Potentially Devastating Social Security Offsets

McCormack, Joseph P.; Perdue, Grady
November 2009
Journal of Financial Planning;Nov2009, Vol. 22 Issue 11, p62
Academic Journal
• This study examines the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) within the Social Security system. These two rarely discussed provisions of the law are very important considerations for financial planners because they probably have caused some financial planners clients to seriously overestimate the Social Security benefit to which they will be entitled. • The people potentially affected by these benefit offsets are the workers who receive a pension from employment in which they did not pay Social Security taxes, or the workers, their spouses, and widows/widowers who had employment both in a job that paid Social Security taxes and employment in a job that did not. • Research has shown that the WEP affects the benefits of almost 3 percent of all retired workers and that almost three-fourths of those affected were subject to the maximum primary insurance amount (PIA) reduction. In a new report, the Social Security Advisory Board has begun to voice criticisms of the Social Security annual statement sent to all workers. In the report's executive summary, one major observation is that the language is often difficult to understand or apply to one's personal situation. The executive summary specifically cites the language used to describe the GPO and the WER A problem arises for both planner and client from the fact that many couples will receive similar annual statements but will receive substantially different Social Security benefits because of the impact of the GPO or the combined impact of the GPO and WEP.


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