<p>To help anyone out on this forum. I actually work for Social Security at one of the payment centers. If you have a general question let me know. I’d be glad to answer it or aim you in the right direction.</p>
<p>The teacher situation above is called Government Pension Offset. It only occurs to state and local pensions. The type that pay a % based on years of service. Most of those pensions never payed into SSA. So I think during Reagan’s era they decided that these people where quote “double dipping”. </p>
<p>But now! I’ve worked here about 8 yrs. Our retirement package is Social Security dependent. We pay into Social Security, Thrift Savings Plan (Government 401k they match the first 5% with 4%), and a pension of 1% of your best 3 years for each year of service, after 20 years you get 1.1% So somehow the combination of all three is suppose to be similar to the older plan. But we’re putting in exponentially more. I currently put about 12% into the TSP in addition Social Security and a smaller amount is taken out for the pension. So after all these deductions I’m probably putting close to 15-18% of my paycheck into retirement >.< before taxes.</p>
<p>So let’s go back to the OPs scenerio. If the wife hasn’t worked AT ALL and has never contributed to SS, she is entitled to 50% of her husband’s benefit.</p>
<p>BUT <em>I</em>, who contributed to SS am only entitled to 1/3 of the benefit I would be entitled to IF I had not been a teacher in one of those six states. I DID contribute. AND in addition, I am NOT eligible to EVER collect based on my husband’s earnings or benefit.</p>
<p>Did those 6 states make some kind of deal with the gov’t in order to be able to opt out of SS? What does the state get out of it?</p>
<p>In my state, pensions of public employees far exceed what you would get from Social Security for the same contributions. Maybe there are some corner cases where it is a disadvantage (not sure how Medicare factors in) but I think in most cases you come out way ahead being able to opt out of SS for a pension.</p>
<p>The school districts are the ones who benefitted…and sought to get this provision in place. The districts do not have to make THEIR contribution to SS thus saving THOUSANDS of dollars.</p>
<p>The state…I’m not sure there is a benefit for them at all.</p>
<p>The Government Pension Offset applies only to spousal and widow(er) benefits. For your own earnings, that is adjusted by the “Windfall Elimination Provision”:</p>
<p>What notrichenough quoted is what I was trying to say. In California there are teachers in both SS and non-SS school districts; I’m not sure how it works elsewhere. (And there used to be a lot of other non-SS jobs; I recall way back when a number of my friends who were State employees had to choose. I think my Dad who was a doctor was SS exempt up until some point as well.) </p>
<p>The difference between pensions in jobs where you pay into SS and teachers pensions is that teachers in non-SS districts don’t pay into SS - they pay into their pension instead, not in addition. So SS has to make some adjustment to avoid the “windfall” referred to in the quote notrichenough cited. I’m sure the formulas and conditions are imperfect, but the intended outcome is as “fair” as anything else in the SS system. As I pointed out in my first post, there are always going to be some folks who fail to see a specific return on their personal contributions - including my wife. It’s all “fair” on one level and it’s all “unfair” on another. I don’t see any way around that.</p>
<p>In CT…there is no choice. All public school teachers to NOT contribute to SS. </p>
<p>Really, I’m not complaining about my pension…but I do find it ODD that I can’t ever collect on my husband’s earnings because of my employment as a career teacher in this state…but someone who has NEVER contributed a nickel to SS or worked in any capacity beside public education here…can.</p>
<p>The issue of not being able to collect on your husband’s SS record, while also collecting a pension from your teaching, makes some sense to me, IF your teacher’s pension is considered a substitute for SS. As a lifetime worker, when I reach retirement age I will have the choice of collecting my own SS or a spouse’s benefit on my husband’s record, but not both. If I hadn’t worked, I would be able to collect the spouse’s benefit.</p>
<p>If you both are covered by SS, you get the higher of your or half your spouse’s benefit while your spouse is alive, and the higher of yours or your spouse’s if your spouse has died.</p>
<p>Sounds like for thumper, she doesn’t get a choice. There’s a good chance that the pension will be higher anyway, but if public pensions are being treated as SS replacements, it seems like she should get the choice.</p>
<p>The total SS + Medicare tax is 15%, as any self-employed person knows. The 2% temporary reduction lowers that to 13%. Of course, I don’t know many self-employed people who get a “paycheck” with deductions, but could be…</p>
<p>kluge–why wouldn’t a self-employed person get a paycheck with deductions? Don’t you pay yourself?</p>
<p>Even for W-2 workers-that 13% is still going toward their SS (and Medicare if you need to be specific). Their employer is paying that, it is still part of their overall compensation.</p>
<p>The employer pays half the medicare and social security taxes. It’s a tax on the employee’s wages whether you’re self- or otherwise employed. Worse, it’s a regressive tax, hitting those who make less than $107K/year harder than those who make more. The social security books would be instantly balanced if Congress simply removed the cap (as was done with medicare many years ago). Of course, that would make it more obvious that it’s a social welfare program, not a pension system.</p>
<p>dmd77-there is a cap on the payment end as well for those who have earned over $108K. The books would NOT be instantly balanced if they removed the cap because they would have to pay out MORE in the long run because the higher wage earners would qualify for higher payouts at retirement. Medicare is totally different. The “payout” for Medicare is exactly the same for everyone so imposing a cap doesn’t really make sense. And once again, I fail to see how it is a welfare program if each and every one of us that will receive social security when we retire have been paying into the system all along. Yes, I UNDERSTAND we are currently paying for the people on the plan and YES, the system should operate more like a funded pension plan, however, it is VASTLY different than a welfare program in where many people ON welfare have never paid a dime in taxes…</p>
<p>one of my kids is self employed. OTHERS pay him…and he gets 1099 statements at the end of the year if required. Otherwise he keeps track himself. He does NOT give himself a “paycheck with deductions”.</p>
<p>When tax time comes, he pays his self employment tax which includes taxes and SS amounts.</p>
<p>As someone who is self employed it kills me when I hear politicians float the idea of eliminating the cap on soc sec taxes. That would be a whopper of a tax increase on small businesses. If your marginal rate was currently 32% then it would jump to 47%. Ouch. I agree dmd77 that soc sec would be viewed as a welfare system in that situation because some would be paying far far more than they would ever receive. Currently top earners who pay the max soc sec pay more than they are expected to receive but it’s not as excessive as it would be with no cap.</p>
<p>There are also some characteristics of a welfare system as discovered by the OP’s question. The spouse never paid anything into SS but is entitled to benefits. It would be one thing if the wage earner of the spouse were deceased but the spouse gets the benefits just by being married. IMO that’s excessive. I have no problem with divorce decrees, death benefits etc but if there was only one payer then the max payout should be based on those earnings not 1.5x the payout.</p>
<p>While two people living together can live for less than two people living separately, they cannot live as cheaply as one person. Hence the spousal benefit of 1/2.</p>
<p>The original intent of SS was to prevent seniors from becoming destitute during retirement. SS pays between 25% and 50% of your pre-retirement income, to live on that amount for two people would be hard.</p>
<p>Sorry but I don’t think that’s accurate…if I understand SS benefits (and obviously I don’t since I started this thread), but I don’t there is an explicit link between the amount of benefits and the amount of pre-retirement income.</p>