Retirement Realities
Retired couple on beach
Are public sector pensions broken?

Social Security benefits don't apply

Some public employees, like those in Fickel's 50,000-member organization, aren't covered by Social Security and are affected by the federal Windfall Elimination Provision, or WEP, which reduces any Social Security benefit they earn elsewhere.

The WEP affects federal employees hired before 1983, when all new hires were required to pay into Social Security. It also affects the 25 percent of state and local government employees and retirees nationwide, including many teachers, firefighters and police, who are in non-Social Security positions. These workers -- even if they have paid into Social Security while working elsewhere -- take a significant benefit haircut. Their spouses are also affected under the sister provision, Government Pension Offset, or GPO, which reduces spousal benefits. A worker isn't affected by WEP -- and their spouse isn't hit by the GPO -- if they have worked under Social Security for a full 30 years.

What public employees can do

The pension fight promises to escalate, with almost every government entity facing rising deficits and pinched budgets. What should you do if you are a public employee or the spouse of a public employee caught up in this mess?

Edward A. Zurndorfer, a financial adviser in Silver Spring, Md., who specializes in offering retirement advice to federal and other public employees, makes the following suggestions.

  1. Understand your current plan. Don't take co-workers' interpretations as gospel. Get help from your union attorney or someone else who is qualified to explain how your government employee pension is likely to affect you and mesh with other plans for which you may qualify, including Social Security.
  2. Don't quit early. Workers who quit well before 65 or 66 are the most vulnerable to cuts and low or no cost-of-living adjustments. If you can, keep working until your full retirement age.
  3. Qualify for Social Security. You can do this by working under it for at least 10 years or 40 quarters. WEP and GPO will reduce how much Social Security you are entitled to receive, but they won't eliminate your benefit entirely. If you are close to having worked a full 120 quarters under Social Security, make that your goal.
  4. Build your savings. If you have access to a tax-advantaged savings plan such as a 457 or 403(b), put in at least 10 percent of your paycheck, whether or not it is matched by your employer. There is no such thing as having too much savings.
  5. Get involved. Learn what changes are in the wind and -- realistically -- what kind of impact they could have on your situation.

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