Posted on Thursday, 12th April 2012 by

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The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit.

For example, this provision affects Social Security benefits when any part of a person’s federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes are withheld under the Federal Employees’ Retirement System (FERS) will not reduce your Social Security benefit amounts.

If you are a CSRS employee and accrued 40 quarters (10 years) of employment where social security payments were withheld you are eligible for Social Security benefits. Your Primary Insurance Amount (PIA), which is simply your Social Security payment, will be impacted. The Windfall Elimination Provision (WEP) can significantly reduce your Social Security payout.

Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation. They separate your average earnings into three amounts and multiply the amounts using three factors. For example, for a worker who turns 62 in 2012, the first $767 of average monthly earnings is multiplied by 90 percent; the next $3,857 by 32 percent; and the remainder by 15 percent. The sum of the three amounts equals the total monthly payment amount.

The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989. For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent.

There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes.  If you have between 21 and 30 years of substantial earnings the percentage of benefit increases from 45% with 21 years to the full 90 percent with 30 years of earnings.

Use one of the WEP Calculators that we have posted on our site to estimate the impact on your benefit.

The 1940 census

The National Archives and Records Administration will be publishing the 1940 census report online April 2 at   The digital images will be accessible free of charge through 2013 at NARA facilities nationwide through their public access computers as well as on personal computers via the internet.  This is the first time the agency has released census reports online and you can now discover more about your family and what they were up to at the end of the great depression.  The forms will initially be searchable by district only. The NARA anticipates having name searches available in the future.

The questions they asked covered a wide range of subjects from what was your income in 1935 and 1939 to employment status,  place of birth,  occupation, education, Languages spoken in the home, veteran status, and 5% of all surveyed responded to 15 supplemental questions.  For anyone interested in their ancestry these reports will provide a wealth of information about their families at this critical time in our history.

Higher Yields

With CDs now at historically low yields – many earning as little as .25% and lower – where does one go to actually earn a decent return on their cash?  Savers, retirees, and investors alike are realizing negative returns on cash accounts when you factor in inflation and the devalued dollar.

Kiplinger’s February retirement report suggests considering mature dividend paying stocks such as AT&T, Johnson & Johnson, Procter & Gamble and other stocks that have yields ranging from 3 to 6 percent. They say, “Dividend payers usually decline less than other companies when the stock market tanks.”

Many today are considering mature dividend paying stocks to at least earn something on a portion of what they had in their money market, savings, and certificate of deposit accounts. There are 51 companies that are considered Dividend Aristocrats.  These stocks have increased dividends every year for the past 25 years.  The good thing about dividend stocks, according to Kiplinger’s, “is that they decline less than other companies when the market tanks.”

That being said, stock prices fluctuate in good and bad times so proceed with caution. A good example is Frontier Communications (FTR). This communications company is not considered a dividend aristocrat however it has been one of the highest dividend payout stocks on the market for several years, currently paying 9% with a market price of around $4 a share.  This company bought former Verizon territories and they provide high speed internet and communications services in rural areas. There stock price has dropped from a high of $8.90 in 2009 to a low of around $4 today and they cut their dividend by half a few months ago, although it is still paying a 9% yield.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

Last 5 posts by Dennis Damp


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