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Potential Retirement Surprise Waiting for Military Spouses: GPO

Retirement Funding

GPO Can Affect Social Security Benefits of Military Spouses

The Government Pension Offset (GPO) is a rule concerning Social Security Benefits most of us have never heard of. The GPO applies to individuals who had a government job where they didn't pay Social Security taxes and they receive a pension from that job. This is often the case for teachers and in my experience a lot of military spouses are or have been teachers. It also applies to those who are covered by the "old" Federal Government retirement system known as CSRS (Civil Service Retirement System). Specifically, the GPO applies to spousal and survivor Social Security benefits.

Spousal and Survivor Social Security Benefits Explained

When Social Security was designed, women generally didn't earn income. Since they didn't earn income they didn't pay into Social Security and therefore wouldn't be "covered" by Social Security. That didn't seem fair to the folks in Congress, so spousal benefits were added to Social Security. In the case where a spouse wasn't covered by Social Security, when the covered spouse retired the uncovered spouse would receive a benefit equal to 1/2 the covered spouse's earned benefit. If the covered spouse died first, the uncovered spouse would receive the covered spouse's full benefit until he or she passed away. As time passed and more women entered the workforce, the rules remained the same with the addition that if both spouses were covered then a spouse would receive the greater of his or her earned benefit or spousal/survivor benefit.

GPO Changes That

In the case where a spouse has a pension from a job where he or she didn't pay Social Security taxes, the rules change. Under GPO, spousal or survivor benefits are reduced by 2/3 of the pension received from the job where he or she didn't pay Social Security taxes. Here is an example:

  • Military Spouse worked as a teacher over the years and did not pay into Social Security while working as a teacher
  • Military Spouse's pension from teaching is $900 per month
  • Covered Spouse's Social Security benefits is $1,500 per month
  • Military Spouse's unadjusted Social Security spousal benefit is $750
  • After adjusting for the pension the military spouse's spousal benefit is reduced to $150 ($750 - ($900 x 2/3))
  • In the case of survivor benefits the unadjusted survivor benefit is $1,500
  • After accounting for GPO, the survivor benefit is reduced to $900 ($1,500 - ($900 x 2/3))

After accounting for GPO, the surviving spouse's income is reduced by 25%. That is a big deal, if you haven't planned for it.

There are Exceptions

As mentioned above, GPO only affects survivor and spousal benefits. If you have your own earned benefits, they are not affected by GPO (they could be affected by the Windfall Elimination Provision). So you will receive the higher of your earned benefits or the GPO adjusted spousal/survivor benefit. Also if you paid into Social Security for your last 5 years (60 months) of employment, the GPO is eliminated.

While there isn't much you can do if the GPO applies to you, you can plan for it. Knowing the "gotcha's" to watch out for is the key to effectively planning for your financial future. There are so many landmines to watch out for. If you're not interested in doing that for yourself, we are here to help.


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