If you expect retirement income from a pension and Social Security, congratulations! These two income streams, along with your retirement savings, could put you on a comfortable financial footing. However, you might not be aware that your pension could affect your Social Security benefits.
Eliminating Windfalls
Private-sector workers who earn a pension typically pay Social Security payroll taxes, in which case the pension should not affect their Social Security benefits. However, an issue arises when someone receives a pension based on earnings in which Social Security taxes were not paid — typically from a federal, state, or local government, a nonprofit organization, or an employer in a foreign country — and the individual is also eligible for Social Security benefits based on employment from other jobs. In these situations the Social Security benefit may be reduced by the Windfall Elimination Provision (WEP).
Congress enacted the WEP in 1983 to address an unfair advantage in the way Social Security benefits were calculated for people who worked mainly in a job not covered by Social Security. Because federal workers who were first hired after December 31, 1983, do pay Social Security payroll taxes, they are generally not subject to the WEP. However, public-sector employees in certain states and workers in foreign countries could be subject to the WEP, regardless of hire date.
The benefit reduction depends on the year in which the worker turns 62 (the eligibility year) and the number of years in which the individual had “substantial earnings” and paid into Social Security (see chart). The reduction cannot be more than one-half of the individual’s pension from non-covered employment.
Offsetting a Government Pension
Although the WEP does not apply to survivor benefits, another factor — the Government Pension Offset (GPO) — could reduce Social Security spousal or survivor benefits by two-thirds of the amount of a government pension. For example, someone who receives a $900 monthly civil service pension and is eligible for a $1,000 Social Security survivor benefit would instead receive $400 per month from Social Security [$1,000 – $600 (two-thirds of $900) = $400].
For more information, visit these pages on the Social Security website: www.ssa.gov/retire2/wep.htm and www.ssa.gov/retire2/gpo.htm.
INVESTING RISK DISCLOSURE
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
IMPORTANT CONSUMER INFORMATION
This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.
Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state’s licenser requirements.
An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor’s state securities law administrator.
SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUE
This information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above.
The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates–so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Managment does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.
Securities offered through
Newbridge Securities Corporation,
member FINRA / SIPC
Investment Advisory Services offered through
Newbridge Financial Services Group Inc.,
an SEC Registered Investment Adviser.
Office of Supervisory Jurisdiction
1200 North Federal Highway, Suite 400
Boca Raton, FL 33432
Toll-Free: 877-447-9625
Phone: 954-334-3450
Fax: 954-489-2390
