Not all pensions are created equal when it comes to Social Security. Private pensions typically don't affect your benefits. The pensions to watch out for are those tied to jobs that don't pay into Social Security, said LaSpisa. That includes many local, state and federal government employees as well as teachers in some states, but also certain railroad employees and workers of foreign companies, among other groups, he said. "There's all these little side deals that have been done over the past 80 years," LaSpisa said.
Not sure if you've paid into Social Security? Ask your pension administrator.
The impact to your Social Security benefits, if any, depends on the details of your work record and what benefits you're claiming. One of two provisions can kick in: On your own benefits, the Windfall Elimination Provision, and on spousal and survivor benefits, the Government Pension Offset.
Under the Windfall Elimination Provision, your Social Security benefits can be reduced by as much as 50 percent. The exact reduction will vary, based on how many years you worked in other jobs that paid into Social Security and your average earnings over that working career, said Randall, so keeping good records is vital. "The more years you worked at a job [that paid into Social Security], the less that pension counts against you," he said.
The Windfall Elimination Provision doesn't apply if you paid Social Security tax on more than 30 years of what the federal government considers "substantial earnings." For example, if you make $22,050 or more this year, that is considered substantial earnings by the Social Security Administration. Use this table to find the amount the Social Security Administration considers to be substantial earnings for each year since 1937.
The Government Pension Offset applies in most cases where a public pensioner is claiming spousal or survivor benefits. It's the harsher of the two penalties, said Arnett. The spousal or survivor benefit is reduced by an amount equivalent to two-thirds of the pension. "It can cause a total loss of Social Security benefits," she said.
That interplay makes it worth crunching the numbers on whether it's more advantageous to claim your own benefit or a spousal benefit. But there are some exceptions where the Government Pension Offset does not apply, such as workers receiving a government pension from a military reserve service that doesn't pay into Social Security, she said.
Whatever your particular situation may be, it if is complicated by disability or you have public pension benefits, check with a financial advisor who has expertise in Social Security claiming strategies to maximize your retirement income.