Many people look forward to retiring with a pension and Social Security, perhaps supplemented by savings. If you're in that group, you'll want to know how much spending money you'll have to work with and whether it will cover your bills.
But it can be difficult to finalize your retirement budget if you have unanswered questions about these income streams. You might be wondering how much Social Security you can expect, if your pension affects Social Security or how taxes are going to work. Here's what you need to know about retiring on your pension and Social Security.
How your Social Security benefits are calculated
Several factors determine if you qualify for Social Security and how much you'll get.* First, you need to earn enough income over your career to gain
Once you've met that requirement, the Social Security Administration
The amount you actually receive might be higher or lower than the PIA depending on your age when you
Working while you
Your benefit also can go up over time as the
Benefits for spouses, former spouses, widows and widowers
If you're married but have fewer than 40 credits,
If you're divorced and you meet some conditions, you may be eligible for a spousal benefit that's up to half your former spouse's benefit at their full retirement age.
If your spouse has died, you may be eligible for a
Does pension affect Social Security?
Usually, receiving a pension doesn't change the Social Security benefits you're eligible for. As long as your employer withheld FICA taxes, which are the payroll taxes that pay for Social Security and Medicare, you're all set.
But if your employer didn't take FICA taxes out of your paycheck—typically because you worked in a foreign country, your employer was a U.S. state or local government or you worked for the federal government several decades ago—then a pension you receive from that employer is considered a noncovered pension. Income from a noncovered pension can reduce your Social Security benefits.
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
If you qualify for a spousal benefit or survivor's benefit, a noncovered pension can reduce that benefit under the
Exceptions to the WEP and GPO
If any of these situations apply to you, then the WEP won't reduce your benefit:
- You work for the federal government and were hired in 1984 or later.
- You work for a nonprofit that was exempt from Social Security on December 31, 1983, and meets some other conditions.
- You only have a railroad pension.
- Your earnings that weren't covered by FICA taxes were from before 1957.
- You have at least 30 years of substantial earnings on which FICA taxes were paid.
The GPO typically won't affect your benefit if any of these is true:
- You get a government pension that isn't based on your earnings.
- You're a government employee, you have a government pension from work that was covered by FICA taxes, and you meet one of a few other requirements.
- You work for the federal government, you switched from the Civil Service Retirement System to the Federal Employees' Retirement System after December 31, 1987, and you meet one of a few other requirements.
- You received or were eligible for a government pension before December 1982, and you qualified for spousal benefits under the rules in place in January 1977.
- You received or were eligible for a government pension before July 1, 1983, and you had one-half support from a spouse.
Does a pension count as earned income for Social Security?
The Social Security Administration doesn't view a pension as
If you start taking Social Security before your full retirement age, a pension won't count toward your earned income limit.
Looking up your Social Security benefits
You can open an
In addition, the Social Security Administration offers a
A financial advisor can help you get ready for retirement
Social Security regulations are complex, but a knowledgeable expert can help you navigate them. Connect with a Thrivent