If You Are Not Covered By Social Security
If you are not covered by Social Security while employed in public safety, there are two provisions that reduce your benefits earned on other jobs while working in public safety and jobs after retirement.
Windfall Elimination Provision (WEP)
Your Social Security benefit could be reduced by as much as 50% by this provision.
Government Pension Offset (GPO)
This provision could severely reduce your spouse’s or widow’s Social Security benefit.
Both WEP and GPO were written to curtail so called “double dipping.” Keep in mind that any benefits accrued for Social Security are based on earnings subject to Social Security withholdings. Just because you are covered by WEP and GPO does not mean that you contribute any less.
If You Are Covered By Social Security
If you are covered by Social Security then WEP and GPO do not apply, but mathematics do. A combined 12.4% of wages is contributed for all regular earnings up to $102,000 per year. If an employee comes to work at age 25 and retires at age 55, with no further employment before he becomes eligible for Social Security, he receives benefits that are less than 50% of what the combined 12.4% contribution would yield. A 12.4% contribution to the pension would yield about a 45% benefit starting at age 55, not 67. Additional earnings over that twelve year period would drive the benefit at 67 much higher. Essentially, the employer’s contribution of 6.2% is wasted and the employee’s contribution buys the benefit, which is actually no benefit, because it is totally funded by the employee with his own money.
Just as our federal income tax rates are graduated (the more you make, the higher the tax rate), Social Security is reverse graduated (the more you earn and pay, the lower the percentage of your benefit). Public safety employees are on the upper end of the spectrum. The only public safety employee that does not get punished by Social Security is one who has never had Social Security wages and therefore receives no benefits.
I know many of you think that it does not matter because Social Security will be broke and out of business by the time you are eligible for benefits. All of the grave forecasts of Social Security going broke are wrong. Many of the pundits who write about this topic claim that eventually there will be only one person paying into Social Security for every person receiving benefits. They are probably right, but with increases in productivity, which has happened since Adam and Eve, that will be possible. If substantial improvement in mortality rates continues, the retirement age may have to be raised but the system is not going to collapse.
Maybe you are concerned about the funding of Social Security. What would make you feel safe? Would 100% of funding invested in U.S. Treasury Notes make you feel better? Good, that is what you have now. That’s right, Social Security is 100% funded and all of the money is invested in U.S. Treasury Notes. It is true that they are special notes, not traded on public exchanges, but they have the same collateral – the full faith and promise of the United States government. What makes you think that the publicly traded notes are more secure? They are not. If you want to do something productive, lobby Congress to get rid of WEP and GPO.
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