Can You Collect Social Security and Massachusetts State Pension?

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Massachusetts has a state pension system like many other states. However, the majority of state workers do not participate in Social Security. When you work for the state and you don't pay into Social Security, you won't be collecting Social Security benefits. You should understand what this means to you when you retire.

Significance

The Massachusetts state pension system is a retirement benefits system where you fund your future retirement along with your agency. Your benefit payment is payable to you when you retire. You likely do not participate in the Social Security system. This means you do not pay into the Social Security system and have no benefit accumulation at the federal level. If you have earned Social Security credits from a non-state job, you may experience a reduction in your Social Security benefits, but you must contact the Social Security Administration to see if your benefit payments are reduced (see reference).

Benefit

Your state pension plan may provide a significant income to you at retirement but may also provide a minimum level of income depending on your contributions and years of service. This benefit payment is guaranteed for your entire life and provides you with money you need to pay your ordinary bills and expenses. This pension ensures that you have at least some money when you retire and are not completely dependent on your own personal savings. You may accumulate a savings outside of the Massachusetts retirement system, but it is not necessary.

Disadvantage

Social Security provides for a death benefit and automatic spousal benefit payments. This option does not exist for Massachusetts state employees without a specific election of beneficiary payments. Even then, benefit payments reduce during the state employee's lifetime to provide benefit payments to the spouse. This results in a lower payment to the employee during his lifetime and may result in an increase in the amount of savings he needs for retirement.

Consideration

You should consider saving an additional amount of money on top of the pension you receive from Massachusetts. This allows you to provide yourself with additional money, which you won't get from Social Security. You may accumulate a savings in an individual retirement account, or IRA, and then convert some or all of this money to monthly payments. Having a lump sum of savings also provides a contrast to the monthly benefit payment you get from Massachusetts.

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References

  • "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
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