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Does a pension reduce my Social Security benefits?

 

In the vast majority of cases, no. If the pension is from an employer that withheld FICA taxes from your paychecks, as almost all do, it won’t affect your Social Security retirement benefits.

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If there was no such withholding, you may be subject to the Windfall Elimination Provision (WEP), which covers people who earned pensions from such "non-covered" jobs but also qualify for Social Security due to other work.

For these workers, Social Security uses a modified formula to calculate the full-retirement-age benefit amount. This formula results in a lower Social Security benefit but never reduces the benefit to $0.

The WEP primarily affects retirees from some state and local government bodies and federal workers hired before 1984, when the U.S. civil service was brought under the Social Security system. About 1.9 million people, or 3 percent of Social Security recipients, have their benefits reduced by the WEP, according to the Congressional Research Service.

A similar rule, the Government Pension Offset (GPO), affects spouses, widows and widowers who collect spousal or survivor benefits from Social Security and also receive pensions from federal, state or local government jobs that did not withhold Social Security taxes. Their benefits are reduced by two-thirds of their government pension — and can be eliminated entirely if that two-thirds exceeds the Social Security payment. 

Keep in mind

  • 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.

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