Social Security’s Windfall Elimination Provision: How to Quickly Calculate Your Penalty

For those of you affected by the Windfall Elimination Provision, finding out how much your Social Security benefits will be reduced is no easy matter. You can ask your local SSA office for help, but it may take you weeks to get an appointment to see a representative. Or, you can use the WEP calculator on the SSA website. However, that calculator requires you to enter your entire Social Security earnings history. Tracking down and entering that information may involve significant time costs for some.

In this post, I offer a quick way to calculate the WEP penalty for those with 20 or fewer years of substantial Social Security earnings. Most people with a government (non-SS) pension probably fall into this category.

Note that the following discussion applies to those turning 62 in 2013. If your year of birth is before or after 1951, the numbers shown below represent for you a close approximation for your WEP penalty.

To determine your WEP penalty, you need to compare three numbers:

  1. 55.6% of your full retirement age benefit (from your SS Statement); this is your tentative WEP penalty;
  2. $396; this is one of two limits on your WEP penalty (it changes with each COLA adjustment); and
  3. 50% of your non-SS government pension; this is the second limit on your WEP penalty.

Once you have these three numbers, pick the smallest one. That is your WEP penalty: that is, the reduction in your full retirement age (FRA) benefit due to your non-SS government pension.

Here are a couple of  examples. Suppose your FRA monthly benefit is $800 and your non-SS pension is $500. The three numbers for finding your WEP penalty are:

  1. $444 (= 55.6% of $800)
  2. $396
  3. $250 (=50% of $500)

So, your WEP penalty is $250, which reduces your FRA SS benefit from $800 to $550.

Next, in the above example let’s change the non–SS pension to $1,000, keeping the FRA benefit at $800. The three critical numbers are:

  1. $444
  2. $396
  3. $500 (=50% of $1,000)

In this example, your WEP penalty is $396, which reduces your FRA benefit from $800 to $404.

This WEP-adjusted FRA benefit is the value you would use if you want to calculate either an early claiming penalty or delayed retirement benefits.

It is also the value you would use if you are requesting a custom report from us to help you get the most out of Social Security.

Further Detail

The following table provides information on the WEP penalty for all of the relevant substantial-earnings years (for those turning 62 in 2013). The row for “20-or-fewer” years of substantial earnings shows the penalty values used in the above examples. (Note that “Limit #1″ changes whenever SS benefits get a COLA adjustment.)

Years with Substantial Earnings WEP Penalty Rate WEP  Penalty Limit #1 WEP Penalty Limit #2
20 or fewer 55.6% $396 50% of pension
21 50.0% $356 50% of pension
22 44.4% $316 50% of pension
23 38.9% $277 50% of pension
24 33.3% $237 50% of pension
25 27.8% $198 50% of pension
26 22.2% $158 50% of pension
27 16.7% $119 50% of pension
28 11.1% $79 50% of pension
29 5.6% $40 50% of pension
30 0.0% $0 50% of pension

Here is an additional example of how to use the above table. Assume you have 25 years of substantial earnings. Further, suppose your FRA monthly benefit is $800 and your non-SS pension is $500. The three numbers for finding your WEP penalty are:

  1. $222 (= 27.8% of $800)
  2. $198
  3. $250 (=50% of $500)

So, your WEP penalty is $198, which reduces your FRA SS benefit from $800 to $602.

This WEP-adjusted FRA benefit of $602 is the value you would use if you want to calculate either an early claiming penalty or delayed retirement benefits.

And, again, it is also the value you would use if you are requesting a custom report from us to help you get the most out of Social Security.

 

 

 

2 thoughts on “Social Security’s Windfall Elimination Provision: How to Quickly Calculate Your Penalty

  1. sue stecker

    I am 62 and collecting widows benefits but never worked. I want to adopt a baby. Can I get benefits for the child. Baby is Not related.

    Reply
  2. Alice Kutil

    I rceive survivor benefits from my former husband. If I retire on a state pension from the Shaker Heights City School District, which benefit will be reuced and by how much. I am 75 and do not plan to retire in the near future. I have worked 36 years for the Shaker Heights Board of Education and could retire at any time, but choose not to. How do i determine what my retirement benefits would be if my retirement amount takes the WEP into account?

    Reply

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