Social Security WEP & GPO Made SIMPLE! (Windfall Elimination Provision & Government Pension Offset)
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- Опубліковано 28 лип 2020
- Finally understand what the WEP & GPO are and how they can carve away at your Social Security benefits.
Video Transcription:
Hi everyone, Erik Bowman here. And today we are talking about the Windfall Elimination Provision and government pension offset, as it relates to social security filing. We’re talking about it so that you don't make a major social security filing mistake that could cost you thousands in social security income.
The first thing that we need to understand is who do these rules apply to? They apply to participants in non-covered pensions, typically a federal state or local defined benefit pension. Participants in these types of non-covered pensions do not pay social security taxes while they're earning their wages, because of that Windfall Elimination Provision and government pension offset apply. The Windfall Elimination Provision is a reduction in your personal social security benefits. If you have qualified for social security benefits. Government pension offset is a reduction in any type of spousal benefit that you may receive.
Now, how do we calculate these reductions? Well, Windfall Elimination Provision is a pretty complex calculation and we use the social security administration detailed web calculator. And you can find that on ssa.gov. When you input all of your history of earnings and some of your pension information, it's going to calculate what your reduced benefit is.
If you look on page two of your social security statement you're going to see that if you've qualified for a social security benefit, but your part of a non-covered pension, the bottom of that page actually states in the fine print that the numbers above are incorrect and you must solve using the windfall elimination provision calculator. Government pension offset is a lot simpler calculation. The way the government pension offset works is if you qualify for a spousal or a survivor benefit, you have to subtract two thirds of your monthly pension from the social security spousal benefit you were going to receive, and you get the difference.
For example, if you have a $3,000 a month non-covered pension and you do a spousal benefit of $2,000 a month, the math looks like this. Take two thirds of 3000, which is $2,000, subtract it from your $2,000 spousal benefit. We can see that that equals zero. That means you will receive no social security spousal benefit in that example.
So why is this important? Well, first, if you've calculated a retirement plan that includes social security benefits that you may not actually get, that could lead to significant income reductions that you don't expect, which could hurt your retirement planning. Secondly, it allows you to start thinking about strategies to offset the risk associated with both web and GPO. For example, if your spouse passes away and you need some social security income, there are some life insurance strategies that you may want to consider. So that that social security income can be replaced if you're not going to get any because of the government pension offset calculation.
Also consider joining our Facebook group retirement simplified. I look forward to speaking with you all again soon. Thanks for watching.
To watch other webinars. Go to Bowman financial strategies.com and learn about topics like social security, maximization, Roth conversions, and tax efficient distribution strategies and retirement.
Investment Advisory Services offered through Change Path, LLC, a SEC registered investment adviser. Change Path and Bowman Financial Strategies are unaffiliated entities.
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We paid into this pension, they need to stop stealing our money!!!
They never reduce your pension
Do i get wep deducted if im getting 50% of my husbands social security
IF you are the pensioner your spousal benefit will be reduced by 2/3 of your pension amount.
Cuz I may actually tell the truth and when they going to get out of these stimulus checks for the poor people in Michigan that really need it
I am a retired cop......not yet retired, but if i understand the windfall correctly they will be taking 60 percent of my ss.....i have a small ss that will be 1000 k when I turn 62 and I will be left with 400 dollars each month...for the life of me I do not understand why I have to get dinged on this...I did not pull the 40 quarters out of my ass....I worked for that from 1981 to 2019 of course with some very small earning years and even about 5 zero years.... I can not complain due to have 3 pensions and a VA disability, but I still busted my butt for those quarters....Oh well....
First, thank you for your service.
Second, you asked, but it does get a bit mathematical. You worked paying SS and not paying SS. During the time you were not paying SS, you were working on a pension in lieu of SS. Note the state you were in was too cheap to pay it's half of FICA and you were able to pocket your half. So many folks would love that opportunity. The SS benefit is calculated using the top indexed 35 years, divided by 420 to get your AIME (Avg Indexed Monthly Earnings). That sum is applied to the bend-points; two points, therefore 3 segments. This is where SS is progressive; lower earners get a larger replacement rate. You likely have a bunch of zeros in your AIME sum, so you appear as a lower earner than you are. WEP simply adjusts the replacement rate in that first earnings segment.
This year the first point is $1174. Normally you get 90% of that, but worst case you will get 40%. You mention $1,000, implying earnings of $1,111, so you should get $444. If you had been on SS in your gmvt job and taken extra and second jobs for the same earning, it would fall into the second segment and you would only get a 32% replacement rate on these earnings.
I'm a bit confused. Are you saying this situation would occur if NO SS tax was collected against the employee's wages whatsoever?
it can occur even if you did pay ss tax on some Earnings, however the earned income due to a state pension with no ss taxes withheld will impact your benefit if you earned one prior to or after your state employment.
how accurate is the SS wep calculator?
as accurate as the data inputs from what I can tell.
If your government pension provides a cost of living increase each year, are you required to let SSA know each year of your change in benefits?
no no need
So I pay into state defined pension, but they also take social security...so does the WEP not apply to me?
if you pay ss taxes, wep does not apply
@@bowmanfinancialstrategies5830 I thought it applied if your earnings were not at or above the substantial earnings for each year.
@@gdruilhet WEP is waived if you have over 30 yrs of substantial earnings in which
you paid SS payroll tax
There are 15 states too cheap to pay SS, the other 35 pay SS. There are also some local gmvts that do not pay SS. It is the cheap ones that precipitate the problem. And so many of their retirement organizations imbue a victim mentality, when they actually get a better replacement rate than the rest of us.
@@bowmanfinancialstrategies5830
What's the difference in a WEP or OFFSET plan?
I plan on retiring in a few more years. I work for a private company, will have 34 years of service when i retire at 55.
I have a defined pension, will have paid into SSI for 40 plus years.
I was told that when i retire i have a choice of when i want to recieve SSI (62 or 65).
When i recieve my SSI my pension will be reduced by the amount of my SSI benefit.
So if i draw $3,000 per month pension. Then when i start SSI $2,000 per month at 62, my pension will be reduced $2,000.
Instead of recieving $5,000 per month. I will only recieve $3,000 due to my pension being reduced by my SSI beneft.
I feel like i'm getting shafted.😢
Unfortunately, this WEP calculator does not deal with every situation. I called the SSA and the person on the phone was stumped about my situation. Here it is: I worked for many years for companies that have taken social security and I qualify for a SS benefit. However, I changed jobs a few years ago and now work for a company that doesn't take social security, but instead puts 2.5% into a 403B. This 2.5%, the SSA considers a pension, I was told by the SSA rep. I am trying to find out how my SS benefit will be altered...it's difficult trying to figure out next steps. Any ideas out there? Anyone had the same problem? I want to plan for a retirement income, but this is a missing piece. Would 2.5% of the total employer contribution to the 403B be the correct pension amount?
If you want to schedule a call I can walk your thought some potential outcomes. go to www.bowmanfinancialstrategies.com if you'd like to schedule a call.
@@bowmanfinancialstrategies5830 Thank you, I will!
I am 75 and get a government pension from being a teacher , can i now get my husbands SSI ? They told me i made to much when i was 69.
HI, Most likely it is because you would have to subtract a number equal to 2/3 of your non-covered pension from any potential spousal benefit. If 2/3 of your pension is greater than the spousal benefit then you would get no SS. Is your husband still alive? That matters, Thanks
Can you give an example for a single person who worked 20 Yeats paying ssi
Can you please explain an example for a single person?
Only WEP applies since no Spousal benefit is available. So no GPO unless you were previously married and can get a spousal benefit from an ex.
I thought if u paid into ss over 30 yrs it does not matter if u have a pension or not
that is true.
If 20 to 30 of those years had substantial earnings, then you will reduce the adjustment. Normally the first segment replacement rate is 90%. WEP adjust that to 40% for each year above 20 of substantial earning will increase the replacement rate 5%; 30 years will give you 10 5%, so you are back to 90%.
subtracted FOREVER? For one month? For one year? Until some amount is recouped by SSA? What?
forever
Hogwash you won’t know till you get your first check🤑🤑🤑
it actually can be calculated ahead of time. I've seen it hundreds of times.
No explanation for the reason for this? .Little bit unfair presentation.
because people in non-covered pensions don't pay SS payroll tax on their working year's earnings and therefore must apply WEP and GPO
@@bowmanfinancialstrategies5830 - I think he means mentioning it is because non-covered pension folks appear to be lower earners than they are and as SS is progressive, WEP adjust for this.
It is not a reduction. It is a modified benefit.
In the end they end up the same. You're making a semantic point.
oh, its a reduction!
@@bowmanfinancialstrategies5830 - I like the term "adjustment".
This came from our Great Actor President Reagan in 1983 . It was just a way to reduce the failing SS system because the Government was robbing the money from the system . If you pay in 40 quarter through another job that deducted SS . You should be able to draw the amount you are entitled to without the reduction .
If SS were not progressive, that is, if lower earning persons did not get a higher replacement rate than higher earning person, you would be right. But SS is progressive. The issue is that folks that do not pay FICA for all there were and take a pension in lieu of that appear to be lower earners than they are and are therefore their benefit is adjusted.
This was a bipartisan decision.