Hi everyone, Erik Bowman here. And today we are talking about the Windfall Elimination Provision and government pension offset, as it relates to social security files.

We’re talking about it so that you don't make a major social security filing mistake that could cost you thousands in social security income. The first thing that we need to understand is who do these rules apply to? They apply to participants in non-covered pensions, typically a federal state or local defined benefit pension. Participants in these types of non-covered pensions do not pay social security taxes while they're earning their wages, because of that Windfall Elimination Provision and government pension offset apply. The Windfall Elimination Provision is a reduction in your personal social security benefits. If you have qualified for social security benefits. Government pension offset is a reduction in any type of spousal benefit that you may receive. 

Now, how do we calculate these reductions? Well, Windfall Elimination Provision is a pretty complex calculation and we use the social security administration detailed web calculator. And you can find that on ssa.gov. When you input all of your history of earnings and some of your pension information, it's going to calculate what your reduced benefit is.

If you look on page two of your social security statement you're going to see that if you've qualified for a social security benefit, but your part of a non-covered pension, the bottom of that page actually states in the fine print that the numbers above are incorrect and you must solve using the windfall elimination provision calculator. Government pension offset is a lot simpler calculation. The way the government pension offset works is if you qualify for a spousal or a survivor benefit, you have to subtract two thirds of your monthly pension from the social security spousal benefit you were going to receive, and you get the difference. 

For example, if you have a $3,000 a month non-covered pension and you do a spousal benefit of $2,000 a month, the math looks like this. Take two thirds of 3000, which is $2,000, subtract it from your $2,000 spousal benefit. We can see that that equals zero. That means you will receive no social security spousal benefit in that example. 

So why is this important? Well, first, if you've calculated a retirement plan that includes social security benefits that you may not actually get, that could lead to significant income reductions that you don't expect, which could hurt your retirement planning. Secondly, it allows you to start thinking about strategies to offset the risk associated with both web and GPO. For example, if your spouse passes away and you need some social security income, there are some life insurance strategies that you may want to consider. So that social security income can be replaced if you're not going to get any because of the government pension offset calculation.

Also consider joining our Facebook group retirement simplified. I look forward to speaking with you all again soon. Thanks for watching

To watch other webinars. Go to Bowman financial strategies.com and learn about topics like social security, maximization, Roth conversions, and tax efficient distribution strategies and retirement.