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Retirement Planner Examples: How The Windfall Elimination Provision Can Affect Your Social Security Benefit

The Windfall Elimination Provision (WEP) reduces your Eligibility Year (ELY) benefit amount before it is reduced or increased due to early retirement, delayed retirement credits, cost-of-living adjustments (COLA), or other factors. The following examples show how the WEP reduction changes when the ELY benefit is affected by other factors.

  • Retirement Examples: The monthly retirement benefits are increased or reduced based on your age after WEP reduces your ELY benefit.

  • If you turn 62 in 2013 (ELY 2013) and you have 20 years of substantial earnings, WEP reduces your monthly benefit by $395.50.

    Your full retirement age is 66. If your full retirement benefit is $1,396, your ELY benefit after the WEP reduction would be $1,000.*

    If You Choose Early Retirement

    If you start getting retirement benefits the month you turn 62, you will get benefits before you reach full retirement age. Your monthly benefit is reduced to 75% because you will get benefits for 48 additional months.

    Your age 62 retirement benefit is $750 ($1,000 x 75% = $750) per month. If your full retirement benefit had not been reduced by WEP, your age 62 retirement benefit would have been $1047. Early retirement changed the reduction for WEP from $395.50 to $297.

    If You Choose Delayed Retirement

    You decided to wait to age 70 to receive benefits so you could get Delayed Retirement Credits.

    Your eligibility year is still 2013.

    If your retirement benefits start after your full retirement age (66 years) the benefit increases 8% for each year before age 70 that you delay retirement. If your benefits start at age 70, you get credit for the 48 additional months when you did not get benefits and your monthly benefit will be 32% higher.

    Your age 70 retirement benefit is $1,320 ($1,000 x 132% = $1,320). If your full retirement benefit had not been reduced by WEP, your age 70 retirement benefit would have been $1,842. Delaying retirement increased the reduction for WEP from $395.50 to $522.

  • COLA Example: The COLA is added to your monthly benefit amount after WEP reduces your ELY benefit
  • When you became disabled in 2013 (ELY 2013) WEP reduced your $1,396 ELY benefit to $1,000*.

    The following year, the 1.5% January, 2014 COLA increased your benefit by $15 ($1,000 x 1.5% = $15). If it were not reduced by WEP, your benefit amount would have increased by $20 ($1,396 x 1.5% = $20). The new benefit would have been $1,416* instead of $1,015. COLA increased the reduction for WEP from $395.50 to $401. ($1,416 - 1,015).

    *Benefit amounts are rounded down to the nearest dollar.

Note:

The examples above apply only to benefits paid to the worker and do not include future COLA increases. The WEP reduction may be larger if family members qualify for benefits on the same record. However, the total WEP reduction is limited to one-half of the pension based on the earnings that were not covered by Social Security.