In that case, under
the WEP and GPO rules, your Social Security benefits would be adjusted so that
you didn’t receive benefits that would be unfairly high. In other words, when
you have a government pension, like a teacher’s pension, any Social Security
you might be entitled to from a previous or later job may be reduced.
The WEP cuts Social
Security retirement benefits, while the GPO affects spousal and other
non-retirement benefits. See, I told you this argument wouldn’t win you over!
Also, in the case of
the WEP, the reductions are erased if you have worked enough at jobs where you
paid Social Security taxes. When a person has 20 years of substantial earnings,
their WEP reductions will begin to shrink. When they hit 30 years, the
reductions will be gone altogether.
You can find far more
details on the benefit reductions in the documents I’ve linked to above.
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