What I Learned at Say Yes

I didn’t always work in education and contribute to MainePERS. I used to have another job and I contributed to Social Security. Will that affect my pension benefit?

No. You will still receive your pension, as long as you are vested. However, your Social Security payment will likely be lower due to the fact that you are also receiving money from a pension. This may not be true for certain PLDs, but is the case for all enrolled in the Teacher Retirement Plan. Your Social Security benefit will also be decreased if you take a private sector job and contribute to Social Security after you retire from your public sector job. The reduction is known as the Windfall Elimination Provision (WEP) which again, reduces the Social Security benefits of workers who also have pension benefits from employment not covered by Social Security. You are only eligible to receive Social Security benefits after you’ve worked for 10 or more years (40 quarters {4 quarters in a year}) in a Social Security eligible job. Social Security benefits received by those who also receive a pension are impacted on a sliding scale, depending on how many years you’ve contributed to Social Security. The chart below highlights the reduction in benefits due to the Windfall Elimination based on years of Social Security Coverage:

Years of Social Security Coverage and Maximum Monthly Reduction due to Windfall Elimination (for those 62 years old in 2015)

20 or less 21 22 23 24 25 26 27 28 29 30 $413 $371.70 $330.40 $289.10 $247.80 $206.50 $165.20 $123.90 $82.60 $41.30 $0

*Important: The maximum amount may be overstated. The WEP reduction is limited to one-half of your pension from non-covered employment. Source: Social Security Administration, How the Windfall Elimination Provision Can Affect Your Social Security Benefit, Washington, DC

Saving Outside Your Pension

Your public pension may not be enough to keep you financially stable when you retire. Or if you were hoping to finally take that trip you’ve always wanted, you may want more income to ensure your Golden Years are truly golden. However you choose to invest any other money, time may be more important than money—and here’s why.

Total Invested

$62,385

Value at Age 65

Investor A saved $1,000 per year for 10 years beginning at age 30, totalling $10,000.

$10,000 $38,993

Investor B saved $1,000 per year for 20 years beginning at age 45, totalling $20,000.

$20,000

Based on an average rate of return of 6% with compounding interest, the hypothetical scenario puts investor A out on top.

In the example above, the additional years of compounding interest greatly increased Investor A’s savings. Investor B now has to play catch up—saving a lot more with far fewer years to do so before retirement.

Small Steps to Retirement Savings

Looking for ways to save more? Think a few extra dollars in savings really doesn’t make a difference? You’re wrong. Consider this scenario:

Current Age: 45

Monthly Savings: $30

Yearly Savings: $360

Value at Retirement (age 65): $11,904

The retirement value is based on a 5% annual rate of return.

To determine retirement savings based on your age, use the retirement calculator found in the Maine Educator Online at www.maineea.org.