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How Retirement and Pension Can Affect Unemployment Benefits

Updated : October 6th, 2022

Does pension affect unemployment benefits

With rising productivity at an advanced age, common concerns for older people facing job losses revolve around their pension and unemployment benefits. Senior citizens can avail UI benefits as there is no age limit to claiming them. This is as long as you have not withdrawn from the labor market, and you meet the other eligibility criteria.

Unemployment Insurance is a government initiative that is funded by collections from employers and not taxpayers. It helps workers financially while they are unemployed and looking actively for work. You can claim UI benefits while drawing social security benefits and pension payments, though it would be subject to deductions as per the pension plan.

When Can I Retire and Claim Unemployment Insurance?

As per the Social Security Administration of the US, the earliest retirement age is 65, for people who were born in 1937 or earlier. For each year after 1937 until 1943, the age increases successively by two months, culminating in 66 for those born between 1943-1954. From 1955, the age increases similarly by two months each successive year to 67 for those born in 1960 and later.

Thus, if you were born in 1957, you would retire at 66 years and six months. Learn about the 2023 Social Security increase caused by high inflation.

Can I Collect Unemployment Benefits if I Retire Early?

If you have taken early retirement, unemployment benefits could be claimed by you. However, this only applies if you were laid off for no fault of your own and/or compelled to accept an early retirement package by your employer to reduce the workforce.

You may also be able to claim UI benefits if you had to retire due to health and safety reasons, and your employer failed to provide you with suitable alternative work. The exact conditions vary from state to state, so refer to your state’s website for details.

Does Pension Affect Unemployment Benefits?

Pension refers to any periodic payment which may be employer-contributed, governmental, union, from sharing profits, annuity, etc. Most states such as Georgia, California, etc. reduce the unemployment compensation of those who receive pension payments. This is not to be confused with social security benefits, which are not affected by pension or UI benefits. If you live in Florida or Michigan you should check out how you can file for unemployment benefits.

So, does a pension affect unemployment benefits? It depends. Your unemployment benefits may be reduced by 100 percent of the amount of any pension distribution you receive if your base period employer contributed to it – this is the case regardless of whether you contributed to the pension as well. This is a dollar-for-dollar decrease. However, if you were the sole contributor to a pension account, your unemployment benefits will not be reduced.

These conditions apply to any governmental pensions or other pensions, 401(k) distributions, retirement or retired pay, annuity, or any other similar regular retirement income based on your previous work history. However, if you choose to roll your pension, 401(k), 403(b), or other retirement payment into a qualified Individual Retirement Account, you will not experience a reduction in your unemployment benefits. In addition, these stipulations only apply if your pension account is connected to a base period employer. Pension payments from other employers are not subject to these deductions. A base period employer is defined as an employer who

Another point to keep in mind: if you become eligible for pension distribution payments during the time you also are receiving unemployment benefits, you must report this change to your state’s unemployment division as soon as possible. Otherwise, you may receive an overpayment of benefits, which will need to be returned, and you also may be responsible for paying other penalties. By the same token, if you’re already receiving pension payments and you lose your job, you must report the pension income you receive when you submit your application for unemployment benefits.

If you are nearing retirement age – or have already begun receiving Social Security retirement benefits – and have lost your job through no fault of your own, it’s important to understand the full scope of your options. Research the eligibility criteria for unemployment benefits in your state so that you understand everything that must be true in your situation for you to qualify. If you haven’t already begun receiving Social Security retirement benefits and are thinking of applying for them, along with unemployment benefits, you should remember that drawing your retirement benefits before you reach full retirement age will result in a reduction of your monthly benefit amount. Ideally, you’d want to wait until age 70 to collect retirement benefits in order to receive the largest possible monthly benefit.

In addition, if you’re currently unemployed and you begin collecting both Social Security and unemployment benefits, you must be mindful of how your finances will be affected if you go back to work. For example, if you begin work after you have begun drawing Social Security, and you are younger than full retirement age, you only will be able to earn a certain amount from your new job before a portion of your retirement benefit will be withheld.

In addition, you may want to confer with a qualified, certified financial planner who can help you get out of debt and further understand the full scope of your current financial situation, how unemployment benefits and Social Security benefits would combine to help you, and the long-term financial ramifications of any choice you make.

Typically the weekly benefit amount is reduced by the amount contributed by your base period employer towards your pension (if they contributed 50% or more). If you draw upon your retirement plans like a 401(k) that too is subject to deduction, based on those amounts, the weekly benefit amount payable to you could drop to zero, thus disqualifying you.

The other requirements you would have to satisfy to claim unemployment insurance include:

  • Meeting all the reporting requirements
  • Registering for work with the state portal and proving that you are actively looking for work
  • Drawing the threshold wage during your base period (which may vary across states)
  • Being unemployed through no fault of your own

Can I collect unemployment benefits and Social Security at the same time?

Yes, it is possible to collect both unemployment benefits and Social Security benefits at the same time. This also is the case for spousal or survivor benefits you may claim on the earnings record of a retired or deceased worker. In fact, since many people are working long past their eligibility for Social Security retirement benefits, it’s not as uncommon as you might think to collect both Social Security retirement and unemployment benefits.

Some workers choose to begin drawing Social Security retirement benefits at age 62, though they are paid at a lower rate than if payments are deferred until age 67 or 70. In these cases of early retirement benefits, those same workers may continue to work and pay into the Social Security retirement system, either by choice or out of financial necessity. If a worker in this situation is laid off or otherwise loses their job through no fault of their own, they typically are eligible through their state to receive unemployment benefits.

Social Security income is classified as unearned income, and as such, is not taxed and it does not count as earnings for anyone who continues to work past the point at which they begin receiving retirement compensation. Anyone who is laid off, even if collecting Social Security retirement benefits, may be eligible for unemployment compensation, as long as they meet the eligibility criteria for their state. The same is true under any circumstance other than a layoff in which the worker loses employment through no fault of their own.

In most cases, receiving both Social Security and unemployment benefits will not affect the amount of either. The historically widespread practice of states reducing unemployment benefits if a recipient also received Social Security retirement benefits has been eliminated nationwide, with Minnesota being the last state to end the practice in July 2022.

Keep in mind, though, that these conditions apply to Social Security retirement benefits only – other types of retirement income, such as payments from a pension plan or 401(k) plan distributions may reduce the amount of your unemployment compensation. Rules vary from state to state, so it’s a good idea to research the criteria in your state and perhaps even to work with a knowledgeable disability attorney to fully understand your financial situation.

In addition to Social Security retirement benefits, it is also possible to collect Social Security disability income benefits at the same time you are receiving unemployment benefits. However, this combination is less straightforward. Some of the conditions for the two benefits are directly opposed – for example, to be eligible for unemployment benefits, you must actively be looking for work and be able to accept it when offered. But to be eligible for Social Security disability benefits, you must be deemed medically unable to work. In order to receive both types of compensation, you’ll have to make a compelling case for why the two are not in conflict in your particular situation.

Older workers who get laid off have a tougher time finding new jobs compared to younger workers. As the unemployment compensation is not considered as income under the Social Security earnings, it is an added advantage for senior citizens and retirees who can also draw Social Security benefits.

Applicants should remember to file their claims as quickly as they can, regardless of whether they have been served the unemployment notice by their employer.

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  1. I have been working in Arizona for two years and have recently been laid off. I have decided to move to Texas and am wondering if it is possible to transfer my Arizona unemployment benefits to Texas and collect benefits based on Texas rules which provide a higher benefit that Arizona?

    • Hi, Gabe – it’s highly doubtful. You typically file for unemployment benefits in the state in which unemployment taxes have been deposited on your behalf. Since your employer has been paying unemployment taxes on your behalf in Arizona, that is the state your benefits will need to come from. Texas’ unemployment program does not have any taxes paid on your behalf.

  2. I work in concert industry. And was subcontracted at new casino back in May.
    I recently was told “ By boss that asked me me as well as 25-30 other Live Natation employees to work stagehand, security, merchandises, lighting spotters ect. To work new casino.
    As of 3 weeks ago. I am not longer on schedule. I was told by main boss, whom we ARE not paid for through, but got us this side job.” The client wants to try something different.”
    I have two texts saying this. My job at casino weekly since May was two days work for each artist we had performing. So, recently approved for house loan. My work days at any venue range from 12-18 hours as I work the “ Production hospitality side of concerts.”

    I have lost in past 3 weeks at least 7-9 concerts I would have worked at casino..
    although, I I am just now finished with regular out door concerts. Can I file for UI?
    There are a few end of season shows for arenas that if are live nation I do get called in for.. I think at least 3. But, I never know. Because we do not know how many runners each concerts “ Needs.” Till 2-4 days before show times. So out of a group of runners, non of us know whom will get the “ shift.” Which is fine.
    The casino job, I actually trained 4 people for. And again, “ Because client wants to try something new..” I am in a limbo state here.

    And FYI I was one of MANY that did not get UI during COVID. Do to calls being dropped, because system was taxed. I even tried again when we had to upload DL and tried many times to do online, and call. Again calls were dropped.

    • Hi, Ginny – you’ll need to visit with someone in your state’s unemployment office about the particulars of your claim. If you can show that your hours have been dramatically reduced due to no fault of your own, then you may be eligible for benefits. Keep in mind that the unemployment office also will check with your former employer, and if they dispute your reasoning for losing work, your claim may be denied. For that reason, it may also be a good idea to connect with a qualified unemployment lawyer, who can help you understand the strength of your claim, along with how to navigate the appeals process if that becomes necessary.

  3. I see this site says it was updated November 2,2022 so dose that mean that this information is valid to this day or has all this long expired?

  4. ive started unemployment on the 24th of last month november…now the adjudication is in process ..the date that changed or started says on the 9th of december…ive clamied 2 claims of unemployment already tomorrow ill have 3 claims..just wondering how long itll take for benefits to come to me or when the adjudication will be done so they can make a decision? its like the holidays and i wish there was a way to find out immediately while theyre working..or how much longer i gotta wait?

    • Rachel,

      Please refer to your claims file online. During the determination process, the authorities would have approved you for a fixed number of weeks.

  5. I need to apply for unemployment nothing else. it seems very difficult to do so. I need a staff to give me a call as soon as possible at this number below (407) 413-7178, please.

    • Jeannette,

      Please note this is a private forum and we do not have access to your claim file. Please call the Unemployment Office on the numbers provided in the website.

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