Retiring With a Pension and Retirement: What You Need to Know
Written by
Andrew Lisa
Edited by
Nupur Gambhir
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Retiring with a pension and Social Security benefits can provide added financial stability and a second source of income. Until recently, the former could conflict with the latter because drawing from non-covered pensions could trigger a reduction in Social Security benefits — but not anymore.
As of this year, nearly all pensioners can enjoy their full Social Security benefit, but it’s still essential to plan strategically for managing the tax implications of multiple income streams. While the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) once reduced benefits for retirees who earned a pension from non-Social Security-covered employment, legislative changes now allow most affected workers to collect both in full.
That means retirees can better predict their income — yet they’ll still need to consider how combined earnings could push them into a higher tax bracket or affect Medicare premiums.
Can You Receive Both a Pension and Social Security?
Most retirees can draw income from both Social Security and a retirement pension simultaneously without issue.
For decades, the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) rules substantially reduced or even eliminated Social Security benefits for those with non-covered pensions, which come from employment that doesn’t withhold Social Security taxes.
However, both provisions were recently repealed and, as of January, they no longer reduce or eliminate Social Security benefits.
Do Pensions Affect Social Security Benefits?
Pensions can impact Social Security benefits because they –along with wages, dividends, interest and capital gains — increase your taxable income, which the IRS uses to determine how much, if any, of your Social Security benefits are subject to taxation.
That’s a dramatic change from the recent past, when two legal provisions reduced Social Security benefits for more than 2.8 million public employees who receive non-covered pensions, including:
- Public school teachers
- State and local government employees
- Firefighters
- Police officers
- Railroad workers
- Pre-1984 federal employees
How Pension Rules Once Reduced Social Security Benefits
For decades, two provisions — the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) — reduced Social Security benefits for millions of retirees who earned pensions from jobs that didn’t pay into the program, such as teachers, firefighters, police officers, and some government workers.
The WEP lowered retirement benefits for those who split their careers between covered and non-covered work, while the GPO reduced spousal and survivor benefits by up to two-thirds of a retiree’s pension.
That changed in 2025, when the Social Security Fairness Act repealed both provisions. Now, nearly all pensioners can receive their full Social Security benefit alongside their pension — a major shift that simplifies retirement income planning. However, retirees may still need to manage tax implications from drawing multiple income sources, especially if combined benefits push them into a higher tax bracket.
Smart Planning Tips for Managing Pensions and Social Security
Having multiple income streams in retirement — like a pension and Social Security — can strengthen financial security and flexibility, but it also adds complexity. These steps can help you make the most of both benefits.
- Review your pension type. Understand how your pension is taxed and whether its distributions could affect how much of your Social Security income becomes taxable.
- Use SSA calculators. Free online tools can help you estimate future benefits and build a claiming strategy that fits your age, goals, and other income sources.
- Delay claiming when possible. The Social Security Administration reduces payments for those who claim early (before full retirement age, typically 67). Waiting until or after your full retirement age can boost monthly payments for life.
- Get professional guidance. A tax professional or financial advisor can help you plan withdrawals and optimize taxes. Even a conversation with your HR department or pension provider can clarify your options and ensure you’re not leaving money on the table.
Smart Planning Tips for Coordinating Pensions and Social Security
Receiving both a pension and Social Security can provide lasting financial stability in retirement, but managing multiple income sources takes strategy. These tips can help you maximize your benefits and minimize surprises at tax time.
- Get professional guidance. A financial advisor or tax expert can help you build a withdrawal and tax strategy tailored to your situation. Even a conversation with your HR or pension administrator can clarify options and ensure you’re taking advantage of every benefit available.
- Review your pension type. Understand how your pension is taxed and how its payments could affect the portion of your Social Security benefits that become taxable.
- Use SSA calculators. Free online tools can help you estimate future benefits and test different claiming ages to see how timing affects your total income.
- Delay claiming when possible. Taking Social Security before full retirement age (typically 67) permanently reduces your benefit. Waiting until or after that age increases monthly payments for life.
How a Pension Affects Your Social Security Benefits
Since the repeal of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), a pension no longer reduces your Social Security benefits. Your Social Security payments are calculated solely on your highest-earning 35 years of covered employment.
However, your pension still adds to your overall income — which can affect how much of your Social Security benefit is taxable. In other words, while your benefit amount won’t shrink, your tax bill might increase if your combined income rises.
Tax Implications & Combined Income Planning
Both pensions and Social Security benefits are typically taxable at the federal level, and some states tax one or both. Here’s how the IRS generally treats each source:
- Pensions. Withdrawals from most traditional (non-Roth) pensions are taxed as ordinary income.
- Social Security. The taxable portion of benefits depends on your combined income.
- Individuals. Up to 50% of benefits are taxable for incomes between $25,001 and $34,000, and up to 85% for incomes above $34,000.
- Married couples filing jointly. Up to 50% of benefits are taxable for incomes between $32,001 and $44,000, and up to 85% for incomes above $44,000.
Because both income sources can affect your overall tax picture, it’s important to plan withdrawals strategically. A financial advisor or tax professional can help you balance income streams, minimize taxes, and keep your retirement plan on track.
The Bottom Line: Coordinate Your Benefits for a Stronger Retirement
Recent changes to Social Security law now allow retirees to collect a non-covered pension without any reduction in their Social Security benefits — a major win for public- and private-sector workers alike. Still, managing multiple income streams takes careful planning, especially when it comes to taxes.
Understanding the details of your pension, projecting your Social Security benefits, and aligning both with your lifestyle and financial goals can help you make the most of your retirement income. For a strategy tailored to your situation, consider consulting a financial or tax professional who can help optimize withdrawals, reduce your tax burden, and give you confidence that your income will last.
