Hi Larry. I retired from the USPS I understand there is a windfall but my question is Is there a maximum or is it a straight 50% for under 20 years work under social security by the way if I wait to 70 I will have 22 years with substantial contributions will that put me at 40% thank you

Hi,

There is a Windfall Elimination Provision (WEP) guarantee that limits the amount of reduction resulting from WEP to no more than 50% of a person's non-covered pension. The WEP guarantee is only used, however, if it results in less of a reduction to a person's benefit rate than would be caused by the regular WEP calculation formula.

The WEP calculation formula is more complex than just a simple percentage reduction in a person's benefit rate. Social Security retirement benefits are calculated using an average of a person's highest 35 years of Social Security covered wage indexed earnings (https://www.ssa.gov/pubs/EN-05-10070.pdf). The average indexed monthly earnings (AIME) are then divided into up to 3 tiers, and each tier is multiplied by a different percentage. The normal percentage applied to the first (lowest) tier is 90%, and the second and third tiers are multiplied by 32% and 15%, respectively. The resulting amounts from each tier are then added together to arrive at the person's benefit rate.

When WEP applies, the multiplier used for the first tier in the calculation described above is 40% instead of 90% (https://www.ssa.gov/pubs/EN-05-10045.pdf). However, if a person has more than 20 years of substantial Social Security covered earnings then the percentage is increased by 5% for each year of substantial earnings in excess of 20 years, up to a maximum of 30 years at which point the WEP calculation yields the same benefit rate as the standard computation method (i.e. 90% of the first tier).

Our software (https://maximizemysocialsecurity.com/purchase) is fully programmed to handle benefit computations involving WEP, so you may want to strongly consider using the software to help you with your Social Security planning.

Best, Jerry