Ask Larry: Will Rolling My Pension Into An IRA Avoid Social Security’s WEP Reductions?

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Today’s Social Security column addresses questions about the effect of rolling a public pension over into an IRA, survivor’s benefits and the earnings test and how military credits can be applied to benefit amounts. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.

See more Ask Larry answers here.

Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.


Will Rolling My Pension Into An IRA Avoid Social Security’s WEP Reductions?

Hi Larry, I turn 65 this year and thinking of taking my Social Security retirement benefit at the year end. I also have money in my state’s Teacher Retirement System. The amount is relatively low but SSA says they will reduce my benefit somewhat.

Would it be better to pull all my funds in Teacher Retirement and rollover to an IRA? And would I then not have my Social Security benefit reduced? I’m at a loss on the best procedure. Thanks, Rick

Hi Rick, Assuming that you already meet the requirements to collect a monthly Teacher’s Retirement System (TRS) pension, then even if you choose to rollover you TRS funds to an IRA, your Social Security retirement benefit rate could still be subject to a reduction due to the Windfall Elimination Provision (WEP).

IRA rollovers that occur after a person meets the minimum eligibility requirements for a non-Social Security covered pension are treated as lump sum distributions for WEP purposes. In such cases, Social Security prorates the lump sum into a monthly amount and applies WEP based on the prorated monthly rate.

You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Both are programmed to handle cases involving the WEP provision. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


Can I Start My Social Security Widow’s Benefit At 62?

Hi Larry, I still work full time but would also like to start collecting my widow’s benefit. I’ll be 62 soon and I’m not sure if I’d be able to collect it now while working. Thanks, Amy

Hi Amy, You already meet the minimum age requirement for widow’s benefits, which is age 60, but whether or not you could actually be paid any benefits depends on your widow’s rate and the amount of your earnings. If you claim benefits this year, Social Security would need to withhold $1 of your benefits for every $2 that you earn in excess of $21,240.

Your best filing strategy could be either filing for reduced widow’s benefits early and then switching to your own record at 70, or filing for reduced retirement benefits on your own record early and then filing for unreduced widow’s benefits at full retirement age (FRA). Normally, you would want to start out drawing the lower benefit first and then switch to the higher record when it reaches its highest potential rate. Best, Larry


Do I Get A Bonus For My Active Military Service?

Hi Larry, I was on active duty from 1958 to1960. But it’s not clear to me if I get the military benefit and if I do, whether I need to actively apply for it. Thanks, Evan

Hi Evan, Yes, but it’s not automatic. Social Security adds deemed military wages (DMW) to a person’s actual earnings for periods from 1957 through 2001 during which they were on active duty in the U.S. military. From 1968 on, DMWs are credited automatically by Social Security. But, for the years 1957 to 1967, veterans must normally submit proof of their active duty periods to get the DMW credits.

If you’re already drawing Social Security retirement benefits, you should have been asked about active military service when you applied for benefits. And if you submitted proof of your active duty (e.g. form DD-214), DMWs should have been considered when calculating your benefit rate. If you’re unsure whether or not you did, you should be able to call Social Security to find out. Social Security can access your records to see if DMWs were added when you applied for benefits. Best, Larry


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