SUNDAY, SEPTEMBER 19, 2010 PERSONAL FINANCE
Social Security benefits could be cut by pensions
BY SUSAN B. GARLAND Perhaps youhadtwo careers. Inone job, youwere
a government employeewhose earningswere exempt fromthe Social Securitypayroll tax.Youalso workedintheprivate sector,paying into the Social Security system.Whenyouretire, you’ll get your publicpension, butdon’t count ongetting your full Social Security benefit. Under federal law, any Social Security benefits
that youearnedwill be reducedif youwere a federal, state or local government employeewho earneda pensiononwages thatwerenot coveredby Social Security.Reductions also apply to Social Security spousal or survivor benefits that are claimedby governmentpensioners. DavidWalrath, a lobbyist for theCalifornia
RetiredTeachersAssociation, saysmany government employeesdon’t realize their Social Securitywill be squeezeduntil they apply. “People will get their annual statementwitha benefit number, but they’renot toldthey’re subject to an offset,”Walrathsays. The two rules that cover government employees
are the “windfall eliminationprovision” andthe “governmentpensionoffset.”TheWEPapplies to workers, andtheGPOapplies to government pensionerswho apply for Social Security spousal and survivor benefits. PatriciaKohlengothit by both.Kohlen, 61,paid
into apublicpensionsystemfor 28 yearswhenshe workedas anelementary school teacher. She also workedpart-time as a secretary andpaidSocial Security taxes throughthat job. Just beforeKohlenretiredwithadisability in
2003,her statement showedthat shewasdue$247 a monthinSocial Securitydisabilitypayments.The windfallprovisionreducedthepayments to$108 a month.Hermonthly teacher’spensionis$1,930. The big shock camewhenshe askedthe Social
SecurityAdministrationabout a survivor benefit afterherhusband,Kenneth,diedat age 62 in2006. Hewas getting a Social Security benefit of$1,406 a month,plus aprivatepensionof$4,000amonth. Widows andwidowers are typically eligible for a
Social Security survivor benefit that is 100percent of thedeceasedspouse’s benefit.Because of the formulausedto calculate theGPO,Kohlenwas told shewouldreceivenothingwhenshe became eligible for a survivor benefit at age 60. Kohlen,who lives inSanLuisObispo,Calif., says
that theyhadbeencounting onhis Social Security payments. “Hepaidinto Social Security for 49 years, andI feel, as awidow, that I amentitledto that money,” she says. “It’s just so terriblyunfair.” Lawmakers onCapitolHillhave introduced
legislationthatwouldendormodify the two provisions.Don’t expect anydecisionsoon.These issueswillprobably be addressedonlywhen Congress takesupthe larger issues of Social Security solvency anddeficit reduction. Inthemeantime, become familiarwiththe two
rules if youhave everworkedina job thatwasnot coveredby Social Security.Checkwithyour employer or former employer.Also, if your Social Security statement lists$0for years that youworked for a government agency, that’s anindicationyou may be subject to the two rules. Tounderstandhowthewindfall elimination
provisionworks, youneedto knowhowSocial Security calculates benefits. Social Security looks at averagemonthly earnings for the years apersonpaid into the system.Benefits are intendedto replace a percentage of aworker’spreretirement earnings. Lower-incomeworkers get a largerpercentage of their earnings replacedthosewithhigher incomes. Thewindfallprovisiondoesnot apply to
governmentpensionerswhopaidinto the Social Security systemfor 30years or longer.Nordoes it apply toworkerswho receive amilitarypensionor a
Resist the temptation to share toomuch online
BY CAMERONHUDDLESTON E
veryday,Facebook andother social-network userspublishpersonal informationthat could put themat riskwithout thinking twice. “An
awful lot ofpeople thinkwhenthey get online and communicatewiththeir friends that they are invincible,” saysAdamLevin, chairmanof Identity Theft 911.Aseemingly benignpost orpiece of informationcouldmake youa target of identity thieves andtraditional crooks.Here are five things youshouldavoidposting online. l Dateofbirth.Almost 60percent of social
networkerspost theirdate of birth, according to a survey by IdentityTheft 911.After all,most ofus like to bewishedahappy birthday.But resist theurge to post your complete birthdate—including the year —onyourFacebookprofile just to get a lot of messages onyour bigday.This is valuable informationfor identity thieves. I knowyou’re thinking only your friends seewhat youpost.But if someonedoes a searchfor yourname, thatperson will see your birthdate if it’s listedinyourprofile. l Child’sdateofbirth.Whenyoupost “Happy
Birthday tomy sweet Susie,who turns 5 today,” you’re giving identity thieves valuable information about your child.Whenit comes to your kids, resist theurge topost any informationabout them. l Travelplans. Surely you’ve seenFacebook
TIM GRAJEK FOR THE WASHINGTON POST
privatepension.Youcanuse aWEPcalculator to figure your benefit. Aswithall Social Security beneficiaries, your
WEP-reducedbenefit couldchange basedonyour agewhenyouclaimit.Here’s anexample:After 20 years of coveredearnings, youturn62 in2009.Your fullmonthly benefit at 66wouldbe$1,372,whichis reduced$372 by theWEP. If youclaimat 62, your benefitwouldbe reducedby 25percent, to$750.For eachyear youdelaypast 66, youget an8percent delayed-retirement credituntil youreach70. Agovernmentpensionerwho applies for a
spousal or survivor benefit basedonhis orher spouse’s Social Security earnings recordwill also face cuts.Typically, a spousal benefit is about 50 percent of ahusbandorwife’s benefit if that’smore thanthe spousewouldreceive basedonhiswork record.Asurvivor generally receives 100percent of a deceasedspouse’s benefit.But if the government pensionoffset applies, your Social Security spousal or survivor benefitwill be reducedby two-thirds of your governmentpension. —Kiplinger’sPersonal Finance
EZRA KLEIN On cutting deficits, a moment of truth for tea parties klein from G1
important, such asnational defense and Social Security. If you take away the revenue but don’t cut the spending, you get deficits. And the tea party hates deficits. So howwould Paul pay for the
tax cuts? Paul said he “couldn’t spell out a proposal to do that before theNovember 2 election.” And evenif he does spell out a proposal after the election, the one put forward by theGOP’s leadership doesn’t pay for itself. Will Paul vote against it—will he infact filibuster his ownparty— unless it adds $4 trillionin spending cuts over thenext decade? Paul isn’t alone.Christine
O’Donnell,who scored the upset inDelaware, rails against the deficit but sayswe “absolutely” have to extend theBush tax cuts. That’s $4 trillionstraight to the deficit’s hips.Howwill she pay for it? “Waste,” of course.Anyone who’s beenaroundWashington for evena day or two is familiar with that dodge. Thenthere’s theMamaGrizzly
herself. Sarah Palinmay be the patronsaint of the tea parties, but whenshe gets onFoxNews, she’s just another politician.Last month, FoxNews Sunday anchor ChrisWallace asked about the tensionbetweenextending the tax cuts for the rich and balancing the budget. “Republicans keep talking about being deficit hawks,” he said. “This is $678 billionyou arenot going to pay for.” Palinrefused to evengrant the premise. “No, this is going to result inthe largest tax increase inU.S. history.Again, it’s idiotic.My palmisn’t large enough to havewrittenallmy notes downonwhat this tax increase,what itwill result in.” In2006,WilliamNiskanen,
former chairmanof the libertarianCato Institute, published aninfluential paper titled “LimitingGovernment:The Failure of ‘Starve theBeast.’ ” In it, he critiqued the conservative idea that cutting taxeswould “starve” the government of revenue, and thus force it to reduce spending.The reality, he said,was quite the opposite. If politicians found they could cut taxeswithout paying for it, they would realize they could increase spendingwithout paying for it,
too. From1981 to 2005, tax cuts led tomore, rather thanless, spending. Inotherwords, they led to deficits. The other problemwith the
theory,Niskanensaid,was that it had letRepublicans off the hook. The idea that you could cut taxes without reducing spending had “substantially reduced the traditionalRepublicanconcern for fiscal responsibility—leading to a patternof tax cuts, increased spending, and increased deficits.” This, finally, is the choice that
faces the tea parties as they begin sending theirmembers to Washington.Democrats and Republicans have both embraced the idea that tax cuts don’tneed to be paid for—and it produced the “runaway deficit spending” that ignited the tea parties.But politicians didn’tmake those decisions because they loved deficits.Theymade those decisions because fiscal responsibility is hard and unpopular. Rightnow, the tea parties are
riding a bad economy, attaching themselves to outsider candidates of varying ideological stripes (Paul is a libertarianand O’Donnell is aChristian conservative), and enjoying a run of easy victories.But asObama could tell them, it’s easier to be popularwhencampaigning than while governing.Amid the poetry of campaigning, you canhave everything. Facedwith the prose of governing, you have tomake choices. ANewYorkTimes/CBS poll in
April asked tea partiers to prioritize betweencutting taxes and reducing the deficit:Cutting taxeswon, 49 to 42 percent.Lots of people, of course, think the budget canbe balanced based on other people’s sacrifices—and politicians aggressively encourage that belief.But at the end of the day, eliminating runaway deficitsmeans one— actually, a few—of the following things:Tax hikes,Medicare cuts, Social Security cuts andmilitary spending cuts.Which do the tea parties favor?Actually, letme rephrase:Whichwill they insist on? That’s the hard stuff.That’s
whenwe’ll seewhether the tea parties are really somethingnew inAmericanpolitics, or justmore of the sameweak brew.
kleine@washpost.com
posts like this: “We’re going to the beachnextweek. Can’twait.”About 18percent of socialnetworkusers post travel times, according to the IdentityTheft 911 survey.Guesswhat?You’ve just extendedan invitationforpeople to burglarize yourhome.Three meninNewHampshire burglarizedmore than18 homes by checkingFacebook statusupdates to see whenpeoplewouldn’t behome. l Address. If your address is onyourprofile and
youletpeople knowwhenyou’re going out of town . . .well, youknowwhere I’mgoingwiththis. lMother’smaidenname. Itmight seemlike
commonsensenot topost yourmother’smaiden name, but about 11percent of thepeoplewho respondedto the IdentityTheft 911 survey saidthey did. Identity thieveswillhit the jackpot if youreveal this bit of informationonline. Not only shouldyouavoidposting any of this
information, but youshouldalso fix yourFacebook settings to controlwho seeswhat onyourpage.Use differentpasswords for socialmedia sites thanyou use for financial sites, suchas your bank or credit cardsite.Be careful about clicking onlinks on Facebook or similar sites because they couldcontain viruses thatwill secretly track yourpasswords, accountnumbers andmore. —Kiplinger’sPersonal Finance
6
Go to
www.kiplinger.com for more analysis.
KLMNO
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BRENDAN SMIALOWSKI/GETTY IMAGES Arally by tea party and other activitsts for conservative principals was held in front of the Capitol last week, two months before midterms.
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