Why is the WEP reduction so severe?
The SSA uses a lower formula to calculate the WEP, which is best explained through examples. Example 1: Terry worked only in SS-covered employment during her career. The SSA calculates her retirement benefit based on her average monthly earnings adjusted for inflation. It separates the average earnings into three amounts. It then multiplies each amount by a percentage, known as a factor. In Terry’s situation, the SSA multiplies: The first $606 of Terry’s average monthly earnings by 90 percent; The second $3,046 by 32 percent; and The remainder by 15 percent. Example 2: Terry worked in non-SS-covered employment for the majority of her career and only a few years in SS-covered employment. SSA reduces the 90 percent factor to 40 percent. Thus, it multiplies Terry’s first $606 by 40 percent, not 90 percent.
