false
Catalog
Windfall Elimination Provision and Government Pens ...
Windfall Elimination Provision and Government Pens ...
Windfall Elimination Provision and Government Pension Offset
Back to course
[Please upgrade your browser to play this video content]
Video Transcription
(upbeat music) <v ->Hi, I'm Yvette with AARP.</v> I lead workshops in my community to help older adults stay connected and age successfully. Let's look at two Social Security rules that affect people who have worked in jobs where they did not pay Social Security taxes on their wages. The Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO. Let's start by watching a short video about the Windfall Elimination Provision. <v Narrator>What's the Windfall Elimination Provision</v> for Social Security? <v Narrator 2>The Windfall Elimination Provision</v> is a rule that reduces Social Security retirement benefits for people who also collect a pension from what's called non-covered employment. Those are jobs in which people do not pay Social Security taxes. <v Narrator>You mean a job</v> in which the employer doesn't withhold FICA taxes? <v Narrator 2>That's right.</v> Today most workplaces participate in Social Security, but some state and local government agencies do not. If you have a non-covered pension, but have also worked at least 10 years in jobs for which you paid Social Security taxes, so that you also qualify for Social Security benefits, the Windfall Elimination Provision kicks in. It can reduce your monthly Social Security payment by up to half the amount of your pension, but it never reduces your benefit to zero. The more covered work you did, that is the longer you paid Social Security taxes, the less the Windfall Elimination Provision cuts into your benefits. To learn more, go to aarp.org/socialsecurity. <v ->All right, now that you have a basic understanding</v> of the Windfall Elimination Provision, let's take it a bit further. Under the Windfall Elimination Provision, Social Security uses a modified formula to calculate the retirement benefit. To understand how this works, we need to first understand how Social Security calculates a regular benefit. Let's hear from Social Security expert, Martin Booker to get the details. Martin, can you please help us out with this? <v ->Sure Yvette, for a worker turning age 62 this year,</v> the formula replaces 90% of average monthly earnings up to a certain amount. Then it replaces 32% of the average monthly earnings of this range of earnings and if the worker's average monthly earnings are above that range, the replacement for the remainder of the earnings drops to 15%. <v ->Got it.</v> So how is the formula different under the Windfall Elimination Provision? <v ->All the steps in calculating the retirement benefits</v> are the same except for one. The step that changes, is that instead of replacing 90% of the first portion of the worker's average monthly earnings, Social Security will only replace 40% of that amount. If the average monthly earnings are more than that, then the 32% and the 15% replacement rates stay the same, so that the workers turning 62 this year, who have a non-covered pension, could lose up to but not more than this amount in their full retirement age Social Security benefit. <v ->Thanks, Martin.</v> Now, let's talk about the other rule called the Government Pension Offset, or GPO. Does the GPO affect Social Security benefits? <v ->The GPO affects Social Security benefits</v> for spouses, divorced spouses, widows, widowers and surviving divorced spouses. When a person is eligible for two Social Security benefits, one benefit offsets the other. In other words, for every dollar I collect from my own Social Security, that's a dollar that I cannot collect from my spouse's Social Security. The Government Pension Offset treats non-covered government pensions in a similar way. Remember a non-covered pension is a pension from a job that you did not pay Social Security taxes on your wages. So if you receive a federal, state or local pension from a non-covered employment, Social Security offsets the benefits you can collect on your spouse's record. The offset is two-thirds of the amount of your government pension. For example, if you have a non-covered government pension of $1,500 per month, Social Security will reduce any benefit you might collect off of your spouse's Social Security record by $1,000, which is two-thirds of $1,500. If two-thirds of your pension is more than the Social Security spousal benefit, nothing would be payable. If two-thirds of your government pension is less than the Social Security spousal benefit, you could collect the difference. <v ->Thanks for explaining all of that, Martin.</v> I know we've covered a lot of complicated material in a short time. If you still have questions and need assistance, you can reach out to your local Social Security office by visiting ssa.gov/locator or calling 800-772-1213 and a representative can help you make an informed decision about your benefits. To find clear and comprehensive information about Social Security, check out this website. For additional information about other Social Security topics and resources, visit learn.aarp.org/socialsecurity. While you're there, be sure to use the Your Questions Answered tool to browse Frequently Asked Questions. If you don't see what you're looking for, you can submit your own question. Volunteer Certified Financial Planner professionals from the Foundation for Financial Planning will answer every question submitted with a personalized response within 10 days via private email. Thanks for watching. (upbeat music)
Video Summary
In this video, Yvette from AARP discusses two Social Security rules: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The WEP reduces Social Security retirement benefits for individuals who receive a pension from non-covered employment where they did not pay Social Security taxes. The reduction can be up to half of the pension amount, but never reduces the benefit to zero. The GPO affects Social Security benefits for spouses, widows, and divorced spouses who are eligible for two benefits. The GPO offsets the benefits one can collect on a spouse's record based on the amount of their non-covered government pension.
Keywords
Yvette
AARP
Social Security rules
Windfall Elimination Provision
Government Pension Offset
×
Please select your language
1
English