NJ GVT Pension

[Shaun5052]

1.) I am a 40 year old career firefighter in NJ. I do not pay into SS. Upon retirement at 49 will i have to pay SS, state, federal, or medicare taxes on my $65,000 pension? I will have to pay a portion of my medical costs (estimate $10k) & i assume that would lower my taxable income?

2.) Aside from chatter in Congress about removing/reducing GPO & WEP i do not plan on receiving SS even though i have contributed from other jobs & will work after i start collecting my pension. Even though i expect to be ineligible how can current GPO/WEP affect my 35 y/o wifes  ability to choose between her SS or mine (40) when i predecease her?

[fkbright]

First, let me thank you for your service!

If you are covered under the NJDPD Police and Firemen's Retirement system,  your pension is a "defined benefit plan" and will be taxable.  However, you will only be subject to Federal, State, and local income taxes and will not have to pay Social Security or Medicare taxes on the retirement income.

Regarding your medical coverage, your medical costs would be deductible as an itemized deduction (if your deductions exceed the standard deduction amount the amount you can claim as a deduction is the amount of medical expenses you paid that exceed 7.5% of your Adjusted Gross Income).

The survivor benefit is not reduced by WEP -- the calculation is based on the deceased's benefit as determined by the standard Social Security formula, without any reduction for the WEP.  

Please keep in mind that if your wife had a government job in which they didn't pay Social Security taxes, and draws a pension from it, their survivor benefits could be affected by the Government Pension Offset.

I do suggest that as you approach Social Security eligibility age you consult with a financial planner on the potential benefits and drawbacks of collecting Social Security at the different age benchmarks.