Ask Terry Questions Social Security Benefits reduced by Govt pension

Social Security Benefits reduced by Govt pension

By Terry Savage on September 21, 2019 | Wild Card

I’m a retired employee of the City Colleges of Chicago and currently receive the State University Retirement Pension. I now work as a Realtor. This year I’m having a super year netting about 50k in income. Because I’m a sole proprietor, I need to pay both sides of social security and medicare. I worked part time over the years and have earned more than my 40 quarters. I have contributed to social security and medicare for about 20 years. The federal government said that because I receive a state pension, that I am NOT entitled to my full social security because they consider it double dipping. I am entitled to only about 50% of my social security benefits. Currently they say I’m entitle to about $300 at age 67, I am currently 59.

My question…. is there a way I can avoid paying the social security and medicare tax since I receive a pension and not entitled to my full benefits. I don’t think my payments will go up much in the next 8 years. It seems unfair that they take 12.4% for this. And because I receive a pension, that already puts me in the 25% tax bracket. Is there anything I can do?

Terry Says

You are caught in a horrible situation.  It is based on the WEP  — windfall elimination provision — that was part of the 1983 Social Security reform. The best article explaining it is here at the AARP website.

And I can’t think of a way around paying into the SS system — except for earning cash!  But do note, that the more covered quarters you get from SS, the lower the deduction for the WEP.  So keep working, despite the huge penalty you have to pay.



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