Social Security And Your Other Pensions – WEP

His question was “Will his military retirement will reduce his Social Security retirement?” It will not as explained below but the question brings up a topic that I have not mentioned for a while, the Windfall Elimination Provision (WEP).

As a general rule, pensions are not considered in the amount of your Social Security benefit. Pensions are not counted towards annual earnings test amounts and they do not reduce your SSA retirement amount.

The Windfall Elimination Provision (WEP) is an exception to this general rule. In very limited cases, mainly involving people who have had government employment, their pension can result in a lowered Social Security retirement amount based on your own work record.

In summary, the WEP could be important to you if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security. A pension based on earnings not covered by Social Security can affect the amount of your own Social Security retirement.

Key here is that the employment was not covered by Social Security. Most pensions are based on employment that is covered by Social Security. If you pay Social Security tax on your wages or self-employment, then you are in covered employment.

Military service has been covered employment for Social Security for many years so a military retirement pension does not reduce Social Security retirement.

The WEP is not a direct reduction of your own Social Security retirement. It is a change in the formula used to compute a retirement amount that results in a lower retirement benefit. As a result, estimates of your SSA retirement amount on your Statement or from the online Retirement Estimator will not be accurate. Instead, use the WEP Calculator for your retirement estimate. The WEP Calculator is in the Retirement Planner portion of the Social Security website,

The Windfall Elimination Provision is not new. It dates back to the Social Security Amendments of 1983, signed into law by President Reagan on April 20, 1983. Designed to resolve short-term funding problems faced at the time, that legislation made significant changes to the Social Security and Medicare programs.

I will write more about the Windfall Elimination Provision later this week. Additional WEP information is here.