July 26, 2009

Windfall Elimination Repeal - The Congressional PR Two Step

The Social Security Administration's (SSA) Windfall Elimination Provision (WEP) has been on people's mind, and with it affecting more and more people (including educators) every year, it is an important topic to cover. Back in February, I wrote a post titled - "Will You Miss Out on Social Security Benefits? - Your Retirement and the Windfall Elimination Provision." It was essentially a basic summary of what happens when you retire and try to collect SSA benefits from your account or your spouse's account when you have not been contributing to Social Security.

Today's post will still focus on the WEP, but it deals more with proposed reform and our "lovely" elected members of Congress. It is something I found very interesting.

I have heard from some of my financial clients and educators that they are "excited" that the "new" Congress has bills in the House and Senate to remove the WEP and Government Pension Offset (GPO) (note - they are essentially the same thing and for this article any reference to WEP is also a reference to GPO). Specifically, there is the House bill, HR 235 (H.R.235) - Social Security Fairness Act of 2009, and the Senate bill, S 484 (S.484) - Social Security Fairness Act of 2009. This sounds great until you dig a little deeper.

It seems that every single year/term there are new bills to remove the WEP. I found one website, The Coalition to Preserve Retirement Security (CPRS), that had news items going back on this subject till 2004 about bills that mirror this current legislation. Take a look for yourself - Windfall Elimination Provision News and Reports. Since this has been an ongoing issue, both the Democrats (who have been in control of Congress since 2007) and the Republicans (who controlled Congress from 1995-2006) are not without blame for not confronting this issue.

What really strikes me as odd is that every year bills are introduced with tremendous support, but they never get out of committee or reach the floor for a vote in either the House or Senate. For instance, the 2009 House version has 301 sponsors, and for those that do not know, there are 435 Representatives. You would think that this would be an easy bill to pass since a majority have already sponsored it, but it just sits in the House Ways & Means Committee.

On the Senate side, the numbers are not quite as large, but 29 Senators have sponsored it (out of 100). I have not done the research, but I wonder how many of the 29 are up for reelection this next cycle? In any event, the bill also just sits in committee - Senate Finance - with no hope of being brought up for a committee or floor vote.

For those wondering, the 2007 versions of the bills had the following:

  • Senate - S 206 - Social Security Fairness Act of 2007 - 39 sponsors including former Senator and now President Barack Obama - view sponsors
  • House - HR 82 - Social Security Fairness Act of 2007 - 353 sponsors including former Representative and now President Obama's Chief of Staff Rahm Emanuel - view sponsors
Is this just a ruse? Let's look at it. All of these Representatives and Senators can come home and tell their constituents about how they care and how they have put forward a bill to help the citizens, but each one knows it has no chance to be voted on or lead to true reform. What makes it worse is that during these lean economic times, this is when most citizens are vulnerable to believing them.

I looked at a number of articles about reforming WEP, and the prospects are not good. In a time of soaring deficits, a Social Security system that WILL run deficits in 30 years without reform (see SSA Trustee Annual Report), and a population that is already being beat down with health care reform and cap and trade (both proposals would lead to higher taxes and/or expenses), it is tough to try to find a way to pass these WEP reform bills that could cost up to $80 billion over 10 years.

There are solutions, but each of them cost money, and right now no one wants to spend the "political capital" to reform it. Previous reports I have read said various reform proposals could cost from $5 billion to $80 billion over 10 years. Most on the low end simply alter the formula to help the very lowest incomes and those on the high end repeal the WEP altogether. The problem with just reforming the bottom is that the top will also beg and plead for reform.

Years ago, before I started this blog, I had heard story after story from my wife and her colleagues about how the WEP was costing educators hundreds of dollars every month in reduced benefits. I heard about various legal ways that educators around the country tried to circumvent the system to take them outside the WEP formulas, and it all seemed a bit "over-the-top" to me. Having researched it, written about it, received e-mails asking/talking about it, and knowing my own wife will confront it, it is obviously something that will continue to be an issue.

The reality is that WEP reform opens up the subject of Social Security reform (greatly needed), but rather than deal with both issues, we just push it back further and further. They could both be solved, but no one wants to be the bad guy that alters SSA benefits or full retirement age.

I really wish I could point to something positive on the subject, but it looks as if the current system will remain in place - despite what our elected members of Congress say and propose.

On a side note, I was asked how I decide to focus on any particular subject. Truthfully, I respond to e-mails privately, but if the subject is of a broad scope I try to use it to help others that may have similar questions/concerns. Also, I can view what searches people have used to find the blog, and the number of searches for windfall elimination provision or something similar have far exceeded other subjects. What has been a surprise to me is that since I posted the previous WEP article it has been the second most viewed article over that time period (retirement safety being the first). The bottom line being if you have questions or suggestions, please send them to me. I am always looking for a good subject to discuss and hopefully help others. E-mail me your thoughts at rschultz@rollinsfinancial.com.


Anonymous said...

Can the WEP repeal bill be linked with another,perhaps more urgent, SS problem that the President wants to end,so it gets more attention? (I read that this may happen, but I don't recall what it would be linked with.)

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

A WEP repeal could conceivably be part of any bill that that deals with any issue. It could also become part of a reform of SSA, but the history and current environment do not look to be very promising.

The President, for all of his promises, words, and good intentions, may wish to leave this part out of any reform. There are several reasons, but the main issue is money and the "limited" population that it effects.

I hope any reform does include a change in WEP, but until SSA is really broken down and changed to extend its life, I am not very optimistic.

Unknown said...

Since these two provisions affect nearly one third of the members of the National Education Association, in addition to many other workers, and since this is the Social Security issue that the House Ways and Means Committee hears most about from constituents, it will be hard for Congress to avoid addressing WEP and GPO next spring with Social Security's other problems.
Americans must investigate "Social Security Fairness" and insist that we stop penalizing those who teach our young!

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thanks for your comments Bonnie.

I completely agree that a large population of educators (and thereby NEA members) are affected by the provisions. I also have little doubt that our members of Congress are regularly contacted by their constituents. Unfortunately, the history of those in Congress (in both the House and Senate and both parties) is of inaction. They simply do not move at all on a WEP/GPO repeal even with overwhelming member support.

As I have said before, SSA reform is imperative, and there are some very large decisions to be made. Any SSA reform should also include a repeal or at the very least a drastic change in the WEP/GPO. Every change will cost tax dollars, but if you are revamping the system anyway, it should be considered.

Thanks again for your comments.

Anonymous said...

I am currently awaiting review in front of a judge in Newark NJ to evaluate the application of the WEP to my situation.I am not in the education field, so I am not sure if you can answer my query, but I will try.
I worked to earn my 40 quarters in the USA, in private jobs. I then worked in Italy, for a private company, where I recently became eligible for a pension after 20 years of social security contributions paid to the Italian government. I have been told that the totalization agreement between Italy/USA does not apply to me (i.e. exempting me from the WEP), because I did not need to "borrow" USA work credits to be eligible for the Italian pension. (basically, I should have worked one month less there to avoid the WEP). However, I was exempted from paying double taxes/social security under the totalization agreement. You are well informed about the WEP. Does your information indicate that I should be exempt? I believe the social security people are liberally interpreting the provision, and incorrectly including my Italian pension (as well as many others in my situation), probably because it is convenient for them. I have to convince the judge that I am right. How does it look to you?
Thank you

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thanks for your question and comments Elena.

Generally speaking, the Social Security workers do not interpret the law liberally especially on a local level. They try to assess the information and make rulings based on the code. I definitely do not believe that anyone person or the SSA as a whole makes a decision based on being convenient. I think they are quite literally trying to uphold the code as it is written.

While I know that foreign pensions are subject to the WEP, I am not sure nor do I have experience in how they are handled. I believe they are the same, but there could be items that I am not aware.

I am unsure whether or not you had meetings with SSA prior to going to court. From what I have seen and heard, the SSA does try to give a thorough explanation of their decision which you could ask to be reviewed further.

Since you are already at the judicial level, what I believe will have no effect on the outcome. I would like to get more information, and review the ruling by the SSA and judge to fully understand the situation and learn from it.

Whatever the ruling, I wish you only the best.

Thanks again for your comments, and I am sorry I could not be of more service.

Anonymous said...

Although legislation to repeal these provisions have been introduced year after year without success, I think there is hope and a ground swell of interest in finally getting something done in 2010.
I am part of a grassroots organization started by educators in the San Francisco bay area Social Security Fairness and we have a web site as well. www.ssfairness.com
Our organization and site exist for one purpose and one purpose only, the elimination of WEP and GPO. We have worked hard to give people not only the latest information about these issues but also to equip them to get involved in the battle. We can get this done! I hope you will check us out write your letters and join the battle.

Anonymous said...

This should be a moral, not a money issue. The whole world views the USA as a greedy, dollar-chasing country. In view of the virtual theft of cash from thousands of pensioners through the WEP, this view of America is right. I am ashamed of my US citizenship and am happy to spend my retirement in a far less grasping place.

Anonymous said...

Hey Robby, First time I have ever posted on anyone's blog. I feel like the movie Julie Julia... All kidding aside, my wife and I are school teachers in Texas. Both of us have enough quarters to draw social security however we both will have pensions from Texas and I have heard as you mentioned that there are ways around the WEP, can you enlighten me? One of my friends started the texas pension, left to work in California, where SS was taken out of the check again, retired from California and is currently collecting full ss benefits? Can you explain this?

Anonymous said...

WEP is thievery. People who paid into Social Security for decades, and then work for the federal government and pay separately into PER for a short period of time, are penalized by having their Social Security benefits cut. There is no "double dipping" taking place and the two systems are unrelated. I have seen families thrown into poverty because of this. WEP must be repealed now. If you paid into the system, you should get what's coming to you. Fair is fair!

Anonymous said...

I am a victim of the WEP rule, which does not apply in all fifty states, but it does in mine, California. I kee hearing about "until age 70<" but does this mean the WEP theft stops at age 70 or not?

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

While I believe that "thievery" is a bit strong, I understand your frustration. The end result is that SSA is trying to say that since you did not contribute while working and contributed to an alternate plan, you should receive reduced benefits. The maximum amount you can be reduced is $380.50 a month ($4,566 annual) for 2010.

Anonymous said...


(Contrary to his promise to repeal WEP/GPO, Obama plans to screw retirees in 2011.)

Read it yourself: U.S. Government Budget for Fiscal Year 2011


"The Administration proposes to increase enforcement of the existing Social Security Windfall Elimination Provision/Government Pension Offsets. This proposal would improve enforcement of current law provisions, resulting in improved payment accuracy for the Old-Age and Survivor’s Program. This proposal wouldbetter enforce current law provisions until they can be considered as part of Social Security reform. It would reduce the overpayments that occur because the Social Security Administration (SSA) does not find out that the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO) should have been applied until after the beneficiary has received benefits for a number of year' - Office of Management and Budget

Meanwhile, Obama's latest vacation to Hawaii cost taxpayers $1,474,200.

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

While I thank you for your comment and for reading the blog, I must say that the manner in which you commented does not show respect for our President.

The President is not the end all be all, and he does not have ultimate authority. The Congress must pass the act, and they have never acted upon it. The President cannot simply change the law. As President though, he must enforce the law, and as such, he must put in place people that will enforce it.

I understand your argument and the disgust you must feel. I would also say that a more "diplomatic" and reserved approach would be more well received than stating that "he is a liar!" You know the old saying... "You catch more flies with honey..."


Anonymous said...

Robby, I truly appreciate your positions. However, I disagree when you told the person who called Obama a "liar" regarding the WEP repeal that he was not showing the proper respect. Respect doesn't heat your home or put food on your table. And just how much respect has been shown for the tens of thousands of suffering senior citizens? You suggested that he should be more diplomatic and that you can "catch more flies with honey." Yes, that is often true. But, in this case, the "honey" approach hasn't worked since 1983 and is not likely to produce any change in the future. Now may be the time to get aggressive in our tone and comments. Actually, I do believe President Obama has not told the truth and that our congressional representatives have not been truly sincere about changing this unfair law. Strong language may be exactly what is needed to get their attention.

Michael said...

Is this not a post for educators? The last post by Anonymous regarding Obama's lack of "respect" for "suffering senior citizens" does not speak to Robbie's legitimate point that the WEP repeal efforts die in Congress. Who is disrespecting us? I think that the last two Anonymous posters are pointing thier fingers at the wrong branch of governent.

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thanks for your comment (and defense) Michael. Interestingly enough, in the Senate a bill to repeal the WEP has already been submitted by Republican Senator Kay Bailey Hutchison of Texas on January 25, 2011... I wonder when the House will put forward a similar measure...

Thanks again,

Anonymous said...

Thank you for posting this helpful information. Missouri educators and state employees struggle with WEP as well- In WEP/GPO states, are the retirement benefits of state senators and representatives also affected by this?

Anonymous said...

Michael, please pull your head out of the sand. Both parties are to blame for WEP; i.e., the Reagan and subsequent administrations. Obama is to blame when he fails to keep his promises as evidenced by his recent budget proposals, and is our past and present congress.

Yes, it's okay if you want to defend your pro-Obama voting record but it's more important to work for the interests of educators and retirees harmed by WEP & GPO. This may or may not be a forum strictly for educators but the issues here goes beyond mere occupational class.

Robbie's points are indeed legitimate but they are not actually in conflict Anonymous' views. Please re-read those posts for enhanced clarity.

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

To answer your question simply, "any" employee that contributes to a retirement instead of social security will be affected by WEP. If state senators and representatives do not contribute to Social Security (and do not have 30+ years paid in to Social Security), then they will be affected by the WEP on the pension/retirement they collect.


Anonymous said...

I am sympathetic to educators and want them to know that there are other citizens impacted by the WEP rules. We have struggled to fund a small pension for our community mental health employees and are only now realizing those that work here for only part of their career are jeopardizing their retirement. How much do we have to give to help the mentally ill?

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thanks for your comment.

Martin said...

A new bill was introduced on April 1st, 2011---HR 1332. Does anyone have a copy of it? If so, please e-mail me at: mmatso@cmers.com

Anonymous said...

It is estimated that the United States is going to spend over 4 Trillion Dollars on the wars in Iraq and Afghanistan - and that doesn't include the cost of rebuilding those rat-hole countries. Meanwhile, the government says it can't afford to pay Earned Social Security Benefits to seniors effected by WEP & GPO because it would cost 62 Billion Dollars over a ten year period. What is wrong with this country?

Gary said...

I am retired from the U.S. Postal service. What I would really like to know is what does the word "Windfall" mean. I worked 17 years under the social security system and 27 years on CSRS. When I retired I lost about half of my social security benefit, which would have been 643.00 a month had I never worked again. But because I worked under CSRS, I receive 371.00 before medicare deduction.
I am really tired of being laughed at by people who have a much better pension than I, but still receive full SSA benefits.
Because the Government misused SSA, the poor will always have to pay. My cousin is a millionaire, but still receives max SSA. My "Windfall is 28000.00 a year.
I am also a veteran and served one year in Vietnam, June 67 to June 68. I feel used and abused by my Government.
Than you,

Anonymous said...

As I only immigrated to this country in the middle of my life, I have worked in my original home country (Switzerland) for the first part of my life. Therefore I receive a small pension (or Swiss social security payment) which I earned before I ever was obligated to pay into the US Social security system, as this was before I ever set foot into the USA.
After moving to Oregon and later on becoming a US citizen, I only worked here and never worked abroad again since.
As I turned 66 in December and applied for Social security payments, I was informed, that half of the payments I receive from Switzerland would be taken out of my US payments, because of the Windfall Elimination Provision.
Everybody I talked to so far agreed that this makes absolutely no sense at all, but that it is ‘the law’. I have talked to several lawyers (on the phone) so far, who all are ‘specialized’ to deal with social security issues. Nobody knew that such a provision even existed and I was referred from one to another. The last one actually said he read about it for about an hour, but did not think I had a chance to appeal the decision, but I should try anyway.
I am curious if this is really how this law is supposed to be applied to earnings that had nothing to do with any obligation towards the US yet. I feel as if I am being punished for not living here since birth, as if I had paid the same amount I paid during the first part of my life into social security in the US, nobody would consider to take this part away from me.
I am at a loss to understand the ‘fairness’ of this law or how to find out if I have a chance to fight this decision.
I would be grateful for any information concerning any chances in attempting to repeal this decision of the Social Security administration concerning my case.
Thank you very much

Jana Bouc said...

I've been searching for an answer to my question below for more than a year and your blog is the first place I'm seeing any intelligent answers on the WEP situation!

I work for an educational research and development non profit that has many Department of Education contracts but is not a government agency. My employer contributes 15% of our salaries to our 403b defined contribution plan.

We are all worried that somehow SS will apply WEP to our benefits even though we have no pension and our 403b plans can be invested in annuities, equities, bonds, etc. with no guaranteed or defined payout like a pension. Do you know whether SS has a way of claiming it's a pension and docking our SS?

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...


Thanks for your question and for reading the blog. Unfortunately, I am the bearer of bad news... SSA will take in to account your 403(b) when calculating your WEP reduction.

Your colleagues and you do not contribute to SSA, and your employer contributes money to a 403(b) on your behalf... that is the definition of the WEP.

Saying all of that, your employer seems to be pretty generous in contributing 15% of your salary. I would suggest to your colleagues and you that you contribute to your own 403(b) as well. Since SSA is 6.2%, I would contribute at least that much if not 10%.

I know this is not what you want to hear, but in the private sector, employees generally must make contributions to receive a match and this is on top of the SSA. For instance, I must contribute 8% of my salary to receive 4% from my employer, so with the SSA, I am contributing 14.2%...

I hope this helps, and I hope that your colleagues and you start your retirement funds soon!

All the best,

atm said...

I would like all who read this blog to realize that police and firefighters are also affected by this, many who still work 2nd jobs to support their family and are still paying into SS but can't collect it. Why can't we at least get out what we put in??? At the same time city governments are laying us off , trying to take away our pensions etc. how quickly memories of what they thought of us 10 years ago are forgotten.

Anonymous said...

My situation is similar to that of many other bloggers. I worked in Canada for 24 years before moving to USA. I wonder if we can raise some money and hire a lobbying firm in Washington in order to repeal WEP. Is this a feasible approach?

My email is sergeimichailov@yahoo.com

Anonymous said...

I omitted on a calculation of WEP an amount in the pension block to
compare w/ actual...in other words supposed my earnings record represented a woman that had gone
back into the workforce or even started late in life....you are
talking a difference of 300$ just
because I was Civil Service and the fictitious woman was not...the calculation should be the same across the board.......

Anonymous said...

resident Obama promised to work to repeal the Windfall Elimination Provision and Government Pension Offset acts that reduces Earned Social Security benefits for many seniors by up to 60%. If he fails to keep this promise before the 2012 election, millions of Americans are going to turn away from him, and he'll be looking for a new job come 2013. - Gerald Branson, Detroit, MI

Unknown said...

I worked from 1981 to 1994 for a research branch of a college in a state that did not deduct social security. I elected to continue my TIAA-CREF retirement.
In 1988 I was divorced and my ex claimed 50% of our total TIAA-CREF funds. Since she had not worked from 1975 to 1982, she took a hunk of my fund.
I was released before ADA went into effect, but my hearing disability was not considered by SSA until 2009, when I had finally accumulated the minimum requisite of quarters.
I have TIAA-CREF annuities from several accounts, and the process of determining how much is considered in windfall elimination is not clear.
Morever, I have not formally retired--I was teaching part-time and simply elected not to return, so I saved an educational institution the expense of a photocopy of a gold watch.
Robby, any suggestions?

Anonymous said...

Robby, you stated: "To answer your question simply, 'any' employee that contributes to a retirement instead of social security will be affected by WEP.

But according to the Social Security Administration, not "any" employee is affected but only those employees of governement:

"Some Federal employees and employees of State or local government agencies may be eligible for pensions that are based on earnings not covered by Social Security.

"If you didn't pay Social Security taxes on your government earnings and you are eligible for Social Security benefits, the formula used to figure your benefit amount may be modified, giving you a lower Social Security benefit."


Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

While I see your point, "typically" it is only employees of a government position that do not pay in to SSA. In most instances where employees do not pay in to SSA, they are contract employees and instead pay self employment taxes... which is SSA.

The SSA has changed their website, but what I said before still holds true. I would suggest meeting with the SSA to clarify any specific situations though.

All the best,

Anonymous said...

Romney states he will not repeal WEP & GPO.

Obama says he wants to repeal WEP & GPO but, in actuality does nothing.

1. The Fraternal Order of Police strongly supports H.R. 1332/S. 2010, the “Social Security Fairness
Act,” which would repeal both the “Windfall Elimination Provision” (WEP) and the “Government
Pension Offset” (GPO) in current law. The WEP penalizes certain public employees who also worked in the private sector and paid into the Social Security system, through a substantial reduction in their benefits, because they also collect a government pension. The GPO provision in current law causes the reduction or elimination of the spouse’s or widow(er)’s benefit from Social Security by two-thirds of the monthly amount received from the government pension. Are you a cosponsor of this legislation? If elected, will your Administration actively support its enactment and will you sign the bill if it is passed by Congress?

OBAMA: Throughout my career, I have stood with law enforcement. And I will never forget that the members of the Secret Service, including its uniformed division, put their lives on the line to protect my family and me. Even in tough economic times, when tough budget choices are needed, I have insisted on protecting proven efforts to support law enforcement and combat crime. My support for the men and women who put their lives on the line will never waiver.
The Windfall Elimination Provision and Government Pension Offset raise important questions of fairness. A broader set of reforms are needed to strengthen Social Security for future generations. I support eliminating these two provisions within a comprehensive effort to reform Social Security to ensure that state and local employees are treated fairly.
NOTE: President Obama DID NOT take one action to repeal WEP/GPO while in office. In other words, he lied.

ROMNEY: Providing for the elderly is a bedrock commitment of our society, and both Social Security and government employee pension programs must be able to meet that obligation for generations to come. Unfortunately, today’s Social Security program is unsustainable over the long-term and defined benefit pensions are placing significant strain on government budgets. I am strongly committed to preserving Social Security for today’s seniors, who have planned their retirement around the program’s benefits. But I do not believe that it would be fiscally responsible to pursue policies that would increase Social Security liabilities.
NOTE: In other words, under Romney, NO REPEAL of WEP/GPO is ever going to happen.

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thanks for the info. I'm not trying to push anyone one way or the other, but I - personally - would much rather know where someone stands on the issue than just be given lip service...

Anonymous said...

I'm a dual status UK/USA citizen & qualify for pensions from both governments. I paid into the UK system for 40 years and the US system for 12 years. Recently my US social security was lowered because of the UK pension under WEP rules despite the fact there is a treaty between both countries & I paid taxes in both countries. Any advice would be welcomed.

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thanks for the comment...

While I am certainly not an expert on any US/UK treaties (especially pertaining to pension benefits), it seems that you have been caught by the same thing that is frequently happening. The US DOES look at other pensions because you had retirement benefits from work that was not covered by SSA - even though that work was covered by a foreign government.

One of the issues that is usually overlooked is that the SSA tries to pay out more percentage-wise on lower incomes, so to offset that "increased benefit" the WEP was devised - faulty as it is.

I wish I could say that there was something that you could do, but I unfortunately don't think so. I would have a meeting with the SSA and discuss it with them. They truly are helpful and want to make sure that you get the maximum benefits that you can.

Sorry that I don't have better news.

Anonymous said...

I worked for State of Alaska, which paid into Social Security until either voted to op out or someway dropped paying into Social Security, was that a legal move..??

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Yes, states and public employers were able to opt out of Social Security many, many years ago. You can go to the following links to read various items on the subject:

Congressional Report linked from the National Association of State Retirement Administrators

Alaska Retirement Guide

Thanks for your question.


Anonymous said...

Since SSA is supposed to be a retirement investment, can I claim the difference between what I am receiving, and what I should be receiving, as a retirement investment loss on my income tax?

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Thank you for your post, but unfortunately, no, this is not a deductible "loss" for any purposes (including taxes). A very interesting and inventive try, but I am sorry - no.

Actually, taking a "retirement investment loss" is very, very difficult to do. I will not get in to the specifics here because they are complicated tax matters that should be discussed with your CPA or tax preparer. Remember, just because you sold something at a loss in your IRA does not mean that you can take a loss on your tax return.

Thanks again for your question and for reading the blog.


Anonymous said...

I've taught in MO for 10 years. Since I just turned 60, I'm able to retire and collect MO teacher retirement benefits. About $800 a month.

I stayed home for years raising my family, and worked part-time, sub-teaching, etc. I've got enough quarters to collect about $700 a month Soc. Security. But, as you know, the WEP is probably going to reduce my Soc. Sec. by 50%. I guess I've not really understood it until now.

It makes me mad and I almost wish I hadn't returned to teaching late in life. I'll always wonder if I should have just done something else for these 10 years.

I've been wondering if I should just get a refund of my MO teachers account and transfer it into an IRA. Then, since I wouldn't be collecting ANY from them, could I collect the full amount from my Soc. Security? Or is it EVER a good idea to get a refund on a teacher's account? Would that just be a stupid thing to do?

Or will I forever be penalized by this little teacher's retirement? Since I paid into the teacher retirement instead of Soc. Security for 10 years, are they going to say I had a choice and therefore my Soc. Security check will be forever reduced because of it? (I'm probably going to be working part-time in jobs that I'll have to pay into social security anyway. So, it's not very motivating to think that ALL Social Security Wages are going to be penalized forever!)

I'm trying to decide if I can EVEN think of retiring. I had hoped to collect my spousal benefits or on my own record. But, now I'm finding out that it doesn't matter which one I collect on--anything is penalized because of this tiny little teacher retirement.

I'm tired of being in the rat race of today's public education. I'm ready to call it quits. But, now I feel really deflated and wonder how I'll make it if something ever happens to my husband. Thank God he is okay, working at a good job, and we will be okay. But, I've been reading so much this last month about this WEP and GPO, that it makes me want to shout right here in MO "Don't become a teacher in the state of MO late in your life or you will be penalized!"

As you can tell, I'm feeling kinda sick about the whole scenario!

Robert (Robby) E. Schultz III, CFP®, ChFC®, CPWA® said...

Dear Frustrated in MO...

I understand your frustration, and honestly, this is something that the school system should have warned you about as well. It is not just a problem with Social Security but the system that doesn't explain the long term effects to the educators.

The "extra take home pay" sounds great... but it should have been saved in a separate retirement account... that is what the system should have said 10 years ago.

I would not recommend taking a lump sum distribution. Social Security will still see the benefit you would have received and reduce your benefit.

Yes, your benefit is subject to the WEP and your spousal benefits are subject to the GPO. The best advice is to make an appointment at the local Social Security office where you can sit down with someone. The representatives are truly there to help, and I have nothing but admiration for the job they do. They really do try to help you maximize your benefit.

I know you feel like you are in a tough situation, but before getting frustrated to the point on inaction, try to find out all of the information possible for your husband and you.

Once you know everything you possibly can, then you can map out what direction to go and action to take.

I hope this helps and good luck! Thanks for your comment and for reading.

All the best,

Anonymous said...

Thank you for your kind response. I did go to the Soc. Sec. office just last Friday. The man who talked to me ran a printout of what my Soc. Sec. amounts would be. I also gave him a copy of what my estimated teacher retirement benefit would be if I take retirement now. He did some figuring, then went into the back office to consult with someone else. When he returned, he confirmed the WEP would reduce my Soc. Sec. He said they figure what 50% of my teacher retirement is going to be. Then they deduct that amount from my Soc. Sec. amount. (I had already talked to Soc. Sec. on the phone, and that person had figured it would be 40%. This last gentleman said it MIGHT be 40%, but that they had figured the worst case scenario for me. I asked him how the formula was figured, and he didn't know. He pretty much said that was determined by the "higher ups" that decide that!.)

I DO remember our district giving out some material about the WEP a time or two. But, honestly, I've not dwelled on it. I don't think most teachers worry about that. They feel called into teaching, and leave that in God's hands. I still need to do that, too.

My daughter, who is finishing up her 5th year of teaching has been listening to me lately. She has a new baby and wants to quit. But, financially, she does not know if she can! I'm reminding her that if she ever wants to have another job in MO where she pays into Soc. Sec., that her teacher retirement will affect it.

My husband and I have tried to be efficient with our money through the years. Raising 3 kids and putting them through college, weddings, and life in general, we got behind on bills like a lot of people. So that's when I went back into teaching. I had hoped to help them get through college.

They did, and guess what degree they all chose? You guessed it! They all have teaching degrees. My husband is a university professor. They are natural-born teachers. I'm so proud of them, but so torn because I can't help but see the changes that the teaching field has gone through in the last 30 years. The professionalism of the teacher's role has been taken away. And I'm concerned about their financial needs, too. My son is a middle school teacher, my youngest daughter is a 3rd grade teacher, and my oldest daughter just quit this year after teaching preschool for about 9 years. She is expecting her 4th baby (our 5th wonderful grandchild!) I live in a world of teachers. This topic could affect every one of us!

So this whole WEP thing is making me really upset. I really keep wondering WHAT CAN I DO to help change things? I keep reading that it might be repealed. But, I agree with you, the chances don't look good right now. I have written emails to my
congressman, etc. I have signed petitions.

But, you know I think that only GOD is going to be able to cause things to change. With prayer, anything is possible. We need to encourage people to ask God to help the WEP and GPO to get repealed. He can cause that to happen.

As for me, I will have to make some major decisions in the next month. I'm thankful to God for my health, happiness, and his provisions for me and my family.

Thank you for trying to help teachers.

Randy Sutherland said...

I worked for 31 years in Canada and paid into CPP. I now receive Canada Pension Plan of $469 US a month (varies by month based on Exchange rate). SS applies a WEP tax of $380 a month against that CPP leaving me with $89 a month pension. This is not fair after all the years I paid into this pension. What can I do to repeal this?

Anonymous said...

So, let's just cheat American citizens out of much-needed social security money. However, let's fund relocating, housing, feeding, educating, etc., immigrants--mostly illegals, who are eating up all our financial resources, without paying anything into the program. Yep, that's the answer!