Windfall Elimination Provision (WEP), Social Security and IRA’s
Prior to government service I earned enough credits in the private sector to qualify for Social Security benefits.
During government service we do not pay into Social Security. Would the WEP apply to future SS benefits? What effect does the WEP have on people who have qualified for SS and also have have on traditional or Roth IRA’s?
Permalink Submitted by William Tuttle on Fri, 2016-08-19 00:04
You only need 40 quarters (10 years) of minimum earnings to qualify for SS. However, ou need 30 years of “substantial SS earnings” to completely eliminate WEP. Refer to this document on the SSA site https://www.ssa.gov/pubs/EN-05-10045.pdf
Permalink Submitted by Alan - IRA critic on Fri, 2016-08-19 00:07
If the WEP applies with the affect of reducing SS benefits below the amount that would have been received if a person only worked in jobs subject to the payroll tax, it just means that there will be less taxable income subject to inclusion in AGI due to TIRA distributions. Taxable TIRA distributions increase AGI which in turn can result in more SS benefits included in AGI up to 85% max. Qualified Roth IRA distributions do not have this effect because they are not included in AGI.