For the folks who have had multiple jobs both in the Social Security system and outside of it (teachers, state employees, etc), the Windfall Elimination Provision factors into their retirement income.

Its not a simple adding of your Social Security benefit plus your PERS/STRS/SERS pension. There is an offset to the monthly income from Social Security.

Check out this video to see how it works.

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The Social Security Windfall Elimination Provision (WEP) is a law that affects people who worked in jobs where they did not pay Social Security taxes and then worked in jobs where they did pay Social Security taxes. This law was designed to prevent people from receiving too much money from Social Security if they already receive guaranteed pensions from other jobs.

The WEP became law in 1983, as a solution to the problem of “double-dipping”. Double-dipping refers to people who receive guaranteed pensions from their previous jobs and then receive Social Security benefits based on their current job. This would result in higher Social Security benefits than if they had only been working in a job that pays Social Security taxes.

Under the WEP law, the Social Security Administration (SSA) uses a formula to calculate a person’s monthly benefit amount, based on the average of the 35 highest earning years of their Social Security-covered employment. This formula reduces the proportion of the first $996 of that benefit by up to 50%. This reduction applies only to people who qualify for Social Security benefits based on their own earnings record and also receive a pension from a job where they did not pay Social Security taxes.

The WEP applies to people who worked in jobs that did not pay Social Security taxes, such as government workers, teachers, and other public employees. The WEP does not apply to people who worked in private-sector jobs where no Social Security taxes were paid.

For example, if a person receives a monthly pension of $500 from a job where they did not pay Social Security taxes and qualifies for $1,500 per month from Social Security based on their own earnings record, the WEP formula would reduce the person’s Social Security benefit by the maximum amount of 50% of the first $996. In this scenario, the monthly Social Security benefit would be reduced by $498, leaving a monthly benefit of $1,002.

The WEP can be a complicated law that affects a person’s retirement income. If someone is affected by the WEP, it is important to understand the law and to plan accordingly. It is recommended to seek guidance from a financial advisor to determine the best retirement income strategy, given their unique situation.