Ask Larry

Is It Better for a Spouse Not to Earn 40 Credits Due to the WEP?

My wife (born Oct. 1952) has been employed as a teacher for over 30 years in several US and international school systems. After ten years of teaching in Texas, she took her Texas Retirement System (TRS) amount of $604/month when we moved out of state for new employment. Some of her other employment settings contributed to Social Security and she now has 37 credits.

I have beyond 40 credits (born Nov. 1952) and my SSA account currently estimates I will receive $1699/month at FRA in Nov. 2018. If I apply for benefits at FRA (Nov. 2018), the SSA representative said I would receive about $1699/month and if my wife then applies for spouse benefits, she would receive 50% of my benefit -- approximately $850/month without any deduction for WEP because she has 37 credits and would not qualify for individual benefits -- other than Medicare. Is this accurate?

In the next several months, we may be offered teaching positions in a system which would contribute to each of our Social Security accounts (FICA) and each of us would earn credits based on individual salaries of approximately $60,000+ per year. We would expect to be in these new positions for 2 or 3 years. If we accept these new positions, then my wife certainly will earn the additional credits to receive full SSA benefits -- but also the possibility of a reduced monthly amount due to WEP at her full retirement age (66) in Oct. 2018 since she has taken the Texas retirement amount of $601/month. The SSA cannot give her an estimate of her potential monthly benefit amount once she reaches 40 credits -- but we estimate the amount to be between $450-$650 per month at her FRA. Is it better for her not to cross the threshold of 40 credits and apply for spouse benefits based on my earnings record? Thank you, Randy

Hi Randy, You are operating with a lot of misinformation. First, when your wife takes her spousal benefit it will be reduced due to the Government Pension Offset by two thirds of her non-covered pension from the Texas teaching system. So, the SSA representative gave you half the story. Your wife can't get hurt by gaining 40 quarters of coverage and becoming eligible for her own retirement benefit. True, it will be reduced due to the WEP, but it won't be zero and it can't be reduced by more than half of her non-covered pension. What she will receive will be her own WEP'd retirement benefit plus her GPO'd pension. The good news is that when you die, the GPO goes away. So her widows benefit will be equal to your monthly check. They will describe this as giving her her WEP'd retirement benefit plus her excess widows benefit, but it will add up just to your check.

Taking your benefit at 66 is surely not optimal. I recommend you run our software and see what it suggests. It may suggest that, leaving out the earnings test, you wife take her retirement benefit as soon as she gets 40 quarters and then have you take a full spousal benefit on her work record (It too will be GPO'd based on your pension). Our software will handle everything including the earnings test and both of your WEPs and GPOs.

My best, Larry

Jun 4 2016 - 6:30pm
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