E.A.S.E. into Retirement Podcast

with Tom Mosley.  
When will my pension impact my Social Security?

Click on the video to watch the podcast. Full transcript is included below.

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Tom Mosley:

Hey, welcome to the EASE Into Retirement Show. I’m Tom Mosley, your host every week. And I want to promise you, if you’ll give me 5 to 10 minutes, I’ll do my best to increase your financial knowledge. Today, we’re going to try to answer the question, will my pension impact my Social Security? Well, it could. Now, I’ve got really, really, really, really, really good news for you. If you’ve got a regular run-of-the-mill business pension that you got through work and you weren’t government related, if you weren’t government related, your pension is not going to be impacted. Your pension is not going to impact your Social Security is what I mean to say. You’re going to get your Social Security and your pension.

Now, if you are government related, and I’m talking about I’ve got two daughters who are school teachers who are on CalSTRS, I’ve got tons of clients who are on CalPERS, public employees, and there’s MERS, DERS, FERS, all the different ones that are out there. If you’ve got a government related pension, there’s going to be an impact on any Social Security that you might have coming your way. Now, let me talk about the two main things. The question is, will my pension impact my social? Only if it’s a government pension. But here are the anachronisms and acronyms that we need to work through. The first is the Windfall Elimination Provision or Program. The Windfall Elimination Provision says that it affects your Social Security.

Now, here’s why. Government pensions are generally so, they even call them this word, rich pensions. Doesn’t mean you’re rich if you’ve got one, but it means you’re probably better off than a regular pension. Plus, most of them have a cost of living increase and most pensions don’t. So you’ve got a really, really, really good pension. And if you’ve got a really, really, really good government pension, it could impact the money that you’re going to get from Social Security because they see it as drawing from the same source, the government for the pension and the government for Social Security. They call it actually double dipping is what it’s considered. And remember, it impacts your Social Security.

Now, I want to hasten to caution you. Don’t listen to anybody tell you you’re not going to get any Social Security because you’ve got a government pension unless Social Security is telling you that information. I’m going to give you an illustration. Stories teach better than anything else. I had a lady came into my office about five years ago. She says, “I’m retiring as a school teacher after 25 years.” A little flag went up in my head, I’ll tell you why in a minute. She said, “I’m 64 years old and I can’t take it anymore. I just don’t want to be there anymore.” Okay, fine, fine. So you started when you were 39. “I actually started when I’m 40, right? When I started, 40, and I’m just about to turn 65. I’m retiring after 25 years of service.”

The reason the flag went off in my head was she was with CalSTRS, and CalSTRS really kicks in the benefit at 20 years, starts to kick in the benefit, but it grows each year till you get to about that 30 or 31 years. That’s the really primetime where it can really max out at 30 or 31 years. Well, I asked this lady, I said, “Well, what did you do from the time you started work after college until you were 40 years old?” She said, “Well, I was a legal secretary.” I said, “Well, you need to check out Social Security.” She said something very interesting that you never want to be caught saying. She said, “I asked my coworkers and they all told me that I won’t draw any Social Security.” A big mistake to listen to your coworkers. They’re not financial advisors. They don’t work for Social Security. So you really need to get some better advice necessarily than your coworkers.

Here’s why. She’d worked 25 years in the school system. Her coworkers, come to find out later, had worked 32, 34, 36 years, and they were about to retire. And they’ve never paid in any Social Security. So I asked this lady, I said, “What did you do during that time?” She said, “I was a legal secretary.” Legal secretaries pay Social Security. She said, “Oh, but my coworkers tell me I’m not going to get anything.” I said, “You need to go ask.” Bottom line into the story, she went and asked Social Security and come to find out it did cut down her benefit. But because she wasn’t receiving a full-fledged 100% STRS pension and because she had paid in a pretty healthy way to Social Security for 20 years, she got over $900 a month. They’re not going to knock on your door and say, “Hey, I know you think because your coworkers told you, you’re not going to get any social.”

Go ask. Don’t let your coworkers tell you, you’re not going to get Social Security. You go ask if you’ve had Social Security and you’ve paid into Social Security and you still have a government pension, but it will impact your Social Security. Now, I’m standing in front of another provision. And I’m going to turn over here to this side and I’m going to talk about the government pension offset. Now, here’s the way it works. It affects spousal and survivor rights. If you have a huge Social Security and your spouse has a huge government pension, as long as you’re both alive, huge and huge, you both get them both. But if you’re expecting to inherit a full government pension when you’ve got a super huge Social Security yourself, when your spouse passes away, they won’t mingle. The double dipping will still kick in.

You say, “How will it kick in?” That’s where you need to talk to Social Security. But just know that you’re not going to have your big Social Security, and then get 100% survivor rights on a government pension. It can affect up to two-thirds of your payment depending on what you’re getting from Social Security. And again, the reason is they consider it to be double dipping. Hey, Muhammad Ali said, “It was the punch that I didn’t expect that always knocked me out.” So don’t go through life thinking, “Man, I’ve got Social, I’ve got this, I’ve got my spouse’s Social, I’ve got my pension,” or vice versa. You need to ask and make sure, so that that punch doesn’t knock you out when you’re planning for income in retirement.

Hey, will my pension impact my Social Security? If it’s a government pension, yes. And you need to find out how it’s going to impact your particular Social Security payout. Hey, thanks for listening. This is the EASE Into Retirement Show and I appreciate you listening. I hope you enjoy it. Let us know in the comments if you do enjoy it. That encourages us. And if there’s a subject you want us to talk about, let us know. Click subscribe, and that way, you’ll get notified of every future episode. But the biggest way you can help us is pass this information that we’re trying to educate people with along to somebody who’s got a government pension and doesn’t know if they’re going to get Social Security. That’s how we’re trying to help. I’ll see you next time.


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