How Do Pension Benefits Affect Social Security Benefits?

The vast majority of American workers depend on Social Security for at least part of their retirement plans. While the number of retirees with defined benefit plans from private employers has dropped significantly in recent years, many who are looking at retirement are eligible for both private pension plans and Social Security retirement benefits. People with private pensions often wonder how these payments will affect their Social Security benefits.

How Social Security Retirement Benefits Are Determined

Social Security retirement benefits are based on how much money you earned while working and paying Social Security taxes. People who have completed at least 10 years of qualified work can draw Social Security retirement benefits when they reach retirement age. The amount they can draw depends on how much they have paid into the Social Security system via their taxes and the age at which they retire. Workers can retire and collect Social Security benefits as early as age 62 but will receive higher payments if they wait until their full retirement age, which at the time of this writing ranges from age 65 to 67, depending on the year you were born.

American Private Pensions and Social Security

Private pensions do not factor into Social Security retirement benefits. The amount of Social Security retirement benefits to which you are entitled will neither increase nor decrease based on your private pension earned through an American company. The only Social Security benefits that could be affected by a pension are Supplemental Security Income, or SSI, benefits, which are only available to those with very limited income <ahref="http:"" policy="" docs="" quickfacts="" prog_highlights="" index.html"=""> </ahref="http:>and resources.

If your income from your pension and Social Security retirement benefits is low enough that you qualify for SSI, the Social Security Administration will subtract the "countable" amount of income from your pension on a dollar-for-dollar basis from your SSI benefit. Generally, the first $20 of unearned income, including pension payments, is not countable, but the rest of your pension payment is.


If you receive a private pension from a company outside of the United States for work and income that was not subject to U.S. Social Security taxes, your Social Security retirement can be affected. This is governed by the Windfall Elimination Provision.