financial planner Stephen Zelcer
Fake Social Security

Fake Social Security (w/Video)

Read the video transcript:

Welcome back to the channel. So in a previous video, we spoke about the three legged stool. Somebody who retires at minimum retirement age (MRA), which for many FERS employees is age 57. So they could get their first pension. They could get their Thrift Savings Plan, but can they get the third leg, which is Social Security?

They cannot get their Social Security at the age of 57. The youngest Social Security kicks in is the age of 62. So that means from the age of 57 to the age of 62, you don’t have a three legged stool, you only have a two legged stool. How does that stand? So OPM felt bad, and they made it up to you by giving you the FERS annuity supplement.

They call it the FERS annuity supplement. I call it the Fake Social Security. Why do I call it the Fake Social Security? Well, because it looks like Social Security. It acts like Social Security. But it’s not coming from Social Security. It’s coming from OPM. When I say it looks and acts like Social Security, here’s what I mean.

It looks like Social Security in that the dollar amount that they send you is actually a percentage of your Social Security benefit. What percentage will they send you? So there’s a formula for that. The formula is, you take your years of FERS, divide it by the number 40, and then multiply that by your projected Social Security Benefit.

So, for example, if your projected Social Security Benefit will be $2,000 month, and you have, let’s say, 30 years of FERS Service, so 30 divided by 40 is three fourths or three quarters or 75%. 75% of $2,000 a month is $1,500 a month. $1,500 a month times 12 months a year, that’s $18,000 a year. So this person will receive the Fake Social Security amount of $18,000 a year from the age of 57 until the age of 62.
And there are no COLAs. No COLAs. Now when you are calculating that formula, your years of service divided by the number 40, you only include full years, not fractional years. So for example, if you had 33 and 3 quarters years, You would not use thirty three and three quarters years divided by forty. You would just use thirty three years divided by forty.

So you don’t round up, you just use the whatever full years that you have. Also, you only use actual service, not converted service. I’ll give you a couple examples of converted service. Unused sick leave. Does unused sick leave count towards your first pension? Sure, yes it does. But does it count towards the Fake Social Security?

No, it does not. Similar with military service. If anybody here has bought back their military time, does military service count towards your FERS pension? Yes, it does. Does it count towards the Fake Social Security? No, it does not. So when you are calculating your Fake Social Security, you’re going to use actual service, not converted service.

Full years, not partial years. So they’re going to give you a percentage of your Social Security benefit. So it looks like Social Security, and it also acts like Social Security. Just like by Social Security. If you’re making too much money, they will reduce your Social Security benefit. So too with the Fake Social Security.

If you’re making too much money, they will reduce your Fake Social Security benefits. It has the same earnings test as the real Social Security. So, for example, this year, you’re allowed to make $21,000, but any amount above $21,000, for every $2 in excess, you lose $1 of benefits. That’s the earnings test for the real Social Security, and that’s the same earnings test for the Fake Social Security.

For every $2 in excess, of $21,000, you lose $1 of Fake Social Security. And guess what? They’re going to require you to submit an earnings report every year. So anybody here who retires and is receiving the Fake Social Security, there will be an earnings report that you need to submit declaring what your income is, and this way they will determine whether you’re supposed to have a reduction in your Fake Social Security.

The earnings test applies for those who are collecting the Fake Social Security from MRA to the age of 62. There are some that collect the Fake Social Security before MRA. For example, if you’re in a special provisions retirement, law enforcement, firefighter, you could actually collect the Fake Social Security at the age of 50.

So you could collect it from the age of 50 until the age of 62. And here’s what’s interesting. If you are collecting the Fake Social Security from the age of 50 to the age of 62, there will be no earnings test from the age of 50 until the age of MRA, which is for most people, 57. No earnings test, but once you turn MRA, then there will be an earnings test from 57 to age of 62.

So the Fake Social Security looks like Social Security, acts like Social Security, but it’s not coming from Social Security. It’s coming from OPM. And the Fake Social Security, it stops at the age of 62, no matter what. Even if you’re not collecting the real Social Security. The Fake Social Security goes away.

And I know one of the questions that people ask me is, Stephen, I’m a little bit nervous to take the Fake Social Security, because, you know, if I take the real Social Security early, it causes a reduction in my Social Security benefit. If I take the Fake Social Security, Will that also cause a permanent reduction in my Social Security benefit?


And the answer is no, it will not. Why? Because it’s not real Social Security. It’s Fake Social Security. Fake Social Security will not cause a reduction in your real Social Security benefits. So, if you retire at MRA, you will have a three legged stool. Two real legs and one Fake leg. You’ll have your first pension, you’ll have your thrift savings plan, and then for the third leg, you won’t have the real Social Security, you’ll have the Fake Social Security.

I hope you enjoyed this video. If you did enjoy, please share, subscribe, like. I look forward to sharing with you more content.

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