Pacific United Planning, Inc. | Will I receive spousal or survivor Social Security if I have a government pension?
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01 Aug Will I receive spousal or survivor Social Security if I have a government pension?

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Will I receive spousal or survivor Social Security if I have a government pension?

 

Spousal and survivor Social Security benefits. Retirement plans and government pensions. Exceptions and more exceptions.

You’re a government employee and you have a government pension coming, but what about your partner’s retirement plan? You may be entitled to some of their Social Security benefits, but does your government pension influence what you receive? It turns out it does, and the government has the details down to a T.

First things first. What are you entitled to?

You can collect up to 50% of your spouse’s Social Security benefits instead of your own. This is good if your own benefits are less than that. If you’re a widow or widower, you can collect up to 100% of your late spouse’s benefits.

Now is when the Government Pension Offset enters the picture.

The Government Pension Offset reduces your spousal or survivor Social Security benefits if you receive a government pension on which you didn’t pay Social Security taxes.

However, the Government Pension Offset doesn’t apply if:

  • You have a private company pension.
  • You’re collecting both a government pension and Social Security based on your own work history. Keep in mind the Windfall Elimination Provision may apply.
  • Your government pension is not based on your own earnings.
  • Your government pension is from a job for which you paid SS taxes and:
    • Your last day of employment that your pension is based on is before July 1, 2004; or
    • You filed for and were entitled to spousal/survivor benefits before April 1, 2004; or
    • You paid SS taxes on your earnings during the last 60 months of government service.

Keep in mind that if you remarried before the age of 60, you are not entitled to a survivor benefit.

If you’re still with me and those exceptions don’t apply to you, let’s look at the calculation. You have a government pension and are entitled to spousal or survivor Social Security benefits. What happens when those two worlds collide?

Spousal or Survivor Social Security Benefits vs. Your Government Pension

 

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The Calculation

In a nutshell, your Social Security benefits are reduced to 1/3 the amount of your monthly government pension. (Even if you take your government pension in one lump sum instead of monthly payments, Social Security will calculate the reduction as if they were monthly payments.)

Example 1: Your spousal/survivor SS benefits totals $2,000/month and your government pension is $2000/month. We subtract $1,333 ($2,000 x 2/3 (or 0.667)) and you’re left with $667 per month from Social Security (1/3 the original amount) plus $2,000/month from your government pension. Your total combined benefits are $2,667 per month.

Example 2: Your spousal/survivor SS benefits totals $2,000/month and your government pension is $5000/month. Your SS benefits will be completely eliminated because what we would subtract (2/3 of your government pension, or $3,335) is more than your total SS benefits. You are left with just your government pension of $5,000 per month.

If you don’t want to do the math, use the government calculator here.

But it’s not all deductions and bad news!

Don’t forget Medicare. Even if you don’t get cash benefits from your spouse’s work, you can still get Medicare at age 65 based on your spouse’s record if you aren’t eligible for it yourself.

Retirement benefits are a tricky business. Spousal and survivor Social Security benefits aside, calculating even your own retirement benefits as a California public employee and especially as a public-school teacher can be confusing. If you haven’t already, get a solid grasp on what you’re entitled to first, and then figure out what else you may have coming your way from your partner.

Life is unpredictable. The more you know, the better prepared you’ll be for those inevitable twists and turns.

 

 

David Yu, CFP®
dyu@pacunited.com

David Yu is a CERTIFIED FINANCIAL PLANNER™ practitioner with over 10 years of industry experience helping people make smart, lasting financial decisions. He believes in developing strong, lasting relationships based on mutual trust and honesty. He also provides helpful resources via his blog, THE INQUISITIVE MIND. In his spare time, he enjoys traveling, Brazilian Jiu-Jitsu, tennis, and USC football.