TRS Guide Page 8 Benefit and Social Securityrdeluccio2017-10-02T14:15:07-05:00
HOW DOES MY BENEFIT WORK WITH SOCIAL SECURITY?
Step right up and let’s learn about a terrible aspect of the U.S. Tax Code. There is a special provision designed to punish people who work for state and local governments (which have their own retirement systems), AND work in other sectors covered by the Social Security system. This is the Windfall Elimination Provision (the WEP). The WEP is designed to prevent someone from earning both a covered social security benefit and an uncovered pension benefit (that’s TRS).
Here is how it works. Social Security looks at your career covered earnings, and checks if you have substantial earnings.
What are substantial earnings?
It changes each year, but for 2017 it is $23,625
Your teaching salary does not count
If you make $40,000 teaching in TRS you earn $0 Social Security credit
If you don’t have substantial earnings for at least 20 years, they take up to 50% of your EARNED social security benefit. That’s right. Even though you pay into the system, and they taxed you at the full tax rate your benefits are reduced.
If you do have substantial earnings; they still reduce your benefit but not as much.
Here is what that can look like:
This person worked and earned two benefits. But they take half of her social security benefit, up to $423/month to keep her from enjoying a “Windfall”.
Here is where this is really important. If you are leaving TRS after earning a pension and moving to the social security system this can reduce your retirement income significantly.
See, each system is designed for you to only work within the system. If you swap back and forth, moonlight, or just change systems midcareer, you can harm your retirement.
TL:DR - Before you jump systems ,make sure you know the costs.