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Financial Questions & Answers

Financial Questions & Answers

Question:

I will retire in three years and have paid my required 44 units to Social Security. My employer does not deduct Social Security from our pay. I was told my Social Security pay will be reduced by a percentage when I retire. Is that true? – Nicolas

Answer:

Thanks for your service to our country and our kids. Yes, I’m afraid there is some truth to that rumor. Social Security retirement benefits are subject to what is called the Windfall Elimination Provision (WEP). Social Security is meant and structured to replace a greater percentage of low-income workers’ pre-retirement earnings. The idea behind WEP is to ensure that folks with non-Social Security-covered earnings, such as your teaching career, don’t receive “too much” Social Security (since without this provision it would seem, based on the Social Security calculation, that you were a low-income earner, when that isn’t necessarily the case).

The good news is that if you have 30 or more years of “substantial” earnings in a Social Security-covered job – meaning you contributed to Social Security, as you did in the military – your Social Security will not be impacted by WEP. If you have 21 to 29 years of substantial earnings in Social Security-covered work, however, the payment will be reduced. This may seem tricky and complicated, but the WEP link (http://www.ssa.gov/pubs/10045.html) gives you all the information, and there’s also a calculator to figure out exactly how much Social Security you can count on. Thanks for all your contributions to our society.