Sirkingcat

Additional clarifications help on WEP.
I have an expat pension of 29 years 14 of which, I was in the USA so I paid social security on that pension the remaining years I was in remote locations eg russia, Nigeria etc. how is this treated in determining WEP is this a covered pension, partly covered pension or not covered?

Also for one of those years I worked in USA and uk for around 6 months each and paid Social security and NI to uk and us. How would this be treated. As I managed to pay into my expat employer pension, uk employer pension, social security and NI in the same year. Is that year, going to be covered?

Cape Blue

Ugh, that was a new one on me, I realised my UK NI state pension would generate some WEP but not my UK work pensions as well - maximum WEP here I come! (I only had 42 quarters of SS payment).

durham_lad

I mentioned that fact above, and I have done the WEP calculations and my UK private pensions WEP me to the max, for me, before I even get to the OAP.

The calculator below is very good. You just need your latest statement from SSA showing all your years. It doesn’t take long to type in 25 figures or so.

https://www.ssa.gov/benefits/retirem...iaWepjs04.html

Cape Blue

But if I delay my private pension to age 67 and take my SS at 62 it looks like I’ll get 5 years of no WEP before the UK state pension kicks in.

durham_lad

I believe that is correct. You will be asked when you expect to receive private pensions and as long as you don’t delay beyond your full retirement age (FRA) I don’t believe you’ll have a problem. If you delay beyond FRA then I think WEP will be applied based on the value of your pension at FRA, not when you actually receive it.

Pulaski

I don't know if your circumstances would allow it (it would depend on what sort of private pension you have, and the value of it), but have you considered drawing down your UK private pension and living entirely off that, i.e. depleteing the fund entirely, before claiming your US SS? This is now possible as, to the best of my understanding, private pensions in the UK are no longer required to be used to purchase an annuity, and can be drawn down and spent piecemeal at the owner's discretion.

So although this would be foolish for most people under most circumstances, in your case*, it might make sense to use up your pension fund before claiming US SS, thereby dodging WEP at least on your private pension. If the value is sufficient, you may even have the option to defer claiming SS beyond your 67th birthday and actually get an increase to your SS - and of course you'll get substantially more each month just by deferring claiming SS until you reach the age of 67.

* Please note, I am not a financial advisor and I am not offering you financial advice.

durham_lad

correct.

This is how it works these days plus the first 25% of the drawdown is UK tax free. My wife’s brother is doing this right now. He took his 25% and invested it and is drawing it down. When that is depleted he will move onto the tax deferred investments.

Russet

There are so many factors to take into account. We have been considering the same approach but I believe with a full state pension (all from employment) and less than 20 years SS - we will be close to full WEP anyway regardless of any early distributions from a small private pension. I will need to plug in some scenarios into the calculator but have been deferring this project in the hope that the rule will be abolished in the next few years!

However, One question I cannot seem to find the answer. My husband will have a much higher SS pension than me but will probably be subject to the full 50% WEP. Although I do qualify for SS, under normal (non WEP) circumstances, I would have claimed under his SS (50%). However I am not sure if the spousal SS benefit I could receive is calculated pre or post his WEP adjustment? Then, as I would also be in receipt of the state pension, would my SS pension would be WEP'd again!

durham_lad

My wife and I are in a similar situation and this is how it is playing out for us. Firstly, to be clear, the max amount that can be WEP reduced is 50% of SS up to the first "bend point" and that max for 2023 is $557/month, so if your monthly SS works out to be $2,000/mo and the max WEP is applied it will go down to $1,443/mo.

My wife started taking her SS payments in 2021 and they were reduced by WEP by her OAP.

I will start taking my SS at age 70 in 2025 and it will get reduced by WEP by about $400/mo (I have more than 20 years contributions but less than 30). At that point my wife's SS will be boosted up to half my SS since she is receiving less than half now, and started her SS benefits at full retirement age.

www.ssa.gov/pubs/EN-05-10044.pdf

I am not certain but think that her SS will be boosted to half of mine less her own WEP amount that has already been applied. If her WEP amount that was applied in 2021 was a reduction of $350/month then that will stay the same, it won't increase. I THINK

Russet

Thanks Durham Lad for the detailed response as ever.
Just to clarify, and apologies it helps me to use real numbers! If your SS is for example $2k /mth and reduced by $400 WEP to $1600/mth, would the 50% spousal pension be $1k or $800/mth? Following on, if her WEP stays as $350 - are you expecting her boosted SS pension to be $650/mth or $450/mth? Hope this makes sense.

durham_lad

I don’t know the answer but I THINK her SS would be boosted to 50% of $2k/mo and her WEP will stay the same at at $350/mo leaving her with $650/mo.

I’ll know for sure in about 18 months.

kateg60

As I understand WEP only applies if you have less than 40 qualifying years?

durham_lad

It mostly applies if you have less than 30 years. It starts going down after 20 years of "substantial earnings" and is at its lowest at year 30.

Full details are here including the substantial earnings limit year by year:

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

Russet

Thanks again - yes it would seem to make sense otherwise it is double WEP! I will keep my fingers crossed for you in 18 months

durham_lad

Thanks, I will be sure to make a report somewhere on the process and results.