How to plan for retiring with a pension and Social Security

Planning for financial comfort in retirement can be stressful—and a lot of work. That’s especially true if you plan on retiring with a pension and Social Security. As you plan your retirement strategy, you’ll likely have many questions. For example: Can you collect a pension and Social Security at the same time?

Understanding how a pension and Social Security work together can feel complicated. Many retirees wonder how these income sources work together and how to make the most of them during retirement.

Whether you’re years from retiring or currently planning your retirement, understanding these benefits could protect your financial security. Learn more about retiring with a pension and Social Security.

If you’re retiring with a pension and Social Security, you should understand the basics of both options.

A defined benefit pension promises to pay employees who meet certain requirements a specific amount of money every month of their post-retirement lives. Think of it as a retirement paycheck. While you’re working, your employer sets aside money from all participating employees and invests it. This pension fund helps make sure the company can pay participants’ future benefits, no matter how the market does.

The monthly set benefit pension payment amount is guaranteed and determined by a formula, typically based on salary history and years of service. For example:

• A plan might pay 2% of your average salary for your highest-paid three years, multiplied by the number of years you worked there. 

• Say that you worked for 30 years at your employer. If your highest three-year average salary was $80,000, you’d take 2% of $80,000 ($1,600). 

• Multiply that by 30 years of service at the company. In this case, you could receive about $48,000 per year in pension income in retirement.

Although most private sector companies, meaning those not operated by the government, no longer offer defined benefit pensions, many of the largest U.S. employers continue to manage legacy pensions, or pensions that already existed before options changed, according to the BLS. They may also provide retirement offerings like a 401(k) plan, a workplace retirement savings account that lets you set aside a part of your paycheck to invest for the future, usually with tax advantages. However, defined benefit pensions remain common among public-service jobs, which are jobs through the government, and still cover tens of millions of those workers, the Congressional Research Service reports.

Social Security is the federal government program funded through taxes that come out of paychecks that provides a basic level of retirement income. According to the Social Security Administration (SSA) Monthly Statistical Snapshot for May 2026, more than 59 million Americans aged 65 and older receive Social Security benefits. As of December 2025, the SSA estimated that 87% of the population aged 65 and over were receiving these benefits. For most Americans, they’re the base of retirement planning.

But Social Security works differently than pensions. Social Security benefits are calculated based on the money you’ve made over the course of your life. Rather than focusing on the three years during which you made the most money, as pensions often do, the SSA reviews your 35 highest-earning years. These earnings are adjusted for inflation, or the general increased cost of goods and services over a time. The SSA then averages those years and applies a formula designed to replace a bigger share of income for those who earn less money.

For example: In 2026, you would receive 90% of your first $1,286 in average indexed monthly earnings (AIME). Above that, you’d receive 32% of earnings between $1,286 and $7,749, and 15% of any earnings over $7,749.

You can adjust this amount based on when you decide to retire and start claiming Social Security benefits. For example, collecting retirement payments early at age 62—the earliest eligibility age—lowers your monthly check by up to 30%, according to the SSA. Waiting until age 70 increases it by 8% per year beyond your full retirement age (age 67 for those born in 1960 or later).

Those retiring with a pension and Social Security benefits will need to do some research to figure out how much they can receive from each.

For those wondering how to plan for retirement with a pension, there are three main things that will decide your pension benefits:

1. Years of participation. The U.S. Department of Labor sets specific guidelines for pension participation:

• Most employers require employees to be at least 21 years old.

• Employees typically need to have worked there for one year before joining the plan.

• Longer participation generally means higher benefits. Each additional year of participation typically increases the benefit amount.

• Companies often set vesting periods (usually three to seven years). This means you must work that long before you can keep the full amount of your employer’s contributions if you leave.

• Some plans offer early retirement options with reduced benefits.

2. Average salary calculations. Your final pension amount typically depends on your earnings history.

• Most plans use one of the following methods:

  • Final average salary (typically based on the last three to five years)

  • Highest consecutive years of earnings

  • Career average earnings

• There may, however, be some things to consider:

  • Overtime and bonuses might not count toward salary equations.

  • Some plans cap salaries used for calculations.

  • Cost-of-living adjustments may vary by plan.

3. Covered vs. non-covered pension status. The Social Security Fairness Act was signed into law on January 5, 2025. Prior to this law, those receiving pensions from a public service job that didn’t take out money from paychecks for Social Security (also known as “non-covered” pensions) would see lower Social Security benefits. The act gets rid of this lowering and ends the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) formulas. Still, this difference is worth remembering.

With covered pensions, more common with private sector jobs:

• Employers pay Social Security taxes on your wages.

• They allow for straightforward retirement planning.

With non-covered pensions, more common with state and local government jobs:

• Employers pay no Social Security taxes on wages.

• They require careful planning for benefit optimization.

Wondering if your benefits have changed? Contact your local Social Security office or visit the SSA website for more details.

If you’re not certain whether you qualify for Social Security income, it’s easy to find out. According to the SSA, the following standards will impact your eligibility and the amount of your benefits:

• You’ll need to have earned at least 40 credits. Generally, you can earn up to four credits per year. Many people will qualify after 10 years of working.

• As of 2026, each credit requires $1,890 in earnings.

• You must be at least 62 years old.

• Benefits are based on a participant’s highest 35 years of earnings.

• Earnings are adjusted for inflation.

• Working longer can help you balance lower-earning years and increase your Social Security income.

Note: Individuals with disabilities might qualify with fewer credits, and benefits can begin at any age—assuming the SSA’s definition of disability applies. The number of earned credits required to qualify for benefits depends on the age at which the person begins living with a disability.

Once you understand what will impact your eligibility for retiring with a pension and Social Security, you could then plan how to get the most retirement income from both. Here are some tips:

Consider the following to develop a plan:

• Work with a financial advisor or accountant who knows both systems. They can help you prepare to receive and balance income from both Social Security and a pension. Those professionals can also help you plan for how taxes will affect your income from both sources.

• Start building a retirement budget and update it as needed. Many tools are available to help you get an idea of your retirement budget. You can also use the SSA’s online calculators to figure out how much you can expect to earn.

• Talk to your company’s HR department or plan provider to understand your pension coverage status.

• Research how marital status affects income from both benefits.

When it comes to getting the most out of your Social Security and pension income, timing is everything. Taking these steps can help you earn more:

• Delay Social Security to age 70, if possible. Doing so will increase benefits by 8% annually once you’ve reached full retirement age (age 67 for most) and by 5% each year between the ages of 62 and 67.

• Think about what happens to your benefit payouts if you choose partial retirement. For some people, working part time can allow them to stay active—and delay earning full income from both benefits.

• Consider how your Social Security and pension income work with your husband or wife’s benefits and timing.

• Plan for times when you may not have healthcare coverage. If you’ll be without employer-sponsored health insurance, budget for COBRA (a program that lets you temporarily keep your former employer’s health plan, usually at full cost), a marketplace plan or other coverage to avoid unexpected medical costs.

You can make several moves to get the most from Social Security and pension income. For example, one simple thing to do is to put bonuses and raises to retirement savings whenever possible. Once you turn 50, the IRS allows you to make extra catch-up contributions to your 401(k) or individual retirement account (IRA) above the standard yearly limits. This is a useful way to speed up your savings as retirement gets closer.

You can also create variety in your retirement savings so you’re not relying only on Social Security and pension income.

• Consider other retirement vehicles like an IRA or a 401(k) or 403(b) account. All of these will offer tax advantages. For instance, adding to a traditional 401(k) allows for tax-deferred growth, meaning you won’t pay taxes on that money until you withdraw it in retirement. Meanwhile, a Roth 401(k) offers tax-free withdrawals in retirement, provided you’re at least 59-1/2 years old and have had the account for at least five years.

• If you prefer smaller but guaranteed growth, you can open a certificate of deposit, or CD. You might also explore CD laddering options to access those funds at different times without getting penalties for early withdrawals. A CD ladder is a savings strategy that involves dividing your money among several certificates of deposit with different maturity dates instead of putting it all into a single CD. Opening a 360 CD allows you to lock in a rate that’s above the national average, ensuring your savings grow steadily over time.

• Take steps to build emergency funds so you won’t need to take money from Social Security or pension income to cover unexpected expenses during retirement. Give your emergency fund a boost with the 360 Performance Savings account that offers a great rate.

If you’re retiring with a pension and Social Security, you can usually collect both benefits. You’ll need to understand how they work together in your specific situation. If you’re wondering “How much should I save for retirement with a pension?” there are many factors at hand. For example: pension coverage, benefit timing and additional savings options.

Working with a financial professional can help you create a retirement plan specific to you that brings your pension and Social Security benefits together in a way that fits your life. With the right strategy, you can better coordinate both income sources. That way, you’ll get the most from the benefits you’ve earned.

The goal isn’t just collecting benefits. It’s building a steady, reliable income that helps support a comfortable retirement over the long run.

Don’t let your hard-earned cash sit idle. Put it in a 360 Performance Savings account designed to boost your savings and give your future self a head start.