Pension plan payment deductions if I earn too much income.

[John T F]

Next year i am transitioning into retirement. I have two pension plans and Soc Sec, and I expect to still earn income over the next few years. I understand that if I start taking SS the amount can be significantly reduced by my regular earnings, Is that also true with the Pension plans? If I hold off taking SS for a few years, but take the Pension benefits, will I still be penalized if I make regular income above some threshold?

[Anonymous]

Hello John T F,

Thanks for participating in our Ask the Experts event today. As to your question, whether or not your other pension plans will reduce your pensions due to outside income depends on the specific plan documents of each plan that was approved by the IRS. I know that some governments pensions do and some don't because of the way their governing body created the plan. Yet, there is no hard and fast rule and private pension plans may or may not have the same provisions.

I wish I could be of more help, but the best way to figure that out is to contact your pension plan administrator or look for information on their website.

[Cate9]

You are correct that your social security benefits can be reduced if you are still working and under the full retirement age.  Here is a link to a pdf that may help https://www.ssa.gov/pubs/EN-05-10069.pdf 

From this pdf here is a basic guideline as to how they may reduce your benefits. 

If you’re younger than full retirement age
during all of 2023, we must deduct $1
from your benefits for each $2 you earn
above $21,240.
If you reach full retirement age in
2023, we must deduct $1 from your
benefits for each $3 you earn above
$56,520 until the month you reach full
retirement age.

As for the pension, you generally would not have a reduction of your pension benefit is you are continuing to work.  However, that is a question best addressed by contacting HR or the administrator of the pension as there could be restrictions based on your specific type of pension plan. 

If you delay taking social security, there is not penalty for earning additional income through working.  However, if  you delay your benefits until age 70 your base social security benefits will not continue to increase.  Here is a link to help determining how delaying your beginning date of social security benefits will effect your monthly payments. https://www.ssa.gov/OACT/quickcalc/early_late.html

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