Does WEP Make A Difference In When I Should Start Drawing Benefits?

Sep 12 2016 - 11:15am

I taught overseas for the Dept. of Defense Dependents Schools (Dodds) for 10 years and paid Social Security for 40 quarters. I have a small federal retirement w/Dodds and a Texas Teacher's Annuity. The Texas Teacher's Annuity doesn't pay social security so a Windfall Provision reduces my SS. There is talk of doing away with it, but no telling when. Having taught for Dodds overseas and paid SS, should I be penalized since I was teaching for the U.S. Government for those ten years? Is it better to take SS now at 69 or wait until May when I'm 70 to see what happens with Windfall? Which is more beneficial to me?

Hi,

If you receive an annuity based on work that was exempt from Social Security taxes, your Social Security will potentially be reduced by the Windfall Elimination Provision (WEP) regardless of where you worked when you paid into Social Security. There are exceptions, but it doesn't sound like any of them would apply to you (https://www.ssa.gov/pubs/EN-05-10045.pdf).

Even with a reduction for WEP, the percentage difference in your benefit amount starting now vs. at age 70 would be the same. Delayed retirement credits increase your benefit amount by 2/3rds of 1% per month, or 8% per year, so that's what you'll gain by waiting until age 70.

If Congress does change the WEP provision, which seems doubtful given that the provision has been in effect for over 30 years now, my guess is that any changes they make would apply to you regardless of when you start drawing your benefits.

Best, Jerry