How to Optimize Social Security as a Texas Teacher

The Problem

Most of the public school districts in Texas have TRS as their pension but do not pay into Social Security. So these teachers will get no benefit from Social Security or a significantly reduced one if they haven't paid into it before or after being a teacher.

For many teachers, this seems unfair. Congress has attempted to address this, but no new legislation has been passed in almost 20 years. However, there have been more attempts in recent years. But don't hold up hope for Congress to save you!

The Laws

If you are a Texas teacher, how do you optimize your Social security? Two laws reduce Social Security if you are eligible to receive some benefit. The Windfall Elimination Provision or WEP says that if you have enough quarters of qualified work and are entitled to receive Social Security, you would get it reduced.

The idea is that you should not receive the full benefit of Social Security since you were already getting a pension (where you did not pay into Social Security) when you worked for the school district. Instead, you should receive the full Social Security benefit only if you have 40 quarters or ten years of work. But Congress has not decided to change this law so far, most likely from pressure from interest groups that want to keep it the same and not have teachers pay into Social Security. It seems like an easy fix for the new generation of teachers. Changing the laws for existing teachers might be more challenging. It would essentially mean paying the payroll tax for already underpaid teachers. This would mean less take-home pay for teachers.

The second law is the Government Pension Offset or GPO. This law makes a little more sense than the WEP. If you have not paid into Social Security and get your deceased spouse's benefit, it will be significantly reduced. So the GPO could impoverish the former teacher, especially if their spouse was the primary breadwinner. In addition, the spousal benefits reduction is much higher than the WEP at two-thirds. So, for example, if your monthly pension is $2500 and two-thirds of that is $1650, this will be deducted from your Social Security benefits. So if you were eligible to get a $1,500 spousal benefit from Social Security, it would eliminate your Social Security benefits. This is because 2/3 of your Social Security benefit is more than what you would get.

The Solution

Given these two laws, and it looks like no changes will happen soon, what should you do as a teacher to optimize Social Security if you are entitled to receive something.

1. Get enough quarters of work to get entitled to Social Security. You could work before, during, and after being a teacher. Try to get a summer job where you pay into Social Security. If the job does not pay well, you will not get a significant amount of money, but it will be some money. Remember that Social Security is better than most pensions, including TRS, since it is indexed for inflation. Social Security keeps up with the cost of living as things get more expensive, such as gas and groceries. TRS or many pensions do not have COLA or cost of living clauses.

2. Use some free calculators on the Social Security Administration website. You can calculate the benefit you will get in retirement by going to the SSA website. With this information, you can better plan. See if you can get enough quarters of work covered. Be sure to log into the Social security website and make sure it has an accurate earnings history. I often see that clients have never logged into the Social Security website and have not checked out one of the most significant parts of their retirement.

3. Consider retiring from the district and taking on a second career. This way, you can start to pay into Social Security. Then if it lasts over 30 years, there will be no WEP. You could either retire early and take TRS or take it later after a second career. If you paid Social Security taxes on 30 years of substantial earnings, WEP does not apply to you. Thirty years seems like a long time, but you could have teaching as a second career or have worked part-time, perhaps in retail, while being a teacher.

4. Talk to a financial planner to get advice on how to optimize Social Security. Financial planners can estimate your Social security benefit and how not being covered will reduce your monthly benefits. Then, they can work with your financial planner on strategies to optimize your Social Security benefits.
 
I hope these tips help you navigate Social Security as a Texas teacher. Be sure to contact me below if I can be of service.

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on to avoid federal tax penalties. Individuals are encouraged to seek advice from their tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.