Chris Stein, CFP®
Military Pensions and Social Security
A blog reader recently asked us if their military pension earned from active duty in the 1990s and early 2000s would affect their Social Security benefits. They had been reading about how government pensions can affect your SS benefits due to the WEP (Windfall Elimination Provision)and GPO (Government Pension Offset) provisions of the SS rules. Well, we have good news for this person… military pensions do NOT reduce your Social Security benefits.
Since 1957, active duty military personnel have paid into the Social Security system. This participation in the system shields them from any reduction in SS benefits due to service between 1957 and today. Prior to 1957 these personnel did not pay into SS, but if you served between 1940 and 1956 the SS system credited you with $160 a month in earnings for service during those years, which counts as participation in the SS system and once again shields you from a WEP or GPO offset.
We have even more good news for military personnel and veterans. If you served between 1957 and 2001 you paid into the SS system as described, but in addition to that you received a special “extra earnings” increase on your SS record that should increase your SS benefit. Service between 1957 and 1977 credits you with $300 in additional “earnings” on your record for each calendar quarter in which you received active duty basic pay. Service from 1978 through 2001 grants you an extra $100 in “earnings” for every $300 of active duty basic pay, up to a maximum of $1,200 yearly. While these “extra earnings” are not paid to you, they are recorded in your Social Security record as if you earned them, leading to a larger Average Indexed Monthly Earnings figure, which leads to a greater PIA, or Primary Insurance Amount. As discussed in our last blog, the PIA is the monthly retirement benefit you receive if you claim at your Full Retirement Age.
Now, with all rules set by the government there are always a few exceptions, but for the vast majority of military personnel the situation described above should apply. To make sure you can check with your local Social Security office where they can confirm your eligibility for the “extra earnings” adjustments and also advise you of your projected PIA based on your earnings history.
For more information on the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), just click in the search box in the upper right of our blog website and search for WEP or GPO to find dedicated blog posts addressing those issues.
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