SS Windfall Elimination Provision for early retiree

[tizlo]

I turned 62 earlier this year and have been contemplating whether I will start Social Security. Recently for the first time I heard of the Windfall Elimination Provision. For years I have looked at my annual SS statement or logged on to the ssa.gov to see what my benefit would be for 62, FRA, and 70. I have no pension -- just my savings, investments, and an IRA. I have never worked at a job that did not pay FICA. But, I have just 29 years of paying FICA. Of those 29 years I have 24 years of working full time.


I have read information about the Windfall Elimination Provision in several places, including on ssa.gov, but it is still confusing. Everywhere it says it is meant to reduce the SS benefit for people who have another pension for a job where they did not pay FICA. That does not apply to me, but then when I look at other information it seems to actually reduce the benefit for anyone who has paid FICA for less than 30 years. Can someone please explain this to me. Will my SS benefit be reduced to less than what is shown on my SS benefit report?

 

[Alan]

You won’t be subject to WEP unless you worked at a job that didn’t pay into FICA but did provide a DB/final salary pension. At least that is how I understand it.

 

[Rianne]

This AARP article explains why you should not be concerned.
Does Receiving A Pension Affect Social Security?

 

[Lakewood90712]

44 years of labor, not counting paper routes.

Am one of those with FICA work and 17 years of non FCIA gov. work.

The small WEP I will be subject to is a good deal for me IMO, both myself and the employer ( city ) not having to pay the FICA.

Many of my city co workers over the years bitched about the WEP. I sure did not.

 

[beowulf]

Alan is correct. The WEP is mainly aimed at federal employees who were under the old retirement system called CSRS. No new federal employees have been hired under that system since 1983 or 84. All federal employees hired since then have paid FICA. There are also a number of municipalities that have defined benefit pension plans that exclude their employees from SS. Generally they still pay the Medicare premium. I believe the number of employees who are under those systems has gone way down over the years.

So, no worries, Tizlo, your SS benefits will not be affected by the WEP. Just keep in mind that your SS benefit is based on your highest 35 years of earnings. Any year that you have no earning is a big fat goose egg - 0 - and that will effect your payment at whatever age you choose to take it.

Eventually, WEP will become extinct as retired CSRS feds like myself shuffle off this mortal coil. Many feds aren't even eligible for SS as they don't have 40 quarters of contributions. I have 17 years under SS from military service and employment after federal service. Since I have less than 20 years, so I forfeit the maximum amount of SS due to the WEP. It's all about the bend points, so I lose about $350 a month. Fair enough as the higher bend points are intended for lower income earners.

 

[Teacher Terry]

4 states don’t pay into SS. Mine was one of them. If I had 30 years of service it wouldn’t be a big deal but I only had 15. My SS should be 800 but is reduced to 363 due to WEP.

 

[Chuckanut]

WEP is simply an equalizing rule that keeps Higher income earners who did not pay much into SS from collecting a benefit as though they were low income earners. ( SS pays a bigger % to low income people, that's the social part of Social Security.)

If WEP did not exist, people who contributed little to SS would be collecting a much bigger portion of the contributions than those who have contributed most or all of their lives. It's really a matter of simple fairness.

From what you describe it does not apply to you.

 

[joeea]

when I look at other information it seems to actually reduce the benefit for anyone who has paid FICA for less than 30 years.

No, WEP doesn't do that.

Will my SS benefit be reduced to less than what is shown on my SS benefit report?

Possibly, but not because of WEP.

Your benefit report assumes you will continue working until your FRA and continue to earn your current salary.

If you retire early, or if your salary is significantly reduced before you reach 60, the estimate on the benefit report may be higher than what you will actually receive. Since you are 62, your benefit report is likely to be reasonably accurate.

This has nothing to do with WEP (which doesn't affect you).

 

[tizlo]

So, no worries, Tizlo, your SS benefits will not be affected by the WEP. Just keep in mind that your SS benefit is based on your highest 35 years of earnings. Any year that you have no earning is a big fat goose egg - 0 - and that will effect your payment at whatever age you choose to take it.

I have not had a year working and paying any FICA for a long time. I FIREd years ago so since then each year my FICA income has been $0.

 

[joeea]

I have not had a year working and paying any FICA for a long time. I FIREd years ago so since then each year my FICA income has been $0.

Right.

But you are 62 now, and recently received a benefit statement, right? So they have already accounted for your $0 years and included them in your estimate.

 

[tizlo]

But you are 62 now, and recently received a benefit statement, right? So they have already accounted for your $0 years and included them in your estimate.

Yes, but in the several websites I read about WEP they said that if you are affected by WEP then your SS benefit statement is incorrect.

 

[joeea]

Yes, but in the several websites I read about WEP they said that if you are affected by WEP then your SS benefit statement is incorrect.

You aren't affected by WEP.

 

[tizlo]

Yes, from the several helpful posts in this thread I am relieved that I am not affected by WEP. Thank you to everyone! I say again though that in some of the stuff I read the info is rather unclear and spends most of its time talking about people who "have fewer than 30 years of substantial earnings" -- which is me. Although it is mentioned about the case of a separate government pension, when they get into the details they only talk about less than 30 years of paying FICA.

https://www.ssa.gov/planners/retire/wep-chart.html

https://www.fool.com/retirement/general/2016/04/18/what-is-the-windfall-elimination-provision.aspx

It all just gave me a bit of scare today. Glad to be reassured that I won't be hit after spending years believing that my SS benefit statement and the info on ssa.gov that showed my estimated benefits was true.

 

[Alan]

Eventually, WEP will become extinct as retired CSRS feds like myself shuffle off this mortal coil. Many feds aren't even eligible for SS as they don't have 40 quarters of contributions. I have 17 years under SS from military service and employment after federal service. Since I have less than 20 years, so I forfeit the maximum amount of SS due to the WEP. It's all about the bend points, so I lose about $350 a month. Fair enough as the higher bend points are intended for lower income earners.

I think it will be around for awhile yet. There are still thousands of us who have worked overseas who are subject to WEP. Even me and my wife’s UK SS will cause our US SS to be reduced by the WEP since the UK SS is based on a person’s work record. (If you have worked for 40 quarters in the UK you get the minimum UK SS).

 

[steelyman]

I’m one of those affected by WEP as a state (not Federal) employee. It doesn’t freak me out because I understand the reasoning and overlap with pensions.

What was more of a wakeup was that my system also did not contribute to Medicare (that information is provided on your SS summary, whether you have enough credits/quarters to qualify). It was a strong motivator to earn those extra credits through self-employment income with taxes applied. I now have enough credits (40) for Medicare. And am learning about what that means right here.

 

[MichaelB]

What was more of a wakeup was that my system also did not contribute to Medicare (that information is provided on your SS summary, whether you have enough credits/quarters to qualify). It was a strong motivator to earn those extra credits through self-employment income with taxes applied. I now have enough credits (40) for Medicare. And am learning about what that means right here.

That's a BFD.

I too have just enough credits for SS eligibility - which is required for Medicare. That was the last big hurdle to not having to work. Now I'm working on my son. He probably has 6 - 7 years of SS credit (note to self - check), but lives and works abroad. He needs a plan to get to the minimum credits for eligibility.

 

[steelyman]

That's a BFD.

I too have just enough credits for SS eligibility - which is required for Medicare. That was the last big hurdle to not having to work. Now I'm working on my son. He probably has 6 - 7 years of SS credit (note to self - check), but lives and works abroad. He needs a plan to get to the minimum credits for eligibility.

It sure is. Glad I worked all those low pay odd jobs, mostly retail. And here I thought it was only to scrape by and meet interesting people!

 

[Chuckanut]

Yes, but in the several websites I read about WEP they said that if you are affected by WEP then your SS benefit statement is incorrect.

I suppose if your SS benefit statement is incorrect, they might erroneously think you did not pay into SS when you did. That needs to be corrected, ASAP.

IMHO, I think everybody should be required to contribute to SS and Medicare as long as we believe such programs should exist. The exemption of some from SS is an ongoing source of confusion, and can be harmful to people whose find out late in life that their pension funding is, shall we say, not so good.

 

[Sue J]

In DHs case, he worked for a county agency, paying into the state pension system. He did not pay into Social Security for all those years but he did pay into Medicare. So he is subject to WEP.

You can be eligible for Medicare via your spouse if you don’t qualify on your own record. Correct me on that if I’m wrong on that. I think learned that here on the forum.

 

[Teacher Terry]

Sue, I don’t think that’s true.

 

[Sue J]

I checked it out at Boomer Benefits
https://boomerbenefits.com/can-i-get-medicare-through-my-spouse/

Scroll down to “Medicare for non-working spouse”

 

[Teacher Terry]

Wow I learned something new today.

 

[Sunset]

I think it will be around for awhile yet. There are still thousands of us who have worked overseas who are subject to WEP. Even me and my wife’s UK SS will cause our US SS to be reduced by the WEP since the UK SS is based on a person’s work record. (If you have worked for 40 quarters in the UK you get the minimum UK SS).

+
There are bunch of reasons besides the Fed workers for WEP to remain around forever.

 

[Telly]

WEP, and its spousal alternate GPO (Government Pension Offset) will probably be in existence forever. In TX, 96% of the school systems do not pay into SS, so WEP is a conversational football that gets kicked around often by the older employees. The depth of conversation is often: WEP is unfair!!! (it's a very short conversation ). From long ago, DW has enough quarters in for her own SS account, and will be affected by WEP due to her non-SS work pension. And if she receives SS benefits via my account, she will be affected by GPO. Neither of us have a problem with it because of what it addresses. Meanwhile, some in the "to be WEP'd" crowd, are convinced that the US congress will soon see the light and "correct this injustice" (their words). T'aint gonna happen. SS would need a new source of revenue in the billions to handle the halt of WEP and GPO. If a person is slowly drowning, throw him a cement block


EDIT - Sunset, my post was NOT a response to your post. I am a very slow typer, and when I started, your post was not there.

 

[donheff]

I just read an article that explains that you can qualify for free Part A Medicare based on a spouse’s earned qualification. Failure to qualify for Medicare would be a scary situation. I’m a CSRS retiree. We can carry our Federal health insurance into retirement but also joined Medicare many decades back so we also qualify for free Part A. Some local governments never joined so those effected (often teachers) don’t get Medicare or SS. They rely on their governments honoring their pension obligations and retiree health insurance guarantees. That’s something to keep in mind when debt laden state and local systems look at cutbacks affecting old age pensioners.