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We Gotta Talk About Windfall Elimination Provision (WEP)
If you’re a public employee who also receives Social Security benefits, you might be familiar with the Windfall Elimination Provision (WEP). This little-known provision can significantly reduce the amount of Social Security benefits you receive, and it’s important to understand how it works and how it might impact your retirement income.
The WEP was established in 1983 as part of the Social Security Amendments. Its purpose is to prevent individuals who have spent a significant portion of their career working in jobs not covered by Social Security (such as public sector jobs) from receiving disproportionately high Social Security benefits compared to individuals who have worked consistently in jobs covered by the program.
The key factor in determining whether the WEP applies to you is if you receive a pension based on work not covered by Social Security. This typically includes public employees such as teachers, police officers, firefighters, and other government workers. If you fall into this category, the WEP will likely affect the amount of your Social Security benefits.
The formula used to calculate the WEP is complex, but in simple terms, it reduces your Social Security benefit by up to 50% of the amount of your pension. The reduction is capped at a certain amount, which is adjusted annually. This means that the more your pension is, the greater the reduction in your Social Security benefits will be.
It’s important to note that the WEP only applies to individuals who are eligible for Social Security benefits based on their own earnings history. If you are a spouse or survivor of someone who is affected by the WEP, your benefits are not subject to the same reduction.
If you are impacted by the WEP, it’s crucial to plan for its potential effects on your retirement income. You might need to adjust your financial plans and expectations accordingly. There are also strategies that can help mitigate the impact of the WEP, such as delaying your Social Security benefits or considering other sources of retirement income.
Congress has considered legislation to reform or repeal the WEP in the past, but so far, no major changes have been made to the provision. Therefore, it’s important to educate yourself about the WEP and its potential impact on your retirement benefits.
In conclusion, the Windfall Elimination Provision is a little-known but important consideration for public employees who also receive Social Security benefits. Understanding how the WEP works and how it might affect your retirement income is crucial for creating a comprehensive financial plan. Be sure to explore your options and consider consulting with a financial advisor for personalized guidance on navigating the complexities of the WEP.
I'm retired with a pension. Worked 20 years of substantial earnings in SS. I work part time but not enough to be substantial. Looks like work in another pension system might work out better.
Josh, I was going to ask for this WEP explanation video. Then did a search and found it. Thanks good content. Retired Firefighter.
Josh, love your videos! Do the WEP years of substantial earnings cut off when one turns 62? Meaning that if you work and contribute to SS from 63 and beyond they don't count toward years of substantial earnings?
Teachers need total repeals of WEP and Government Pension Offset. HR 82 and S 1302.
I am 56 y/o retired with a pension. I have 15 years of covered earnings none over $1400. My PIA is $373. It doesn't make sense to me to work more to lose, my pension & spousal benefits substantial.
Great stuff Josh, I am happy to say I am in my 30th year this year of substantial earnings. It’s a long road, but now I see it will be worth it.
I hate to be negative but I'm a CSRS retiree. I've looked forwarded to maybe in my lifetime I would see WEP/GPO repealed however I'm so disappointed to believe but I do. That it will not happen, Ive fought for it for years. This flipping government ( all politicians) are NOT going to reverse it. They (the politicians) will patronize all of us with lies. However, they will NOT let go of our money they gain from WEP/GPO. It's just too good to be true.
Thanks for this Josh! Have you done anything on the GPO?
The reason for WEP?
I'm a public school teacher in Texas with 23 years of SS significant earnings If I don't take my SS benefits until age 70. I'll be docked about $340 per month on SS, but not until I take my teacher's retirement pension, which I plan to do later than that. Yes, I could try to work to get some more SS years, but that would be hard to do while working full time as a teacher. Thanks.
A lot of teachers do a summer job.
Thanks for suggesting we read the linked document, because I didn't understand it at first. I learned the teacher's (for example) teaching benefits wouldn't be reduced, but possibly income from other jobs where social security taxes were paid, would be reduced. For a minute there, I was wondering why Sniffy was picking on teachers. Substantial income in 1992 per the SS *.pdf was $10,350, while the lowest average teacher salary that year was in South Dakota at about $24,000. It doesn't affect me, but I enjoyed the show anyway.
https://www.edweek.org/education/1992-93-average-salaries-of-teachers-by-state/1993/10