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Will your pension crush your Social Security benefit?

Understanding how non-covered pensions reduce your Social Security benefits and what you might do about it could save you thousands of dollars

How sharply WEP reduces your Social Security benefits depends on a number of factors.

By Joan Hill

More than 60% of police officers are feeling the pinch of the Windfall Elimination Provision (WEP).

WEP generally affects government workers who qualify for a public pension that didn’t require paying Social Security taxes (a non-covered pension) and who also worked at another job where they did pay Social Security taxes, which qualified them for Social Security benefits.

WEP is one of the more technical areas of Social Security planning, and its special calculation can reduce monthly Social Security benefits by as much as half of a retiree’s monthly pension amount. This is no small thing. Social Security benefits usually make up a large portion of anyone’s retirement income.

WEP can take you by surprise

The average income earner can keep track of projected Social Security benefits by looking at their annual statement, a great tool for making educated retirement planning decisions. But what if the figure on your Social Security statement is incorrect by several hundred dollars per month? For those affected by WEP, it is wrong. This is because the Social Security Administration (SSA) simply has no way of knowing whether an individual is eligible for a pension from a non-covered job.

What’s worse, many WEP-affected workers don’t know their Social Security statement is wrong. This can add up to a terrible retirement surprise. Imagine thinking your monthly retirement income will be, for example, $400 more than it actually turns out to be. Now imagine not finding out until you apply for your Social Security benefits.

Mitigating or eliminating WEP

How sharply WEP reduces your Social Security benefits depends on a number of factors, including how long you worked in the private sector versus the public sector.

Once you achieve 21 years of what the SSA considers substantial earnings in the private sector (with Social Security taxes paid), the special WEP calculation begins to change. The WEP penalty starts to lessen at 21 years of substantial earnings, and each additional year continues to lessen it, with it going away completely at 30 years.

In 2020, the minimum substantial earnings amount is $25,575. Refer to the second page of this information piece for substantial earnings minimums in earlier years.

Obviously, not everyone can accumulate enough years to eliminate or mitigate the WEP penalty. But it’s certainly worth taking a closer look at this option for someone who has accumulated 20 years of substantial earnings because even one additional year of work can materially reduce the WEP penalty.

Start by checking your earnings history on your Social Security statement. Make note of the years where you achieved substantial earnings in the private sector. Be sure to double-check the accuracy of your record – it isn’t unheard of for the SSA to get things wrong. Keep in mind that if you miss the substantial earnings threshold by even $1, you cannot count that year in your WEP-penalty-reduction count.

WEP isn’t your only challenge

Most people, including wealthy people, fail to optimize their Social Security benefits. There are many rules to be considered in anyone’s calculation. Deciding when to draw benefits also depends on several personal factors such as age, health, other savings, marital status and plans for retirement.

There are several reasons why people get it wrong. Some are too cash-poor to wait for an increased benefit. Some fear they will die before they can begin collecting. Others believe Social Security will become insolvent and benefits will be cut or non-existent in the future.

A recent study revealed that 96% of retirees choose the wrong timing to claim Social Security at a loss of about $111,000 per household. This is too bad since the average recipient would get 9% more income in retirement if they did make optimal claiming decisions. The study concluded that only 4% of retirees wait until age 70 to claim their benefits when 57% should be doing so.

It also concluded that more than 70% start collecting benefits before age 64 when only 6.5% should be doing so. This is not to suggest that waiting later is always best. While most people are better off waiting to collect until age 70, 43% would be better off collecting earlier.

There are no simple rules of thumb for Social Security planning and timing is far from the only factor to be considered. The best decisions must be highly individualized.

Knowledge and advice are crucial

Your Social Security income is likely an essential part of your successful retirement planning. Don’t get it wrong because you lack the right information. Don’t file for benefits just because you’ve reached a certain age. Take the time to run the numbers and explore at least a few what-if scenarios specific to your life.

You can learn more on the SSA website, which includes a WEP calculator to help you determine what your actual Social Security benefit might be. You might try a Social Security analysis software, such as Maximize My Social Security, which is reasonably priced. For a deeper dive into the mechanics of Social Security and WEP, refer to Navigating Social Security’s Windfall Elimination Program (WEP) With a (Non-Covered) Government Pension, an article written for financial advisors with real-to-life mathematical examples.

Arm yourself with information, but also seek the help of a carefully vetted professional financial advisor to help you with Social Security, WEP, and your overall retirement planning.

When you meet with a financial advisor, they’ll want to discuss many things with you, including the age difference between you and your spouse and your life expectancies, the type of pension you have and its survivor benefits, the amount of your WEP reduction, Social Security benefit amounts for you and your spouse, and the pros and cons of specific timing strategies.

Finally, share your knowledge with your colleagues, not only fellow police officers but firefighters and other first responders as well. Perhaps the sooner, the better.


Carroll D. Navigating Social Security’s Windfall Elimination Provision (WEP) With A (Non-Covered) Government Pension.

Fellows M, Fichtner J, Plews L, Whitman K. The Retirement Solution Hiding in Plain Sight: How Much Retirees Would Gain by Improving Social Security Decisions.

Frank L. (n.d.). Social Security gotchas with WEP and GPO Pensions.

Kotlikoff L. Why retirees are leaving trillions of Social Security dollars on the table.

National Association of State Retirement Administrators. (n.d.). Social Security Coverage.

About the author

Joan Hill is a freelance editor and writer specializing in developmental and substantive editing and rewriting. She’s on a mission to help writers organize and refine their work, resolving broken elements and amplifying strengths. Connect with her on LinkedIn. Joan’s husband is a retired law enforcement officer and founder of LE Drones.