Ask Rusty – Computing benefits when “WEP” applies

by | Jun 13, 2019 | Opinion

Dear Rusty: My wife is subject to the Windfall Elimination Provision (WEP) and I’m trying to calculate what her monthly Social Security payment might be. The circular provided by SS says that her earnings will be calculated by multiplying the first $895 of her average monthly earnings by 90%. According to the circular, since she doesn’t have 30 or more years of substantial earnings the 90% will be reduced to 40%. My question is this: How many months do they use to divide into the total earnings to determine the average monthly earnings? If I use the number of total working years, her monthly average is very low and getting lower the longer she works. For example, she has been working since 1973 (46 years/552 months). However, she only paid SS taxes in 20 of those years (240 months). She turned 62 last November, so if she waits to draw SS until her full retirement age she will add another 56 months to the average calculation and reduce her benefit accordingly. I can’t determine when it’s better for her to apply unless I know how many months they will factor into the calculation. Signed: Confused

 

Dear Confused: First, I need to clarify for you the basics of how SS benefits are determined (before the WEP computation). Social Security will look at your wife’s entire lifetime record of SS-covered earnings, adjust each year’s earnings for inflation, and find the 35 years in which she had the highest earnings. If she doesn’t have a full 35 years of SS-covered earnings, they’ll put zeros in to bring the number of years to 35. They’ll then total her earnings for those 35 years and divide by 420 (the number of months in 35 years) to arrive at her “average indexed monthly earnings” (AIME).

The WEP computation is done using her AIME. To arrive at the SS benefit amount, her AIME is divided into 3 parts, and a different percentage of each part contributes to her “primary insurance amount,” or “PIA” – the amount due at full retirement age. Normally, the first of the 3 parts is 90% of $895 (for her eligibility year, which was last year). But when WEP applies, a different percentage is used for the first calculation. If she has 20 or fewer years of SS-covered significant earnings, the first part is multiplied by 40% instead of 90%. If she has more than 20 years of SS-covered significant earnings, the multiplier will increase by 5% for each additional year, up to 30 years of SS covered significant earnings when WEP no longer applies. So, for example, if she has 24 years of SS-covered significant earnings then the WEP multiplier would be 55% instead of 40%, thus increasing her WEP-PIA and lessening the amount of her WEP reduction.

For each year your wife now works and has significant SS earnings, one of those zero years in the 35-year computation will be eliminated, thus increasing her “AIME” and “PIA” (as described above). If your wife now has 20 years of SS-covered earnings, then each additional year she now works in SS-covered employment will add 5% to the multiplier used when doing the WEP computation (thus reducing the WEP effect and increasing her net SS benefit amount). If your wife claims before her full retirement age (FRA), her WEP-reduced benefit amount will be further reduced because she is claiming benefits early. WEP reduces her PIA, which is her FRA benefit amount; claiming earlier than her full retirement age further reduces her benefit amount.

So, to your specific question, the number of months they factor into the benefit calculation is always 420 (35 years times 12). If she doesn’t have earnings in all 35 of those years working now will improve, not decrease, your wife’s Social Security benefit.

 

For more stories like this, see the June 13 issue or subscribe online.

 

By Russell Gloor

0 Comments

Related News

Why we need a community forum

Why we need a community forum

I am not sure what I expected our country to look like in 2021, but I certainly did not expect it to be so fractured and so bogged down in hate. My oldest son was a year old on September 11, 2001. The wave of patriotism following that day gave me hope for the America...

read more
Rural America needs sound, predictable tax policy

Rural America needs sound, predictable tax policy

They say that nothing is certain in life ex­cept death and taxes. While those two certainties are undeniable, we need to make sure that family-owned busi­nesses, including farms and ranches, aren’t taxed to death. Texas boasts more than 248,000 farming and ranch­ing...

read more
Supporting local journalism supports this community

Supporting local journalism supports this community

The Local Journalism Sustainability Act (LJSA) was recently introduced in the House and has now been introduced in the Senate – and will benefit every member of this community! Unlike many issues in Wash­ington, this legislation has bi­partisan support and is focused...

read more
We’re global now

We’re global now

No matter how hard we try, we really can’t avoid one another. We live in a world where what takes place some­where else on the globe has a very good chance of affecting us, along with many others. The pandemic, of course, is a useful – if sobering – ex­ample. A virus...

read more
Texans’ right to know should be front and center

Texans’ right to know should be front and center

With state lawmak­ers immersed in the COVID-19 pandemic response and Texas’ electricity failures, the public’s access to information must be at the forefront of the Legis­lature’s actions. Information allows citizens to watch over their government, to speak out and to...

read more
Legislators can help prevent trafficking

Legislators can help prevent trafficking

The COVID-19 pan­demic has produced too many tragedies to tally, but here is one that does not get talked about enough: It has worsened conditions that leave children and youth especially vulnerable to com­mercial sexual exploitation, a human trafficking crime. Human...

read more
Texans urged to roll up their sleeves

Texans urged to roll up their sleeves

Gov. Greg Abbott and other Texas leaders are rolling up their sleeves to get the COVID-19 vaccine and to encourage the public to follow suit. “I will never ask any Texan to do something that I’m not willing to do myself,” Abbott said before getting vaccinated at a...

read more