Can You Collect Both a Pension and Social Security?
Demystify collecting both a pension and Social Security. Get clear insights into how one affects the other and what you need to know.
You can generally receive both a pension and Social Security benefits. While certain situations previously led to adjustments, recent legislative changes have significantly altered these provisions. Understanding your employment and pension clarifies how these different retirement income streams interact.
General Rules for Collecting Both
Most individuals can collect both Social Security benefits and a pension without reduction. This applies when the pension is from “covered” employment, meaning that Social Security taxes were paid on those earnings. Covered employment includes most private sector jobs where employers and employees contribute a portion of wages to the Social Security system through payroll taxes. For 2024, workers and employers each contribute 6.2% of earnings up to an annual maximum earnings level of $168,600.
When a pension is derived from such employment, it does not affect the calculation or amount of Social Security benefits. Benefits are earned independently through contributions to the Social Security system over a working career. The Social Security Administration (SSA) uses a formula based on average indexed monthly earnings from covered employment to determine a worker’s Primary Insurance Amount (PIA).
Understanding Non-Covered Government Employment
Certain types of employment, particularly in the public sector, did not historically contribute to Social Security. This is known as “non-covered government employment.” Examples often included some federal, state, or local government jobs, such as those for certain teachers, police officers, and firefighters, where employees participated in a separate public pension system instead of Social Security. Neither employee nor employer paid Social Security taxes on these earnings.
Approximately 6% of workers in paid employment or self-employment are not covered by Social Security. Earnings from non-covered government employment did not count toward Social Security eligibility or benefit amounts. This distinction led to provisions addressing situations with both covered and non-covered earnings.
Windfall Elimination Provision
The Windfall Elimination Provision (WEP) previously reduced Social Security retirement or disability benefits for individuals who also received a pension from non-covered employment. Enacted in 1983, WEP aimed to prevent a “windfall” for workers with both non-covered and covered employment. This provision modified the benefit formula, specifically by reducing the first factor of the Primary Insurance Amount (PIA) calculation from 90% to a lower percentage, depending on the number of years of substantial earnings in covered employment. The reduction was applied on a sliding scale; individuals with fewer than 30 years of substantial Social Security-taxed earnings saw their benefits reduced, with the largest reductions for those with 20 or fewer years of covered earnings. However, the WEP reduction could not exceed one-half of the monthly non-covered pension amount.
As of January 5, 2025, the Social Security Fairness Act was signed into law, effectively eliminating the WEP, with the change retroactively applied to benefits dating back to January 2024. Affected individuals will see increased Social Security payments and may receive retroactive reimbursements.
Government Pension Offset
The Government Pension Offset (GPO) previously reduced Social Security spousal or survivor benefits. If an individual received a pension from non-covered government employment and was eligible for Social Security benefits based on a spouse’s work record, the GPO would reduce or eliminate those spousal or survivor benefits. Under the GPO, the Social Security spousal or survivor benefit was reduced by two-thirds of the non-covered government pension. For instance, a $900 monthly non-covered pension would have reduced a Social Security spousal benefit by $600. This offset could significantly reduce or eliminate spousal or survivor Social Security benefits.
Like the WEP, the GPO has been repealed by the Social Security Fairness Act, effective retroactively to January 2024. This change results in higher Social Security benefits for millions previously affected, along with retroactive payments.