Will my pension and 401k withdrawals reduce my Social Security benefits at 62?
Turning 62 in November and planning to apply for Social Security soon. I haven't worked in about 3 years after taking early retirement from the public school system. I get a monthly pension of $3,100 from my teaching career. I'm also planning to start taking withdrawals from my 401k (about $1,500/month) to supplement income. I'm worried these might affect my SS benefit amount. My benefit statement says I'd get around $1,750 at 62, but I've heard pensions can reduce this amount through something called WEP or GPO? And do 401k withdrawals count as "earnings" that might reduce benefits under the earnings test? Really confused about all these rules working together. Anyone dealt with this combination before?
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Caleb Stark
Great question - pension rules with Social Security can be really confusing! The answer depends on whether your pension is from work where you paid Social Security taxes. If your teaching job was in a state where you DIDN'T pay into Social Security (like California, Texas, or several others), then yes, the Government Pension Offset (GPO) or Windfall Elimination Provision (WEP) might reduce your benefits. WEP reduces your own benefit, while GPO affects spousal/survivor benefits. The good news: 401k withdrawals don't count as earnings and won't trigger the earnings test. Only actual wages or self-employment income count for that test. Do you know if Social Security taxes were withheld from your teaching salary?
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Harper Thompson
•Thanks for explaining! I taught in Illinois for 28 years and looking at my old paystubs, I didn't pay into Social Security during that time. Does that mean both my SS from previous jobs AND any spousal benefits might be reduced? My husband gets about $2,300/month from Social Security already.
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Jade O'Malley
DONT TRUST WHAT SSA TELLS YOU OVER THE PHONE!!!! I had a similar situation with a state pension (police) and was told THREE DIFFERENT THINGS by three different reps. One said my benefits wouldn't be affected at all, another said they'd be reduced by 60%, and the third couldn't even answer my question! The whole WEP/GPO thing is a NIGHTMARE and they don't train their people properly. You need to get everything in WRITING.
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Hunter Edmunds
•Yeah this happened to my aunt too. She got completely wrong info and ended up with $400 less per month than they promised her! Its so sad how they treat seniors
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Ella Lewis
Your pension will definitely affect your Social Security through the Windfall Elimination Provision (WEP) if you worked in a job not covered by Social Security. The reduction can be substantial - potentially reducing your $1,750 down to around $875-1,100 depending on how many years of substantial earnings you had under Social Security-covered employment. And yes, if you're considering spousal benefits, the Government Pension Offset (GPO) would reduce those by 2/3 of your pension amount. With a $3,100 pension, that's about $2,067 in offset. The good news is that 401(k) withdrawals don't count as earnings for the earnings test and won't reduce benefits. They're considered investment income, not earnings. I'd recommend creating an account at ssa.gov if you haven't already and looking at your earnings history. Then use the WEP calculator on the SSA website to get a more precise estimate.
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Harper Thompson
•This is so disappointing. I worked 12 years in Social Security-covered jobs before teaching. Is there any way around this WEP reduction? And should I just wait until FRA (66+8months for me) to avoid the early filing reduction on top of WEP?
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Andrew Pinnock
my sister had same issue with her pension. dont 4get that 401k money is taxable and might push ur social security into taxable range too. i think up to 85% can be taxable if u make too much
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Brianna Schmidt
I went through this exact situation last year! Illinois teacher pension + SS benefits from previous work. Yes, WEP will reduce your benefit - but with 12 years of substantial earnings under SS, your reduction won't be as bad as it could be. The maximum WEP reduction for 2023 is $512, but you'd get a slightly lower reduction. One thing to consider: if you wait until your Full Retirement Age, you'll still face WEP reductions, but you won't have the additional reduction for claiming early. At 62, you're looking at a double reduction (WEP + early claiming). For the most accurate calculation, you need to call SSA directly. I tried for weeks and couldn't get through until I used a service called Claimyr (claimyr.com). They got me connected to a real person at SSA in under 15 minutes instead of waiting on hold for hours. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU. The agent was able to calculate my exact WEP-adjusted benefit which was very different from the estimate on my statement.
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Alexis Renard
•did u have to give them ur ss# to use that service? seems sketchy
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Brianna Schmidt
•No, it's just a call-back service. They connect you with SSA, they don't access your information. You talk directly with Social Security. It saved me hours of frustration - I had tried calling 11 times before that and kept getting disconnected.
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Harper Thompson
Thank you all so much for the help! I'm definitely going to call SSA to get exact numbers. The WEP reduction is disappointing, but at least I understand it now. And good to know 401k withdrawals won't count against the earnings test - that's a relief! I think I'll wait until FRA to avoid the double reduction.
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Andrew Pinnock
just wondering did u check if ur eligible for any of ur husbands benefit? sometimes that can be more even with the gpo reduction
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Harper Thompson
•I thought about that, but with the GPO, I think I'd get very little. My husband's benefit is $2,300, so 50% would be $1,150. But then they'd reduce that by 2/3 of my $3,100 pension ($2,067), which would leave me with $0 in spousal benefits. I think I'm better off just taking my own reduced benefit.
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Hunter Edmunds
They shouldn't be allowed to do this! You earned those benefits and they take them away just because you have a pension??! My dad worked for the railroad and they did this to him too. Such a scam.
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Caleb Stark
•It's certainly frustrating, but the rationale is that these pension systems were designed as replacements for Social Security, not supplements to it. The WEP/GPO provisions were meant to maintain parity between those who paid into SS their whole careers versus those who didn't. Not saying it's fair in all cases - especially for people who split careers between both systems.
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Ella Lewis
One more important thing: WEP can't reduce your Social Security by more than half of your pension amount. So with your $3,100 pension, the maximum WEP reduction would be $1,550. Also, if you have 30+ years of substantial earnings under Social Security, WEP doesn't apply at all. With 12 years, you get a partial exemption. And regarding the timing question - yes, waiting until your Full Retirement Age would avoid the early claiming reduction, which makes a significant difference. At 62, you'd get only about 70% of your PIA (Primary Insurance Amount), and then WEP would reduce that further.
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