Many public employees pay into a separate retirement or pension system from Social Security. For example, public employees in the state of Ohio pay into the Ohio Public Employees Retirement System (OPERS). Each employee pays 10% of their earnings into OPERS, and they choose the type of investments for their funds. If you also worked for a non-profit or private company, you paid into Social Security. If you have enough Social Security credits, you might be eligible to receive both a pension and your Social Security payments. Let’s take a look at how that works and what amount of benefits you’ll receive.
Who Is Eligible for a Public Pension and Social Security Retirement Payments?
Some government employees are exempt from paying Social Security taxes. When it comes time to retire, your state’s pension plan will kick in as your primary source of retirement income. You are eligible to receive the full amount of your pension in accordance with state law and the pension program. If you’re also eligible for Social Security retirement payments for other work you did, these payments take second place. Federal law requires that your Social Security retirement payments be incrementally reduced based on the amount of your public pension payouts.
Receipt of Your Public Pension
If you’re eligible for a public pension, it takes precedence over your Social Security retirement payments. This is true regardless of how many years of service you have or how many quarters you paid into Social Security. Two federal rules govern how much of your Social Security retirement payments you can actually receive in addition to your full pension. These two rules are the Windfall Elimination Provision and the Government Pension Offset. These rules also apply if you intend to apply for spousal or survivor benefits under the Social Security Administration.
Windfall Elimination Provision
The Windfall Elimination Provision reduces the Social Security benefits of retired employees who receive a public pension. It lowers the eligibility year benefit you receive. The size of the reduction depends on your retirement age and the amount of your pension. If you retire at the age of 62, you will receive 70% of your monthly benefits. If you wait until age 70 to retire, your monthly benefits will be 24% higher.
Government Pension Offset
If you’re a spouse, widow or widower who will receive a public pension from your own career, and you want to claim your spouse’s Social Security retirement benefits, the Government Pension Offset applies to you. It reduces the amount of Social Security income you can receive. Your benefit will also be reduced if you retire early.
Planning for retirement requires careful consideration. Along with other retirement savings and investments, eligibility for both a pension and Social Security retirement payments could help you maintain a comfortable financial position after you leave the workforce. Understanding how Social Security benefits interact with your public pension payouts will help you avoid any unexpected hassles or unwanted surprises with your retirement finances
