Does Retirement Pension Count Against My Social Security Check?

A pension from your employer can help out tremendously when you retire. Social Security is not designed to provide 100 percent of your retirement benefits. Instead, Social Security was originally designed as part of a 3-pronged approach that would also include a company pension and personal savings. However, your pension payments could end up affecting your Social Security benefits.


When you are single and filing single for tax purposes, your pension income plus personal savings income cannot exceed $25,000. If it does, then your Social Security benefits will be taxable. Income between $25,000 and $34,000 means that up to 50 percent of your Social Security benefits are taxable at ordinary income tax rates. If your income exceeds $34,000, then up to 85 percent of your Social Security will be subject to income tax.


When filing jointly with your spouse, your combined income must not exceed $32,000. If you and your spouse have a combined income between $32,000 and $44,000, then 50 percent of the total of your Social Security benefits is subject to income taxation. If your income exceeds $44,000, then up to 85 percent of your benefits are taxable.


The disadvantage to receiving a pension is that it pushes up your income. While this might be good in some respects, it also might subject your Social Security income to taxation. You could end up with less net income overall than if your pension fell below the income threshold that makes your Social Security taxable. Taxation of your benefits might also make it harder to pay for all of your expenses in retirement.


To avoid taxation of your Social Security benefits, you should consider taking your full pension amount at retirement. A lump sum pension may be invested anywhere you wish. You can roll it into an IRA, which will defer income tax on the amount of money in the plan (and thus deferring tax due on your Social Security income), or you can roll it into a Roth IRA. The Roth eliminates the problem with taxation of Social Security income, since Roth income is tax-free and is not counted in the calculation to determine whether your Social Security benefits will be taxed.