If you receive Social Security survivors benefits based on your spouse's work record, and you receive a pension from work that didn't require you to pay into the Social Security system, your survivors benefit could be reduced because of the government pension offset rule.
Explaining survivors benefits
Survivors benefits are paid to spouses and are based on the deceased spouse's Social Security benefit. The amount paid out in survivors benefits is a fixed percentage that is based on the surviving spouse's age.
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If a surviving spouse has reached the full survivors retirement age, then they can receive 100% of the Social Security benefit that was being paid to the deceased spouse, up to certain limits. The full retirement age applying to survivors can differ from the full retirement age for regular Social Security benefits, and that age depends on your birth year. A table of full retirement ages for survivors can be viewed here.
Surviving spouses who are between age 60 and their survivors full retirement age get less in benefits than they'd get at full retirement age. The amount that the benefit is reduced by is a fixed percentage for every month in age that the recipient is below the full survivors retirement age.
As an example, a surviving spouse born in or after 1962 has a survivors full retirement age of 67. If that spouse claims survivor benefits at age 62, and the deceased spouse's monthly benefit is $1,000, then the surviving spouse's benefit would be reduced to $796, or by 0.339% per month.
Survivors benefits and pensions
If you receive a pension that's based on earnings for which you paid Social Security taxes, that pension will not reduce your survivors benefit.
However, if you worked in a job that provides a pension to you based on earnings for which you didn't pay Social Security taxes, then you'll be subject to the government pension offset rule.
According to the government pension offset rule, your survivors benefit is reduced by two-thirds of your government pension. So if your government pension is $600, your survivors benefit will be reduced by $400. If your survivors benefit is $500, then you would only receive a survivors benefit of $100. Conceivably, this offset rule could fully eliminate your survivors benefit, depending on the amount you receive from your pension.
Why it exists
Survivors who qualify for Social Security on their own work record receive benefits based on either their own record or the deceased spouse's work record, but not both.
For example, if a spouse's benefit that's based on their own work record is $800 and their survivors benefit is $500, then that person would only receive the larger $800 benefit.
Prior to the government pension offset rule, people with pensions could double-dip and receive both a government pension based on earnings for which they didn't pay Social Security taxes, and a survivors benefit. Ultimately, that strategy was considered to be unfair, and the government pension offset rule was put in place to prevent it.
The fine print
There are exceptions to the government pension offset rule, but they are complex. For example, a federal government employee who receives a government pension based on a job for which they paid Social Security taxes during their last 60 months of government service may avoid the reduction. Because the exemptions have strict criteria, contact your local Social Security office to discuss your situation as soon as possible to find out if you qualify. Understanding your Social Security options thoroughly is important to planning for a financially secure retirement, so it's smart to know where you stand on your pension and your survivors benefit.
