Q. I retired on an early-out offer on Dec. 31, 2011, with 29.5 years of service at age 52. As a self-employed individual, I am paying both the employer and employee share (slightly reduced) to Social Security. Assuming another 15 years of work, that’s a tremendous amount to be paying into a retirement system with little or no benefit. I also have quarters from pre-CSRS employment. What, if any, Social Security benefit can I receive down the road?
A. At age 62, you’ll be eligible for a Social Security benefit. Whether or not you apply for it at that time or wait until later is up to you. When you are retired and apply for that benefit, it will be based on your total years of Social Security-covered employment. However, because you are receiving an annuity from CSRS, a retirement system where you didn’t pay Social Security taxes, you’ll be affected by the windfall elimination provision. The WEP will reduce but not eliminate that Social Security benefit.
If you apply for that Social Security benefit before you retire, you’ll be subject to the Social Security earnings test. Your Social Security benefit would be reduced by $1 for every $2 you earned above the limit, which is $14,640 in 2012. In the year you reach your full Social Security retirement age, the limit changes and your benefit is reduced by $1 for every $3 over the limit ($38,880 in 2012). There isn’t any limit after you reach your full retirement age. Note: The WEP will still apply if you have fewer than 30 years of substantial earnings under Social Security.