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Social Security and collecting a government pension

Working for the government can reduce both your Social Security benefits and your family's.
6 minute read

Points to know

  • The windfall elimination provision (WEP) may reduce your benefits if you receive a pension from a government entity or another organization that didn't withhold Social Security taxes from your paychecks.
  • If you worked in a job in which you didn't pay Social Security taxes and later claim on your spouse's or former spouse's earnings record, the government pension offset (GPO) may reduce your spousal benefits.

Did you work for an employer that didn't collect Social Security taxes?

You're entitled to Social Security retirement benefits if you paid Social Security taxes for 10 years. But not all employers withhold Social Security taxes.

Did you know?

When you check your paycheck deductions, you probably won't see a line for "Social Security taxes."

Instead, you may see a deduction for "OASDI," which is short for "Old Age, Survivors, and Disability Insurance." That's Social Security.

You may also see a separate deduction for Medicare. Social Security and Medicare together make up your FICA (Federal Insurance Contributions Act) deductions.

Some local and state government agencies, public schools, and companies located outside of the United States, for example, may not withhold Social Security taxes and may offer their employees a pension plan instead.

If you work or have worked for an employer that offers a pension plan instead of withholding Social Security taxes (called a noncovered pension), you should be aware of 2 provisions that could reduce Social Security payments.

Windfall elimination provision

If, in the course of your career, you worked for both (1) at least one employer that did withhold Social Security taxes and (2) at least one employer that didn't withhold Social Security taxes and that offers a pension, the windfall elimination provision (WEP) may come into play.

The WEP may apply if you receive both a pension and Social Security benefits. In that case, the WEP can reduce your Social Security payments by up to 50% of your pension amount. This reduction is known as the WEP PIA.

The Social Security Administration (SSA) publishes a chart that shows the maximum amount (in dollars, rather than percentages) that your Social Security benefits would be reduced based on the number of years you paid Social Security taxes.

The rules are complicated, so check with the SSA if you have questions.

Government pension offset

The government pension offset (GPO) is like the WEP, but instead of reducing the worker's benefits, the GPO reduces the benefits for a spouse or former spouse who claims spousal benefits based on a spouse's or former spouse's earnings record.

That is, if you worked in jobs for which no Social Security taxes were withheld and then claim benefits on your spouse's or former spouse's record, you may receive reduced Social Security benefits—or none at all.

The SSA website offers a calculator to help you estimate a spouse's or former spouse's monthly benefits. As with the WEP, the formula for calculating GPO is complicated, so it's best to check with the SSA.

Exceptions to the WEP & GPO

The WEP and GPO may not apply in some cases, meaning that some workers who receive pensions can also receive their full Social Security benefits. The rules are complicated, and we'll provide a few general exceptions here, including how you may be able to avoid the GPO by paying Social Security taxes near the end of your career. Get in touch with the SSA or a financial advisor if you have questions.

30 years of paying Social Security taxes

The WEP won't reduce your Social Security benefits if you worked for 30 years in jobs in which you paid Social Security taxes.

Federal or railroad employment

The WEP doesn't apply if you were hired by the federal government after December 31, 1983, or if the only pension you receive is the result of working for a railroad.

Reservists or ministers

The WEP doesn't apply to military reservists who receive a reservist pension or to ministers who receive a pension for their ministry.

See how it works: Avoiding the GPO: The 60-month exception for government employees

A Vanguard advisor can help

If you're struggling with making your best Social Security decision, we can help. You'll also get a custom financial plan, ongoing portfolio management, investment coaching, and real-time goal tracking—all at a low cost.

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