Windfall elimination penalty (WEP) and spousal benefits for SS

[retired?]

My wife works for a school district and will qualify for a pension in 6 years.  But, she is not a long-time public employee.  At that point, she'd have 9 years with the teacher retirement system and would be 55 years old.

WEP makes some sense if a worker has spent an entire career in govt roles (30+ year career.....SS uses 35 years history for private employees), but it is punitive for those with fewer years since the public pension won't be that high.  I would like to avoid the penalty and am trying to determine if she should stop working for school district just prior to turning 55 (assuming she still wants to work anyway).

So, without going into detail, my main question is:

     If half my SS benefit is higher than my wife's benefit, and she qualifies for a pension from teaching work, would she still be penalized or simply take the spousal benefit?

This seems unreasonable, since if she never worked a day in her life, she'd be able to claim half my benefit (or a lowered amount if taking early).

I've read that if I were subject to WEP, then if she claimed spousal, her benefit would be affected the same % as mine.  That makes sense.  I don't want to suggest that she stop working if she wants to continue.  I haven't found this detail elsewhere.

[Spicolli]

There are safeguards for those with small pensions. WEP will only take up to half the pension amount, so, as I understand it, if your wife earned SS income of say $20K and she earned a pension of $10K, half the pension ($5K) would be deducted from her SS and she would get $15K from SS and $10K from the pension for $25K total.

Her spousal benefits would be affected by a different government policy...the Government Pension Offset. That says if she qualified for a normal spousal SS benefits of say $20K again and had the $10K pension, 2/3 of her pension would be subtracted ($6.6K) from the $20K...leaving her with $13.4K from SS and $10K from the pension for $23.4K total.

Here are a couple of links for more details:

WEP: https://www.ssa.gov/pubs/EN-05-10045.pdf
GPO: https://www.ssa.gov/pubs/EN-05-10007.pdf

I think I understand the logic of the GPO, as spousal benefits were initially supposed to cover spouses who stayed home to raise the family...something that is rare these days. From my POV the WEP seems pretty unfair though, as if you paid money into SS from other work you did, you should get the same benefits as someone who paid the same amount into SS.

[Captain FIRE]

If she worked 20-30 years in SS contributing jobs, I believe she can also get the WEP reduced (10%? each year).  So if she worked 30 years for Private Company and 9 years for Government, she'd get both the full SS benefits and the pension.

That said, for those under the 20/30 year mark (me!), yeah, it sucks.   I understand the policy was enacted because of the break points for SS (those who contributed a small amount get a lot of value back out), but I wish there was a better way to manage that issue.

[terran]

I did a bit of research on this recently for a family member.

First, realize that WEP only applies if your pension is from a position that did not pay in to social security. This is true for some states/districts and not for others.

According to https://www.ssa.gov/pubs/EN-05-10045.pdf if you have 30 or more years of substantial earnings under Social Security then the WEP reduction doesn't apply. They include a table of what constitutes "substantial earnings" but the amounts are pretty low, so if your wife worked full time for 30 years before becoming a teacher it seems pretty likely she won't see a reduction. If she didn't work 30 years then she'll see some reduction, but it might not be a lot if the pension is small and/or she had quite a few years working. The previous link discusses it, or this one might be a little more user friendly: https://socialsecurityintelligence.com/teachers-retirement-and-social-security/. The key take away for me from that link is that the most WEP can reduce your benefit is $463/month or 1/2 of your pension (whichever is less) and it goes down from there to $0 if you have 20-30 years of substantial earnings

Since it sounds like 1/2 of your Social Security might be more than your wife's full benefit, the Government Pension Offset (GPO) might be a bigger issue for you, since unlike the WEP reduction, my understanding is that a GPO reduction isn't effected by the time she worked in a covered position, so her pension could have a bigger effect here. You can learn more about the GPO here: https://socialsecurityintelligence.com/the-government-pension-offset/. Note that if she is eligible for her own benefit, the spousal benefit is only the difference between her benefit and 1/2 of your benefit, so I would think only that difference, not the whole benefit would be subject to GPO. I don't know for sure though.

[terran]

I think I understand the logic of the GPO, as spousal benefits were initially supposed to cover spouses who stayed home to raise the family...something that is rare these days. From my POV the WEP seems pretty unfair though, as if you paid money into SS from other work you did, you should get the same benefits as someone who paid the same amount into SS.

I haven't looked terribly closely at the logic or the math behind the WEP reduction, but I think the idea is that it's supposed to adjust for the fact that social security is progressive in the sense that people with lower earnings get a larger benefit in proportion to earnings than high earners. Without the WEP reduction a teacher with Social Security eligible years before becoming a teacher will "look" like lower earner than they really were when you do the social security calculation, so they'll get proportionally more than they paid in to social security than someone who continued to work and be covered by social security instead of becoming a teacher. Instead, the teacher switches career's, no longer pays in to social security and should (in theory) get a social security like benefit in the form of a pension, so WEP is just meant to even things out so it's they get a Social Security plus pension benefit more equivalent to what the non-teacher who continued to pay in to social security will get. That's my understanding of the theory anyway. Whether or not it works, or is fair, in practice I don't know.