Congress on early Saturday passed a bill that would increase Social Security benefits for public sector workers.

[Brett]

There are winners and losers in both the public and private sectors. When I started working in 70's, the private sector was much more attractive, paid better, provided great benefits, and jobs were secure. This changed in the 80's when mergers increased, CEO's became more greedy, pensions were eliminated, and a person had to job hop to stay ahead of layoffs and mergers. It became almost impossible to become vested and retirements were 'forced' at 55. My friends who worded in the public sector were able to stay in their jobs and not relocate, and have higher pensions than my combined SS and private pensions. I think it is fair for everyone who paid into social security to get their fair share. A friend was forced to retire at 55 from P&G, but then got a teaching job at a state university and earned a significant public pension after 7 years. If only I could find a time machine and I would have done something similar.

That time machine would have to go back decades. Even military pensions have been converted to hybrid plans but it's still good especially with disability and Tricare.
I was in the private sector and had to "hop" to stay ahead of the mergers but it turned out OK because I was in senior management and stock options are good if a profitable company gets bought out.

 

[beejaybee]

I will wait to see how this affects me in my social security payment. I have a pension from Ohio STRS and finally worked enough quarters under social security at a charter school to have Medicare payments covered plus a small monthly check. DH will be set if I go 1st thanks to being able to choose the reversion option for him via STRS. Whether this new ruling will allow me to claim survivor benefits on his social security is something I don't wish to experience.

 

[rapmarks]

I will wait to see how this affects me in my social security payment. I have a pension from Ohio STRS and finally worked enough quarters under social security at a charter school to have Medicare payments covered plus a small monthly check. DH will be set if I go 1st thanks to being able to choose the reversion option for him via STRS. Whether this new ruling will allow me to claim survivor benefits on his social security is something I don't wish to experience.

Medicare let you send a check monthly? They would not allow me to do that

 

[isisdave]

SSA has a pretty good explanation of WEP at https://www.ssa.gov/pubs/EN-05-10045.pdf -- but it's definitely "my eyes glaze over" stuff. The explanation is in "How It Works" but the justification isn't really clear.

SS benefits are calculated based on average salary over your 35 best-earning years. But the first $14000 of the average normally counts more than the rest.

Say Joe Janitor works 35 years on an SS-covered job for an average annual salary of $20000.
And say Tom Techie works for the government for 25 years, then retires with a pension and works for Tesla for 10 years, earning an average of $70000.
10/35 of $70000 is about $20000, so it looks like they both had the same average SS income over 35 years.

Because one of the purposes of SS is to prevent poverty in retirement, Joe's benefit is BOOSTED by amplifying the value of the first $14000 of his annual contributions.
WEP recognizes that Tom has another big retirement income and isn't in danger of poverty. He doesn't get the boost: the value of the first $14000 annual earnings is not amplified.

So it's not really that Tom is penalized, it's more that Joe is boosted and Tom is not.

This always seemed fair to me, based on the goals of the SS system. My equally smart DSIL who worked in both systems sees it differently. I think she's about to be pleased.

 

[rapmarks]

SSA has a pretty good explanation of WEP at https://www.ssa.gov/pubs/EN-05-10045.pdf -- but it's definitely "my eyes glaze over" stuff. The explanation is in "How It Works" but the justification isn't really clear.

SS benefits are calculated based on average salary over your 35 best-earning years. But the first $14000 of the average normally counts more than the rest.

Say Joe Janitor works 35 years on an SS-covered job for an average annual salary of $20000.
And say Tom Techie works for the government for 25 years, then retires with a pension and works for Tesla for 10 years, earning an average of $70000.
10/35 of $70000 is about $20000, so it looks like they both had the same average SS income over 35 years.

Because one of the purposes of SS is to prevent poverty in retirement, Joe's benefit is BOOSTED by amplifying the value of the first $14000 of his annual contributions.
WEP recognizes that Tom has another big retirement income and isn't in danger of poverty. He doesn't get the boost: the value of the first $14000 annual earnings is not amplified.

So it's not really that Tom is penalized, it's more that Joe is boosted and Tom is not.

This always seemed fair to me, based on the goals of the SS system. My equally smart DSIL who worked in both systems sees it differently. I think she's about to be pleased.

Very interesting. To be honest, I never made 20000 a year on ss. Just summer jobs and self employed To barely over 40 quarters.

 

[rickandcindy23]

So important to save vast amounts of money. You will never regret having money invested, even in a downturn because it's always going to go up again.

 

[joestein]

SSA has a pretty good explanation of WEP at https://www.ssa.gov/pubs/EN-05-10045.pdf -- but it's definitely "my eyes glaze over" stuff. The explanation is in "How It Works" but the justification isn't really clear.

SS benefits are calculated based on average salary over your 35 best-earning years. But the first $14000 of the average normally counts more than the rest.

Say Joe Janitor works 35 years on an SS-covered job for an average annual salary of $20000.
And say Tom Techie works for the government for 25 years, then retires with a pension and works for Tesla for 10 years, earning an average of $70000.
10/35 of $70000 is about $20000, so it looks like they both had the same average SS income over 35 years.

Because one of the purposes of SS is to prevent poverty in retirement, Joe's benefit is BOOSTED by amplifying the value of the first $14000 of his annual contributions.
WEP recognizes that Tom has another big retirement income and isn't in danger of poverty. He doesn't get the boost: the value of the first $14000 annual earnings is not amplified.

So it's not really that Tom is penalized, it's more that Joe is boosted and Tom is not.

This always seemed fair to me, based on the goals of the SS system. My equally smart DSIL who worked in both systems sees it differently. I think she's about to be pleased.

Overall agree - SS payments are progressive. - but want to point out that is you have 30 years of paying into SS - WEP will not apply regardless of pension.

It is about averaging out. The payments of SS are based upon 90% of the first $14,712 of annual average salary and then 32% of the annual average salary between $14,712 and $88,692. Any average annual salary over that amount (until the max FICA) is paid out at 15%.

So, if you have 2 employees - one has a 60K annual average salary (AAS) - they will get around $28K or around $2,300.month in SS at full retirement age(FRA) and the other one has AAS over the Max, lets say $180K annual average (approx max FICA) - they get around $51,000 or $4,250/month in SS at FRA.

So, even though employee 2 paid in 3X in FICA - they get less than double.

But lets say that employee 2 worked for 1/3 of his career in private and 2/3 in the gov't where he didn't pay SS and collect a pension. Without WEP - his SS would be the same as the person who earned average annual salary of $60K. In reality - he should get something that looks like 4,250/3 or $1,416. The WEP would reduce his payment of $2,300/month to around $1,700 - closer to what he deserves.

These are VERY approximate calcs.

 

[beejaybee]

Medicare let you send a check monthly? They would not allow me to do that

When I had to pay Medicare, it was quarterly via check. Now that I am covered due to 40 quarters, the monthly check I was referring to is my benefit. Actually, it's direct deposited into my checking account.

 

[rapmarks]

When I had to pay Medicare, it was quarterly via check. Now that I am covered due to 40 quarters, the monthly check I was referring to is my benefit. Actually, it's direct deposited into my checking account.

I have never seen my benefit. Withheld for Medicare and a bill sent for the entire year. I have tried to pay with automatic withdrawals and they claim it us not allowed.