For ordinary people, the average indexed monthly earnings (AIME) is used to calculate the Primary Insurance Amount (PIA) for your social security benefit. The calculation is as follows
90% of the first $1174
+ 32% of the amount between $1174 and $7708
+ 10% of the amount over $7708
If you retire at your full retirement age, that's what you get.
So, you can see that lower earning people, who have a lower AIME, always recover a greater percentage relative to the social security contributions they paid in, since everyone pays the same percentage in.
The WEP:
If a person has a pension from a non-social security job, the PIA is changed by modifying the percentage recovery below the first bend point ($1174) depending on how many years of "substantial earnings" you had at a job where you
did pay social security. If you had less than 20 years of substantial earnings, the percentage for the first of the above brackets is 40%. Each year of substantial earnings above 20 yrs, increases that percentage by 5% until it gets to 90% like everyone else.
So, if I worked in a different profession and paid into SS for 20 years, and then I went into teaching (here in CT where teachers don't pay social security), my PIA would be
40% of the AIME under $1174
+32% of the amount between $1174 and $7708
+ 10% of the amount over $7708.
That's the worst case. A reduction of 50% of the amount under $1174 or $587. There is also a "WEP guarantee" - they won't decrease your PIA by more than 1/2 of your non-social security pension. BUT, it is crucial to note that this reduction is the
lesser of these two limits. So, if my non-SS pension pays me $1000 per month, my PIA is only reduced by $500 per month. If my non SS pension pays $800 per month, the reduction is only $400 month. But if my non-SS pension pays me $2000 per month, the maximum reduction is still only $587 per month (50% of the amount under $1174) NOT $1000 per month.
So, as you can see, WEP can
never eliminate your social security benefit entirely.
References:
https://www.ssa.gov/policy/docs/pro...between the,than otherwise would have applied.
https://www.ssa.gov/pubs/EN-05-10045.pdf