Social Security

Dear Liz: You recently mentioned the windfall elimination provision that affects pensions from jobs that don’t pay into Social Security. I’m wondering what those jobs are. Are they just part of the gig economy, or is there some other category of jobs that don’t pay into Social Security?

Answer: Gig economy jobs are supposed to pay into Social Security, just like the vast majority of other occupations. People with gig jobs are often considered to be self-employed, so instead of paying just 6.2% of their gross wages into Social Security like most workers, they also pay the employer’s 6.2%, for a total of 12.4% of their earnings.

Some state and local governments have their own pension systems that don’t require workers to pay into Social Security. People who get pensions from those systems and who also qualify for Social Security benefits from other jobs can be affected by the windfall elimination provision, which can reduce their Social Security benefit. They also can be affected by the government pension offset, which can reduce or even eliminate spousal and survivor benefits from Social Security. Here’s an example:

Dear Liz: I am 59, retired, and receive a pension of approximately $150,000 a year. My husband receives a small pension, about $1,000 a month, and Social Security disability due to a diagnosis of Stage 4 lung cancer. I am the sole financial support of my 88-year-old destitute mother, who requires care that costs approximately $5,000 a month. I retired earlier than anticipated to care for my ailing mother and husband.

Although I worked many years where I paid into Social Security, I knew I would receive only about half of my Social Security check due to the windfall elimination provision that affects pensions received from jobs that didn’t pay into Social Security. What I didn’t know is that when my husband passes, I will receive no survivor benefits from his 41-plus years of paying into the system.

Our entire retirement planning was based on his Social Security combined with my pension. He’s just a few months from passing, and I will not be receiving anything, which will immediately put me in an untenable financial position. How is it that after 30 years of marriage I will receive nothing because I have a pension? This just doesn’t seem right. Do I have any options?

Answer: Your situation shows why it’s so important to get sound advice about Social Security before retiring because many people don’t understand the basics of how benefits work.

Even if you didn’t have a pension, for example, your income would have dropped at your husband’s death. When one spouse dies, one of the couple’s two Social Security benefits goes away and the survivor gets the larger of the two checks the couple received.

Your pension is much, much larger than the maximum you could have received from Social Security in any case. If you can’t get by without your husband’s benefit, consider ways to reduce your expenses. Because your mother is destitute, she may be eligible for Medicaid, the government healthcare program for the poor. Unlike Medicare, Medicaid pays the costs of nursing home and other custodial care expenses. Contact your state Medicaid office for details.