What is the maximum percentage by which WEP can reduce your Social Security check?

The correct answer is that the Windfall Elimination Provision (WEP) can reduce your Social Security check by a maximum of 50%. This reduction applies to retirees who have other pensions from work where they did not contribute to Social Security, typically in jobs that are covered by different retirement systems.

The WEP recalculation uses a modified formula in determining benefits for individuals affected by this provision. Instead of using the standard formula, which has different bend points for the computation of the primary insurance amount (PIA), the WEP formula reduces the first bend point percentage from 90% to 40% for those who have fewer than 30 years of substantial earnings in Social Security-covered work. This adjustment can significantly impact the amount of Social Security benefits received.

Those with more than 30 years of substantial earnings are generally not affected by the WEP. However, it is crucial to understand that the maximum reduction is capped at 50%, which indicates a considerable decrease from what someone would normally receive based on their earnings history, thus emphasizing the importance of understanding how the WEP may impact retirement income planning.