Chris Stein, CFP®
Government Pension Offset
In last week’s blog post, we discussed the Windfall Elimination Provision (WEP), which will affect the amount of an individual’s Social Security benefit if they also receive a government pension. WEP will not, however, have an effect on the individual’s spousal, widow or widower Social Security benefits. That’s where the Government Pension Offset (GPO) comes in.
Leveling the Playing Field
The GPO was another attempt by the Social Security Administration to level the playing field between couples who had only Social Security pensions and couples who had both Social Security pensions and government pensions. The GPO reduces the benefit amount due to a Social Security recipient’s spouse, widow or widower.
Take for example, a husband and wife who both had Social Security pensions. When one spouse died, the other had the option of claiming the SS benefits of the deceased spouse if that benefit was higher, but would then have to give up their own. The living spouse would only collect one Social Security pension, not two. Under the old Social Security system, people with a government pension could also claim their spouse’s Social Security pension, which would in effect give them two pensions. This was considered an unfair advantage to individuals receiving government pensions, so the SSA enacted the GPO.
All the ins and outs of the GPO can be quite complex, but what it boils down to is that if an individual receives a government pension, then any SS spousal benefit they would be entitled to is reduced by 2/3 of the amount of their government pension. For many people this can, in effect, wipe out any spousal Social Security benefit.
For a more in depth discussion of this complex topic, please use the play button below to listen to our audio blog.
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