What is the impact on my pension and/or social security if I go to work?

If you are receiving Maine Public Employees Retirement System (MainePERS) pension, going to work at a position not covered by MainePERS, there is no impact on your MainePERS pension.

If you are in receipt of Social Security retirement benefits, going to work may impact your Social Security retirement benefits.  The federal Social Security Administration has an “official age of retirement” based on your birth date.  If you receive Social Security retirement benefits prior to reaching your “official age of retirement” according to the Social Security Administration, your earnings can impact your Social Security retirement benefits.

The first step when deciding if you want to return to work, you need to ask the Social Security Administration your personal “official age of retirement.”  The Social Security Administration can provide you the amount you can earn before your Social Security retirement benefit is impacted.

Once you reach your “official age of retirement,” there is NO offset to your Social Security retirement benefit due to earnings.

If you return to public service covered by MainePERS, the state law has changed.  There was a state law that limited state retirees and educators’ wages and benefits if they returned to employment covered by MainePERS.   Those limitations have been removed.  The one limit is employment time after retirement will not be added to your MainePERS calculation for pension purposes.

https://www.mainepers.org/Retired%20Members/Retired_Return_to_Work.htm

https://www.investopedia.com/articles/personal-finance/120715/how-does-my-parttime-job-affect-social-security.asp

https://www.investopedia.com/ask/answers/020215/can-i-collect-social-security-if-i-still-have-job.asp

How do I calculate when it is most beneficial to take Social Security?

There is NO best age for everyone to take Social Security.  The most financially beneficial age to draw Social Security benefits is based on individual and family circumstances. 

Most individuals (if they have worked under Social Security for 40 quarters with substantial earnings) can start receiving Social Security benefits at age 62.  However, your full benefit is dependent on your year of birth.  Your full retirement age can be found on https://www.ssa.gov/benefits/retirement/learn.html#h3.

Drawing Social Security benefits prior to reaching your full retirement age will result in a reduction of benefits, however you will be drawing the benefit for a longer period of time.  If you delay drawing Social Security to after your full retirement age, the benefit level will be larger however you will be drawing the benefit for less years.

Individuals can meet with their local Social Security Office to obtain specific information on their situation.

Individuals need to evaluate the following issues:

  • Current cash needs
  • Current health
  • Family longevity
  • Plan to work or not in retirement
  • Future financial needs
  • Future financial obligations

In addition to the impact on the amount of Social Security benefits, most individuals are required to enroll in Medicare at age 65.  If you are receiving Social Security benefit, under federal law, your Medicare Part B premium cannot increase more than the Social Security Cost of Living Adjustment.  However, if you are not in receipt of Social Security Benefits, there is no protection for the potential increase in Medicare Part B premium.

https://www.investopedia.com/retirement/when-take-social-security-complete-guide/

How am I going to be impacted by the GPO?

MainePERS retirees are impacted by the GPO due to the fact that the State of Maine does not participate in the federal Social Security System.

The GPO impacts spouses, widowers, and widowers who receive monthly MainePERS pensions they have earned.  If the person is a beneficiary, the GPO does not apply to them.

For survivors who are MainePERS recipients based on their earnings (not a spouse) 2/3 of your MainePERS pension amount will be reduced from your Social Security survivor’s benefit.  Social Security survivor’s benefits are ½ of the Social Security worker’s benefit.

EXAMPLE 1:

  • Spouse receives $1,500 in Social Security benefit
  • Your MainePERS pension is $1,000 per month
  • Spouse passes away
    • Social Security survivor’s benefit would be $750 per month
    • Minus 2/3 of MainePERS pension ($1,000 x .67) = $660

                                    SS Survivors Benefit = $90

EXAMPLE 2:

  • Spouse receives $1,500 in Social Security benefit
  • Your MainePERS pension is $1,750 per month
  • Spouse passes away
    • Social Security benefit would be $750 per month
    • Minus 2/3 of MainePERS pension ($1,750 x .67) = $1,155

                                    SS Survivors Benefit = $0

If the MainePERS pension was “earned” by your spouse, the GPO does not affect your Social Security benefit.

http://www.ssa.gov/planners/retire/gpo.html

https://www.ssa.gov/pubs/EN-05-10007.pdf

https://www.ssa.gov/benefits/retirement/planner/gpo-calc.html

How am I going to be impacted by the WEP?

When determining the impact of the WEP, the number of years a MainePERS retiree participated in the federal Social Security System with substantial earnings impacts the percentage formula in the first tier of the calculation.

When a MainePERS retiree has between 20 and 30 years of participation in the federal Social Security System, the percentage in the first tier of the calculation is as follows:

SS Years2021222324252627282930
Percentage0.40.450.50.550.60.650.70.750.80.850.9
$826$330.40$371.70$413$454.30$495.60$536.90$578.20$619.50$660.80$702.10$743.40

If a MainePERS retiree has 30 + years substantial participation in the federal Social Security System, there is no WEP.

https://www.ssa.gov/pubs/EN-05-10045.pdf

https://www.ssa.gov/benefits/retirement/planner/wep.html

What is the Social Security Windfall Elimination Provision (WEP)?

In 1983, the Maine Legislature and Administration choose not to participate in the federal Social Security System for Public Service Employees (Legislators, Judges, Troopers, State Employees, Educators and some Municipal Employees) and choose to participate in the Maine Public Service Retirement System (MainePERS).  This decision impacts the method the federal Social Security System uses to determine the Social Security retirement benefits for MainePERS retirees.

Federal Social Security benefits are calculated based on the average monthly earnings over thirty-five years (AIME).  Once the AIME is determined, a three tiered formula is used to calculate the monthly Social Security retirement benefit.  The first $826 of the AIME provides 90% of the AIME as part of the Social Security benefit; the AIME amount between $827 and $4,980 provides 32% of the AIME as part of the Social Security benefit; and the AIME over $4,980 provides 15% of the Social Security benefit.

SOCIAL SECURITY CALCULATION WITHOUT THE WINDFALL PROVISION

AIMEPercentageSS Benefit Amount
Up to $82690%$  743.40 Maximum
$827 to $4,98032%$1,593.60 Maximum
$4,980 and up15%$   747.00 Maximum
Total $3,083.00

The WINDFALL ELIMINATION PROVISION (WEP) changes the formula for determining the Social Security benefit with the intent to take into account the years someone was not paying Social Security because of another public pension versus no Social Security due to no employment.  For MainePERS retirees, the formula changes the percentage in the first tier of the formula from 90% to 40%.  The remaining two tiers are unchanged.

SOCIAL SECURITY CALCULATION WITH WINDFALL ELIMINATION PROVISION

AIMEPercentageSS Benefit Amount
Up to $82640%$  330.40 Maximum
$827 to $4,98032%    $1,593.60 Maximum
$4,980 and up15% $   747.00 Maximum
Total $2,670.40

https://www.ssa.gov/pubs/EN-05-10045.pdf

https://www.ssa.gov/benefits/retirement/planner/wep.html