SOCIAL SECURITY

Calculating your retirement income is a paramount concern, driven by the desire for a comfortable retirement. The intricacies of Social Security are at the forefront of your financial considerations, and rightfully so.

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With each paycheck, a portion is diligently allocated to the Social Security trust. Understanding the implications of this contribution is vital for informed retirement planning. Your financial well-being is directly linked to the awareness of how these payments will shape your future.

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The latest data from the Social Security Administration (SSA) reveals that a significant three-fourths of state and local employees are currently under the umbrella of Social Security coverage. This statistical insight underscores the importance of comprehending the system, as it opens avenues for applying for payments. These payments can prove instrumental in managing expenses and mitigating the potential income gap that may arise post-retirement.

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Early Retirement, Social Security?

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Contemplating an early retirement at 62 is an option, albeit with the caveat of reduced payments. Full benefits become accessible at 65, 66, or 67, contingent on your birthdate.

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Despite these retirement age options, the landscape of Social Security is undergoing challenges. The significant exodus of baby boomers into retirement poses a potential threat, creating a scenario where the Social Security trust may face a diminishing pool of funds for future retirees. If corrective measures aren't implemented to address the trust's deficit, it could translate into diminished Social Security paychecks for the upcoming generation of retirees.

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In the context of retirement planning, the synergy of Social Security with personal savings, Thrift Savings Plan (TSP), and pension forms the bedrock, particularly for those enrolled in the Federal Employees Retirement System. While this combination provides a foundation for a secure retirement, we recognize the importance of exploring additional options and financial products to enhance your overall retirement portfolio. Our analysis delves into your Social Security contributions, examining the optimal timing for withdrawals. LET US ASSIST YOU in charting a strategic course for your financial future.

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Social Security and FERS

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For retired federal workers enrolled in the Federal Employees Retirement System (FERS), Social Security stands as a pivotal income source.

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The scope of FERS encompasses federal employees hired on or after January 1, 1984, or individuals who made the transition from the Civil Service Retirement System (CSRS) to FERS. Under FERS, every enrolled federal employee contributes to Social Security through taxes and, in turn, accrues Social Security benefits. This dynamic integration underscores the integral role that Social Security plays in the financial landscape of those affiliated with FERS.

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Social Security and CSRS

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Opting to remain within the confines of the Civil Service Retirement System (CSRS) has distinct implications: exemption from Social Security coverage, the absence of Social Security tax obligations, and the non-accrual of Social Security benefits. Despite this exclusion, individuals under the CSRS umbrella find solace in being included in the Medicare program. Under this coverage, they fulfill their Medicare tax obligations based on their federal earnings. This nuanced distinction highlights the unique financial landscape experienced by those who have chosen to stay within the CSRS framework.

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Government Pension Offset

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The benefits accorded to your spouse, widow, or widower through Social Security might encounter a two-thirds offset if you possess a government pension without Social Security tax contributions. It's important to note that while this offset impacts the benefits derived from a spouse's employment, your own Social Security benefits remain unaffected.

The inception of the Government Pension Offset rectified a previous scenario where the Social Security Administration (SSA) had to disburse full benefits to a spouse, even if that spouse earned a separate monthly Social Security retirement benefit. This provision aligns workers without Social Security tax contributions more closely with their counterparts in the private sector, who adhere to Social Security tax obligations.

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Several provisions exist to safeguard certain circumstances where your spouse's benefits won't undergo reduction. One such exception applies if your spouse is receiving a government pension not tied to their earnings. Further details on these exceptions can be explored in the SSA's fact sheet on the Government Pension Offset. For a more personalized understanding of your Social Security benefits and these nuances, feel free to reach out to one of our benefits specialists who can provide comprehensive assistance.

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Windfall Elimination Provision 

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Certain federal employees may qualify for pensions rooted in earnings not subject to Social Security coverage. If your employment history involves a role where Social Security taxes were not deducted, the Windfall Elimination Provision (WEP) comes into play, impacting the computation of your Social Security income or disability benefits. In essence, any pension stemming from such employment has the potential to diminish your Social Security benefits.

The fundamental purpose of your Social Security benefits is to serve as a partial replacement for your pre-retirement income. Consequently, if you're already receiving a pension from your job and have accrued enough work history to qualify for Social Security retirement or disability benefits, the WEP steps in to rectify what might be perceived as a dual benefit scenario. The formula is adjusted to yield a reduced Social Security benefit, eliminating the advantage of receiving both pensions concurrently.

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WEP considerations may be relevant if you turned 62 as of 1985, became disabled after 1985, or initially qualified for a monthly federal pension based on work without Social Security tax contributions after 1985, even if you are still actively employed. Various provisions exist for WEP qualification, and we are here to guide you through these intricacies and explore alternative options tailored to your unique situation.