Can a Pension Affect Your Social Security Benefits?

A lot of people hope to retire with Social Security and a pension, maybe augmented by savings. If you fall into that category, you should know whether the amount of spending money you have available will be sufficient to pay your expenses.

However, it may be challenging to complete your retirement plan if you still have unresolved concerns regarding these sources of income. You may be curious about how taxes will be paid, if your pension will have an impact on Social Security, or how much Social Security you can expect. What you should know about Social Security and pensions when you retire

Yes, receiving a pension can affect your Social Security benefits in two ways:

1. Windfall Elimination Provision (WEP)

Impact: Reduces your Retirement or Disability benefits if you receive a pension from an employer who didn’t withhold Social Security taxes.
Commonly affects: Government work or work in other countries.
Avoidance: Pay Social Security taxes for 30 years on enough work outside your pension-earning job(s).

2. Government Pension Offset (GPO)

Impact: Reduces your Spousal or Survivor benefits if you receive a pension from a government employer who didn’t withhold Social Security taxes.
Learn more: See the GPO fact sheet (PDF) for details.

Estimating Benefit Reductions

Retirement or Disability benefits: Use the WEP chart (PDF) to estimate the maximum reduction based on years of “Substantial Earnings.”
Spousal or Survivor benefits: Enter your monthly employer pension before taxes in the provided tool to estimate the maximum reduction.

Understanding the Reductions

WEP: Aims to prevent individuals from receiving full Social Security benefits while also receiving pensions from jobs that didn’t contribute to the Social Security system.
GPO: Ensures fairness in spousal and survivor benefits by offsetting them with government pensions that weren’t funded by Social Security contributions.

Situations Where Benefits Won’t Be Reduced

WEP:

Pension isn’t based on your earnings.
You paid Social Security taxes for 30 years on enough work outside your pension-earning job(s).
You meet specific requirements related to your government employment and Social Security contributions.

GPO:

Pension isn’t based on your earnings.
You’re a government employee who paid Social Security taxes on your government work.
You meet specific requirements related to your government employment and Social Security contributions.
You received a government pension before December 1982 and meet certain criteria.

Additional Considerations

Contact Social Security: For further clarification or assistance, contact Social Security through their website or toll-free numbers.
Medicare eligibility: Even with reduced benefits, you may still qualify for Medicare at age 65 based on your spouse’s work record if you’re not eligible on your own.

Understanding how pensions can affect your Social Security benefits helps you plan for retirement and make informed decisions. By utilizing the provided resources and contacting Social Security if needed, you can ensure you receive the benefits you’re entitled to.

How noncovered pensions can lower your benefits

If you have a noncovered pension but you still qualify for Social Security because you earned credits through a different job, then the Windfall Elimination Provision (WEP) may apply to you. Under this provision, the Social Security Administration uses a smaller percentage of your earnings in its formula for calculating the PIA so that the result is a smaller benefit. The WEP can cut your benefit by as much as half of your pension amount, although it cant bring your benefit all the way down to $0.

If you qualify for a spousal benefit or survivors benefit, a noncovered pension can reduce that benefit under the Government Pension Offset (GPO). This provision cuts your benefit by two-thirds of your pension amount, and you can end up with a $0 benefit if your pension is large enough.

Exceptions to the WEP and GPO

You were employed by the federal government in 1984 or later.

You work for a nonprofit organization that satisfies additional requirements and was exempt from Social Security as of December 31, 1983.

You only have a railroad pension.

The portion of your income that wasn’t subject to FICA taxes was earned before 1957.

You’ve made significant income for at least 30 years, during which time FICA taxes have been paid.

How Pension Income Affects Social Security Benefits

FAQ

Can you collect Social Security and a pension at the same time?

Can you collect Social Security and a pension at the same time? You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages.

How much will my Social Security be reduced if I have a pension?

How much will my Social Security benefits be reduced? We’ll reduce your Social Security benefits by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits.

Does having a pension reduce Social Security?

Your Social Security benefit might be reduced if you get a pension from an employer who wasn’t required to withhold Social Security taxes. This reduction is called the “Windfall Elimination Provision” (WEP). It most commonly affects government work or work in other countries.

Does pension count as income?

If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable unless the payment is a qualified distribution from a designated Roth account.

What happens if I get a pension from work not covered by Social Security?

When you get a retirement or disability pension from work not covered by Social Security, we may calculate your Social Security benefits using a different formula. This lowers your Social Security benefit. We do this whether your pension comes from work you did for a U.S. government agency or in a foreign country. More Information

Can a pension reduce Social Security payments?

But there are some types of pensions that can reduce Social Security payments. If your pension is from what Social Security calls “covered” employment, in which you paid Social Security payroll taxes, it has no effect on your benefits. The vast majority of Americans work in jobs covered by Social Security.

Do pensions count toward social security benefits?

Pensions are not counted toward the earnings test that can reduce your Social Security payments if you continue to work after claiming benefits. Pensions do count toward income for the purpose of determining whether you pay taxes on your Social Security benefits. Nothing precludes you from getting both a pension and Social Security benefits.

Does a non-covered pension affect social security?

Changes in the amount of a non-covered pension generally do not affect the Social Security benefit. However, if that pension is suspended and you are no longer entitled to it, Social Security may be able to increase your benefit. Pension income does not count against the Social Security earnings limit, regardless of the pension’s source.