Social Security Leveling: What is It? Is it Better than a Traditional Pension Payout Option?

Social Security Leveling: What is It? Is it Better than a Traditional Pension Payout Option?


You are lucky if you have a pension. You are lucky if your pension gives you different pay out options, but the choice for what to do can be confusing. Pension leveling — also called Social Security leveling — is one payout option that can be confusing.

social security leveling

What is Pension Leveling / Social Security Leveling

Pension leveling is a payout option on some pensions. It is designed to level out your income and can be a way to help you achieve an early retirement.

Usually when you take a pension you can opt for a lump sum amount up front or for monthly payments for the rest of your life.  If you take the traditional monthly payment option, your payments are roughly the same every month for as long as you live.

Pension leveling is a way of calculating your monthly pension payments to keep your retirement income steady throughout your lifetime. Instead of uniform lifetime pension payments you instead get a larger monthly payment from your retirement date through to when you start Social Security.  When you start Social Security, your pension benefit drops to keep your income at the same level as before you started the Social Security benefit.

So, let’s say you wanted to retire at 55 and opt for pension leveling until you start Social Security at 66. If your Social Security at 66 is $1500 and your starting leveled pension monthly payments were $2500, your pension payment would be reduced to $1000 when you started Social Security.

Your income would remain constant at $2500, but the source of the income would be split.

Considerations for Social Security Leveling

Leveling pension plans can be an excellent option for those who are retiring early and looking to boost income during the beginning years of retirement.

Whether or not it is a prudent financial decision depends on your personal situation and a number of assumptions. If possible, you should work with an accountant or financial planner to run scenarios on how this will impact your lifetime payment amount. You can also compare these options using the NewRetirement Planner, one of the only tools to offer robust pension inputs.

Considerations include:

  • Will your pension plan adjust with inflation? (Social Security does adjust modestly each year.)
  • Do you have a spouse that relies on payouts of the pension after you die?
  • Will your spouse depend on your Social Security after you die?
  • How might the larger payouts with impact your tax strategy?
  • Do you need the income right away?
  • How do different Social Security start ages impact your pension leveling decision?
  • What other income sources do you have?
  • Might you work at another job? Will that impact Social Security or your tax bracket?
  • What is the financial health of your pension? Do you worry about the viability of the fund?
  • Do you believe that Social Security will continue to be available to you?

About NewRetirement

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