How Social Security Checks Can Be Reduced By $ 100 If You Have Other Retirement Income

SOCIAL Security providers can see their checks written down if they have other retirement income.

This reduction in Social Security is not tied to tax or working income, but to what is known as the Windfall Elimination Provision (WEP).

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WEP is a formula that effectively reduces social security benefits for some retirees who receive an additional pension during retirement.

It applies to social insured persons whose pension comes from a job which is not covered.

Uncovered employment is a pension paid by an employer who does not deduct social security contributions from your salary.

These are typically state and local governments or non-U.S. Employers.

It prevents some workers from receiving full Social Security benefits in addition to a pension, without having contributed long enough to Social Security.

As of December 2020, around 1.9 million recipients (3% of the total) were reached by WEP, according to the Congressional Research Service.

How WEP Works

Social security benefits are calculated by applying various percentages to a person’s lifetime average indexed monthly income (AIME).

WEP then reduces your benefit amount for the year of entitlement (ELY) before it is reduced or increased due to early and delayed retirement, as well as the cost of living adjustment.

If you were 62 in 2020 and had 20 years of substantial income, WEP would have reduced your monthly benefit by $ 480.

For example, if your full retirement benefit is $ 1,396, your ELY benefit after WEP reduction would be $ 916.

Meanwhile, if you choose to retire early and start claiming at age 62, your benefit would be reduced by $ 314 by WEP.

And if you delay retirement until age 70, your monthly benefit would be reduced by $ 608, according to the Social Security Administration.

Who is exempt from WEP?

There are a number of exceptions, which means that your benefits will not be reduced by WEP.

For example, if you have paid Social Security taxes over 30 years of substantial income, WEP does not apply to you.

Substantial payouts are currently set at $ 26,550 or more for 2021.

The same is true if you became eligible to accept pension payments from your non-qualifying job before 1986.

The exceptions also apply to federal employees whose Social Security service and coverage began on January 1, 1984.

Finally, you will not be affected by WEP if you are receiving a railway pension.

Social Security recipients are expected to get more money next year through an expected increase in the cost of living adjustment (COLA).

We also explain how to boost your checks at any age.