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:
- 55.6% of your full retirement age benefit (from your SS Statement); this is your tentative WEP penalty;
- $396; this is one of two limits on your WEP penalty (it changes with each COLA adjustment); and
- 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:
- $444 (= 55.6% of $800)
- $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:
- $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.
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:
- $222 (= 27.8% of $800)
- $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.