Basic question about SSI

[Scanner]

If you are self-employed and you therefore pay double into SSI, do you get prorated a higher benefit than a comparable employed person?

For instance, let's say I make 50K/year and I am self-employed and JimOhio makes 50K/year and works for Dell, do we both get the same benefit for disability and retirement?

[noppenbd]

I think the short answer is yes, your benefit is the same whether your wages are from self-employment or as an employee.

[jIM_Ohio]

In your example I would assume same benefit. But that example is one of many to consider. I heard from a friend yesterday, who has a fire and police pension, that his SS benefits are reduced dollar for dollar based on the benefit from the pension.

His example to me was if his pension was 2k/month and SS benefit was $2500/month, he would only get $500 as his SS benefit.

[MonkeyMama]

Agreed.

Benefits are the same if you are self-employed vs. employed.

Also agreed, certain government pensions lower your SSI benefits.

[tripods68]

You are referring to Windfall Elimination Provision (WEP). The WEP primarily affects workers who spent most of the careers working for a government agency in a position not covered for social security, but who also worked at other jobs where they paid Social Security taxes long enough to qualify for retirement or disability benefits. In these cases, Social Security benefits will be figured using a formula different from the one used for those spent most or all of their working years paying Social Security taxes. The WEP formula results in a reduced Social Security benefit.

Before this provision was enacted in 1983, government employees had their benefits computed as if they were long-term, low-wage workers. Thus, they received the advantage of the higher percentage Social Security benefits in addition to their non-covered government pension.

[scfr]

Remember that when there is an employer involved, the employer is (supposed to be) paying 1/2 of the SS tax, and the employee pays 1/2.

When you are self-employed, you have to pay both the employer and the employee portions.

The same amount is being paid in in both instances, so the benefits paid out should be the same.

[Scanner]

That's what I figured. . .thanx.

I don't know though. . .sometimes I have looked at my benefit statement and it actually seems I am entitled to a bigger benefit than I thought I may be.

I understand the logic - the amount paid in is the same.

It just feels like double for the self-employed person (well. . .because it is) and therefore, it would seem to mean more benefit.

But that's why I can get a SEP-IRA and Keough and you normally employed people can't, I guess.