January 13, 2019
Every week, Simply Money’s Nathan Bachrach and Amy Wagner are answering your financial questions in The Cincinnati Enquirer. If you, a friend, or someone in your family has a money issue or problem, please feel free to send those questions to firstname.lastname@example.org
Trisha in Western Hills: My big goal for 2019 is to really take charge of my finances. I’m 44 and have a little bit of credit card debt, a mortgage, and some savings. Any suggestions for how to get started?
Answer: We’re thrilled to hear you’re making your money a top priority in the New Year! This is a fantastic time to wipe the slate clean and begin creating new financial habits. Our complete list of suggestions is a long one, but here are a few with which you can get started.
Here’s The Simply Money Point: Getting a handle on your personal finances starts with taking small steps – and the fact you’re making this a goal is a great first step. Good luck!
Tom in Loveland: I’m 66, retired, and currently receiving Social Security benefits. But I just found out I have a small pension coming my way. Is this going to affect my Social Security in any way?
Answer: We’re assuming you’re concerned about exceeding Social Security’s annual “earnings limit” and having $1 withheld for every $2 you earn above that limit. The good news is that this earnings limit is determined by “earned” income only (i.e., anything that would be included on a W-2 tax form) – and a pension from a private employer does not count as earned income since it’s technically retirement income. If this is your scenario, you can receive your full pension and Social Security benefit without penalty. (Note: depending on your “combined income” once you factor in the pension, your Social Security benefit could potentially be subject to taxes.)
On the other hand, if your pension is from a public employer, you’ll probably run into something called WEP, or the “Windfall Elimination Provision.” This will reduce your Social Security benefit, and the impact can vary since the formula is pretty complex. (The “Government Pension Offset,” or GPO, applies to spousal or survivor Social Security benefits). The government started putting these safeguards in place in 1983 to prevent “double dipping:” getting a public pension and Social Security benefits.
The Simply Money Point is that a private pension has no effect on Social Security benefits, but a public pension generally does. If you have questions about WEP or GPO, visit the Social Security website or seek out the guidance of a credentialed financial advisor.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and his team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email email@example.com.