- Workers may have jobs that pay into Social Security or receive pensions.
- If you have both, your Social Security benefits may be adjusted to reflect that.
- There is growing support in Congress to revise these rules or repeal them altogether.
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When 87-year-old Dave Bernstein started working for the U.S. Postal Service in February 1970, he earned $2.35 an hour.
To supplement his income, he also took on other jobs. After several years, Bernstein decided to take his voluntary retirement in 1992.
“I knew my pension would be reduced because of early retirement,” said Dave’s wife, Phyllis Bernstein, 84.
But what happened next was something the couple didn’t expect.
Dave expected his monthly Social Security check to cost about $800, but ended up paying about half that, even though he had earned the 40 credits needed to fully enroll in the program. It came to about $415. Benefits were adjusted based on provisions for workers receiving both pension and social security benefits.
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A couple living in Tampa, Florida, is living a different life than they had envisioned for their retirement due to reduced income.
Phyllis continued to work until she was 82 years old. She also asked her family for financial support.
Their lifestyle was frugal, their meals were home-cooked, and the couple joked that they kept their car for 20 years, or “until the wheels fell off.”
However, due to limited resources, Phyllis’ dream of traveling to Australia and New Zealand does not come true.
“I was working when he retired,” Phyllis said. “We couldn’t travel.”
Now, Dave is seeking changes to the Social Security rules that reduced his benefits.
His union, the American Postal Workers Union, Social Security Fairness Act, a bill proposed in Congress that would repeal Social Security rules known as the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) would reduce benefits to workers, making them less likely to pay Social Security taxes ( (also known as tax exemption). COVERED EARNINGS.
The bill also has support from other organizations representing public servants, including teachers, firefighters and police.
This bill has overwhelming bipartisan support in the House of Representatives – 300 sponsors – at a time when that chamber is politically divided. Given this support, House members recently sent a letter to Ways and Means committee leaders requesting a public hearing.
The Social Security Fairness Act was also enacted. introduced in the SenateWith the support of 49 leaders from both sides of the aisle.
But some experts say simply eliminating rules may not be the most effective way to make the system fairer.
of WEP This provision provides that if a worker receives a retirement or disability pension from an employer that does not withhold Social Security taxes and is eligible for Social Security at another job that paid taxes into the program, Applies to how disability pension is calculated.
Social Security benefits are calculated using a worker’s average indexed monthly income, which is then calculated using a formula that calculates the worker’s base benefit amount. For workers affected by WEP, the replacement rate part of the indexed average monthly salary will be reduced from 90% to 40%.
of GPOMeanwhile, benefits will be reduced for spouses and widows or widowers who receive retirement or disability benefits from local, state, or federal governments.
This affects hundreds of thousands, if not millions, of public servants who are essentially penalized for being on Social Security and also being public servants.
edward kelly
President of the International Association of Firefighters
Under the GPO, Social Security benefits will be cut by two-thirds of government pensions. If two-thirds of your government pension exceeds your Social Security benefits, your Social Security benefits may be zero.
Edward Kelly, president of the International Association of Fire Fighters, said the rule’s impact will be far-reaching. Many firefighters work side jobs in the private sector as taxi drivers, bartenders, or truck drivers, where they earn Social Security credits.
“They are also public servants, so they are stealing money,” Kelly said, adding that union members are “passionately angry” about the issue.
“This impact affects hundreds of thousands, maybe even millions, of public servants who pay into Social Security, whether they are teachers, police officers, or of course firefighters, who also happen to be public servants. So they’re basically being punished,” Kelly said.
The WEP and GPO rules are intended to ensure that workers who pay Social Security taxes throughout their lives are treated the same as workers who do not.
But under these current rules, some beneficiaries are receiving lower benefits than they would have been if they had paid into Social Security over their entire career, while others are receiving higher benefits. . Bipartisan Policy Center.
But repealing the WEP and GPO rules would result in “overly generous” Social Security benefits for ineligible workers. research has discovered.
One factor contributing to this advantage is that Social Security benefits are progressive, replacing a large portion of low-income people’s income. Therefore, someone who has been in Social Security for only a portion of their salary history may receive a higher replacement rate, without considering pension income.
Eliminating WEP and GPO rules entirely could also be costly if a program is facing funding constraints. The changes will increase the cost of the program by an estimated $150 billion over the next 10 years, according to the newspaper. Focus on budget and policy priorities.
Another way to address inequality might be to create a proportional approach to income replacement. Instead of WEP, workers’ benefits would be calculated based on all their earnings and adjusted to reflect the percentage of their careers in jobs covered by Social Security. A similar approach may be taken for his GPO.
be capitol hill banknotes We suggest a proportional approach.
But Emmerson Sprick, senior economic analyst at the Bipartisan Policy Center, said the proportional formula won’t solve all the inequities in the current system, prompting think tanks to work on improving the proposal.
An important benefit of reforming the current system is that it will be easier for workers to understand and plan for their retirement.
“It’s definitely very complex and it’s very difficult for people preparing for retirement or in retirement to understand what it means for their bottom line,” Sprick said. said.
Your Social Security statement, which provides an estimate of your retirement benefits, does not take these rules into account.
As a result, many workers find out their benefits are being adjusted right before they retire.
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“Young people don’t pay attention because it’s too far away, so I’m not worried about them,” Kelly said of the firefighters.
“It’s only when you’re ready to leave home that you actually start paying attention to what you’re going to have to eat in retirement,” he added.
Reductions in Social Security benefits may come as a shock.
If recipients like the Bernsteins start with lower benefits, it could be difficult to catch up even after the record 8.7% Social Security cost-of-living adjustment goes into effect this year.
“Gasoline, which was $4 a gallon this summer and spring, just ate up that money like it didn’t exist,” Dave Bernstein said.