Figuring out how much you should receive during retirement can sometimes be hard to understand. Between pensions and Social Security, it can be difficult to calculate what your retirement pay will be. This is especially true for Baby Boomers who worked for both the private and public sectors during their careers. The Motley Fool reports that under the Windfall Elimination Provision, retirees may not be eligible for all of the Social Security benefits they think might be coming to them.
Before 1983, people who worked both in the public sector and the private sector could collect both Social Security and an employer-sponsored pension.
“… Benefits were calculated as though the employee had been a low-wage worker throughout his or her career. In order to make sure that lower-paid employees are given an ample monthly payment upon retiring, Social Security is calculated in favor of low wage earners. So not only were public employees able to retire with a pension, but any additional work in which employees paid into Social Security was calculated with maximum returns in mind,†says the Motley Fool.
Unfortunately, the government considers that “double dipping,†so this practice will no longer be allowed.
Rather than just cut off the double dipping, the government has decided to adjust the Social Security pay based on earnings. This means that you can collect your pension, but you will not be able to collect all of the Social Security that you would have been able to collect in the past. The Social Security payment is reduced based on the amount of your pension and how much you will collect each month.
Keep in mind that the Social Security payout will never be more than one half of your pension payout. In order to collect the full amount you will need to be sure to have worked a full 30 years and be of retirement age. The amount of Social Security paid out is reduced by percentages if you don’t meet these qualifications. You will not really know how this will affect you until you retire, but knowing about it now will allow you to plan and prevent surprises later on.