If you expect retirement income from a pension and Social Security, congratulations! These two income streams, along with your retirement savings, could put you on a comfortable financial footing. However, you might not be aware that your pension could affect your Social Security benefits.
Private-sector workers who earn a pension typically pay Social Security payroll taxes, in which case the pension should not affect their Social Security benefits. However, an issue arises when someone receives a pension based on earnings in which Social Security taxes were not paid — typically from a federal, state, or local government, a nonprofit organization, or an employer in a foreign country — and the individual is also eligible for Social Security benefits based on employment from other jobs. In these situations the Social Security benefit may be reduced by the Windfall Elimination Provision (WEP).
- Written by Charles Sims Jr.