Will This Retirement Perk Ruin My Social Security Spousal Benefit?

Will This Retirement Perk Ruin My Social Security Spousal Benefit?
Photo by SpeedKingz / Shutterstock.com

Welcome to the Social Security Q&A. You ask a Social Security question, our expert provides the answer.

You can learn how to ask a question of your own below. And if you would like a personalized report detailing your optimal Social Security claiming strategy, click here. Check it out: It could result in receiving thousands of dollars more in benefits over your lifetime!

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.

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

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.

About me

I hold a doctorate in economics from the University of Wisconsin and taught economics at the University of Delaware for many years.

In 2009, I co-founded SocialSecurityChoices.com, an internet company that provides advice on Social Security claiming decisions. You can learn more about that by clicking here.

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.

Earn more interest on your savings

Are you earning as much interest on your savings as you could be? Grow your savings faster with banks offering rates that are significantly higher than the national average. Find the best rates and start earning more interest on your savings by using the Money Talks News savings account and CD comparison tool.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next

This Grocery Store Is Cheaper Than Even Walmart
This Grocery Store Is Cheaper Than Even Walmart

One grocery chain is likely to save you more money than any other.

5 Ways to Put an End to Junk Mail
5 Ways to Put an End to Junk Mail

Here’s how to keep unwanted mail from clogging your mailbox and trash can.

6 Tech Gadgets That Make Your Daily Life Easier
6 Tech Gadgets That Make Your Daily Life Easier

These products on Amazon will ease your worries and simplify your routine.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Comments

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.