Getting SS Credits for Benefit by Federal Retiree

Question Follow Up by Nanette:
Thank you for the information on your blog to my question. I don't think this exemption applies in my case as I retired on an early out due to down-sizing in 1997. If I work for several additional years to earn the quarters I need, how would that affect my social security/pension?
Nanette from Penn.



Answer:

The amount of your social security benefits will likely be limited by the Windfall Elimination Provision (WEP). This is designed to reduce the benefit amount for government pensioners who become eligible for a SS retirement benefit due to second-job employment. The computation of the regular ss benefit is weighted to advantage lower income workers. The calculation provides for a decreasing sliding scale percentage of worklife earnings. See Section Chapter 7, Sect. 702.2 of the Social Security Benefits Handbook, online edition at SocialSecurityBenefitsHandbook.com for a discussion of how benefits are calculated.



The WEP reduces the percentage for the first level of average wages from 90% to 40%. After that the percentages are the same. This will significantly reduce your SS retirement benefit because your average monthly SS covered earnings will be low. There are exemptions from the WEP for those who have at least 21 calendar years of substantial earnings in each year, but from what you have said, you will not be eligible for this exemption.



Note that to get the needed credits, called Quarters of Coverage (QCs), you need not work year-round. You will receive one QC in a given year for each increment of the annual amount required in that year. For example, in 2008, you need to earn $1,050 to get credit for one quarter. If you earn $4,200 in 2008, even if you earn it in just one calendar quarter, you will receive 4 QCs. But you cannot use the credit for a future quarter until the first day the quarter "arrives," so to speak. As you probably know, you need another 13 QCs on top of the 27 you already have.