Chris Stein, CFP®
Earnings Test and GPO
We recently received the following question that relates to both the Earnings Test and the Government Pension Offset (GPO).
“My sister has been teaching over 30 years and she will be turning age 60 in 2019. She belongs to the Teachers Retirement System of Texas and is not eligible for her own social security benefits. However, her husband died 3 years ago and was drawing SS Disability.
Would my sister be eligible to receive SS survivor benefits when she turns age 60 and is still teaching? If so, would the survivor benefits amounts be penalized based upon the amount of pay that she receives as a teacher?
Also, once she retires and is drawing her teacher pension, would the survivor benefit be reduced and possibly go away based on the Government Offset Pension Rule?”
I will answer this in 2 parts:
1. Survivor Benefit
Yes, she will be eligible to receive a Survivor Benefit on her deceased husband’s record when she turns 60, but she will be subject to the Earnings Test based on her employment.
Once she starts drawing her teacher’s pension (but not before) she will be subject to the Government Pension Offset, which will reduce her SS Survivor benefit by $2 for every $3 of her pension amount. If her pension is of substantial size, it is likely to completely eliminate the Survivor Benefit.
The general rule is to try to collect as much of the Survivor Benefit as possible before turning on your pension. The exact timing of this strategy depends on several factors. I would encourage you to recommend to your sister to have a Social Security optimization analysis run in order to make sure she does not leave an benefits for which she is eligible on the table.
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