There is a fairly old provision of Social Security that most people don’t know about. If you are a person who has worked a job that does not pay into Social Security and well as jobs that do pay into Social Security, this is one you need to know about. Why? It WILL cost you if you fall into the category.
In the State of Colorado, the biggest group are contracted workers like school teachers and college faculty. This group works 9 months out of the year and pays into the State Pension plan. They also work the remaining 3 months at a “summer” job or some such that pays into Social Security. This class does this for years and figures that, come retirement, they will be in good shape because they will collect their pension and their Social Security. Yes and No. This is where the Windfall Elimination Provision comes into effect. Oh, and by the way, your HR department probably know nothing about this. You can find this document at https://www.ssa.gov/pubs/EN-05-10045.pdf
Read this document CAREFULLY and COMPLETELY. What is says that if you have not worked a job that paid into Social Security for 30 years or more AND you have not made SUBSTANTIAL EARNINGS for those years, you will be subject to the Windfall Elimination Provision of Social Security. For 2024, Substantial Earnings are $31,275. Do you know any average school teacher is going to pull down this much money for their 3 month summer job? Not very likely for most people.
What does the Windfall Elimination Provision look like in real numbers? This is my personal situation. I am a PERA recipient and I also receive Social Security. I started collecting Social Security in March, 2024. After Medicare is deducted, I received $1626.00 per month. In May, I began receiving my PERA pension of $364 per month. That is when the Windfall Elimination Provision kicked in. Because of this provision, I have $189 deducted from my Social Security payment each month. After income tax withholding on my PERA, I net $89.72 per month. My total monthly budget from Social Security, after Medicare, and PERA is $1715.12. I had calculated retirement income based on Social Security and PERA of $2164. That is a monthly difference of $448.88 per month. Just remember to deduct your Medicare payment from your Social Security when you are planning your retirement. My disposable income for the month is $339.73 for food, clothing, fuel, and any incidentals. Yes, that is a very tight budget and I DO have to watch every penny. This situation will only become more dire over time.