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Social Security Information
This is a complex topic depending on whether the retiree is planning to collect SSA benefits on their own record or on a spouse’s record, as well as how many years they’ve worked paying into social security.
- Retirees should call financial advisors, as the answers are pretty specific to an individual, and the advisors can refer them to the SSA for more detailed estimates.
- The most common issue SMFR retirees face is the Windfall Elimination Provision – essentially a provision of social security that limits the ability of folks with a government pension to “double dip” by receiving both their pension (whether that is FPPA or the defined contribution 401a) and social security benefits.
- The way the provision works, is that Social Security calculates a reduction of someone’s monthly social security benefit, based on the size of the government pension they receive, up to a max. Links to the SSA site with more info:
- The most conservative assumption for a retiree that spent a substantial amount of their career at SMFR is to assume they will receive the maximum reduction in benefit allowed.
- In 2021, the maximum reduction for the WEP is $498 per month
- For example: if a retiree sees an estimate on their social security statement of $1,200 per month at full retirement age, the safe bet is to assume they receive only about $700/month ($1200 estimate less the maximum reduction of $498).
- Folks with a shorter career at SMFR (or those who had substantial amounts of non-government wages in addition to SMFR from self-employment or part time work) may receive a reduction that is smaller, but financial advisors always say it is safe to aim low.
- In 2021, the maximum reduction for the WEP is $498 per month