42 Sunday,March 29, 2020 DAILY NEWSNYDailyNews.com
T
o prepare for a loss of income or a
large, unexpected expense, the
standard advice is to set aside at
least three to six months of living
expenses.
But only 41% of U.S. adults have
stashed away enough to cover just a
$1,000 emergency, according to a recent
Bankrate survey. Instead of tapping
savings, 16% say they’d use a credit card,
1 4% would borrow from family or
friends, and 7% would take out a per-
sonal loan.
An emergency fund in a dedicated
account offers more freedom and less
stress than a loan when you need money
fast. If you keep the funds in a bank
money market deposit account, it may
come with a debit card or checks, pro-
viding easy access to your money. (Like
other bank accounts, a money market
account is FDIC-insured.)
If you prefer a savings account, look
for one that allows large, quick transfers
of money to your checking account, says
Ken Tumin, founder of DepositAc-
counts.com. One way to achieve that is
to open both a savings and a checking
account with a single bank — transfers
within an institution are usually imme-
diate and free, says Tumin.
Whichever type of account you
choose, look for one that doesn’t charge
amonthly maintenance fee. If your
account tacks on a monthly fee when
the balance falls below a certain level,
you may end up being charged if you
make a big withdrawal. Ideally, the
account will have a track record of
offering a high interest rate and require
alow minimum balance to earn
interest.
Look for saver-friendly accounts.
Tumin recommends three online sav-
ings accounts that fit the bill. The Ally
Bank Online Savings Account
(www.ally.com) yields 1.6%, the Marcus
by Goldman Sachs Online Savings Ac-
count (www.marcus.com) has a 1.7%
interest rate, and the SFGI Direct Sav-
ings Account yields 1.86% (www.sfgi
direct.com).
Among money market deposit ac-
counts, check out the Sallie Mae Money
Market Account (www.salliemae.com/
banking), which comes with check
writing and offers a 1.75% rate. Redneck
Bank Mega Money Market (https://
redneck.bank) yields 1.75% on a balance
of up to $50,000 and offers a debit card
and checks.
For the latest savings yields and loan
rates, visit Kiplinger.com/links/rewards.Lisa Gerstner is a contributing editor to
Kiplinger’s Personal Finance magazine.
Send your questions and comments to
[email protected].Stash
some cash
Emergency fund is vital
when times are tough
BY LISA GERSTNER
KIPLINGERU
nfortunately, if you receive a
pension from a job where
you were not required to
pay FICA taxes, Social
Security benefits are re-
duced for you and your spouse. This
is mandated under the so-called
Windfall Elimination Provision and
the Government Pension Offset.
Ihave received a great deal of
correspondence lately from people
who either are not aware of these
provisions or do not fully under-
stand their implications.
The people affected are certain
public sector workers, including
some federal, state and local em-
ployees whose retirement systems
were not part of the Social Security
system. This can include police
officers, firefighters and many for-
eign workers.
One impacted group is federal
employees hired before 1984 who
remained under the Civil Service
Retirement System. Federal em-
ployees hired under the Federal
Employees Retirement System are
not subject to WEP or GPO because
these individuals did pay FICA
taxes. Also exempt are many but not
all state and municipal workers. If
you are not sure if you are affected,
you should contact your employee
benefits office/and or the SocialSecurity Administration.
For your non-FICA years, your
earnings were exempt from Social
Security taxes, and not included in
SSA records. These years are posted
as “zero years” unless you also had
other jobs in which you paid FICA
taxes.
For workers who did not work at
all during those zero years, Social
Security uses a higher wage re-
placement rate, based on a prog-
ressive sliding percentage scale, to
compute their benefits. But this
higher replacement rate is meant
for true low-wage workers.
In the case where you receive a
pension without having paid FICA
taxes, the high replacement rate for
low earners is considered an unfair
windfall. For this reason, WEP
eliminates part of the higher per-
centage bonus for people with
non-FICA pensions. If you are
affected, your Social Security bene-
fit will be reduced up to $463/
month in 2019 This is the worst-
case scenario.
The reduction could be less if you
have lower Social Security earnings,
if you have many years of Social
Security earnings or if your non-
covered pension is low.
The WEP only affects your Social
Security payments, not your other
pension. WEP applies only if you are
eligible for both Social Security and a
pension from a job not coveredunder Social Security. If you have 21
to 29 years of substantial earnings
(substantial level was $24,675 for
2 019) that were taxed for Social
Security, it would have less of an
impact. If you had 30 years of such
work, it would have no impact.
For more information on WEP,
go to http://www.ssa.gov/planners/retire/
gpo-wep.html.
WEP affects your own Social
Security payments. If you receive a
pension from a federal, state or local
government, a different provision,
the Government Pension Offset
could reduce your spousal or sur-
vivor benefit. The amount of the
reduction is two-thirds of your
government pension. The offset is
often enough to eliminate any So-
cial Security spousal benefit.
Example: Alice retired from a
state government job and receives a
pension of $600 per month. Her
husband has a full Social Security
payment of $2,000 per month.
Alice would normally be eligible
for a spousal benefit of $1,000 per
month. However, in this situation,
her spousal benefit would be re-
duced by 2/3 of $600, or $400. So,
her spousal benefit would be re-
duced from $1,000 per month to
$600.
For more information on GPO,
visit http://www.ssa.gov/planners/retire/
gpo-wep.html.Elliot Raphaelson welcomes your
questions and comments at
[email protected].DREAMSTIMEPensions can bring reduced
Social Security benefits
Some who worked in public sector affected
BY ELLIOT RAPHAELSON
THE SAVINGS GAME