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Will My Social Security Benefits be Reduced?

The Social Security Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) are just two examples of how financial planning for public sector workers can differ from their private sector counterparts.

Both can impact your Social Security benefits if you:

• work (or worked) for an employer who didn't withhold Social Security taxes, such as some state and local government systems,
• receive a pension based on that work, and
• qualify for Social Security benefits based on other employment.

The WEP can reduce what you, or your spouse or a child, could get based on your earnings.

The GPO can reduce what you could get based on a current, ex, or decedent spouse's earnings.

The Social Security Administration knows when you didn't pay into Social Security – in fact, your Social Security Statement will reflect that by showing $0 earnings years – but it doesn’t know if you will be entitled to a pension. So your Statement won’t reflect any WEP reduction.

It's critical to understand and plan for both the WEP and GPO if you're impacted by them. Otherwise you may overestimate your retirement income and be in for a nasty surprise.

If you're subject to the WEP, its impact may be lessened.

• • First, the reduction in benefits can’t exceed ½ the pension you receive from an employer who didn't participate in Social Security or $428/month, whichever is less.
    
    Example:
    You are projected to get $1,428 in monthly Social Security benefits
    You get a pension benefit of $1,000 a month.
    WEP reduces your Social Security benefit by $428, so you get $1,000 instead.
  • While it could also affect how much your spouse could receive based on your earnings, it doesn’t affect spouse survivor benefits. Upon your death, your spouse could receive a survivor benefit based on your unreduced benefit even if your benefit was reduced by the WEP.
  • The WEP's impact is reduced if you have 21 to 29 years of "substantial earnings", as defined by the Social Security Administration, and doesn't apply at all if you have 30 or more year's worth.

The GPO can reduce the benefit you get from your spouse’s earnings by up to two-thirds. Unlike the WEP, there is no limit on the reduction so it can completely eliminate your spousal benefit.

Example:
You get a $600 a month pension from employment not covered by Social Security
You are scheduled to get $500 a month in spousal benefits.
Your spousal benefit could be reduced by two-thirds of $600, or $400, down to $100 a month.

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