Social security and pensions

There is nothing that precludes you from getting both a pension and Social Security benefits. 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.

But say you worked for and get a pension from a “non-covered” employer, one that did not withhold Social Security payroll taxes. Your benefits might be cut under a rule called the Windfall Elimination Provision (WEP).

WEP applies primarily to federal workers hired before 1984 and employees of some state and local government agencies. (Employees of companies in other countries might also be affected.) The formula for figuring the benefit cut is complicated, but the more time you spent in covered employment, the less the WEP reduction. There’s also a cap: Your Social Security retirement benefit can’t be cut by more than half of the amount of the non-covered pension, and it cannot be eliminated entirely.

A similar rule, the Government Pension Offset (GPO), reduces Social Security spousal or survivor benefits for spouses, widows and widowers who also collect a non-covered pension from their government jobs. The reduction can be up to two-thirds of the government pension amount, and under this rule — unlike with the WEP — your spousal or survivor benefit could be zeroed out.

The Social Security Administration provides more details on the WEP and the GPO.

Keep in mind

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.