The windfall elimination provision applies for work that is done for which you did not pay social security tax. That’s because the pension on that work is seen to be equivalent to social security in terms of the progressiveness of its benefits in terms of having low-wage workers get comparatively more of their pre-retirement income than high-wage workers. This is true for any type of work for which you didn’t pay social security, whether because it was covered by an equivalent government pension, or because you worked outside the US and paid into an equivalent of Social Security. The point is to not give people that same minimum level of benefits twice. IRAs, 401ks, etc, are always done in tandem with Social Security, not instead of.
Incorrect. It reduced the benefits I earned during my 40+ quarters of covered work. If I run the numbers and I did not work at all (instead of teaching) and continued to not work then my monthly benefits would be $863 / mo. But since I have a pension it will be $419 dollars / mo. Merely because I worked a job with a government pension and did not pay SSI for those years I lose $444 / month. And again, if I had been out of work for those years (and in the future) and not paying into SSI I would have lost nothing. So it is not about not paying into social security - it is being penalized for having a government pension. And others that have pensions or retirement plans are not penalized.
I’m not saying I should get SSI for the years I didn’t pay into it. Yes, my pension covers that. But likewise don’t take the benefits I did earn while paying into the system.
You’re saying the same basic thing I said, just using different terms. You’re being penalized for having the government pension in terms of your Social Security benefits because your government pension was designed to cover the base amount needed for survival, the same as Social Security, and giving you both of those would mean giving you more than you would have earned if all of your work was covered by Social Security. This is different than with a pension or IRA that was designed from the beginning to be a supplement to Social Security, not a replacement for it.
Note, I’m not saying that the calculation of the amount of offset is necessarily fair. If your point is that the offset is too high, well, I don’t set the numbers. I’m referring to the intention. You didn’t mention how large the government pension due to work not covered by Social Security is.
Also, SSI is not Social Security, and you’re definitely not on SSI anyway. It has nothing to do with it other than being another program administered by the Social Security Administration. I already stated that in this thread.
That is just one aspect of the means testing I suggested upthread.
People get quite upset about the GPO. The only answer is, the rules are the rules, you (and your spouse) made your choices, and now you are experiencing the consequences. Of course, few people make job choices in their 20s, 30s, 40s with an eye towards how it will affect their retirement income in their 60s and beyond.
Some people effectively use state and local pensions in their favor, having multiple jobs for different governmental units which entitle them to very generous (IMO) multiple pensions. In any system of rules, you will have some people who are sophisticated enough to use the rules to their advantage. And there will be other people who will not be aware of the rules until they realize that they apply in some manner other than they had hoped.
It is unfortunate that you feel SS is treating you unfairly. If it gives you any comfort, you might appreciate that you have a decent enough income from your teaching work that the offset applies.
I agree with you, that there ought to be significant means (income AND wealth) testing for receipt of SS retirement benefits. But the hurdle of (relatively) wealthy folk saying “That’s MY money that I paid into the system!” is a high hurdle indeed.
Coincidentally, yesterday was the 50th anniversary of SSI, signed into law by Nixon. In 9/22, 7.5 million adults and children received SSI.
Just thought the participants of this thread might find that interesting.
That’s exactly what I did and I was able to retire a couple of years ago at 56. I should suffer because I planned better than most?
Yeah fuck that. My retirement planning keeps my lifestyle going and it took my expected SS income (which I will start to take at 62) into account. Should I live well into my 90s, I will be screwed without SS even though I might appear too wealthy by a means test. I started putting into the system when I was 15 and did so for over 40 years. There is no way that people who fucked off and were ski bums or whatever during their 20s while I worked my ass off should get rewarded for that.
As has been pointed out, the wealthiest people never really had W2 or 1099 income. It’s all investment income for them and they don’t qualify.
Ridiculous. Look, back around 1984 they FEDs converted from CRS to FERS. The earlier system had a full pension, no SocSec withholding, and an offset if you happened to get 40 quarters from another job.
The FERs system, currently in use- has a very small SocSec supplemental pension, SocSec withholding, a type of 401K, and no offset. There should be no offset from them.
So, very few Government workers are still getting full pensions and no withholding. Most have an offset.
And penalizing the few wage earners who actually planned for a decent retirement is wrong.
Just take the cap off withholding. It is simple and easy.
Again incorrect. If I worked in a state like Arizona that has both a government pension AND social security, there is no offset so it is not as simple as a government pension replaces social security.It is all about a government job that is SS-exempt penalizes the years you do pay into social security unlike any other retirement plan including government pensions in non-exempt states.
I wonder how many people would still think the government offset was fair if they decided tomorrow that because you don’t pay income tax on Roth IRAs then anyone with a Roth will receive less social security than they would have. Or if you own your house outright, you receive less social security since you don’t have to pay a mortgage or rent and therefore have more disposable income. The issue with the offset is that it is so arbitrary. And here’s the thing, working in an exempt state already “penalizes” us (fairly I might add) because we get no social security credit when in those professions and so there is no double-dipping. Just losing what we earned.
You’re literally repeating what I’m saying in other words while saying I’m incorrect. Please tell me what exactly I said that was incorrect, and how it differs from reality.
You seem to be completely missing the point. You again didn’t say anything about how much that pension from work not covered by social security gets you, and how the amount that you get between social security and that pension compares with the amount that you’d get from social security if you didn’t have that pension from work not covered by social security. Also, see how annoying it sounds when I have to say “pension from work not covered by social security” over and over since you seem to think me saying “government pension” instead means that I’m implying all government pensions are like that, instead of just shorthand for “pension from work covered by social security”? I have cut and paste so whatever.
The point of the offset is that your pension from work not covered by social security plus social security should be about the same as the amount of social security you’d get if you had always worked in jobs covered by social security. It’s a progressive system - you get a lot more in benefits at the lower end than at the top end. If you paid into two progressive systems, you’re being given a windfall of benefits from having the low end of both benefits, when you should only be able to get the low end of one benefit.
Other retirement plans that you get through work covered by social security tend to not be progressive, especially for defined contribution plans like an IRA. Defined benefit plans in general could be somewhat progressive, but I don’t really know how most of them work. Does working for 40 years always get you twice the benefits of working 20 years? I don’t know. But it’s definitely true for IRAs and 401(k)s, ignoring the investment growth potential, and that growth potential really makes them regressive - benefiting people more relatively if they paid in for longer.
No, glowacks is right.
The government pension offset is intended to correct a situation where somebody is “rewarded” and getting extra money for having worked in both SS-covered and non-covered employment, rather than the same amount of time for the same wages but in only one or the other system. Your Social Security Primary Insurance Amount is computed using average indexed monthly earnings over your highest 35 years of earnings in covered employment, and then uses three percentages:
(a) 90 percent of the first $1,115 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $1,115 and through $6,721, plus
(c) 15 percent of his/her average indexed monthly earnings over $6,721.
(These are the amounts for people retiring in 2023; the formula is the same but the exact dollar amounts vary each year based on national average wages.)
For somebody who worked in a covered job for 10 years and then spent 30 years working in a job that didn’t pay into Social Security, their SocSec benefit would be computed on ten years of wages and twenty-five years of zeros, to get the 35 years. That makes their average wage over their career look much lower than it really was, and the formula pays low-wage workers a significantly higher percentage.
The offset isn’t arbitrary. The existence of a Roth has no effect on the calculation of your primary benefit amount, and neither does your disposable income. Having your time in covered employment weighted more heavily because the system sees it as your only ten years, rather than just an extra ten years, does.
Unless I missed it, you’re argument would also apply to people with government pensions that also pay into social security. Except they don’t have the offset. So saying an offset is because a government (or railroad) pension is meant to replace part of social security and not supplement it is not applied evenly between exempt and non-exempt states. For example if I taught exclusively in Arizona I would get both my full social security benefits and my pension. Teaching in California I get offsetted social security and my pension.
My argument is only about pensions that are from work not covered by social security. As I implied in my previous most, I may have used “government pension” when referring to your pension from work not covered by social security, but that was just shorthand.
Except as I pointed out, if you work in a non-exempt state you get both your full social security and your full pension. And you don’t get extra money as working in a exempt state the wages you earn do not pay into social security so in a way my social security is already offset and I do not get credit for any wages I earn in California or Colorado.
If you work in a non-exempt state, a state where government employees are covered by Social Security, then you’re not getting this bonus in the first place, because the 35 years included in figuring your average wage doesn’t include any zeros for years when you were working and earning but not paying Social Security tax.
Let’s run an example: you worked 40 years and earned an indexed wage of $48,000 ($4000/month) each year.
If all of that time was spent in SocSec-covered employment, your benefit will be $1003.50 (90% of the first $1115) plus $932.20 (32% of the next $2885), for a total of about $1936 per month.
If all of that time was spent in CSRS, you’d get roughly $3050 (using the average of the highest three years of earnings, and then 1.5% for the first five years, 1.75% for the next five, and 2% for the remaining 30 years).You get more from CSRS, but also contributed a higher percentage of your salary (7 to 8%, vs 6.2% for SocSec [although it was lower in the 1980s and again during the Great Recession]).
If you spent 10 years in SocSec and 30 in CSRS, then the amount looks more like:$2250 from CSRS and $1014 from SocSec, totaling $3264. SocSec is figured on ten years at $48K and 25 years at $0, yielding an average month wage of $1142. You get 90% of the first $1115 and 32% of the next $27. You contributed a lower percentage of your salary overall, but receive a higher benefit because SocSec weights that “first” $1115 so heavily.
With the pension offset, however, your $1014 is reduced by two-thirds, to about $338, which when added to your CSRS pension gives you a monthly amount of $2538, which is still higher than you would have gotten from SocSec alone.
“Full pension” in a jurisdiction where you are also paying into Social Security is generally quite a bit lower than “full pension” in a jurisdiction where you’re not. FERS, for example, is figured on 1.1% of your final average salary for each year of service, versus 1.5-2% for each year under CSRS.
Obviously the dollar amounts in my examples are rough approximations and somewhat contrived; most people don’t earn the same salary every year of their working life even after indexing, for example, and it could make a fair bit of difference which order the covered versus non-covered work occurred. However, the overall point stands: absent the offset, you’d get extra money just for having worked in two systems.
Saint Cad’s argument is a good example of why it is so challenging to reform SS - everyone complains when THEY bear any of the cost, but feel the best solution has EVERYONE ELSE paying for it.
So I figure the best approach is one that spreads the cost among EVERYONE - pisses everyone off! 
As you suggest, they vary all over the map, but common schemes are one factor based on longevity and another factor based on wages, or on late-career wages. This latter tends to be regressive, especially in traditional unionized jobs.
e.g. somebody who starts as a low-tier worker and progresses up the longevity scale and the responsibility / job duties scale for 40 years rises to pay level X. Somebody else who works 20 years at one company and another 20 years at another company may rise only to pay level M at both companies. The former person ends up with 40X some fixed percentage as a pension. The other ends up with (20M) + (20M) * same fixed percentage. But M can be a lot less than X.
@slash2k did a better job of giving the example I tried to give here. But I want to point out the pension offset goes away if you have 30 years of substantial SS covered earnings.
Personally, I think that SS did this calculation in the worst way possible - I think it would have been more palatable if they have changed the number of years the income was averaged over so that if you had 10 years of wages covered by SS, those earnings would be averaged over ten years rather than 35.
That’s not what I said. Not that I shouldn’t bear the cost but that if I have to then everyone in a similar situation (non-exempt pension, tIRA, rIRA, 401k, etc) should as well OR nobody should. So we agree to the last part - PISS EVERYONE OFF.
ETA: I know there will be some rationalization why I’m not like everyone else and they get their full retirement plan. But you’re all wrong and I am right. LA LA LA I CANT HEAR YOU!