Will the Windfall Elimination Provision reduce my Social Security?

Question

I have recently changed careers after working for 20+ years outside of education, and now I'm being told I will never be able to access any of the SS dollars I have contributed because now my contributions go to the Teacher Retirement System of Texas. Is this really true?

Answer 1

Your contributions that you've already made are made and done, and will not disappear.

What the Windfall Elimination Provision does is make sure that people do not collect the subsidized low-income payments while also collecting a full pension. People who did not pay anything into SS are able to collect money - less, but still something - from the system. Prior to this provision, people on full pensions who were exempt from SS contributions (such as teachers in many places) were able to still collect those amounts (which were never earned through contributions) even though they had quite significant pensions; that led to subsidies being given to people that didn't have as much need for them, as opposed to the indigent people who did need them.

In your case, earning for 20+ years and then presumably only earning a small pension, you may be affected by this, but not necessarily severely.

First of all, you are limited in how much your total reduction is to the lesser of a bit over $400 ($413 in 2015) or half your pension amount per month; so if you earn a $200 in pension monthly, your SS benefits are reduced by $100 monthly at most.

Second, your percentage (and total cap) is reduced if you have over 20 years of credited work at 62 by 10% per credited year, and if you hit 30 years it's eliminated. So if you have 25 years right now, your total reduction is more like $200 at most.

You also have an option to keep earning via credited work. Do some part-time work or summer work, for example. Sell things online. Whatever you need to do in order to get more years of credited work such that you end up with 30 years at 62. That will then increase your benefits back to the full amount.

This article published on Nasdaq's website explains how this works in detail, including tables of benefit reductions. And, log in to ssa.gov to check how many years of creditable coverage you have and to see if you can get to 30 years and avoid any issues with this at all.

Answer 2

The Windfall Elimination Provision will possibly reduce your benefits from Social Security depending on how much money you receive as a pension from the TRS.

Money that is earned toward your TRS pension will not have payroll taxes withheld, so it will certainly not count toward the calculation of your Social Security retirement numbers. Beyond that, this page from the Social Security Administration will help you calculate the impact on what you'll receive.