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Today’s question comes from Judy:
“I receive a federal CSRS pension and I am not eligible for any Social Security benefits on my own record. In several months, my husband will claim his Social Security benefits. I believe I will then be eligible for a spousal benefit on his record. I also read that my spousal benefit will be reduced because of my federal pension. What can I do to maximize my Social Security spousal benefit?”
How a ‘ruthless provision’ kills Social Security benefits
Judy, there are several million people who may be in similar circumstances. About 2 million federal Civil Service Retirement System (CSRS) retirees have no Social Security on their own account. Moreover, many state and local retirees are not eligible for Social Security, since they paid into an alternative pension arrangement during their working years.
In addition, some public sector retirees worked enough years in covered employment to qualify for Social Security benefits in addition to their government pension.
Judy, let’s consider your case first. You are indeed potentially eligible for spousal benefits on your husband’s record. However, there is a strong chance that you will not actually receive anything.
You are affected by the Government Pension Offset (GPO) provision. This is a ruthless provision that can eliminate your potential spousal benefit. It may even eliminate your potential Social Security widow’s benefit.
The GPO reduces your potential Social Security spousal benefit by $2 for every $3 of pension benefit (provided that the pension is based on employment not covered by Social Security). To illustrate, suppose your husband’s Social Security benefit at his full employment age (FRA) is $2,400 a month. Your maximum potential spousal benefit, therefore, is $1,200. If your government pension is $1,800 a month or more, you will get nothing in Social Security spousal benefits.
Now, if your husband claims his benefit at his FRA, your potential widow’s benefit is $2,400. It follows that if your government pension is $3,600 or more, you get no widow’s benefit from Social Security.
As noted above, some retirees have a government pension (from work not covered by Social Security) and they qualify for some Social Security benefits from at least 40 quarters of work in covered employment. In addition to being affected by the GPO, they are also affected by the Windfall Elimination Provision (WEP).
While the GPO reduces spousal benefits, the WEP reduces one’s retirement benefits. For those with fewer than 20 years of substantial earnings taxed by Social Security, retirement benefits are reduced by about $55 for every $100 in pension benefits, up to a maximum reduction of $480 a month in 2020. The WEP penalty declines as the number of years of covered employment increases beyond 20 years, reaching zero at 30 years of covered employment.
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The questions I’m likeliest to answer are those that will interest other readers. So, it’s better not to ask for super-specific advice that applies only to you.
I hold a doctorate in economics from the University of Wisconsin and taught economics at the University of Delaware for many years.
Disclaimer: We strive to provide accurate information with regard to the subject matter covered. It is offered with the understanding that we are not offering legal, accounting, investment or other professional advice or services, and that the SSA alone makes all final determinations on your eligibility for benefits and the benefit amounts. Our advice on claiming strategies does not comprise a comprehensive financial plan. You should consult with your financial adviser regarding your individual situation.