The term government pension offset is a law that affects spouses, widows, or widowers. If you’ve received a retirement or disability pension from a federal, state, or local government based on your own work for which you didn’t pay Social Security taxes, you may be able to reduce your Social Security spouses, widows, or widowers benefits.
You may be able to reduce your Social Security benefits by at least two-thirds of your government pension. In shorter terms, this basically means if you get a monthly civil service pension of say $600, two-thirds of that, or $400, must be deducted from your benefits. However, if two-thirds of your government pension is more than your Social Security benefit, your benefit could be reduced to zero. It’s also important to note that if you’re taking you government pension annuity in one lump sum, Social Security will calculate the reduction as if you chose to get monthly benefit payments from your government work.
The benefits that are paid to the spouses or widow or widowers are considered dependent benefits. They were originally set up in 1930, and these benefits were created to compensate families where one party had to stay home to raise a family and were solely depending on the other working spouse. While this family dynamic has changed immensely over the past years, it’s now not uncommon for both parties to be working and providing a dual income. This means that both parties are now earning their own separate Social Security retirement benefits. Currently, the law requires a person’s partner benefit to be offset by the dollar amount of their own retirement benefit. For example, if a person who is working and earning around $800 monthly in Social Security benefits, but was also due a $500 benefit on their spouses record, they wouldn’t be able to be paid that benefit due to their own benefit being offset. However, before Government Pension Offset, if that same scenario was to happen, and they didn’t pay into Social Security and earned an $800 government pension, there was no offset and they would have to pay the full government pension.
However, your Social Security benefits won’t be reduced as a spouse, widow, or widower if you received a government pension that is not based off your earnings. They won’t be applicable if you’re a federal (including Civil Service Offset), state, or local government employee and your government pension is from a job for which you pay Social Security taxes.
Government Pension Offset has many parts to it, which can be confusing. It can also be confusing when it can directly affect your financial future. At Integrity Wealth & Management LLC, we are here to help you make sound financial decisions about your future. We have a growing passion for our clients, which has driven us to provide the industry’s premier financial services since 1997. For any further questions about our firm or our services, connect with us today! We look forward to hearing from you and helping you secure the future that you deserve.
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Virtue Capital Management, LLC and Integrity Wealth Management & Insurance Services, LLC are not affiliated with or endorsed by the Social Security Administration or any other government agency.